A landmark, joint study by Aussie Home Loans and CoreLogic has revealed Melbourne house values have risen at the annual rate of 8.1 per cent or $28,300 since 1993.
At the same rate of growth over the next 25 years, Melbourne’s median house value could rise from $825,000 to $5,825,000 in 2043.
The Aussie/CoreLogic ’25 years of housing trends’ report found that over the last 25 years, the median value of Melbourne apartments have risen at the annualised rate of 6.6 per cent or $18,300 to reach a median of $574,000 this year. In 25 years, the median unit value in Melbourne could be $2,847,000.
Chief Executive Officer of Aussie, Mr James Symond, said “Our report reveals that Melbourne has enjoyed the largest annual percentage increase in both house and unit values within a capital city over the past 25 years. While there have been upswings and downturns in the market at various times over the past quarter-century and prices are currently softening, our report shows that over time property remains a very strong asset class.”
Interestingly, the percentage of annual household income in Melbourne required to service a loan – at an 80 per cent loan to value ratio – has risen from 29 per cent to 42.6 per cent since 2001.
Mr Symond said “With average mortgage rates currently close to their record low levels of the 1960’s, loan serviceability levels have improved in recent years despite the solid price growth in Melbourne.
“However housing affordability remains a major issue for people in Melbourne, largely driven by the recent and dramatic housing price growth across the city. Buyers now need to dedicate 160 per cent of their annual gross household income to raise a 20 per cent deposit, with property worth a staggering 8 times annual household incomes,” he added.
Perhaps the greatest change we are seeing is Melbourne’s growth in higher density housing, with the share of apartment sales to all residential property sales growing from 25.4 per cent to 34.7 per cent in the last 25 years.
The report also revealed the top 20 suburbs in Melbourne for value growth over the last 25 years, with the Mornington Peninsula’s Flinders the star performer.
Flinders has experienced extraordinary growth in its median house values from $126,000 to $1.5 million, followed by Kingsville in Maribyrnong which lifted its median house value from $86,500 to $1 million since 1993.
Detached houses have been the primary drivers of the market, with the Top 20 listing featuring no apartments.
“If the changing face of residential property and staggering growth of technology we’ve seen over the last 25 years continues, it’s likely the next 25 years will produce even greater change,” concluded Mr Symond.
To view the full Aussie/CoreLogic 25 years of housing trends report, visit www.aussie.com.au/25years or contact an Aussie Broker for a free copy.