The (delayed) ABS results for the December 2020 quarter showed a strong increase in house prices in Australia. Combined capital cities increased by a robust 3.0% to be 3.6% higher than in the December 2019 quarter. What recession?
Of course there has been a recession and an extremely tough 2020 for many people. However, from the perspective of asset prices, any recession was very short-lived. That can be seen across a range of assets; housing, shares, cryptocurrencies, commodities etc.
In retrospect, 2020 was an unusual pocket of opportunity. Imagine buying Bitcoin or Tesla for a fraction of their current price. And even though less spectacular, there are a range of other investments that would have returned 50, 100, 150% etc. For instance, a less flashy investment, ANZ Bank, I bought at under $18 in September (well after the market bottom), which is now over $28, well over 50% in 6 months.
Getting back on topic, house prices are increasing across the board.
A good time to be property holder, with low mortgage rates and generally rising prices. However, nor is it perfect, with many looking to upsize effectively falling further behind – as e.g. the gap between the cost of 4 bedroom home and 2 bed unit balloons.
On a city basis, Melbourne and Sydney have suffered some indigestion from prior successes. In fact, many who bought at the 2017 top would be left basically breakeven; not a great result given the performance of alternate investments over the last several years.
Hobart has been a superstar over the last few years, such that it is now between Sydney and Melbourne in terms of gains since 2012. I’m expecting some of the ‘cheaper’ capitals continue to perform well going forward. With job mobility improving amid WFH practices, ‘house price arbitrage’ is quite possibly here to stay.
Until next time.