The Rise in Australian Property Prices Over the Last 25 Years (And What This Tells Us About the Future)
Sometimes, we can look to the past to anticipate what will happen in the future. And the last quarter-century of property market data is especially revealing.
Cast your mind back to 1993.
Back then, median house prices in Australia stood at $111,524. Remarkably, unit prices were slightly higher, coming in at $123,840.
Now, imagine that we’d come to you back then and told you that house prices would increase by almost 6 times over in 25 years.
You’d say that was a ridiculous statement. Yes, property is an asset that appreciates in value over the long term. However, to see such a marked increase in that span of time is practically unheard of.
But that’s exactly what happened between 1993 and 2018. Australian property prices have shot up and we believe that they’ll maintain the same trajectory.
Let’s dig into the data to see what it can tell us.
What’s Happened Between 1993 and 2018?
Barring a couple of blips, we’ve seen Australian property prices rise consistently over the last 25 years.
This chart from Aussie and CoreLogic highlights the trend in more detail:
Between April 1993 and April 2018, the median house price rose from $111,524 to $571,424. That represents a total increase of $459,900 in 25 years, or a percentage increase of 412%.
When averaged across all 25 years, this equates to an annual growth rate of 6.8%.
This high rate of growth exceeds that achieved by many other developed nations.
For example, the United States saw an average growth rate of 5.3% between 1992 and the beginning of 2019. On the other hand, the UK has achieved an average growth rate of 4.5% between the same period.
Simply put, Australia’s property market has been amongst the strongest in the world for over 25 years.
Interestingly, the growth of the market also outpaced that of ASX All Ordinaries. Between 1993 and 2018, that index rose by 261%. That’s 150% less than the property index, as illustrated below:
There are two clear messages here.
First, the Australian property market has been among the best globally for investors since 1993. Near constant price increases, which even absorbed the effects of the Global Financial Crisis, show that.
Second, for investors inside Australia, it appears that property has been a better choice than other investment options. The rate of growth has certainly outstripped that of shares. The differences between the property and ASX indexes show that the former is the better choice for those who wish to make long-term gains.
What’s even more interesting is that the property market’s increases apply across the board. Take a moment to examine this chart:
What we see here is that not one of the major Australian cities falls below an average growth rate of 5.9% over 25 years. Even cities that may struggle right now have seen marked increases over the long term.
What we’re saying here is that there’s a clear pattern for investors to consider.
Yes, the market will have its ups and downs. Many would argue that we’re in one of those downward periods right now, even though we’re already seeing signs of recovery.
However, over a longer period of time, the average price of property in Australia rises. And it does so at a pace that outstrips both other investment assets and the property prices in other major countries.
With that pattern of growth established, let’s now look towards the future.
What would happen if we saw the past 25 years’ worth of growth continue over the next 25 years?
A Growth Trend Continued
We can look to the Aussie and CoreLogic report to see what prices would look like if the trend continues:
Your eyes do not deceive you.
That chart indicates that maintaining the same growth rate for the next 25 years will see median house values rise to $2,928,009.
The news is even better for the two major cities – Sydney and Melbourne. The latter will see prices approach $6 million, with the former exceeding that value.
Now, imagine what that would mean for you as an investor if you bought a property today.
In Sydney, you should expect to pay an average of $1,026,638 for a house. By 2043 you would see a capital gain on the property of $5,323,247. This represents an average growth of $212,929.88 per year.
It sounds absolutely crazy, right?
Most would feel inclined to agree with you, except for the fact that we have precedents to prove it. These figures are simply extrapolated from what’s happened over the last 25 years. If the property market maintains the same pace of growth, the above example is exactly what we’ll see in 25 years’ time.
What This Means for you as an Investor
On the most basic level, the advice is simple.
Invest in property.
Specifically, invest in Australian property. Its growth outpaces both domestic shares and many international property markets.
But digging a little deeper, we want to explain what would happen with your property over the next 25 years.
You are going to see some peaks and troughs. The market does not grow steadily, as we’ve seen over the last 25 years. There will be times when the market will falter as it did at the beginning of 2019. The market also declined in 2009 and 2011.
But what this data shows us, more importantly, is that the market always recovers. Soon after every decline, we see a recovery. And typically, the recovery and following growth periods last far longer than the declines that preceded them.
Simply put, you need to take a long-term view of property investing.
Yes, if you invested at the beginning of 2018, you’ve likely seen your property’s value fall during the past year.
However, Australia has a trend of long-term and sustainable growth. A single year does not define an investment. And over the next 5, 10, or 25 years, you will see more growth than you may realise.
At Freedom Property Investors, we want to make sure you’re positioned to take advantage of that growth.
To find out how we can help you find high-performance properties, just do the following:
- Schedule a one-on-one strategy session with us.
- Attend one of our live events.
- Watch our web class.