A report has been released by RPDATA, a company which provides comparative sales information and other data to real estate agents and other professionals. They have released the following commentary about the australian property market, and I share it with the members of the site in case of interest:

To sum up, Adelaide has achieved annual property price growth averaging 10.6% over the last 10 years, slowing to 8.4% in the last 5 years. Not a bad result given what has happened elsewhere around the world...

The original report from the author, and additional graphs etc can be viewed here:

http://www.vision6.com.au/em/message/em ... &id=631708
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The Australian property market’s last decade in review
Over the last ten years the Australian property market has recorded an annualised rate of growth just below 10% each year however, the results vary greatly between each city.

Across the capital city residential property market, the last 10 years has seen home values almost double with an annual rate of growth of 9.4%. Today the capital city median dwelling price across the country sits at $451,000 with houses recording a median of $485,000 and units at $400,000. If you bought a home 10 years ago, you were probably looking at a median price of less than $200,000 for either property type.

As the capital city market pricing graph shows there has been distinctive periods of growth during the last decade. Between 2000 and 2003 there was a strong growth period which was following a long period of negligible value growth. Following this boom, values nationally showed little growth again until 2007. In fact, the majority of value growth recorded between 2004 and 2007 was due to the Perth market which was undergoing a significant surge in values due to unprecedented strength in the mining and resources sector. Conversely, in parts of Western Sydney in particular, some areas recorded significant falls in property values over this period. During 2007 there was another strong growth period which occurred in all cities except Perth and Sydney. During 2008, the global economy stalled as a result of the Global Financial Crisis (GFC) and values slumped 3.8% nationally from their peak during February 2008 to the trough in December 2008. Larger falls were recorded in Perth and Brisbane. In 2009 property values jumped again, this time in all cities as a result of the lowest interest rates in 49 years which has lured buyers back into the market, the Boost to the First Home Buyers Grant and a dramatic housing undersupply.

Over the decade, sales volumes were strongest between 2001 and early 2004 which was the time that nationally, property values were undergoing significant growth. Once the slowdown hit in mid 2004 volumes dropped by around 10,000 sales each month as the market cooled. During 2007 when markets such as Melbourne, Brisbane, Adelaide, Hobart and Darwin were performing particularly well, volumes again picked up but never reached those heights witnessed between 2001 and 2004. Once the GFC hit, sales volumes slumped to the lowest levels seen at any time over the last ten years. It’s not surprising as many with non-core assets such as holiday homes were forced to sell, as did some of those who lost their jobs or ran into financial difficulty. At this time there was plenty of willing sellers however, the problem was a significant lack of willing buyers at that time. Finally in 2009 as values rebounded and recorded growth only slightly below that recorded during 2007 sales volumes rebounded although not to the same levels as those recorded during 2007.

On a city-by-city basis Hobart has actually seen the greatest value growth over the last ten years with dwelling values increasing on average by 12.8% annually (to November 2009). It’s no real coincidence given that Hobart prices came from a very low base. Despite this, Hobart still provides the most affordable capital city housing. What is probably most interesting is the performance of the three largest cities (population wise). Sydney prices have dramatically underperformed the national average with average annual growth in dwelling values of just 6.3%. Melbourne has only just outperformed the national average seeing average annual growth of 9.7% whilst Brisbane has recorded growth of 11.0% p.a. The national figure is weighted by population and property type so given this it is clearly influenced by the larger population centre's such as Sydney and Melbourne.

It’s also imperative to remember that Sydney and Melbourne have had higher property prices and because of this fact growth rates tend to be lower as they are coming from a higher base.

Looking specifically at the last five years values have grown at an average annual rate of 6.5% which is much lower than the ten year growth rate showing just how significant the boom was in the early part of the decade. Over the last five years the standout performers have been: Darwin (17.2% p.a), Perth (13.6% p.a) and Adelaide (8.4% p.a). Sydney has by far and away been the worst performer during the last five years recording average annual growth of 2.3% p.a. The other poorer performing markets have been Hobart (6.8%) and Brisbane (7.5%).

Given what has occurred over the last ten years it will be very interesting to see what the next ten years holds. Undoubtedly property prices are expensive in most capital cities and the provision of affordable housing must be imperative. However, it appears that to-date Governments are unwilling or unable to provide affordable land supply with the necessary infrastructure. As population growth looks set to remain at high levels and we continue to fail to build enough dwellings to cater for demand, upwards price pressures on property is likely to persist.

Please find attached some commentary from the Governor of the Reserve Bank of Australia, which talks about the economy, interest rates and touches upon property prices.

Note, the cash rate is currently 3.75%

(Sourced from Commsec)
Important Information
The summary and attached report has been prepared without taking account of the objectives, financial situation or needs of any particular individual. For this reason, any individual should, before acting on the information in this report, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

RBA Governor says mission accomplished
Semi-annual testimony
The tone and comments from the Reserve Bank Governors testimony is consistent with CommSec’s view that the cash rate will rise to around 4.5 – 5.0 per cent by year end. However the timing of the rate hikes is debatable.
The Reserve Bank Governor in essence has declared victory over the global financial crisis. The Governor says the new challenge is “managing an economic expansion”. The cash rate is no longer in an emergency setting however the rates still have “a little distance to go yet” in getting back to a normal setting. Mortgage rates are still between 50 – 100 basis points below the decade average.
In response to the recent IMF view that central banks may need to raise inflation target bands, the Governor noted that the Australian inflation targeting framework is adequate and has always had flexibility.
The Governor commented that “the historic shift in the centre of economic gravity to the Asian region” will ensure that Australia is relatively well placed to prosper. And on issue of public debt and fiscal sustainability, the Governor highlighted that Australia’s position is, “very strong” by any measure.
What does it all mean?
The Reserve Bank is growing in confidence about the recovery of the domestic economy. At the parliamentary testimony the Governor noted that Australia is well placed to benefit from the substantial rebound and in some instances the “V-shaped” in growth in the Asian region. Interestingly the Governor highlighted that the recovery is not confined to China, but includes the likes of India, Korea, Singapore and Taiwan. Given that over half of Australia’s exports are to the Asian region the continued strength in the area will have positive ramifications for the Australian economy.
The Reserve Bank Governor did note that the cash rate will need to rise to more “normal levels” as the recovery gains traction. The trajectory of those rate hikes is still debateable, especially given that the Reserve Bank moved early on interest rates and that has given policy makers time to judge the early impact of the rate hikes before deciding to move again.
While the inflation environment is still benign the Governor did highlight capacity issues. The domestic economy is starting the new upswing in the growth cycle with less spare capacity than previous recessions, while the unemployment rate peaked at less than 6 per cent. – a result as the Governor highlighted “would have been seen as a good outcome in strong times, let alone in times of economic weakness”.
The Governor warned that Australia is likely to experience a two speed economy over coming year – a consequence of the fast growth of the Asian economies; “structural adjustments are there and I think they will intensify’.
Interestingly the Governor commented on the resilience of household consumption which “is holding up reasonably well after the various fiscal boosts faded”. However the Governor did note that households seem to be adopting a more cautious approach regarding saving and borrowing.
In response to questioning over the considerable rise in house prices over the past year, the Governor seemed comfortable about the future outlook. The Reserve Bank believes that at present the level of credit growth is moderate, and the fact that bank lending standards have tightened is a positive. Coupled with rising interest rates and the reduction in first home buyer demand, this should ensure that house prices post modest growth.
In fact the Governor believes that house prices at the bottom end of the market have flattened off, while the growth in house prices at the top end is strong. This outcome would be expected given the weakness at the top end during the global financial crisis. CommSec expects house prices to rise by 5-8 per cent over the year.
CommSec believes that a more “normal” level for interest rates (effectively a point where interest rates are not having a stimulatory or contractionary impact on the economy) will be around 4.5 - 5 per cent.
Key excerpts of the Reserve Bank Governor
The Governor noted that developed nations will continue to drive global growth; “the historic shift in the centre of economic gravity to the Asian region is continuing, and if anything it has been highlighted by the different performances during the crisis and initial recovery. The differences in speed of recovery between the emerging world and the advanced world, and the likely persistent differences in growth trajectories into the future, will increase the pressure on exchange rate arrangements in the region.”
The Reserve Bank Governor has confidence that the Australian economy is well placed in the scheme of the global recovery. “Normally after a sharp downturn, the ensuing upswing is correspondingly strong. This has been the case among a number of Asia-Pacific economies, which take half of Australia’s exports. The strength is not confined to China: India, Korea, Singapore, Taiwan and others have all seen a significant pick-up in production and trade. In several of these instances the term ‘v-shaped recovery’ would be apt.”
The Governor commented that the labour market was performing better than could have been anticipated with “we start the new upswing with less spare capacity than would typically be the case after a recession. One measure of this is that the rate of unemployment peaked at less than 6 per cent, much lower than we or most others forecast. Only a few years ago, unemployment rates like this would have been seen as a good outcome in strong times, let alone in times of economic weakness.”
The Governor notes that “If economic conditions evolve roughly as we expect, further adjustments to monetary policy will probably be needed over time to ensure that inflation remains consistent with the target over the medium term. This is a normal experience in an economic expansion: as economic activity normalises interest rates do the same”.
And on issue of public debt and fiscal sustainability, the Governor highlighted that Australia’s position is, “very strong” by any measure and “Australia’s sovereign debt position far removed from any other country”.
The Governor commented that house “prices in the bottom end have flattened off” while prices at “the top end of the market continue to strengthen”. The Governor believes that “the strength in residential construction will continue to have multiplier effects” throughout the economy.

As property prices have boomed right across Australia and now many in the real estate industry are predicting periods of slowdown, stagnation.The property buying process in Australia is relatively straightforward and foreign investors are permitted to own real estate in Australia as long as the land or property for sale has been approved for sale to overseas buyers by the Foreign Investment Review Board.