Australia Leads World in House Price Recovery
The previous world leader in house price growth rates has officially relinquished the title to Australia, according to an economic report released by the Canadian bank Scotia bank. The report found that Australia had now taken over the fastest growing property crown from Canada, who has been relegated to second place.
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Twelve of the main developed countries in the world were assessed during the survey that sought to find the country with the best recovery of residential house prices since the deflationary effects of the Global Financial Crisis (GFC). Australia took the title from Canada in the first quarter of 2010 despite interest rate increases taking place at the time. The Reserve Bank of Australia (RBA) had previously lowered interest rates to combat the worst effect of the GFC but said at the time that it would return rates to a more normal level as the economy recovered.
Australia was declared the world leader in property price recovery after posting a first quarter housing price growth rate of 17.1 percent in 2010 compared that of 2009.
Scotia Economics senior economist, Adrienne Warren, said that Australia’s steady boom in economic recovery and an aggressive labour market, have contributed to Australia’s success in realizing increased property prices and sales.
The Scotia bank report said the Australian result far outweighs the 11.4 percent increase in house prices in the previous quarter which was arrived in a climate of affordability, generally low interest rates and first home buyer incentives such as the ‘boost’ payment (that has since been discontinued). Although all these factors would have set the foundation for the outstanding result obtained in 2010. Spain came out of the survey as the weakest country with a decline of 6 percent in their property prices across the board during the first quarter of 2010 when compared to the first quarter of 2009.
The most noticeable aspect of Australia’s success on the world recovery stage was that the increase in house price growth rates occurred while the RBA was increasing interest rates and while most property watchers were screaming that any further increases would stifle continuing growth. Australia was the first of the developed countries to raise interest rates following the economic collapse of 2008/9.
When the GFC became the main economic topic among the world’s most developed countries in 2008, governments of all political beliefs became fearful of their own economies. The property collapse in the USA was the most frightening and the economies of Europe, including that of the United Kingdom braced themselves for what was to follow. The Australian government also feared the worst and began to take immediate action to lessen what the most damaging effects, such as unemployment would have on the Australian people. This feeling was borne out as some of our largest mining companies began laying off thousands of mining workers because of the perceived slow down in the Chinese market for our resources. This belief was brought about by the fear that Chinese trade with the American and European economies would decline drastically.
Australia recovered from GFC faster than any other developed economy
The Australian government responded by instigating an economic stimulus plan that was designed to keep people spending. Part of this plan included a stimulus for the building industry including that of building houses. A ‘boost’ payment was added to the First Home Buyer Grant scheme and the RBA began a series of lowering interest rates. The plan worked and the building industry thrived, first home buyers brought new homes in their droves and to top it all off the Chinese Government decided to embark on a massive internal expansion program that meant that it still required Australian minerals, not just at previous levels, but more, much more.
Australian confidence returns
Confidence started to return to the Australian people as they realized that the measures taken by the government and the RBA had protected them from the worst aspects of the GFC. While the USA were still fighting to stave off a complete collapse of their banking system, the Greek government was collapsing under the weight, Spain was not looking much better and Ireland had to finally accept a hand out from the European community, not to forget Britain who’s change of government meant its people had accepted the need for drastic cuts to be made in its public spending budget, Australia was riding home safe and sound on the back of China and the timely measures taken by the government and the RBA.
The RBA has slowly returned interest rates to a more ‘normal’ level to better reflect the Australian economy and the Federal Government has withdrawn the First Home Buyer Grant ‘boost’ payment. These measures had helped slow demand for housing later in 2010, resulting in world finance experts stating that Australian homes have now become the world’s least affordable. Although many Australian housing commentators may agree, the slowdown in growth in the latter half of 2010 has set the stage for further growth in 2011, especially the latter half.
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