A landmark, joint study by Aussie Home Loans and CoreLogic has revealed house values nationally have risen 412 per cent since 1993 from $111,500 to $571,400.
At the same rate of growth over the next 25 years, the national median house value could rise to $2.9 million in 2043. Sydney’s median house value could reach $6.3 million and Melbourne $5.8 million, followed by Canberra ($2.9 million), Perth ($2.48 million), Darwin ($2.28 million), Brisbane ($2.24 million), Hobart ($2.2 million) and Adelaide ($1.9 million).
The Aussie/CoreLogic ’25 years of housing trends’ report shows the median house value across Australia has increased at an annualised rate of 6.8 per cent.
Across our capitals the gains have been diverse, with the stand-out for annualised growth in house values being Melbourne at 8.1 per cent, followed by Sydney (7.6 per cent), Perth (6.7 per cent), Hobart (6.5 per cent), Darwin (6.3 per cent), Canberra (6 per cent), and Brisbane and Adelaide (5.9 per cent).
Chief Executive Officer of Aussie, Mr James Symond, said “Our report clearly shows that housing continues to grow as Australia’s largest asset class, with the typical home owner showing average dollar growth in their investment at $18,400 a year over the last quarter-century.
“Meanwhile average mortgage rates are currently close to their record low levels of the 1960’s. Mortgage sizes have increased roughly in line with property values, up 376 per cent or 6.4 per cent per annum. With mortgage rates close to historic lows, loan serviceability levels have improved, however housing affordability remains a major challenge,” he added.
The proportion of annual household income required to service a mortgage (based on a 20 per cent deposit) is currently tracking at 36 per cent, up from 27 per cent in 2001 (when serviceability data began) but down from its peak of 51 per cent of annual income in June 2008.
Mr Symond added “Housing affordability will remain a major issue for many Australians, largely driven by the dramatic housing price growth in recent years, particularly in Melbourne and Sydney.”
Nationally, to raise a 20 per cent deposit for a property, borrowers now need to dedicate 135 per cent of their annual gross income.
“This has caused major issues for young people to get into the property market, with first home buyers falling from 22 per cent of mortgage demand in 1993 to 17.4 per cent in 2018, with the falls in recent years influenced by a worsening of housing affordability as well as lower government first home buyer incentives,” said Mr Symond.
Conversely, investors have taken up the slack with their proportion of mortgage demand rising from 20 per cent in 1993 to an historic high of 55 per cent in 2015, before trending lower in recent years to 43 per cent in March 2018.
Mr Symond said “Perhaps the greatest change I’ve seen over the last 25 years of Aussie has been the growth of higher density housing and smaller lot sizes. Unit values nationally have increased by 316 per cent since 1993 from $123,800 to $515,600 today, annualised at 5.9 per cent. The share of apartment sales to all property sales has grown from 22.7 per cent to 29.6 per cent.”
Canberra leads the country with its share of apartment sales now at 47.5 per cent, followed by Sydney (43.8 per cent), Darwin (35.1 per cent), Melbourne (34.7 per cent), Brisbane (30.2 per cent), Adelaide (27.1 per cent), Hobart (24.7 per cent) and Perth (18.9 per cent).
Meanwhile the average vacant block of land has reduced from 820 square metres nationally to 610 square metres.
Mr Symond said “I expect this trend in apartment living and shrinking of block sizes to continue as the boom in apartment construction lingers, changing the face of residential property forever from the famous quarter acre block that many of us grew up aspiring to purchase.”
National Top 100 Suburbs
The report also revealed the top 100 suburbs for value growth over the last 25 years, with Melbourne coming out on top with 41 suburbs in the list.
Unsurprisingly, 81 of the suburbs in the top 100 are located in capital cities, with 25 suburbs in Sydney and 12 in Perth.
However the big winner at number one is the small suburb near Byron Bay on NSW’s North Coast, Suffolk Park, which has experienced extraordinary growth in its median house price from $74,250 to $1.18 million over the last 25 years.
Mr Symond said “While it’s not a big surprise that suburbs in the two biggest cities came out on top, it’s worth noting nine of the top 10 are located in regional areas. These suburbs are generally in coastal or lifestyle locations with strong performances in the south-west of WA and NSW’s Hunter and Illawarra regions.”
Detached houses have been the primary drivers of the market. The top suburb for apartment value growth was Willoughby at 131, indicating land value is a key driver of asset growth.Mr Symond said “Another important finding in the report has been the strong performance of Perth suburbs over the last 25 years, with 12 in the top 100, despite a drop-off in values since 2014.
“Over the last 25 years we’ve seen five property cycles and I expect the pattern of cyclic gains to continue, with major growth to come where a larger proportion of the population will seek to live closer to CBD’s and transport corridors in better designed apartments.
“With the staggering growth of technology we’ve seen since the 90’s, it’s likely that more households will take advantage of flexible work arrangements and a lower necessity to travel to central work points. Without doubt, 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.