Australian house prices soar by 500% over the past 25 years

Australian housing prices have soared by more than 500% over the past 25 years but while capital values have grown, yields have fallen to all-time lows.

Real Estate Institute of Australia (REIA) President, Adrian Kelly said housing investors have been driven more by expected capital gains rather than rental yields.

According to data from REIA, the median price for Australian housing inflated from $160,000 in 1996 to $825,000 in 2020. Concept Of Property Real Estate Investment With Houses Placed On Top Of Coins

It’s a tale of two cities with other dwellings, such as units and apartments seeing capital values increase by just over 400% in comparison however these assets produce higher yields.

The data shows that over the past five years, housing grew by 25%, from a median of $683,000 to $825,000 while other dwellings rose by 10% to $600,000.

Mr. Kelly said that over the 25-year period, Australian housing yields tightened from 5.1% to 2.9% while other dwellings have recorded a drop in yields but not as dramatic, falling from 5.2.% to 3.7%,” he said. 

“Houses in Darwin have the highest return averaging 4.2%. In 1996, housing investments in Darwin were yielding 6.4%.

“Melbourne and Sydney have always had the lowest yields both falling from around 4% in 1996 to just 1.8% in 2020.

“The pandemic saw Melbourne and Sydney experience rising vacancies with Melbourne now the highest in Australia at 5% while Sydney is currently at 3.7%,” he said.

Mr. Kelly said that there has been a decline in investors in the market in recent times particularly as concerns have emerged with moratoriums on evictions and rising vacancies.

The increasing vacancy rates had made residential property less attractive as a proposition for investment, particularly in inner Sydney and Melbourne.

“Despite rising vacancies and the low yields, we are starting to see investors reemerge as they respond to a rising market with further growth expectations and low borrowing costs,” he added.

REIA’s latest report, Real Estate Market Facts found that in the December quarter of 2020, the weighted average capital city median price for both houses and other dwellings increased in the Australian residential property market.Australia Property

“The weighted average capital city median price increased by 6.0% for houses and by 0.9% for other dwellings.

The weighted average median house price for the eight capital cities increased to $825,205.

Over the quarter, the median house price increased in all capital cities.

At $1,211,488, Sydney’s median house price continues to be the highest amongst the capital cities, 46.8% higher than the national average.

At $490,000 Perth has the lowest median house price across Australian capital cities, 40.6% lower than the national average.”

What will the response be to our hot housing markets?

As predicted, the RBA has kept the cash rate the same, but in the minutes politely put lenders on notice in relation to home loans.

APRA to this month has ruled out intervention in housing prices.

APRA Chairman Wayne Burns has ruled out (for now) intervention in mortgages while household debt is below housing prices.

If you are wondering what this looks like, here it is.

Houshold Debt

Now is the time to take advantage of the opportunities the current property markets are offering.

Metropole Team

Sure the markets are moving on, but not all properties are going to increase in value. Now, more than ever, correct property selection will be critical.

You can trust the team at Metropole to provide you with direction, guidance, and results.

Whether you’re a beginner or an experienced investor, at times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s exactly what you get from the multi award-winning team at Metropole.

We help our clients grow, protect and pass on their wealth through a range of services including:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now! Click here to learn more
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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media. Visit Metropole.com.au


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