Where will house prices be 25 years from now?

While most real estate investors worry about the value of their properties today, particularly in light of our flat and falling property markets, in my mind a much better question is “where will property prices be 25 years from now?”

Depositphotos 13513212 OriginalAnd the good news is that, believe it or not, the median house price in Sydney could be over $6million and the median apartment price in our Harbour City could be close to $3.5 million in 25 years’ time.

Now before you say “NO that can’t be! Housing is already unaffordable” let me explain…

I bought my first investment property in Melbourne in 1973 for $18,000.

I had to buy it in partnership with my parents because house prices were so expensive, and we took out a 30 years loan because we had no idea how we were going to repay that much money.

At the time we received $12 a week rent and were excited.

I still own that property today – we’ve since built two townhouses worth well over $2million where the original run-down house stood.

Here’s what’s happened to property in the last 25 years.

ad_build_wealth
According to Corelogic research reported by Aussie nationally, the median house value has delivered an annual growth rate of 6.8% and have risen in value by 412%, from $111,524 to $459,900 over the past 25 years.

Apartments delivered an annual growth rate of 5.9% and have increased in value by $392,000 (+316%) since 1993.

In 1993 the median house value across Australia was just an interesting, apartments showed a slightly higher median value, at $123,840.

It’s the old story…who wouldn’t like to buy the home their parents bought for the price hey paid 25 years ago?

7893

Source: Corelogic and Aussie

But as always growth rates were diverse with average rates of growth over the last 25 years being:

5788994

Source: Corelogic and Aussie

Of course, a significant trend in the last 25 years has been Australian’s adoption of apartment living.

Here’s how apartments have been performing:

6600898jpg

So what’s ahead?

While past performance isn’t always the best predictor of the future, and housing trends are likely to change with a shift to smaller housing since more of us will be trading back yards for balconies and courtyards; if property prices were to rise in the future at the same rate as over the past twenty-five years, here’s what Aussie’s report forecasts:

6790

468904

 

Source: Aussie and CoreLogic Median values have been extrapolated based on applying the annual compounding growth in median values over the past twenty five years to current median house and unit values.

Depositphotos 9286992 S 2015Yes, it’s hard to believe that the median house in Sydney’s value could be $6.35 million and $5.82 million in Melbourne.

Obviously, these are simple extrapolations and don’t, in fact, can’t, account for the many economic, demographic and political variables that will play out over the next quarter of a century.

However, Australia has a “business plan” to keep growing its population.

This plus the ongoing wealth of our nation should underpin the growth in value of our property markets.

With Australia’s current annual population growth of 1.4 percent, this adds around 340,000 people to our population each year.

While this may not sound like much, we’re adding the equivalent of one new Darwin every 20 weeks or a new Tasmania is stuffed into our capital cities every 18 months.

Depositphotos 115799120 S 2015Sydney is growing much faster than the national averages and will add almost two million people to its population by 2037, which is the equivalent of adding a new Perth into Sydney.

Of course, Melbourne is Australia’s fastest-growing city, growing 18% faster than Sydney.

At this rate, Melbourne is set to overtake Sydney as Australia’s biggest city sometime in the 2030s.

What does all this mean for house prices?

Well, the law of supply and demand would suggest that all else being equal, where population growth will strongest, house price rises are likely to rise the most.

8588085

Source: Sydney Morning Herald

WHAT CAN YOU DO TO STAY AHEAD IN THE CURRENT MARKET?

As signs point to softer growth conditions for Australian property over the coming months, independent professional advice and careful consideration will be as important as ever in navigating Australia’s varied market conditions.  

property investors

If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi-award-winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat. Or call us on 1300 20 30 30.

 

icon-podcast-large

Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.

icon-email-large

Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Michael Yardney

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 his opinions are regularly featured in the media. Visit Metropole.com.au


'Where will house prices be 25 years from now?' have 16 comments

    Avatar

    September 1, 2019 Andrew Wilde

    Hi, Can anybody tell me, is the Gold Coast a good place to invest for long term, and if so, which suburbs East of the motor way or it doesnt mater

    Reply

      Michael Yardney

      September 1, 2019 Michael Yardney

      Andrew – The Gold Coast is not on my radar – stick to the 3 bog capital cities

      Reply

    Avatar

    June 23, 2019 Paul

    Thanks for the article, Any related statistics regarding Gold Coast?

    Reply

      Michael Yardney

      June 23, 2019 Michael Yardney

      Sorry Paul – no I don’t clearly it is growing fast and changing in nature, but still much too volatile to be on my investment radar

      Reply

    Avatar

    February 1, 2019 Leisa Garbellotto

    Hi Michael,
    I’m finding your articles and posts really helpful. Thank you. I’d like to ask you a question about my 2 bedroom unit in Auchenflower. It s in a 1966 building with high ceilings and generously sized rooms. I have happily lived here for the past 20 years and have enjoyed lovely city views from the balcony and main bedroom. My new neighbours have plans to raise their traditional house (with preserved character overlay). This will completely block my city views. Real Estate agents have said that this will significantly impact my resale price in the future . I had been planning on holding on to my unit for another 10-15 years but had not foreseen this current dilemma. Would I be best to attempt to sell up now before my neighbours proceed further with their plans in order to take advantage of the city view factor?

    Reply

      Michael Yardney

      February 2, 2019 Michael Yardney

      Leisa – I’ve alredy replied to this request when you asked a few days ago

      Reply

    Avatar

    July 14, 2018 Fabrice

    In the last 25 years the world has gone through a lot of growth because Asian nations started growing a lot, like China, Korea and then India. That created high inflation and high interests rate. Growth in the next 25 years will not be as strong globally and therefore also for Australia. Wage growth will remain slow as well, so I guess we’ll see only half of the growth that we experienced in the last 25 years. But that would still put average houses prices in Sydney around 2.5 mil instead of about 1 mil today.
    Michael’s point is still valid, prices will go up, and houses more than units because of the irreplaceable land value component.

    Reply

      Michael Yardney

      July 14, 2018 Michael Yardney

      Fabrice – no doubt the next 25 years will be different – but we’ve experience low interest rates for the last 15 years – I remember when I was happy with a rate with a 9 in front of it.
      It’s low interest rates rather than high rates that have driven the market – but these will eventually rise

      Reply

    Avatar

    July 13, 2018 Mauricio Bassaletti

    Other factors not mentioned is wages growth and inflation. Not to mention what policies will be introduced to make housing “affordable”. So to buy something for $6M, you would need $600K deposit (or $1.2M to avoid LMI) and earn a combined income of around $600K per year (assuming one would be able to borrow ten times the borrower’s income).

    Reply

      Avatar

      April 15, 2019 Edi V

      Mauricio – It sounds a bit crazy when you put it like that, however lets go back to the 1970’s where average income was $7600/pa. Imagine telling people back then that in the future they would need $120K deposit to buy a house for $600K, they would also tell you that is crazy talk and it cant happen because nobody would be able to afford it…
      Money loses value over time, prices will always go up.

      Reply

        Avatar

        April 24, 2019 Rohit

        1970’s Average income $7600pa, house price in the article above $18000 (2.5 x salary / affordable for a smart middle class person)
        2019 Average income $84000pa, house price in the article above $2000000 (23 x salary / Only a very smart rich person can afford)

        Salary increase from 1970 to 2018 (11 times)
        House price increase from 1970 to 2018 (111 times)
        How far can it go????

        Reply

          Michael Yardney

          April 24, 2019 Michael Yardney

          You’re right house prices great much more than salaries.
          This occurred because many families moved to 2 income earners and because of the massive fall in interest rates.
          The flow on effect of these are now over, so house price growth is more likely to be subdued. However it will be stronger in areas of strong income growth

          Reply

    Avatar

    July 13, 2018 Tom

    Hi Michael, interesting observations about the 25 year extrapolations for capital city price growth and the links to population growth.
    I was wondering with the expansion of these cities what your thoughts are about how the satellite cities linked to Sydney and Melbourne (say Newcastle and Geelong) would perform against the second tier capital cities of say Brisbane and Adelaide. Also how would say an outer NW suburb of Melbourne (say Sunbury) perform against an inner ring suburb in Adelaide (Say Norwood). Thanks

    Reply

      Michael Yardney

      July 13, 2018 Michael Yardney

      Tom – good question – the problem is there are so many variables to contend with.
      My question is why speculate or try and guess? I’d rather not fight the big trends and own an apartment in Sydney or Melbourne than a house in Geelong or Sunbury.
      If you lived in the USA you’d be thrilled if you bought an apartment in New York 25 years ago – if you thinka bout it Sydney has Manhatanised

      Reply

    Avatar

    July 13, 2018 Christopher

    Hi Michael, you have a nice and reasonable analysis with a very logical argument. You did mention that the political landscape can change and I personally believe that is the greatest risk. I believe that one of the bigger drivers of property prices in Syd and Melbourne is “black money”. This same “black money” directly increases population as well. If I was a rich Chinese, I don’t blame them, I would move my money here too. If the government had enough gumption they could stop the flow of illegal money pouring into Australia’s housing market almost immediately. I also think that now that we are such a “globalised” world, we are moving back to the old days where only the people that inherited it, owned property.

    Don’t get me wrong, I own my own home and one other investment property – so I’m not somebody egging on doom, but I’d be curious about your thoughts on this.

    Reply

      Michael Yardney

      July 13, 2018 Michael Yardney

      Christopher
      I understand where you’re coming from. You’re right that it will be harder for future generations to get into the housing market in our big capital cities – just like it is in London or New York – but that hasn’t stopped prices skyrocketing there.
      First home buyers only push up a small segment of the market

      Reply


Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*


facebook
twitter
email