The final word on the 2011 property investment markets

According to Craig James, the chief economist at Commsec, the property doomsters have basically nothing to report.

He explains that now that the final data on residential property prices for 2011 has been published by RP Data and Rismark International, it’s worth spending some time looking at the results.

Overall, capital city dwelling prices fell by 3.6% in 2011 after rising by 5.1% in 2010 and rising by 12.1% in 2009.

A soft landing after the boom

So it looks very much like a ‘soft landing’.

Prices were pumped up in 2009 by super low interest rates and government incentives for first home buyers, so a correction was clearly on the cards as demand and supply moved into balance.

And at the end of 2011 it looked like the correction was nearing completion with prices up 0.4% in November and easing just 0.2% in December,

Apartments outperform

And for the fourth straight year units outperformed houses.

Over 2011 unit prices in capital cities fell by just 1.5% while house prices eased by 4.3%.

The gap between house and unit prices has now narrowed to just over $86,000 – the lowest level in 5½ years (since May 2006).

Generation Y buyers are clearly expressing their preference for smaller dwellings with other evidence suggesting they want to live near their workplace, as well as restaurants, cafes and entertainment venues.

What about regional Australia?

Regional centres outperformed capital cities in 2011 with dwelling prices down 2.9% over the year, versus a 3.6% fall in capital cities.

And Sydney was the best performing capital city with prices down just 0.3% in 2011. Still, the out-performance merely represented partial catch-up after years of under-performance.

Over the past six years Sydney dwellings grew by 3.6% a year – the lowest gain of any capital city – short of the 5.8% average gain nationally and well short of gains by Darwin (12.4% per annum) and Perth (8.5% per annum).

Despite the fall in dwelling prices, total return on dwellings grew by 0.8% in 2011, out-performing shares with the All Ordinaries accumulation index sliding by 11.4% over the year. But returns varied from +4.5% in Sydney to -2.3% in Melbourne.

The median dwelling price nationally was $450,000 with little difference between Canberra ($488,000), Sydney ($485,000), Melbourne ($462,000) and Perth and Darwin ($450,000).

A combination of rising household income and lower housing prices has meant that housing affordability is now at the best levels in over eight years (since 2003).

Another interest rate cut this week will boost housing affordability even further.

Where will that leave the doomsters? Basically with nothing to report.


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit

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