Past performance and the future

Some property market analysts say that the absence of past performance indicates that an area is overdue for growth, while others assure us that strong past performance offers us the best prospects of continued growth.

They can’t both be right, so I'll explain what past performance actually tells us about the future.

This table illustrates the dilemma facing those experts who rely on past performance.

It shows you the average annual housing price change in our capital cities over the last fifteen years

Analysts relying on strong past performance as a guide to the future could argue that Adelaide and Sydney offer the best prospects of continued growth because they have “stood the test of time” and experienced the highest average annual price growth of all our capital cities over the last fifteen years.

Yet the reason that Adelaide and Sydney have experienced the strongest average annual price growth over the last fifteen years is only because the demand for housing in those cities has almost constantly been greater than the supply.

This could change at any time.

Those experts relying on a lack of past performance on the other hand, could claim that Darwin is “overdue for growth” because housing prices there are the same now as they were fifteen long years ago.

They might even insist that Perth, Canberra and maybe even Melbourne are due for a housing price catch up to those where stronger growth has occurred.

But Darwin, Canberra and Perth have experienced several boom-bust scenarios in the last fifteen years, with demand for housing altering dramatically in response to changing local economic and demographic conditions.

Perth, for example, is currently experiencing a housing boom with prices doubling in the last five years, but this was preceded by ten years of virtually no price growth at all.

Melbourne’s low average annual price growth is a more recent post Covid hangover, with housing prices generally lower now than three years ago.

The past shows us how property markets respond to change

The long term past performance of our major housing markets indicates that they have always responded to changes in population growth, purchasing power and supply in the same way.

So, the only accurate way to predict the future is by analysing and trending those changes.

About John Lindeman John Lindeman has well over a decade of experience researching the nature and dynamics of various types of assets at major data analysts and is a leading property market researcher, author and commentator. For more information visit Lindeman Reports.