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15-Years Later, Things Are Very Different

15-Years Later, Things Are Very Different
November 8, 2023 Propertyology Head of Research and REIA Hall of Famer, Simon Pressley

It really is incredible to reflect on the (oh so) many changes of the last 15-years. The way that we live, real estate values and the conveniences that we now enjoy are very different.

If we wind the clock back 15-years to the beginning of 2008, Australia’s population was 5 million fewer than today and the median house price in 7 of 8 capital cities was less than $450,000.

Nokia and Blackberry were still the phone of choice, the i-phone was barely out of its wrapping, and Instagram did not exist.

The national housing stock increased by 2.5 million over the last 15-years.

No matter what era one is in, wherever there is a will there will always be a way. The 1.6 million households who became first-time homeowners during that time are testament to that attitude.

In some ways, there have been significant improvements with how people invest in property markets now, compared to 15-years ago.

Let’s take a deeper reflection.

Australians began the 2008 calendar year with a 4.2 percent unemployment rate and an 8.7 percent standard variable rate for home loans. Both of these metrics are more favourable today.

The high levels of enthusiasm across the country at the start of 2008 was reflected in double-digit rates of capital growth in 6 out of 8 capital cities, including more than 20 percent in Melbourne and Brisbane over the year ending 2007.

As can happen, a major change came from left-field, making a very different environment by the end of 2008.

Credit suddenly was difficult to acquire. Poor lending practices from American banks rippled its way into a global financial crisis.

While Australian property markets held firm, the GFC became an important trigger for credit policy reforms.

Real estate was bought and sold differently back then. Large advertisements in printed newspapers, letterbox drops and flyers in agency windows were the go-to methods. Today, digital marketing and virtual tours is all the rage.

Over the period, more people have become more connected to more parts of Australia from a combination of digital media, video streaming, improved road infrastructure and more frequent use of air travel.

Annual domestic airport travel increased from 98 million passengers in 2008 to a pre-pandemic peak of 121 million. Wowzers!

In every single one of those last 15-years, more people relocated ‘away from’ capital cities for a lifestyle in regional Australia than ‘moving to’ a capital city.

For perspective, the combined capital city total net population *decline* produced from internal migration was 305,000.

This longstanding capital city exodus is akin to creating an entire city the size of Geelong (Australia’s 10th largest) in just 15-years.

Back in 2008, only 35 percent of Australian home loans were organised via a mortgage broker. This has increased over the last 15 years to 70 percent.

For 99 percent of people in 2008, it was unimaginable to even contemplate investing in real estate anywhere other than their hometown. People did not realise how incredibly silly that was (for a variety of reasons).

Even so, there was no such thing as a professional service business, anywhere in Australia, which had the skills, the quality controls and no vested interests other than helping property investors seek out Australia’s best real estate opportunities. Identifying this challenge became the opportunity that Propertyology chose to pursue.

These days an increasing number of property investors realise that, in a country with 400 individual townships, the odds of the best opportunity being in one’s hometown are not very good at all.

So far, Propertyology has invested in 23 of those townships across 6 different states, making us Australia’s most experienced property investment business by a considerable margin.

Gradual improvement in investor mindsets has subsequently evolved such that the term ‘borderless investing resonates with financially literate people.

When we started out, there was very little real estate data available. Core Logic did not surface in Australia until 12-years ago.

There wasn’t a single sole who had ever conducted evidence-based studies to deeply understand the cause-and-effect of property market performance.

Consequently, the entire country (foolishly) believed in myths such as ‘population growth is the biggest driver of property prices’ and ‘capital cities outperform regional locations.’

We’ve proven those, and other myths, to be nonsense.

And the pandemic property boom added an extra stamp of approval.

If you stopped anyone in the street 15-years ago and asked them to explain what a buyer’s agent was, they wouldn’t be able to tell you.

Now, people appreciate the importance of engaging a skilled professional for the purchase of one of their most valuable assets.

Lifestyle preferences have also evolved over this period.

15-years ago, inner-city apartment living was the new fad. Now, work-from-home and natural landscapes are lifestyles which are increasingly treasured by more people.

Another trend that has emerged, especially among financial aspirants in their 30’s, is the lateral-thinking embracement of RentVesting.

Of course, adversity always exists. Over the last 15-years, it appeared in a variety of shapes and sizes.

Major events included the GFC, a significant mining downturn, stock market crashes, war (there’s always a war somewhere), oil supply constraints, the biggest ever global health pandemic, construction material constraints, countless natural disasters and inflationary challenges.

This graphic contains bundles of proof that, regardless of the cause of adversity, it has always been a good time to invest in Australian real estate.

Home loan interest rates peaked at 9.4 percent (in 2008) and got as low as 4 percent (in 2021).

The national unemployment rate peaked at 6.4 percent (in 2014) and reached a 3.5 percent floor this year.

Over the 15-years, the asking weekly price to rent a 3-bedroom house has increased from $310 to $845 in Sydney, and from $340 to $545 in Adelaide.

Rental yields reduced significantly over the last 15-years. For example, the yield for a standard house reduced in Melbourne from 3.2 percent to 2.4 percent and Brisbane went from 3.6 percent to 2.7 percent.

The most frustrating change of all over the last 15-years has been the procession of poor policies which have essentially locked-up housing supply in ways that few people adequately understand.

To illustrate Australia’s current dire shortage of housing supply, and bearing in mind that the population increased by 5 million over the last 15-years ago, the total volume of properties available to rent has *reduced* from 48,500 to 32,600.

To reach a supply-demand equilibrium, that figure should currently be 232,600.

Despite the many changes, housing never went out of fashion.

It never will.

Numerous generations of evidence confirms that, regardless of how society changes, residential real estate in Australia is consistently the most reliable asset on the planet.

A well-chosen property asset purchased today for (say) $650,000 is likely to be worth $2 million in just 20-years from now. Here’s 80-years of evidence to support that assumption.

Propertyology are national buyer’s agents and Australia’s premier property market analyst. Every capital city and every non-capital city, Propertyology analyse fundamentals in every market, every day. We use this valuable research to help everyday Aussies to invest in strategically-chosen locations (literally) all over Australia. Like to know more? Contact us here.