Unlocking the Property Market. Lindeman John

you might be tempted to buy shares or even gold instead, but it is the third finding about how the housing market performs over long periods of time that is the most significant of all and demonstrates why property investment has the edge over other forms of investment.

Housing prices change in accordance with supply and demand

Some of the years since 1901 witnessed extremely high house price-growth, and others none at all, but the overall performance of all capital cities tends to even out the booms and the busts. When we drill down to individual capital cities as figure 1.4 (overleaf) shows, each year since 2002–03 has produced a different highest price performer.

Figure 1.4 : every capital city takes its turn as the highest price performer

      Source: Australian Bureau of Statistics.

      Adelaide's house prices rose by over 25 per cent in 2002 and Brisbane's shot up by more than 30 per cent the next year. Not to be outdone, Hobart's house prices rocketed upwards by 50 per cent the following year. In the next ten years, however, there was little price-growth in any of these three capital cities. Sydney, on the other hand, had virtually no house price-growth from 2003 onwards until 2009, and then was the best performer again in 2013 and 2014. But even including these three best performing years, Sydney's total house price-growth from 2002–14 has averaged only 6 per cent per annum, which is still lower than Brisbane, Adelaide, Perth or Hobart over the same time.

      Although the annual price-growth of all capital cities was close to the long-term annual average, you can see that each city performed quite differently. This is because price booms are rare and they don't last longer than a year or two, being caused by a sudden increase in buyer demand combined with a shortage of stock available for purchase. While such growth spurts are sweet for investors, they are also short because the high price rises in themselves dampen demand and buyers look elsewhere. They take place in all types of housing markets, at any time – and just as the growth rates between cities can vary hugely, so can the growth in the suburbs of each city.