Australian Housing Prices Up 500% Over 25 Years
However, yields have fallen to all-time lows.
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Proving itself as a reliable investment, research from the Real Estate Institute of Australia (REIA) shows the price of Australian housing is up 500% over 25-years.
According to data from REIA, the median price for Australian housing inflated from $160,000 in 1996 to $825,000 in 2020.
Other dwellings, such as units and apartments have seen capital values increase by just over 400% in comparison however these assets produce higher yields.
The data shows that over the past five years, housing grew by 25%, from a median of $683,000 to $825,000 while other dwellings rose by 10% to $600,000.
Mr Kelly said that over the 25-year period, Australian housing yields tightened from 5.1% to 2.9% while other dwellings have recorded a drop in yields but not as dramatic, falling from 5.2.% to 3.7%.
“Houses in Darwin have the highest return averaging 4.2%. In 1996, housing investments in Darwin were yielding 6.4%.
“Melbourne and Sydney have always had the lowest yields both falling from around 4% in 1996 to just 1.8% in 2020.
“The pandemic saw Melbourne and Sydney experience rising vacancies with Melbourne now the highest in Australia at 5% while Sydney is currently at 3.7%,” said Mr Kelly.
Further, Mr Kelly said that there has been a decline in investors in the market in recent times particularly as concerns have emerged with moratoriums on evictions and rising vacancies.
“Despite rising vacancies and the low yields, we are starting to see investors reemerge as they respond to a rising market with further growth expectations and low borrowing costs,” Mr Kelly added.
REIA’s latest report, Real Estate Market Facts found that in the December quarter 2020, the weighted average capital city median price for both houses and other dwellings increased in the Australian residential property market.
“The weighted average capital city median price increased by 6.0% for houses and by 0.9% for other dwellings. The weighted average median house price for the eight capital cities increased to $825,205. Over the quarter, the median house price increased in all capital cities.
“At $1,211,488, Sydney’s median house price continues to be the highest amongst the capital cities, 46.8% higher than the national average. At $490,000 Perth has the lowest median house price across Australian capital cities, 40.6% lower than the national average.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Philip Lowe’s comments come amid property industry concerns about pressures on mortgage holders and rising rents
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Leaders in Australia’s property industry are calling on the RBA to hit the pause button on further interest rate rises following yesterday’s announcement to raise the cash rate to 4.1 percent.
CEO of the REINSW, Tim McKibbin, said it was time to let the 12 interest rate rises since May last year take effect.
“The REINSW would like to see the RBA hit pause and allow the 12 rate rises to date work their way through the economy. Property prices have rebounded because of supply and demand. I think that will continue with the rate rise,” said Mr McKibbin.
The Real Estate Institute of Australia today released its Housing Affordability Report for the March 2023 quarter which showed that in NSW, the proportion of family income required to meet the average loan repayments has risen to 55 percent, up from 44.5 percent a year ago.
Chief economist at Ray White, Nerida Conisbee, said while this latest increase would probably not push Australia into a recession, it had major implications for the housing market and the needs of ordinary Australians.
“As more countries head into recession, at this point, it does look like the RBA’s “narrow path” will get us through while taming inflation,” she said.
“In the meantime however, it is creating a headache for renters, buyers and new housing supply that is going to take many years to resolve.
“And every interest rate rise is extending that pain.”
In a speech to guests at Morgan Stanley’s Australia Summit released today, Governor Philip Lowe addressed the RBA board’s ‘narrow path’ approach, navigating continued economic growth while pushing inflation from its current level of 6.8 percent down to a more acceptable level of 2 to 3 percent.
“It is still possible to navigate this path and our ambition is to do so,” Mr Lowe said. “But it is a narrow path and likely to be a bumpy one, with risks on both sides.”
However, he said the alternative is persistent high inflation, which would do the national economy more damage in the longer term.
“If inflation stays high for too long, it will become ingrained in people’s expectations and high inflation will then be self-perpetuating,” he said. “As the historical experiences shows, the inevitable result of this would be even higher interest rates and, at some point, a larger increase in unemployment to get rid of the ingrained inflation.
“The Board’s priority is to do what it can to avoid this.”
While acknowledging that another rate rise would adversely affect many households, Mr Lowe said it was unavoidable if inflation was to be tamed.
“It is certainly true that if the Board had not lifted interest rates as it has done, some households would have avoided, for a short period, the financial pressures that come with higher mortgage rates,” he said.
“But this short-term gain would have been at a much higher medium-term cost. If we had not tightened monetary policy, the cost of living would be higher for longer. This would hurt all Australians and the functioning of our economy and would ultimately require even higher interest rates to bring inflation back down.
“So, as difficult as it is, the rise in interest rates is necessary to bring inflation back to target in a reasonable timeframe.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
