Australian Property Insight

What we can learn from Australia's median house prices from 1970-2016

Does this makes sense to you guys?

 

no, it doesn't. old music...

the problem is in this sentence: With history proving it almost doubles every 10 years, there is never a bad time to buy.

should be: With history proving it almost doubles every 10 years, there WAS never a bad time to buy.

history can't prove anything for the future

in 1975 avg salary was 7.6K, house price in Sydney was 4-5 incomes, now it is 15. That ratio can't grow indefinitly.

 

As Mark Twain said: History does not repeat itself but it often rhymes". History is incredibly important for understanding the future.

Disclaimer: past performance is not a reliable indicator of future performance.

 

Spot on.

 

In the words of the faithful: Brisbane Boom Inevitable

 

You and @JDP1 are a match made in Brisbane!

 

Indeed a boom in Brisbanr is inevitable.. And imminent as well.
I have mentioned in the recent past how jobs (especially higher paying non mining type jobs) are increasing. Even at this time of year, it's very healthy.
It's obvious what this means for the non oversupplied yet well located property.
This doesn't need to be hyped- it has enough momentum to perform strongly.

 

Brisbane is so under valued in my opinion. It has a lot of population around it including goal cost and sunshine coast and still properties are way cheaper than Sydney and Melbourne. Brisbane is the perfect mix of lifestyle and business.

 

Yes. the combined population of seq including Brisbane and gc and sc is greater than 3.5 Mil.
That's actually some muscle...and all three are growing.
Brisbane needs the gc/sc for lifestyle and they need Brisbane for the corporate business.. .

 

Yep, all hype apart, it's what players on the ground are telling me more and more. Been talking to builders, town planners and agents and basically they are saying the demand for free standing homes in certain areas is so strong and getting stronger by the day. The general feedback from them re TH is you need to be very careful what and where you buy. And with units its basically stay away, especially near the CBD.

 

IMO you can certainly understand these demand side factors, especially with price points and likely increasing interstate migration over coming years.

The other side to Brisbane & pricing equation though is supply. The availability of land & units is very different to the way Sydney was in its pre-boom phase.

While demand factors may be there in Brissy, unlike Sydney, it isn't responding to a decade long undersupply pressure. Just means the rate and velocity of growth will likely be different through its growth cycle.

 

I was thinking about this today. With the current rate of wages growth and maybe even tougher lending conditions in the future, it's hard to think median house prices in Sydney will double again in 10 years time. Imagine trying to get finance, even at 80% LVR?

I generally agree with the above comments about Brisbane, especially when you look at the fundamentals and average income to median price multiple.

 

Sydney 2003 to 2013 and Perth 2007 to 2017 proves that property definitely does not double every 10 years. I would not invest in Sydney right now, and it if I did I would not expect my property to double in value in the next 10 years.

This is a good point. For prices to double from the peak now would mean something like 30x. That's unheard of anywhere I have seen and certainly could not be considered sustainable. What's more likely is a flat period in the market for consolidation and for wages to eventually rise. Then there will probably be another boom. Don't forget the median house price in Sydney was $233,250 in 1997. By 2003 it had almost doubled to $454,250. 10 years later it was only $610,000 (1). That's not nearly double. But from 2013 to 2017, the median house price went from $610,000 to $1,178,417 (2). That's nearly double in 4 years.

The past seems to be long flat periods of low growth followed by a short, sharp boom. Possibly in another 10 years in Sydney there could be another boom. But that will depend on what happens with wages between now and then.

(1) Australian house prices climb by 1.3 per cent in October

(2) Sydney's median house prices inches towards $1.18 million

 

@Tenex ....some good reading on this thread......apparently Sydney can't keep growing...

 

could be... but wages won't rise as many people think. For the last 30 years, AU wages grew faster than in US (3x vs 2x), so it won't grow faster than in US anymore... as we don't have economy like in US.

it's likely wages will rise only by depreciating AUD, but all expenses (that depends on imports) will go up.

 

I agree. I don't see huge wage increases in the next 10 years. That would take economic growth, which we just don't seem to be experiencing now in Australia. I am thinking in the next 10 years in Sydney that people could save for a home, which will build up demand but then the next boom could be quite modest. There would have to be huge capacity to take on additional debt for a large scale boom and I just don't see that capacity being there. Still, I have been wrong about markets before and I could be wrong about that. Wait and see I guess?

 

That's one of the reasons why I reckon. There's just still too much land for expansion and any influx of migrants become spread across the three big regions of Sunshine/Bris/Gold Coast as well as regional mining towns since a lot of work here is still in mining.

Also inland regions like Ipswich (probably comparable to Penrith) still has a lot of land...

Plus you have regional center towns like Toowoomba (1hr45min from Bris CBD). I remember driving there last year, there was a developer selling big 1 acre H&L builds for 300k+. City folk could easily sell up their 600k place and get two of those and retire at 50, heck maybe even 45 lol...

So a much lower total population compared to Syd/Melbs and not as concentrated, means less competition for housing and lower prices.

 

I agree with most of your sentiments except I think we focus too much on wages and not income in determining affordability in 2017 and beyond.

 

Fair point. A boom is driven by buyer willingness and capacity to take on additional debt. That capacity could come from wages or investment income. I guess I am influenced by the fact that many investors have a high level of leverage right now, which sometimes makes returns seem quite low. If you looked a some of these people right now, the income from property investments would not be enough to boost their borrowing capacity by much. However, 10 years is a long time for buyers to save up and/or pay down debt. Say someone who is maxed out now spent the next 10 years paying down debt. They could be left with no debt or with modest debt levels. Then there are a bunch of investors who are not highly leveraged and some who are not leveraged at all. That rent coming in without a lot of interest going out can boost borrowing capacity.

 

I was going to say this too. I think people underestimate competition when it comes to house prices. When I get a chance, remind me to tell you about 3 Gatton Way in Embleton. Classic example of how competition drives up property prices.