In this research note we depict the Purchasing Power Index of the median Sydney property (PPI) over time. This is one of the indicators we use to analyse real estate trends.
The PPI for the most recent calculation period being December 2022, is by default set to one (1).
In the graph, the Sydney median house (blue line) PPI for December 2012 (10 years ago) is 1.56 compared to 1 today. What this means is that today’s median Sydney house is 1.56 times more expensive to buy (based on this measure) than what it was in December 2012. In January 1979, the PPI was 2.78 which was the best time to buy a house in Sydney (since then). And so on.
Another way of looking at this is in December 2012 you could have bought 1.56 Sydney median houses compare to just one today.
The January 2022 PPI is 0.84 compared to 1 today. What this means is that in January 2022 you would have bought just 0.84 Sydney median houses compared to 1 today.
On 12 February 2022 we published a research note concluding, “The PPI in the future will get much, much cheaper than today. This could be achieved by house prices falling, higher inflation, higher interest rates or any combination of these”, which is what actually happened! The Sydney property market peaked in February 2022 and subsequently fell.
The green dotted lines on the chart show that each property cycle the PPI had lower highs and lower lows (i.e., property prices became extremely more expensive over time). Should future property cycles form with higher highs and higher lows then this should be of concern.
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Authored by QED Realty.