Australian house prices over the last 50 years: A retrospective

Hi guys.. I spent some time figuring out how much housing affordability has changed over the last 50 years, thanks to a bunch of RBA and ABS data. The tl;dr is that house prices have gone up - a lot. I know, I know - big surprise there.

But actually, it's a little more nuanced than that when you look at things like the cost of servicing a mortgage… Because although house prices are at or near all time highs, interest rates are also at all time lows. At one point in the late 80's / early 90's they were on the way to 20%!

If you're interested in taking a look at the full analysis, here it is: https://datamentary.net/australian-house-prices-over-the-las...

Mods, not sure if this is cool to post or not - please remove if it's a no-no!

 

Hi Bud,

Looks cool. Keep up your good work.

Thx

Subodh

 

4 ingredients. Deregulation + Rate Cuts + Actuals + LMI = kaboom to real estate prices..... these policies facilitated the move from the minimum requirement of 20% deposit and maximum borrowing capacity of 3.5 x income , to the minimum requirement of 5% deposit and prices which have reached 12 x median income. Median prices could not have reached 12 x median incomes without these policies changing....
APRA specifically targeted some of these policies in 2015/16 to bring things to a halt. It worked. Instantly. Perhaps too effectively,,,, so they were then forced to relax them a touch in 2019 and in conjunction with subsequent emergency rate cuts and record levels of stimulus we are now seeing the last almighty motherload hurrah of borrowing capacity driving a sugar hit mini boom....

Overlay a growth graph against the RBA rate graph and you'll see the relationship very clearly.

Even if APRA allowed the reintroduction of actuals , the rate cut cycle is done , so while it would supercharge investors borrowing capacity for sure, creating another boom, it would run out of puff after one or two or three more purchases and we just would find ourselves back at square 1 eventually , 5 or 10 years down the road.... but this time we would have maxed out borrowers with no rate cuts in the kitty... and a banking system underpinned by mortgages which would in turn be underpinned by poor yielding assets that in most circumstances could not withstand any material rate increases without catastrophe. I really hope they don't go down that path and pressure APRA to throw the baby out with the bathwater....but desperate politicians are often out of office when their policies come home to roost , so they may. 40 year loan terms. 50 year loan terms... intergenerational loans..... they could keep this going for years yet if they really really wanted to ...but it will definitely have consequences one day. May be a long long way off.... but ultimately can't be avoided . There is always a reckoning...eventually. Piper always gets paid in the end

 

I like that chart.

 

Not 50yrs but 48yrs ago
My salary was $37 pw as a trainee accountant and part time at University.
I brought a three flat property (4br 2br 1br) for $21k
The net profit after paying interest at 10% 1st mortgage and 12% second mortgage was $37 pw . I said to my boss I believe I earn as much as his boss

Of course earning as much from my salary as my investments in the later years is near impossible.

I could never progress up the salary ladder as fast as the property income went up.

Yes property prices and income easily outstrip salary.

 

Got to love property

 

I read through the whole article and that is some great work you have done! Incredible detail and great data visualisation. Very interesting and should be reviewed by all prop investors! Would love to see more of your work.

 

It's the compound effect of rental rises, debt reduction on impact on profit.
Salary (even with many promotions) just can't compare .

 

If one loves property, one gotta love shares more

 

If one loves shares more. Surely must be in awe and worship Bitcoin?

 

According to the Rich Dad Poor Dad book, even though I was told it was not a "real story", the workload/$salary actually increases as one gets promoted. But one's energy and time is limited. So, getting promotions should be "optimally planned".

 

I had pretty well reached my ceiling salary of $150k in 2006 (when I retired) In the same year just one tenant's rent increased by $160k to $480k (it's $900k now) . If all goes well my largest tenant could well be looking at a $1m increase (12yr review)
I could never get these numbers with my salary ...and this is at a time when interest cost have crashed

 

Thats amazing! Care to share with us your journey? I understand that you are heavy on commercial property. Is that the difference between commercial vs residential? I think a few PCers can earn $150k, but not sure how many can make that sort of return. Thanks.

 

Thanks for taking the time to create those charts and analysis.

"As we can see from the updated chart, none of the cities are currently at peak un-affordability, at least based on servicing a mortgage. Sydney was there in 1990 (avg. loan rate 17%), Melbourne in 2011 (avg. loan rate 7.04%), and the other capitals in 2008 (avg. loan rate 8.84%)".



I can't imagine interest rates going back to even 10% let alone 17%. Personally I think we're going to have very low interest rates, tepid economic growth, and massive government borrowing for the next decade as Australians have soo much mortgage debt.

 

It took me almost a decade for my salary to go from $100k to $150k before retiring in 2006 . Investment income moves by many times that almost every year .

 

Yes you are correct 92% of the rentals are from commercial properties.

 

A third of the income comes from leaseholders.

 

Thanks Beano. A hard act to follow, by me anyway...

 

gave it a decent run on the Twitter for you...15,855 impressions so far