While it's not uncommon for house prices to dip as economic downturns play out, capital city home values have increased by as much as 100% in the five years after the most recent recessions, according to analysis by the Property Investment Professionals of Australia (PIPA).
After examining annual median house price and index data for seven consecutive years, including the start of each recession or economic downturn from 1973 to the Global Financial Crisis in 2008, the data found capital city house prices often increased significantly over the period.
“In fact, looking back over the past nearly 50 years, house prices were higher five years after a recession or downturn each time,” said PIPA chairman Peter Koulizos.
“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.”
Five years after the recession of 1973 to 1975, Sydney median house prices had increased 100.7%, followed by Perth and then Brisbane.
Following the downturn of 1982 and 1983, many capital cities showed growth in the 50% to 64% range, with Melbourne leading the way with median house price growth of 67.7%.
“When it came to the ‘recession we had to have’, Darwin produced median house price growth of 47.3% in the following five years, with Perth the second-place getter again,” Koulizos said.
“Following the GFC, as we all know, Sydney was again the front-runner within five years as the start of its property boom started to take shape.”
While it's fairly standard to see periods of annual house price falls in capital cities, the three most recent economic downturns have shown those price reductions are unlikely to be sustained or prolonged.
“In 2011, every capital city recorded a fall in its house price index, which was simply when the GFC stimulus money ran out,” Koulizos noted.
“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.
“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.”