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Have you ever wondered exactly what data you could have seen to know that COVID boom was happening? Or what about the start of the 2013 property boom in Sydney and Melbourne? In this episode, I'll explain the triggers behind the last four property booms Australia experienced, and more importantly, the triggers you need to watch to give you a clear picture of when the next boom could be here. I'm Joma, the Senior Research Analyst at InvestorKit, and I'll see you next time. Now let's get into it.
When we look back into history, in the past 30 years, Australia has experienced four major property booms. The first happened between 1996 and 2003. It was driven by several factors, interest rates stabilizing, investor confidence recovery, and most importantly, the introduction of the capital gains tax discount. Key booming areas at that time included Sydney, Melbourne, Brisbane, basically the major capital cities across Australia. The second boom happened between 2003 and 2010.
It was mainly driven by the rising income in the mining sector, China's growth driving resource demand, and limited supply in many regional towns. In this boom, the smaller states including Queensland, South Australia, Western Australia, and Northern Territory benefited the most. The third boom we saw was the boom mainly happened in Sydney and Melbourne between 2013 and 2018. These two cities' property markets are in general sensitive to interest rates. So when interest rates came down at the time, demand surged.
And on top of that, we were also looking at the strong investor from both inside Australia and overseas. Plus, without significant growth in the 2010s, Sydney and Melbourne's house market at the time were actually relatively affordable. And then the fourth one we all remember is the COVID boom between 2020 and 2022. It was driven by ultra-low interest rates, loosened lending policies, affecting supply chain issues, limiting incoming supply, and a big drop in established supply levels, especially in the regional areas. COVID boom benefited almost every city, every region across the country, leading by New South Wales, Victoria, and Queensland, and later on South Australia, Western Australia, and North Queensland followed.
One thing to emphasize here is that all these drivers I've talked about are all macro-level drivers. While the booms were happening, at a micro-level, there's also a lot happening locally. And these micro-drivers sometimes can be more important than the macro-level drivers. So when we do research and analyze a market's performance, it is important to consider both macro-level influencers' drivers as well as micro-level drivers. And now, the next question, what will drive the next boom?
Before answering this question, we actually want to see where we are right now. As of early 2026, we are still facing a chronic nationwide supply crunch. Established supply level is still around 30% lower than where it was six years ago. Population has increased massively over the past two, three years, but incoming supply is not really catching up. The building approval rate of new dwellings has been increasing since 2024, but it is not increasing fast enough.
According to the state of our housing system report, Australia will be facing an incoming supply shortage from now to 2029 at least. By incoming supply shortage, I mean incoming supply not be able to catch up with the incoming demand. Second, affordability has become the largest constraint of growth. During the COVID boom, almost all cities' house prices went up dramatically. And after 2022, as our interest rates went up and stayed high, house prices in the previously relatively affordable markets further went up.
Many markets in Perth, Adelaide, or Queensland, their house prices went up by 50% to 70% or even higher in just three years because of their affordability. So now, if we look at house prices nationwide, it's actually hard to really see affordable markets. And on the other hand, interest rates are expected to stay high, meaning that our borrowing capacity will still be limited and affordability would continue to drive growth in the coming year. And in terms of government policy and buyer sentiment, most of the government assistance schemes are for homebuyers, especially first homebuyers. But for investors, there are limited policies.
Buyer confidence has improved over the past year, but it's still not recovered to the same level as where we were five, six years ago. Homebuyers are driven by affordability, while investors are driven by both affordability and yield. It might be surprising you, but we could be seeing a boom as soon as this year, 2026. Here's why I'm saying that. A property boom is not necessarily a COVID boom, where house prices nationwide would be surging by 20%, 30% per year.
If property prices are rising almost nationwide with 8, 9, 10, or even higher growth rates, that can be defined as a boom because that actually doesn't happen often. And in 2026, we're seeing a potential of experiencing that. The affordable regions are retaining their growth momentum because of the consistently high interest rates. And at the same time, the slightly less affordable markets, after a few years of correction, are showing clearly signals of market pressure increase. For example, the middle ring areas in Perth, Adelaide, Brisbane, Melbourne as a whole, and Sydney's middle ring and outer ring areas, we're seeing listings dropping, days on market dropping, and at the same time, rental market being consistently tight.
So when both of these segments are moving fast, we will very likely see healthy, above average growth in many cities across the country. And that can be defined as a boom. It's just not a massive boom. Just before we finish, while we might be seeing another boom in 2026, it doesn't mean that we have to wait for a boom to start investing or to succeed in property investment. Actually, a lot of markets have grown very well outside of booms.
I'll give you some example. Greater Perth, from June 2022 to November 2025, after the COVID boom, has achieved a 13. 7% annualized growth. Mount Gambier in South Australia at the same time has achieved a 14. 1% annualized growth.
In North Queensland, Townsville, after the COVID boom, has achieved 14. 8% per year growth. These cities have all achieved their own localized boom outside the commonly considered national boom. So instead of waiting for a national boom, it's more important to try and identify local booms or localized strong performance markets through identifying strong fundamentals, including strong demand and supply shortage, and localized micro-level drivers, such as affordability, infrastructure improvement, lifestyle attractiveness, and growing job markets. So to summarize, the last four booms we've seen in the past 30 years were triggered by various macro-level drivers.
And moving forward, we are likely to see another boom in 2026 because of the ongoing supply shortage, the continuously high market pressure in affordable markets, and the recovery in markets that are not considered as affordable. And more importantly, it's not necessary that we have to wait for a boom to succeed in property investment. If we keep monitoring localized fundamentals, including demand, supply, and consumer confidence, it is actually not hard to identify good opportunities outside national booms and achieve fast portfolio growth without waiting for the next opportunity. If you have any questions, please leave your comments below. I'm Junge, the Senior Research Analyst at InvestorKit, and I'll see you next time.
