The latest data released on Tuesday by the Bureau of Statistics revealed that in spite of rising interest rates, property prices in the first three months of this year actually went up in most states.
We really need to update the old adage. No longer is nothing more certain than death and taxes; it’s now death, taxes and rising house prices.
Of course, taxes have a bit to do with housing prices.
Last week the taxation statistics for 2020-21 showed – for the first time on record (going back to 1993-94) – that more property investors claimed a profit than a loss.
That year, of course, was the year of the pandemic and record low interest rates, which made it somewhat harder for investors to have rental payments lower than their loan repayments:
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But do not fear, the rising rates since April last year will see the numbers of negative gearers shoot up. And even the relative paucity of those claiming a rental loss did not change who is most likely to be negative gearing.
Who are the negative gearers? Well, if you are ever in need of a surgical consult and can’t get an appointment, your best bet might be to turn up to an auction, given nearly a quarter of surgeons negative geared in 2020-21.
While you’re there you could book the anaesthetist, and a psychiatrist for any post-op mental health issues. And just to tick all the boxes, you could also have a chat with a school principal about your child’s education:
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But really the story of house prices is that they seem impervious at the moment to interest rates.
Three months ago when the previous dwelling price figures were released, prices were falling and there was a sense that interest rates might as well.
Cut to now, and rather than expecting the cash rate to be 3.8% by the end of the year, the market expects at least one more rate rise to 4.35% and an outside chance of two to 4.6%.
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Perhaps this is why dwelling prices for the first three months of the year showed resilience – up 1% across the nation in the March quarter, and up 2.1% in NSW:
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But the more recent data from Core Logic suggests house prices have rebounded this year beyond March.
Such is the resilience of house prices that even though across the nation prices in March this year were lower than in 2022, they are not as low as you would expect, given the drop in home loans:
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In the December 2020 quarter property prices were 3.2% below where they were a year earlier. Given home loans have been falling you would expect the March figures to show a bigger fall in property prices. But instead, the fall stabilised at 3.7%:
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So this might be as big as the fall gets.
The recent improvement in prices is not good for affordability.
In all capital cities, the median price for a house is higher than it was when we entered the pandemic:
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The price of apartments has not risen as quickly as houses but, except for Melbourne, the rise has still been very strong.
In Melbourne the median apartment price across the city fell from $600,000 in June 2020 to $577,000, while in Hobart they have soared 42% from $394,500 to $560,000:
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All up, when we compare property prices with household disposable income per capita the massive drop in affordability over the past three years is clear.
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Since June 2020, average household disposable income has risen 8%, while property prices across the nation have risen 26%.
What does this mean in real terms?
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Had the median property price in Sydney risen in line with household incomes since June 2020, instead of being $1.15m it would be $954,000 – a $196,000 difference.
Perhaps the old adage should not be changed to “death, taxes and rising house prices” but “death, taxes, rising houses prices and a generation of people locked out of the housing market”.
Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
