Comparing Previous Growth Cycle with the Present One

In an article for the website Property Update, Cameron Kusher compares the present growth cycle with the property market boom witnessed between 2001 and early days of 2004.

Present growth phase has come at the back of a few really dull years

The first thing noticeable about the present upswing is the fact that it succeeded a few years of real bust so the growth perceived is not equivalent to the growth in real terms. In comparison, the boom witnessed between ‘01’ and ‘04’ did not rally off the back of plateauing prices. If anything, the prices had already begun to rise prior to 2001.

Monthly growth rates

The monthly growth rate this time has been 0.7% whereas during the ‘01’-‘04’ phase it was 1.5%. The statistic becomes even more formidable if you take into account that the ‘01’-‘04’ phase lasted for 46 months and we haven’t seen the 31st month yet in the present cycle of growth.

Sydney and Melbourne

Another standout trend this time has been the stellar performance of Sydney and Melbourne, asserts Kusher. These very cities were among the poor performers during the last growth phase.

Housing credit

Housing credit has expanded over both the growth cycles but this time there is hardly a difference to spot between investor credit and owner-occupier credit. During the previous growth cycle, owner-occupiers took in excess of 60% of the housing credit pie.

You can read the original article here.

I think the most crucial dimension to the data is that the present growth has come at the back of a few years of very low prices. If we read carefully into what the statistic asserts, we may be inclined to think of this growth phase as nothing but a generous correction. The combined capital city growth rate, riding piggyback on the performance of Sydney and Melbourne, has been a smart one. This said, the rate is expected to mellow down in 2015 with Sydney and Melbourne expected to post conservative growth.