How 2021 became the most epic boom in my lifetime.
I don’t think most people realise how epic 2021 has been from the perspective of property prices.
I mean, we all know that property prices are booming. It’s front-page news right now.
And not to toot my own horn too much, but this is exactly what I was predicting from the early days of Covid.
I didn’t know how the pandemic was going to play out, but I believed that at some point we’d get on top of it, and in the meantime, we’d have super cheap interest rates, money printing and lots of support for first home buyers.
And that’s exactly what we saw.
And the results were predictable too. House prices boomed.
When you’ve got that much money pumping into the system, a house price boom was inevitable.
So there’s a little tooty-toot.
That said, there were a couple of things that surprised me. The first was how shallow the correction was. In the end I think we barely nudged a 5% pull back.
And that’s because mortgage holidays kept any distressed stock from coming to the market, and that’s where panic-discounting normally happens.
So the pull=back was mild.
On the other side, I was surprised at how quickly and how ferociously property prices bounced back. I knew it was coming, but the speed was still surprising.
And in the end, we’re closing out 2021 with house prices growing at 22% a year.
22%. That’s massive.
In fact, it makes it the second biggest boom in 150 years. This is what the long run chart looks like.
You can see that the only other time we got passed this was in 1989, when prices were growing at 29%.
(We can kind of ignore the spike in 1950, as this was war-time price controls coming off, so it’s a totally different kettle of fish.)
So yeah. It’s big.
And when you look at the index levels, you can see just how quickly things are accelerating at the end there. It’s going exponential, and it’s not done yet.
It’s worth noting there too that both capital city and regional prices are on the same rocketship. That’s kind of unusual. It doesn’t happen all that often.
But it’s also perfectly predictable when you remember that super-cheap money is a nation-wide phenomenon.
And when you break it down by regions and by capital city, you can see it’s a remarkably consistent story.
Pretty much every capital city in the country is growing at 15%-plus right now.
And while the market is heating up and getting hotter, there still isn’t a lot of stock on the market, and that shortage is helping drive FOMO and even higher prices.
New listings are coming back, and are running around normal levels:
However, properties are selling like hot-cakes, and not staying on the market for long. The measure of days on market, shows that the national market is very quick right now.
The regional story is kind of phenomenal. Pre-covid it took about 60 days to sell a house. Now it takes just 25. That’s amazing.
Anyway, because we’re churning through stock faster than it can come to market, the total stock of houses – total listings – remains well down on historical levels.
And this is why competition between buyers is so hot right now, and why prices just keep pushing higher and higher.
The other interesting thing in this picture is that we close the year with rental prices growing at over 9% – on of the fastest rates on record.
This feeds directly into house prices, since asset prices reflect the yield (=rental return) of the asset.
So the rental boom is compounding the buying boom, and that’s why the boom of 2021 has been one for the ages.
And the thing is – the really amazing thing is – we’re not done yet.
2022 is coming and it’s going to be huge.
More on that on Monday.