A look at the past and future of the Australian property market and the lessons we can learn.
Twenty five years is a long time. A quarter of a century, in fact. And hasn’t the Australian property market seen a lot of change in that period? We’ve all been swept up in the national pastime of real estate watching – the market has held our (and the media’s) attention as we’ve seen the rise and fall of it all. But what has this period taught us? Our recently commissioned ‘25 Years of Housing Trends’ report, produced in partnership with CoreLogic, reveals some pretty incredible insights into the state of play for Australian property – where it’s come from and where it’s all going. This is what we’ve learnt.
1. When it comes to property, think long-term
When it comes to choosing a place to invest your hard-earned savings, for the past 25 years, the housing market has been a good choice. With the national median house value being 412% higher than it was 25 years ago, housing has performed better than the stock market, which has risen by 261% overall. If we’re talking in cash terms, the typical Aussie property owner has made an average of almost $18,400 per year, which equates to $460,000 in 25 years. Sounds like a good deal, right? That said, we can’t forget about the cyclical nature of the property market – and what goes up must come down. For instance, although Melbourne house values have moved through many cycles where capital gains have exceeded 10% per annum, more recently the city hasn’t been on the up; it’s seen a mild downturn. The takeaway here is that although property values may decrease or soften from time to time, historically this long-term investment has typically provided a boost in wealth.
2. If you’re a first home buyer, think differently
In the past, first time buyers made up a large chunk of those purchasing a home, but as property prices have risen and income levels haven’t kept up, affordability has posed quite the problem. Saving for a deposit means households have needed to dedicate an average of 134.5% of their annual gross income to the deposit – staggering, we know! But, rather than blocking everyone out of the market, this stumbling block has meant first-time buyers have had to get more creative. While some have looked to the bank of mum and dad to help with the deposit, others are looking at different kinds of living situations. Unit sales and terrace houses are more popular for families and looking further afield, outside major city hubs, has become a good option for wannabe homeowners.
3. Innovative design is leading the way
Whether it’s population growth or personal choice, urban living is on the rise. As our cities continue to be a popular place to live, urban planners have had to up their game in the transport, high-density housing, as well as affordable and effective telecommunications stakes in order to meet our needs. The report highlights the fact that remote-working arrangements are becoming more common, thanks to faster internet, the affordability of properties further out of the CBD and more businesses embracing flexible working arrangements. This could have ramifications for the property market, and we might see the demand for housing in these outer suburbs continue to grow. Homes themselves are also evolving with some seriously smart architecture that maximises space, uses clever design principles, such as communal entertaining spaces, and also goes green.
4. We’re borrowing more for less
As housing prices have risen, so have home loans. In fact, the average size of the Australian home loan has increased by a whopping 376% in the past 25 years, with the typical loan reaching $388,100 in 2018. While 25 years ago, the average standard variable mortgage rate was 10.0%, nowadays it’s 5.2%, so we’re borrowing more and paying back less on that loan. While the challenges of housing affordability can prove a hurdle for home buyers, if they are able to get a foot in the door of the property market, serviceability of their home loans is the real silver lining of the situation.
What have you learnt in your time watching the Australian property market? Feel free to share in the comments section.