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Stocks Shading Houses

The Year has ended with the Australian stock market (All Ordinaries price index) up 22.6% for the calendar year, the biggest rise since 1993. At the same time house prices have started dropping from the bubble conditions of 2001-2003. Based on the latest medians released by REIA to September quarter 2004 the latest 1-year change for Australia is 2.0%. This is the lowest rise since 1995 and far from the heady rise of 21.7% in 2002.

For house prices, the latest quarter’s figures from REIA show big falls in prices from June quarter figures in Brisbane (down 14.3%), Sydney (down 8.7%) and Canberra (down 5.9%). Some of this quarter’s percentage change may be due to change in methodology on commencement of a data collection joint venture between REIA and Mortgage broker, Mortgage Choice. From September quarter prices are taken from contract exchanges rather than settlements. Whilst this may detect price trends earlier, it is a less robust approach for long term data as there would appear to be no adjustment for contracts which do not proceed.

FinDem's data series in Graphing in the Research Centre have now been updated for the above latest house price and stockmarket data. Try some different rolling periods for houses and stocks and you will see how long term you need to think in investing in these areas to avoid getting burnt by bubbles.

Posted Saturday, 1 January 2005


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