House prices in the June quarter fell slightly off the back of three interest rate rises and the changes to the capital gains tax discount and negative gearing. But prices remain extremely high.
In the June quarter the total value of Australia’s housing fell $34bn. Sounds like a lot? In percentage terms it was just 0.3%. That’s because in the June quarter the total value of Australian housing was $12.18tn. And here’s the kicker: that is $948bn more than it was a year ago.
The horror warnings about Australia’s “collapsing” housing market really are quite stupid – and very much in bad faith.
That bad faith began before the budget when vested interest groups and the opposition suggested the capital gains tax (CGT) discount and negative gearing had no impact on housing affordability and cutting them would not do anything to house prices. Now they are to blame for prices falling!
Those vested interests have been loudly crying about the fall of house prices and the “brutal” tax changes.
On Tuesday the latest total value of dwellings (houses and apartments) figures provided some much-needed data on the idiocy of the debate.
These latest figures only go to the end of June, so we have yet to see an entire quarter under the new rules, but they do give some insight.
There was a fall in the average dwelling prices in the June quarter – 0.7% across Australia. Although that is very much affected by the 2.4% fall in New South Wales prices and 2.1% drop in Victoria. Prices still rose in all other states except the ACT:
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The size of the housing problem is clear when you ponder that even with that 2.4% fall in NSW, which took average dwelling prices from $1.337m to $1.305m, they are still 2% higher than the $1.28m price they were a year ago.
In every single state the average dwelling price was higher in June this year than a year ago:
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And even worse is that over the past six years (since the pandemic), only Victoria has seen house prices grow less than household income:
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Because these figures include prices from April as well as after the budget in May and June, clearly they don’t register the impact of the tax changes. This may mean that the median house price in Adelaide does not hit the $1m barrier that Perth, Brisbane, Canberra and Sydney have all reached.
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But here’s a juicy statistic to chew: in Adelaide, Perth and Brisbane, the median price of houses has more than doubled in six years.
Just think on that. Yep, nice, steady Adelaide, historically the cheapest capital city on the mainland to buy a home. Back in June 2020, half of the houses sold in the city of churches went for less than $487,500. In the June quarter of this year, you needed a bid of at least $975,000 to have a chance of buying a median-priced house.
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And sure, the percentage growth of house price in Sydney over the past six years was not as large (a mere 56% jump compared with Adelaide’s 100%, Brisbane’s 111% or Perth’s 112% increase), but the median price of a Sydney house in the June quarter this year was $532,600 more than it was six years ago.
Yes, the median price fell from $1.55m in March to $1.49m in June, but is anyone sauntering around Pitt Street chatting about how cheap the harbour city has become?
Whenever we hear anyone, whether they be an economist seeking an AFR column or a wannabe comedy-influencer seeking a spot on Sky After Dark, talking about the fall in house prices and the end of time, we really do need to calm the hell down.
As I noted last month, the “scary” projections about how far house prices would fall would take prices in in Sydney merely back to 2023 levels. In Brisbane the projected fall wouldn’t even get you back to the price they were at the end of last year!
Currently the average dwelling price across Australia is $1.1m – if prices were to take a 10% fall from the March 2026 peak, as the Commonwealth Bank has suggested, that would mean prices would go back to where they were at the end of 2024.
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The good news is because household incomes have been growing since 2024, that 10% price drop would take the value of an average dwelling in Australia from being equivalent to 16.9 years of average household disposable income to 15.4 years.
That is marginally higher than it was in the middle of 2021.
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And what were people saying about housing back in 2021? Well, I wrote a column talking about the howl of despair of those whose housing dreams were being dashed.
The changes in the budget are working as expected and desired. And if anyone thinks they are about to destroy the wealth of Australians, they should think back to 2021 and remember that no one thought housing was cheap then.
• Greg Jericho is a Guardian columnist and chief economist at the Australia Institute
