The Property Investments Association of Australia (PIPA) has published a new analysis of housing market trends following past recessions to assess the potential impact of the COVID-19 crisis.
The research – which involved an analysis of annual median house price and index data for seven-year periods beginning at the onset of economic downturns from 1973 to the global financial crisis (GFC) – found that capital city dwelling values “increased significantly” in the five years after a recession.
“In fact, looking back over the past nearly 50 years, house prices were higher five years after a recession or downturn each time,” PIPA chairman Peter Koulizos said.
The PIPA analysis found:
- In the five years following the 1973-1975 recession, house prices grew by up to 100.7 per cent (Sydney)
- In the five years following the 1982-1983 recession, house prices grew by up to 67.7 per cent (Melbourne)
- In the five years following the 1990-1991 recession, house prices grew by up to 47.3 per cent (Darwin)
- In the five years following the GFC, house prices grew by up to 39.7 per cent (Sydney)
According to Mr Koulizos, such trends undermine suggestions of a looming property market meltdown induced by the COVID-19 crisis.
“[The] research shows that talk of impending property doom has never happened in recent history – and these recessions or downturns lasted multiple years rather than a few months,” he said.
Mr Koulizos said prices would likely fall across Australia’s capital cities once stimulus support has been exhausted but stressed that the downturn would be followed by a strong rebound.
“An interesting point to that is that in 2011, every capital city recorded a fall in its house price index, which was simply when the GFC stimulus money ran out,” he said.
“This could well become a statistical reality this time around, too, but it’s important to recognise that within either one year or two years of that period, the house price index was showing solid growth once more.”
He concluded: “The moral of the story is don’t panic. Property has shown its resilience through economic shocks before and we have no reason to expect it won’t do so again.”
ANZ Research is forecasting a peak-to-trough decline in property prices of 10 per cent, led by sharp declines in Hobart (11.2 per cent), Melbourne (8.5 per cent) and Sydney (8.1 per cent) over the course of 2020 and 2021.
The research group said it expects growth trends to begin turning positive in the back end of 2021.
[Related: Housing market faces prolonged downturn]