The latest housing price figures released this week by the Bureau of Statistics show that Sydney house prices continue to greatly outpace the rest of the nation. So drastically have house prices risen in the harbour city over the past five and half years since the Reserve Bank began cutting interest rates that the affordability problem is now so bad that it almost appears impossible to solve.

A few years ago I was offered work in Sydney, which would have necessitated my moving from Canberra. While the work was attractive I recall rejecting the offer without much thought. Aside from my wife already having a great job, and our kids being well settled in Canberra, moving was never really on the cards because we knew buying a house equivalent to what we owned in Canberra was well beyond our means.

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That was at the end of 2011, when the Reserve Bank began to cut interest rates in order to stimulate the economy. Five and a half years later and any belief I may have had about buying a house in Sydney has gone from “beyond our means” to “beyond any concept of reality”.

It is now 79 months since the Reserve Bank last increased the cash rate, on November 2010 to 4.75%. That run without an increase is 20 months longer than the previous record. It is also 67 months since the RBA began cutting interest rates in November 2011.

In that period Sydney housing prices have exploded in a manner that bears no relation to what has happened elsewhere in the economy. The latest residential housing price data release on Tuesday by the ABS showed that in the past year Sydney house prices grew by 14.4% – the fastest in the nation:

And so far from slowing, that annual growth was actually faster than in the 12 months to December 2016. At best, you can say that quarterly growth in March was down on that observed in December:

The weighted average increase in housing prices for all capital cities was 10.2% – the fastest since September 2015. Such a rise should not have been unexpected. As I have noted, the increase in housing finance suggests that house price growth should continue to increase for another three to six months at least:

But the debate on housing prices really is a debate about Sydney versus the rest of the nation. So dominant is the Sydney housing market that NSW accounts for 41% of the total housing stock in Australia, despite the NSW economy accounting for just 32% of Australia’s GDP and its population:

In December 2011, when the RBA began its round of interest rate cuts, NSW accounted for 34.7% of housing stock – much more in keeping with the size of its population and economy.

But in those past five and a half years Sydney’s house prices have charged ahead of the rest of the nation, and at a rate so out of step with the rest of the economy that housing affordability in our biggest capital city is so bad that even 2011 now looks like some golden period.

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Consider that since December 2011, wages for workers in NSW have risen 13% while housing prices have soared 76%:

And while the growth figures give some indication of how affordability has decreased in the past five and a half years, it is when we look at the median house price in each city that the horrific state of the Sydney market becomes clear.

In December 2011, the median price for an established house in Sydney (using a rolling average to get rid of the seasonal affects) was $566,800. At that time the median price in Melbourne was 13% lower, at $492,400.

But in March this year the median Sydney house price was $928,800 – a rise of 64%. By contrast the Melbourne median price had increased just 31% to $645,000. Rather than being 13% below the Sydney price, the median Melbourne hose price is now 31% lower.

The current median house price in Melbourne was achieved in Sydney back in September 2013, and the $447,000 median house price in Adelaide was the median price in Sydney a decade earlier in 2003:

Now of course, the counter is that the interest rate cuts have made mortgage repayments lower. That certainly is the case for people who already owned a home before the price boom occurred. But while interest rates have fallen, in Sydney the increase in house prices has more than outweighed the benefits of those cuts.

In December 2011, based on a 30-year mortgage taken out on 80% of the median house price at the average mortgage rate of 6.55%, the monthly repayments were $2,881. In March this year, even with the mortgage rate now at 4.55%, because the price of houses has increased so much, the monthly repayment on a median-price house is $3,787:

While home buyers in other cities have seen interest rate cuts lead to lower mortgage repayments on a median-priced home, in Sydney the repayments on a median price home bought in March this year are 31% higher than for a median priced home bought in December 2011:

At this point, things are so dire in Sydney housing, that I can’t see policies such as those proposed in the NSW budget, to cut stamp duty for houses up to $650,000 and to increase the construction of homes, doing anything more than tinkering around the edges.

And to be honest, the NSW government itself agrees – with the NSW budget forecasting stamp duty on residential homes to grow by 5.9% next year – down from the 9.6% this year, but still at a level that suggests improved housing affordability is unlikely to occur in the foreseeable future.