This paper presents historical trends in housing prices, with a particular focus on the supply and demand factors in NSW that have contributed to the strong price growth over the past two decades.
Introduction: In the last few decades, house prices in Australia have risen significantly faster than average household incomes. Most of the increase in real house prices occurred in two episodes, in the late 1980s boom and the subsequent boom in the late 1990s and into the previous decade. While this growth has generally been broad-based across Australia, Sydney has been especially susceptible to rising house prices in recent years.
Because of these price outcomes, the Australian property market can be characterised as a tale of the housing “haves” and the housing “have-nots”. Typically, the “haves” purchased their home many years ago when prices were far more affordable. This group of home owners have since experienced significant capital gains, which over time and in certain instances, have been used to purchase multiple properties. This created unprecedented wealth accumulation through the 1990s and 2000s. The “have-nots” are typically renters and prospective first home buyers who face the highest rates of housing stress and the greatest affordability constraints.
This briefing paper will present historical trends in housing prices, with a particular focus on the supply and demand factors in NSW that have contributed to the strong price growth over the past two decades. In doing so, it will emphasise the combined effects of strong underlying demand drivers (such as population, income and employment growth); a shifting composition of housing demand; and a subdued housing supply response in contributing to the price growth in Sydney and NSW. By assessing the key indicators of affordability, the paper will discuss the implications of rising house prices for affordability, and in turn, on wealth accumulation and home ownership rates across different age and demographic segments in NSW and Australia.
It should be noted that the analysis in this paper will largely focus on trends in house prices, ownership and affordability as it relates to NSW. Data limitations in certain instances prevent analysis at a State level; where this is the case, analysis is conducted at a national level. While this paper discusses certain policies with reference to statistical trends, it does not conduct in depth policy analysis in terms of potential causes and responses to housing affordability in Australia; this is beyond the scope of the research.