The Australian housing market has made a strong comeback. In the third quarter of 2009, the average established home price index for eight capital cities rose by 4.2% q-o-q, or 3.2% when adjusted for inflation.
This follows a 4.1% rise in Q2 2009 and a 0.7% decline in Q1 2009, according to the Australian Bureau of Statistics (ABS).
In the year to end-Q3 2009, "composition-adjusted" median house prices rose by 6.2% (4.9% in real terms), according to Australian Property Monitors (APM). The dramatic 6.2% y-o-y decline (-8.4% in real terms) in Q1 2009 was something of a 'blip'. Since the peak in March 2008, house prices have fallen by just 2.2%.
"Prices have stopped falling and are on the way up, due to increased investor activity and revived interest from second and third homebuyers who have returned to the market," says REIA president David Airey. "These buyers are selling to first homebuyers who have shown a preference for established homes in seven out of 10 sales."
"It is looking increasingly clear that Australia has avoided the large falls in house prices seen in some other countries over the past two years or so," said Tony Richards of the Reserve Bank of Australia (RBA), the central bank.
"But looking forward, the risk is that we might move towards undesirable strong growth in housing prices." Housing affordability has long been an issue in the country. "We don't want very strong growth in housing prices that would be unhelpful from a social perspective."
Darwin leads the recovery
In September 2009, all the eight Australian capital cities recorded strong annual house price increases. Darwin recorded the highest house price increase of about 12.3% from a year earlier. Melbourne and Canberra followed, with price rises of 8.4% and 7.8% over the same period.
Sydney registered a house price increase of 5.9% in September 2009 from a year earlier. House prices have also risen in Brisbane (5.6%), Hobart (5.4%), Perth (4.4%), and Adelaide (3.7%).
Sydney has the most expensive housing in Australia, with an average house price of AU$569,061 (US$530,001) in the third quarter of 2009, according to APM. Darwin follows with average house prices of AU$528,650 (US$492,363). On the other hand, Hobart has the lowest median house prices at AU$311,366 (US$289,994) .
The history of the boom
Australia's housing market accelerated rapidly from mid-90s to the early-2000s, driven mainly by real housing demand, and supply shortages. House prices rose 148% (100% in real terms) from 1995 to 2004.
To moderate the house price increases, the RBA raised interest rates in 2002 and 2003. By H1 2004, annual price increases had successfully been forced down to zero, but quickly regained momentum in 2005. The house price index rose 2.3% in 2005 (-0.5% in real terms), 9.7% in 2006 (6.3% in real terms), and 14% in 2007 (10.8% in real terms).
To curb inflationary pressures, the RBA raised the key interest rate by steps to 7.25% in March 2008, from a historic low of 4.25% in early-2002
Crash avoided - observers amazed
The strength of Australia's housing market has amazed observers, who had predicted that Australia would suffer one of the worst housing market crashes, because of a perceived house price overvaluation.
Australia has avoided a housing crash due to a combination of reasons:
In response to the crisis, the government introduced a huge stimulus package, worth AU$10.4 billion (US$7.24 billion), around 1% of GDP, in October 14, 2008. This included the First Home Owner Boost Scheme (FHOB) which raised the First Home Owner Grant from AU$7,000 (US$6,419) to AU$14,000 (US$12,838) for existing dwellings, and to AU$21,000 (AU$19,257) for newly constructed homes
Due to its success, the FHOB scheme was extended from its original September expiry date till end-December 2009, though the grant amounts were reduced.
The FHOB was very successful in stimulating the housing market. By the end of August 2009, the FHOB had helped more than 153,000 Australians buy their first home. By July 2009, first home buyers had risen 73% from the same period last year.
New home sales rose 11.4% in August 2009 (or by 25% up on last year), from anemic monthly increases of 0.1% in July and 0.5% in June 2009, according to the Housing Industry Association (HIA). Detached home sales rose 11.8%, while apartment sales rose 7.5% in August 2009 from the previous month.
Victoria registered the highest increase in detached home sales of about 21.8%, followed by Queensland (20.9%) and Western Australia (15.1%). On the other hand, sales fell by 11.3%in New South Wales and 2.5% in South Australia.
"A late surge in sales to first home buyers ahead of the step-down in the new home boost, propelled new home sales…[making] August the best monthly result for over three and a half years," said HIA chief economist Harley Dale.
Estimated housing shortage rising
A combination of high migration and weak housing starts is creating a severe housing shortage up. In 2009, the estimated housing shortage was about 130,000 units, up by 55,000 on two years ago, according to BIS Shrapnel.
In 2008, total housing starts fell 3.2%, to 148,420 units. Starts are expected to fall another 12.6% in 2009, according to the HIA, before rebounding in 2010.
Residential dwelling approvals, an indicator of future activity, were flat month-on-month in August 2009. While the detached housing market is strong (buoyed by the First Home Owner Grant), the multi-units market is weak, says HIA's senior economist Ben Phillips.
In August 2009, approvals for detached houses rose 3.1% from the previous month. For the multi-unit sector, building approvals dropped 10.9%.
Australia has been under-building new residential dwellings in the past years, for several reasons.
Stringent urban planning policies and land use restrictions (called 'smart growth', 'urban containment', etc.) have created artificial shortages of land for residential development. "An increase in state government zoning regulations is a significant factor driving up the cost of housing", said Reserve Bank of Australia Governor Glenn Stevens.
Tax burdens on builders and developers have aggravated the situation. In New South Wales, government taxes and other charges are estimated to account for about 30% of the price of new houses.
Due to the global credit crunch, developers of large-scale residential projects continue to struggle to secure finance from banks and other lending institutions, despite the improving economic outlook.
This follows a 4.1% rise in Q2 2009 and a 0.7% decline in Q1 2009, according to the Australian Bureau of Statistics (ABS).
In the year to end-Q3 2009, "composition-adjusted" median house prices rose by 6.2% (4.9% in real terms), according to Australian Property Monitors (APM). The dramatic 6.2% y-o-y decline (-8.4% in real terms) in Q1 2009 was something of a 'blip'. Since the peak in March 2008, house prices have fallen by just 2.2%.
"Prices have stopped falling and are on the way up, due to increased investor activity and revived interest from second and third homebuyers who have returned to the market," says REIA president David Airey. "These buyers are selling to first homebuyers who have shown a preference for established homes in seven out of 10 sales."
"It is looking increasingly clear that Australia has avoided the large falls in house prices seen in some other countries over the past two years or so," said Tony Richards of the Reserve Bank of Australia (RBA), the central bank.
"But looking forward, the risk is that we might move towards undesirable strong growth in housing prices." Housing affordability has long been an issue in the country. "We don't want very strong growth in housing prices that would be unhelpful from a social perspective."
Darwin leads the recovery
In September 2009, all the eight Australian capital cities recorded strong annual house price increases. Darwin recorded the highest house price increase of about 12.3% from a year earlier. Melbourne and Canberra followed, with price rises of 8.4% and 7.8% over the same period.
Sydney registered a house price increase of 5.9% in September 2009 from a year earlier. House prices have also risen in Brisbane (5.6%), Hobart (5.4%), Perth (4.4%), and Adelaide (3.7%).
Sydney has the most expensive housing in Australia, with an average house price of AU$569,061 (US$530,001) in the third quarter of 2009, according to APM. Darwin follows with average house prices of AU$528,650 (US$492,363). On the other hand, Hobart has the lowest median house prices at AU$311,366 (US$289,994) .
The history of the boom
Australia's housing market accelerated rapidly from mid-90s to the early-2000s, driven mainly by real housing demand, and supply shortages. House prices rose 148% (100% in real terms) from 1995 to 2004.
To moderate the house price increases, the RBA raised interest rates in 2002 and 2003. By H1 2004, annual price increases had successfully been forced down to zero, but quickly regained momentum in 2005. The house price index rose 2.3% in 2005 (-0.5% in real terms), 9.7% in 2006 (6.3% in real terms), and 14% in 2007 (10.8% in real terms).
To curb inflationary pressures, the RBA raised the key interest rate by steps to 7.25% in March 2008, from a historic low of 4.25% in early-2002
Crash avoided - observers amazed
The strength of Australia's housing market has amazed observers, who had predicted that Australia would suffer one of the worst housing market crashes, because of a perceived house price overvaluation.
Australia has avoided a housing crash due to a combination of reasons:
- Severe housing shortage due to a rapidly growing population, and overseas migration from 2004 to 2007;
- Preference for smaller household sizes;
- Higher lending standards relative to the US;
- Record low mortgage interest rates; and
- Government incentives for first-time homebuyers (e.g. First Home Owner Grant).
In response to the crisis, the government introduced a huge stimulus package, worth AU$10.4 billion (US$7.24 billion), around 1% of GDP, in October 14, 2008. This included the First Home Owner Boost Scheme (FHOB) which raised the First Home Owner Grant from AU$7,000 (US$6,419) to AU$14,000 (US$12,838) for existing dwellings, and to AU$21,000 (AU$19,257) for newly constructed homes
Due to its success, the FHOB scheme was extended from its original September expiry date till end-December 2009, though the grant amounts were reduced.
The FHOB was very successful in stimulating the housing market. By the end of August 2009, the FHOB had helped more than 153,000 Australians buy their first home. By July 2009, first home buyers had risen 73% from the same period last year.
New home sales rose 11.4% in August 2009 (or by 25% up on last year), from anemic monthly increases of 0.1% in July and 0.5% in June 2009, according to the Housing Industry Association (HIA). Detached home sales rose 11.8%, while apartment sales rose 7.5% in August 2009 from the previous month.
Victoria registered the highest increase in detached home sales of about 21.8%, followed by Queensland (20.9%) and Western Australia (15.1%). On the other hand, sales fell by 11.3%in New South Wales and 2.5% in South Australia.
"A late surge in sales to first home buyers ahead of the step-down in the new home boost, propelled new home sales…[making] August the best monthly result for over three and a half years," said HIA chief economist Harley Dale.
Estimated housing shortage rising
A combination of high migration and weak housing starts is creating a severe housing shortage up. In 2009, the estimated housing shortage was about 130,000 units, up by 55,000 on two years ago, according to BIS Shrapnel.
In 2008, total housing starts fell 3.2%, to 148,420 units. Starts are expected to fall another 12.6% in 2009, according to the HIA, before rebounding in 2010.
Residential dwelling approvals, an indicator of future activity, were flat month-on-month in August 2009. While the detached housing market is strong (buoyed by the First Home Owner Grant), the multi-units market is weak, says HIA's senior economist Ben Phillips.
In August 2009, approvals for detached houses rose 3.1% from the previous month. For the multi-unit sector, building approvals dropped 10.9%.
Australia has been under-building new residential dwellings in the past years, for several reasons.
Stringent urban planning policies and land use restrictions (called 'smart growth', 'urban containment', etc.) have created artificial shortages of land for residential development. "An increase in state government zoning regulations is a significant factor driving up the cost of housing", said Reserve Bank of Australia Governor Glenn Stevens.
Tax burdens on builders and developers have aggravated the situation. In New South Wales, government taxes and other charges are estimated to account for about 30% of the price of new houses.
Due to the global credit crunch, developers of large-scale residential projects continue to struggle to secure finance from banks and other lending institutions, despite the improving economic outlook.
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The Australian housing market has made a strong comeback. In the third quarter of 2009, the average established home price index for eight capital cities rose by 4.2% q-o-q, or 3.2% when adjusted for inflation.
This follows a 4.1% rise in Q2 2009 and a 0.7% decline in Q1 2009, according to the Australian Bureau of Statistics (ABS).
In the year to end-Q3 2009, "composition-adjusted" median house prices rose by 6.2% (4.9% in real terms), according to Australian Property Monitors (APM). The dramatic 6.2% y-o-y decline (-8.4% in real terms) in Q1 2009 was something of a 'blip'. Since the peak in March 2008, house prices have fallen by just 2.2%.
"Prices have stopped falling and are on the way up, due to increased investor activity and revived interest from second and third homebuyers who have returned to the market," says REIA president David Airey. "These buyers are selling to first homebuyers who have shown a preference for established homes in seven out of 10 sales."
"It is looking increasingly clear that Australia has avoided the large falls in house prices seen in some other countries over the past two years or so," said Tony Richards of the Reserve Bank of Australia (RBA), the central bank.
"But looking forward, the risk is that we might move towards undesirable strong growth in housing prices." Housing affordability has long been an issue in the country. "We don't want very strong growth in housing prices that would be unhelpful from a social perspective."
Darwin leads the recovery
In September 2009, all the eight Australian capital cities recorded strong annual house price increases. Darwin recorded the highest house price increase of about 12.3% from a year earlier. Melbourne and Canberra followed, with price rises of 8.4% and 7.8% over the same period.
Sydney registered a house price increase of 5.9% in September 2009 from a year earlier. House prices have also risen in Brisbane (5.6%), Hobart (5.4%), Perth (4.4%), and Adelaide (3.7%).
Sydney has the most expensive housing in Australia, with an average house price of AU$569,061 (US$530,001) in the third quarter of 2009, according to APM. Darwin follows with average house prices of AU$528,650 (US$492,363). On the other hand, Hobart has the lowest median house prices at AU$311,366 (US$289,994) .
The history of the boom
Australia's housing market accelerated rapidly from mid-90s to the early-2000s, driven mainly by real housing demand, and supply shortages. House prices rose 148% (100% in real terms) from 1995 to 2004.
To moderate the house price increases, the RBA raised interest rates in 2002 and 2003. By H1 2004, annual price increases had successfully been forced down to zero, but quickly regained momentum in 2005. The house price index rose 2.3% in 2005 (-0.5% in real terms), 9.7% in 2006 (6.3% in real terms), and 14% in 2007 (10.8% in real terms).
To curb inflationary pressures, the RBA raised the key interest rate by steps to 7.25% in March 2008, from a historic low of 4.25% in early-2002
Crash avoided - observers amazed
The strength of Australia's housing market has amazed observers, who had predicted that Australia would suffer one of the worst housing market crashes, because of a perceived house price overvaluation.
Australia has avoided a housing crash due to a combination of reasons:
Severe housing shortage due to a rapidly growing population, and overseas migration from 2004 to 2007;
Preference for smaller household sizes;
Higher lending standards relative to the US;
Record low mortgage interest rates; and
Government incentives for first-time homebuyers (e.g. First Home Owner Grant).
FHOB fuels the housing market
In response to the crisis, the government introduced a huge stimulus package, worth AU$10.4 billion (US$7.24 billion), around 1% of GDP, in October 14, 2008. This included the First Home Owner Boost Scheme (FHOB) which raised the First Home Owner Grant from AU$7,000 (US$6,419) to AU$14,000 (US$12,838) for existing dwellings, and to AU$21,000 (AU$19,257) for newly constructed homes
Due to its success, the FHOB scheme was extended from its original September expiry date till end-December 2009, though the grant amounts were reduced.
The FHOB was very successful in stimulating the housing market. By the end of August 2009, the FHOB had helped more than 153,000 Australians buy their first home. By July 2009, first home buyers had risen 73% from the same period last year.
New home sales rose 11.4% in August 2009 (or by 25% up on last year), from anemic monthly increases of 0.1% in July and 0.5% in June 2009, according to the Housing Industry Association (HIA). Detached home sales rose 11.8%, while apartment sales rose 7.5% in August 2009 from the previous month.
Victoria registered the highest increase in detached home sales of about 21.8%, followed by Queensland (20.9%) and Western Australia (15.1%). On the other hand, sales fell by 11.3%in New South Wales and 2.5% in South Australia.
"A late surge in sales to first home buyers ahead of the step-down in the new home boost, propelled new home sales…[making] August the best monthly result for over three and a half years," said HIA chief economist Harley Dale.
Estimated housing shortage rising
A combination of high migration and weak housing starts is creating a severe housing shortage up. In 2009, the estimated housing shortage was about 130,000 units, up by 55,000 on two years ago, according to BIS Shrapnel.
In 2008, total housing starts fell 3.2%, to 148,420 units. Starts are expected to fall another 12.6% in 2009, according to the HIA, before rebounding in 2010.
Residential dwelling approvals, an indicator of future activity, were flat month-on-month in August 2009. While the detached housing market is strong (buoyed by the First Home Owner Grant), the multi-units market is weak, says HIA's senior economist Ben Phillips.
In August 2009, approvals for detached houses rose 3.1% from the previous month. For the multi-unit sector, building approvals dropped 10.9%.
Australia has been under-building new residential dwellings in the past years, for several reasons.
Stringent urban planning policies and land use restrictions (called 'smart growth', 'urban containment', etc.) have created artificial shortages of land for residential development. "An increase in state government zoning regulations is a significant factor driving up the cost of housing", said Reserve Bank of Australia Governor Glenn Stevens.
Tax burdens on builders and developers have aggravated the situation. In New South Wales, government taxes and other charges are estimated to account for about 30% of the price of new houses.
Due to the global credit crunch, developers of large-scale residential projects continue to struggle to secure finance from banks and other lending institutions, despite the improving economic outlook.
This follows a 4.1% rise in Q2 2009 and a 0.7% decline in Q1 2009, according to the Australian Bureau of Statistics (ABS).
In the year to end-Q3 2009, "composition-adjusted" median house prices rose by 6.2% (4.9% in real terms), according to Australian Property Monitors (APM). The dramatic 6.2% y-o-y decline (-8.4% in real terms) in Q1 2009 was something of a 'blip'. Since the peak in March 2008, house prices have fallen by just 2.2%.
"Prices have stopped falling and are on the way up, due to increased investor activity and revived interest from second and third homebuyers who have returned to the market," says REIA president David Airey. "These buyers are selling to first homebuyers who have shown a preference for established homes in seven out of 10 sales."
"It is looking increasingly clear that Australia has avoided the large falls in house prices seen in some other countries over the past two years or so," said Tony Richards of the Reserve Bank of Australia (RBA), the central bank.
"But looking forward, the risk is that we might move towards undesirable strong growth in housing prices." Housing affordability has long been an issue in the country. "We don't want very strong growth in housing prices that would be unhelpful from a social perspective."
Darwin leads the recovery
In September 2009, all the eight Australian capital cities recorded strong annual house price increases. Darwin recorded the highest house price increase of about 12.3% from a year earlier. Melbourne and Canberra followed, with price rises of 8.4% and 7.8% over the same period.
Sydney registered a house price increase of 5.9% in September 2009 from a year earlier. House prices have also risen in Brisbane (5.6%), Hobart (5.4%), Perth (4.4%), and Adelaide (3.7%).
Sydney has the most expensive housing in Australia, with an average house price of AU$569,061 (US$530,001) in the third quarter of 2009, according to APM. Darwin follows with average house prices of AU$528,650 (US$492,363). On the other hand, Hobart has the lowest median house prices at AU$311,366 (US$289,994) .
The history of the boom
Australia's housing market accelerated rapidly from mid-90s to the early-2000s, driven mainly by real housing demand, and supply shortages. House prices rose 148% (100% in real terms) from 1995 to 2004.
To moderate the house price increases, the RBA raised interest rates in 2002 and 2003. By H1 2004, annual price increases had successfully been forced down to zero, but quickly regained momentum in 2005. The house price index rose 2.3% in 2005 (-0.5% in real terms), 9.7% in 2006 (6.3% in real terms), and 14% in 2007 (10.8% in real terms).
To curb inflationary pressures, the RBA raised the key interest rate by steps to 7.25% in March 2008, from a historic low of 4.25% in early-2002
Crash avoided - observers amazed
The strength of Australia's housing market has amazed observers, who had predicted that Australia would suffer one of the worst housing market crashes, because of a perceived house price overvaluation.
Australia has avoided a housing crash due to a combination of reasons:
Severe housing shortage due to a rapidly growing population, and overseas migration from 2004 to 2007;
Preference for smaller household sizes;
Higher lending standards relative to the US;
Record low mortgage interest rates; and
Government incentives for first-time homebuyers (e.g. First Home Owner Grant).
FHOB fuels the housing market
In response to the crisis, the government introduced a huge stimulus package, worth AU$10.4 billion (US$7.24 billion), around 1% of GDP, in October 14, 2008. This included the First Home Owner Boost Scheme (FHOB) which raised the First Home Owner Grant from AU$7,000 (US$6,419) to AU$14,000 (US$12,838) for existing dwellings, and to AU$21,000 (AU$19,257) for newly constructed homes
Due to its success, the FHOB scheme was extended from its original September expiry date till end-December 2009, though the grant amounts were reduced.
The FHOB was very successful in stimulating the housing market. By the end of August 2009, the FHOB had helped more than 153,000 Australians buy their first home. By July 2009, first home buyers had risen 73% from the same period last year.
New home sales rose 11.4% in August 2009 (or by 25% up on last year), from anemic monthly increases of 0.1% in July and 0.5% in June 2009, according to the Housing Industry Association (HIA). Detached home sales rose 11.8%, while apartment sales rose 7.5% in August 2009 from the previous month.
Victoria registered the highest increase in detached home sales of about 21.8%, followed by Queensland (20.9%) and Western Australia (15.1%). On the other hand, sales fell by 11.3%in New South Wales and 2.5% in South Australia.
"A late surge in sales to first home buyers ahead of the step-down in the new home boost, propelled new home sales…[making] August the best monthly result for over three and a half years," said HIA chief economist Harley Dale.
Estimated housing shortage rising
A combination of high migration and weak housing starts is creating a severe housing shortage up. In 2009, the estimated housing shortage was about 130,000 units, up by 55,000 on two years ago, according to BIS Shrapnel.
In 2008, total housing starts fell 3.2%, to 148,420 units. Starts are expected to fall another 12.6% in 2009, according to the HIA, before rebounding in 2010.
Residential dwelling approvals, an indicator of future activity, were flat month-on-month in August 2009. While the detached housing market is strong (buoyed by the First Home Owner Grant), the multi-units market is weak, says HIA's senior economist Ben Phillips.
In August 2009, approvals for detached houses rose 3.1% from the previous month. For the multi-unit sector, building approvals dropped 10.9%.
Australia has been under-building new residential dwellings in the past years, for several reasons.
Stringent urban planning policies and land use restrictions (called 'smart growth', 'urban containment', etc.) have created artificial shortages of land for residential development. "An increase in state government zoning regulations is a significant factor driving up the cost of housing", said Reserve Bank of Australia Governor Glenn Stevens.
Tax burdens on builders and developers have aggravated the situation. In New South Wales, government taxes and other charges are estimated to account for about 30% of the price of new houses.
Due to the global credit crunch, developers of large-scale residential projects continue to struggle to secure finance from banks and other lending institutions, despite the improving economic outlook.
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