Newcastle housing on a par with Melbourne as prices keep rising

The ABS says $8.9trillion of Australia's $15.3trillion net worth is in housing.

IT was John Howard, in the modern era, who convinced the Australian electorate that a booming property market made the nation wealthier.

He was correct, after a fashion, but for the bulk of households who either rent or only ever own the home they live in, these long decades of housing price rises are as much a symbol of household debt as they are of accumulated wealth.

In the Lower Hunter, prices have risen so spectacularly in the past few years that property in Newcastle and Lake Macquarie is now, by some measures, on a par with Melbourne.

RUNAWAY TRAIN: As the Reserve Bank says, 'purchases of established dwellings are not captured in the CPI, because they are treated as transfers of existing assets. As a result, the price of established dwellings has no direct influence on CPI inflation.' While this might suit economic theorists, it means governments are able to say the cost of living is rising only slowly, but the biggest purchase in most people's lives, their home, is not included in the data. Picture: Wikipedia from RBA

As we report today, the median price of a dwelling (apartments and houses) has risen two per cent in the past month alone to reach $787,000, compared with the $780,000 recorded for the "Athens of the South".

ONE MONTH AGO: Newcastle closing in on Melbourne

Many factors contribute to build a housing market but it is now generally accepted that record low interest rates are the main driver in pushing up prices, and not only in Australia.

Inquiries are regularly called to investigate housing affordability, and policies promised to moderate costs.

But a look back across the 30 or more years since housing prices began to take off shows a series of usually rapid rises, interspersed with more stable plateaus.

The result has been the median price of a Sydney house rising from $185,000 in 1990 to something like $1.5 million this year.

The percentage increases may have been even greater in Newcastle and Lake Macquarie, where our industrial reputations kept prices lagging the Central Coast on one side and Forster/Tuncurry on the other, until the BHP steelworks and the Pasminco smelter were shut.

STEEP INCLINE: This graph of national median house prices misses the recent big increases since 2018 but shows the scale of the rises since the mid 1990s, with a five-fold increase. Compare this against household incomes, below. Picture: CoreLogic

If wages had risen at the same rate as housing, affordability would not be the pressing concern that it is today.

But they have not.

Two-income families have it easier, but their spending power, in turn, tends to push up prices, making it harder for households with a stay-at home parent.

In September, the Australian Bureau of Statistics put the value of residential dwellings in Australia at $8.9 trillion, or 60 per cent of our national net work, calculated last week at $15.3 trillion.

Both in real dollars, and as a share of the economy, we have a lot riding on the housing market.

Little wonder central banks worry about a return to "normal" interest rates after years at Global Financial Crisis "emergency" levels.

ISSUE: 39,711

ABS National Accounts

ABS Housing Index

SLOWER CURVES: Household income growth from 1995 until 2017 from the Commonwealth's Australian Institute of Family Studies shows only modest growth. The biggest increase is for a couple with children, where income almost doubled over that time. Yet all measures of housing prices over the same time saw an increase of four to six times or more.