"An analysis undertaken by the Property Investment Professionals of Australia (PIPA) demonstrates the likeliness that the Australian property market will make a positive recovery post COVID, supported by data from previous economic recessions. Koulizos states, '…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.'" - Matthew Lapish, Senior Investment Analyst
New research and analysis by the Property Investment Professionals of Australia (PIPA) has found that house prices increased by as much as 100 per cent in the five years after the most recent recessions.
The research, conducted by PIPA Chairman Peter Koulizos, analysed annual median house price and index data for seven consecutive years including the start of each recession or economic downturn from 1973 to the GFC.
The data found that five years after each of the recessions or economic downturns over that time period, capital city house prices often increased significantly.
“In fact, looking back over the past nearly 50 years, house prices were higher five years after a recession or downturn each time,” Mr Koulizos said.
“Some locations performed better than others, mostly likely due to local economic factors after each period.
“However, 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 per cent, followed by Perth and then Brisbane, the PIPA research found.
However, a few years later, following the economic downturn of 1982 and 1983, it was Melbourne who was leading the property pack with median house price growth of 67.7 per cent, with many other capital cities not far behind with growth in the 50 per cent to 64 per cent range.
“When it came to the ‘recession we had to have’, Darwin produced median house price growth of 47.3 per cent in the following five years, with Perth the second-place getter again,” Mr 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.”
Mr Koulizos said that over the three most recent economic downturns, there were periods of annual house price falls in many capital cities, but the price reductions were never sustained nor prolonged.
“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 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.”
PIPA. (2020, May 18). Research shows property resilience after past recessions. Retrieved from https://www.pipa.asn.au/research-shows-property-resilience-after-past-recessions/