CHART: Real house prices in most Australian capital cities have actually declined in the last five years

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Much has been written about the boom in Australian house prices, driven by record low interest rates, more people buying for investment and pent up demand.

However, analysis by the Housing Industry Association (HIA), representing some of Australia’s biggest some builders, shows that the price rises haven’t been that big when looked at in terms of real rises, adjusting for inflation, and the last five to ten years.

This chart below illustrates real dwelling price growth in each capital city over five and ten year periods:

The real surprise is that real housing prices declined in all but two of the capital cities over the last five ears.

“Sydney’s recent dwelling price growth takes place against the backdrop of relatively subdued price growth over the previous decade,” the HIA says. “In the ten years to December 2014, Sydney prices increased by a relatively modest 16% per cent in real terms.”

The price rises in Sydney don’t look that steep when viewed over five years. However, the last 12 months has been stellar, as this chart shows:

In the year to March 2015, home prices rose fastest in Sydney (13.9%), followed by Melbourne (5.9%) and Brisbane (2.7%). Prices actually declined in Perth (-0.1%); Hobart (-0.3%); and Darwin (-0.8%).

Sydney housing is still expensive, compared to the rest of Australia.

When looking at the price to income ratio, or the ratio of median dwelling prices to average annual earnings, you need more than seven years income to buy a home in Sydney, as this chart shows:

The price to earnings ratio is at a record high for Sydney although it is at a similar level to a decade ago, with the price to earnings ratio at 7.34 in February 2005. Nationally, the ratio has increased from 5.17 to 5.43 over the past ten years.

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