Riding the Boom
The Power of the House Price Index
If you’re interested in Australia’s booming real estate market, the ABS can help you keep track of house prices in every State and territory. In fact, if you’d been doing it over the past few years, and you were prepared to move with the market, you would be surprised by the results!
Housing Related Publications
The ABS has a large range of housing related information freely available from its website (www.abs.gov.au) that can be used to keep track of the fluctuations in Australia’s Housing Market.
Building Approvals (cat. no. 8731.0) data comes out monthly and gives breakdowns by regions down to local government area. It also splits out private and public housing and the types of dwelling units provided. Data covers the number of approvals and their value.
Building Activity (cat. no. 8752.0) which presents statistics relating to the construction of new buildings and alterations and additions to existing buildings.
Dwelling Unit Commencements (cat. no. 8750.0) provides data on the number and value of building commencements through to completions. It is available at state level.
Housing Finance (cat. no. 5609.0) presents statistics of housing finance commitments made by significant lenders. This includes secured finance commitments for the construction or purchase of owner occupied dwellings and finance commitments for the construction or purchase of dwellings for rent or resale (investment housing). Also included are the outstanding values of housing loan assets to individuals held by lenders at the end of each reference month.
Producer Price Indexes (cat. no. 6427.0) contains a specific index covering materials used in house building and is issued on a quarterly basis for each capital city.
The Housing Occupancy and Costs collection (cat. no. 4130.0.55.001) relates these variables to characteristics of occupants and dwellings such as tenure, family composition of household, dwelling structure, age, income etc.
The Power of ABS Housing Statistics
If you’re an alert real estate watcher, you would have realised that the ABS began tracking quarterly house movements with its House Price Index (cat. no. 6416.0) in the June quarter of 2002.
If you were happy to move interstate to take advantage of the rising markets around Australia – and timed your buying and selling well – you could have used ABS statistics to assist you to make the most of the real estate booms occurring in different states and territories.
If you owned a house in Sydney, you would have noticed that in the March 2002 quarter, the median house price for Sydney was $422,000, according to the Real Estate Institute of Australia.
According to the House Price Index, house prices rose 7.5% in Sydney for the June 2002 quarter, resulting in the worth of that house rising to $453,650 in value. If you were to retain this house until March quarter 2008, it would have been worth $562,637, an increase of 33.3% or $140,637.
But what if, back in March 2002, you had assumed that the Sydney housing market, which had been the nation’s fastest growing, was due to come back to the pack? And you had also had the good foresight to pick the next emerging market?
If you had picked it right you could have sold out of Sydney and moved through five state and territory capital city markets over a six year period and seen the value of your investment rise by approximately 262% or roughly $1,106,009.
Let’s assume you were literally on the money with your calls on when to get out of one market and into another and follow the trail.
Firstly, you would have correctly deduced that the Canberra established house market would overtake the Sydney market in growth terms, thus sold your Sydney house in June 2002 for $453,650. Subtracting roughly 7% to cover costs such as stamp duty and agent’s fees would have left you with around $440,041 to reinvest in a Canberra house of that value.
By remaining in the Canberra market until December 2002 and then selling, you could have increased the value of your asset to $495,361. This represents only a modest return, but nonetheless positive, with fees and charges eating into most of your profit.
Continuing your good run, you sell up in Canberra and with approximately $460,686 left after subtracting fees and charges, purchase a house of that value in Hobart.
The Hobart market shows strong growth over the next 18 months and you could have retained your asset there until in June 2004 and then sold it for $776,393.
After paying out fees and charges you would have had roughly $722,045 remaining which you could have invested in an established house in Darwin. If you kept your Darwin house until March 2005 you could have sold it for approximately $842,149.
From here, you could have purchased an established house in Perth with roughly $783,180 remaining after taking out costs. If you were to hang on to this Perth house you would have see some spectacular gains in value. Between March 2005 and December 2006 the Perth house market rose 67% and your house would have risen to roughly $1,309,930 in value.
Logic tells you the Perth market must abate at some point, so you sell out and you take your remaining $1,218,235 and invest it into a house of that value in Melbourne. If you were to hang on to your Melbourne house until March 2008, it would have been estimated to be worth $1,559,193. Time to realise your profit which, after selling this house, leaves you $1,528,009, an increase of $1,106,099 from the original price of the house that you bought in Sydney some 6 years before.
If you had lived in each of these houses there would have been no tax payable. If you had operated as an investor and paid on average 25% tax on the profits made from these transactions you would have made $830,000.
Though Brisbane and Adelaide don’t feature in the money trail above they also had periods of strong growth, though not as high or sustained as other markets.
Client Liaison & Information Services,
ABS Western Australia.