Have Sydney property prices doubled in the past seven to 10 years?

It is often said in property circles that house prices in Australia double every seven to 10 years. Prompted in part by the fact that September 2011 marks the seventh anniversary of a relatively sharp downward correction in Sydney housing prices following a boom which peaked around 2003, we thought we would test that proposition by analysing all reported September 2011 sales over $1 million of Sydney houses or units purchased in the last 10 years to see what capital gains or losses were made by the vendors of those properties.

In carrying out this exercise, all transfer costs such as stamp duty and holding costs including interest and land tax have been excluded. We are therefore dealing with raw or gross figures. Also excluded are properties which, according to Council searches and other research carried out by Sydney buyers’ agents, Curtis Associates, derived capital gains partly as a result of re-building or substantial renovation.

The results, in ascending date order, are presented in the following table and they make interesting reading:

Trends:

• Of a total 37 vendors, 92% made a capital gain.
• Conversely and despite ten years’ worth of stock market gyrations (including the GFC) as well as interest and exchange rate fluctuations, only three vendors or 8% of the total number analysed incurred a capital loss.
• Two of three properties whose vendors incurred a capital loss were in the eastern suburbs.
• Cyclical buyers derived the lowest average annual capital gains across all suburbs on re-sale. Proof of that is the 2% average annual capital gain derived by the vendors who bought during the pre GFC credit excesses of 2007.
• Counter cyclical buyers derived the highest average annual capital gains across all suburbs on re-sale. Proof of that is the 6.4 % average annual capital gain derived by the vendors who bought during the GFC in 2008 and, albeit based on only one sale, the 14% average annual capital gain derived by the vendor who bought in the fallen 2004 Sydney property market.
• The 11 properties whose vendors derived average annual capital gains above 6% were spread across Sydney with the exception of the upper north shore. Three of those 11 were on the lower north shore; two in each of the inner west, Canterbury Bankstown and on the northern beaches and one in each of the Sutherland Shire and eastern suburbs.
• Of those 11 properties, 10 were houses and only one was a unit.
• Contrary to another property adage that Australians sell their houses on average every seven years, 59% of vendors sold within seven years of buying their property. The future will tell whether or not that trend was an aberration influenced by profit takers who purchased during the GFC.

Conclusion:

Just as the trends discussed earlier in this article in relation to cyclical and counter cyclical buyers demonstrate that ‘timing the market’ is important, so too is ‘time in the market’. In the latter regard, it is difficult to ignore the generally wide divergence between the 8.25% average annual capital gain derived by those vendors who sold their properties after ten years and the average annual capital gain derived by all other vendors. On this evidence at least, it seems therefore that the answer to the question posed in the title to this article, at least over $1 million,  is ‘yes but closer to 10 than seven years.