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This isn’t a property boom…that was a property boom! - featured image

This isn’t a property boom…that was a property boom!

Sure property values grew significantly over the last year.
In fact, house prices are up 22% around Australia over the year, and even more in certain locations.
But back in 1950 house prices increased by 111%.
According to Paul Ryan of Proptrack, once price and rent controls that were initially brought in during World War II were repealed, property values doubled in that one year.
Property booms
However, as you can see from the above chart, we've just experienced the third strongest episode of annual price growth in history.
The boom of 1950, when home prices rose by 111% in one year, coincided with the end of wartime price controls but this really represented a one-off ‘catch-up’ for the falls in inflation-adjusted prices throughout the 1940s.
Ryan explains that before the 1950s, land on the fringes of our capital cities was both close to CBDs and relatively cheap, which kept a lid on house prices according to Ryan.

Once land close to cities became more scarce, along with the high levels of immigration into Australia in the ’50s, ’60s, and ’70s, prices started rising at a faster rate.

But price rises were modest compared with recent history, as higher demand was partly matched by improvements in transportation technology – car availability and the growth of tram and train networks – which allowed more accessibility to further-flung suburban fringe regions according to Ryan.

Then in the 1980s, the removal of limits on interest rates for loans, the floating of the Australian dollar, and the introduction of competition from foreign banks modernised the lending sector.

These changes made obtaining credit easier for the typical Aussie family and helped facilitate the housing price boom in 1989 when prices rose by 29%

Then since the late 1990s we've experienced a period of very strong property price growth.

House price growth

Source: REA's Proptrack

What's ahead for property values?

While property prices are notoriously difficult to forecast, in my mind property values will keep rising in 2022, but not everywhere and not to the same extent as they have over the last year.

While most property markets around Australia have performed strongly so far this cycle (other than the inner city of high-rise apartment market), moving forward the rate of property price growth will slow and there are several reasons for this including:

  • Affordability issues will constrain many buyers. Property 2
    The impetus of low-interest rates allowing borrowers to pay more has worked its way through the system and with property values being 20- 30% higher than at the beginning of this cycle at a time when wages growth has been moderate at best and minimal in real terms for most Australians, this means that the average home buyer won’t have more money in their pocket to pay more for their home.
  • The pent-up demand is waning.
     While there are always people wanting to move house and many delayed their plans over the last few years because of Covid, there are only so many buyers and sellers out there and there will be fewer looking to buy in 2022.
  • APRA – is intent on slowing our markets using macroprudential controls

This will lead to a two-tier property market - in other words, not all locations will continue growing strongly moving forward.

I can see properties located in the inner and middle-ring suburbs, particularly in gentrifying locations, significantly outperforming cheaper properties in the outer suburbs. House Model On Top Of Stack Of Money As Growth Of Mortgage Credit, Concept Of Property Management. Invesment And Risk Management.

While the outer suburban and more affordable end of the markets have performed strongly so far, affordability is now becoming an issue as the locals have had minimum little wages growth of the time when property prices have boomed.

In these locations, the residents don’t have more money in their pay packet to pay the higher prices the properties are now achieving.

More than that, Covid19 has adversely affected low-income earners to a greater extent than middle and high-income earners who are likely to recover their income back to pre-pandemic levels more quickly, while many have not been hit at all.

And as we start to emerge from our Covid Cocoons there will be a flight to quality properties and an increased emphasis on liveability.

As their priorities change, some buyers will be willing to pay a little more for properties with “pandemic appeal” and a little more space and security, but it won’t be just the property itself that will need to meet these newly evolved needs – a “liveable” location will play a big part too.

Those who can afford it will pay a premium for the ability to work, live and play within a 20-minute drive, bike ride or walk from home.

They will look for things such as shopping, business services, education, community facilities, recreational and sporting resources, and some jobs all within 20 minutes’ reach.

What about the long-term prospects for our property markets?

Currently, there are about 25.5 million Australians and in early 2021 the Government released the Intergenerational Report to help Australia and the businesses plan for the next 40 years –. Property

The IGR projects an Australian population of 38.8 million by 2060-61, and even though this is a little lower than previous projections – due to Covid slowing things down - this still means Australia’s population is projected to grow faster than most other developed countries.

Despite the reduction of the projected population, these trends are truly monumental.

If you think about it, it’s taken Australia well over 200 years since European settlement to reach a population of 25.5 million people today.

But in the next 40 years, our population will increase by around 13.3 million people.

In other words, it will increase by over 50%!

To make this worse, currently, there are 2.5 people in each household, but the IGR forecasts the average number of people in each household will shrink a little moving forward, meaning we are going to require about a third more real estate than we currently have.

To deal with the projected population growth between now and 2061 it’s likely we’re going to require one new property built for every two properties that currently exists!Melbourne, Australia

All this means our way of living is going to change considerably and town planners will struggle to cope with this growth.

Of course, this will impact property investment choices, but strategic, knowledgeable investors will be well-placed to capitalise on the changing trends.

What this means is there will be many more high-rise towers of apartments, not just in the CBD but in our middle-ring suburbs – we are already starting to see that particularly in Melbourne and Sydney.

And there will be lots more medium-density housing – in particular townhouses will be a popular way to live with modern large accommodation on more compact blocks of land.

It would be foolish to try moving forward because no one really knows what’s going to happen to inflation and interest rates, but as more of us want to live in the large capital cities of Australia, and in particular in those locations close to the CBD or the water where there will be more manatees, the scarcity will only push up the price of properties.

ALSO READ: 8 Property trends we can expect in 2022

About 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
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