A long list of moments of adversity over the last 50-years is proof that Australian real estate is arguably the most resilient, safest and best performing asset on the planet.
If we bundled together each of Australia’s capital cities, the median house value over the last half a century increased from $15,000 in 1972 to $915,000 in 2022.
That’s an average annual capital growth rate of 8.2 percent.
Sydney, Melbourne, Hobart and Darwin produced calendar-year declines in 8 of the last 50-years.
While property markets never perform in a clockwork fashion, those numbers equate to capital growth being produced in 5 out of every 6 years, or 83 percent of the time.
Canberra and Perth each had 10-years of declines, while Brisbane (6) and Adelaide (3) have the most stable track records.
The graphic below contains examples of solid property market performances in Australia’s 50 largest townships, in response to the biggest adversities seen across 5-decades.
Periods of high national unemployment rates, recessions, rising interest rates, Global Financial Crisis, a national credit squeeze and the recent health pandemic all created challenges for society, but the evidence outlined in this graphic illustrates that real estate values are always increasing in numerous different corners of this huge country.
Sydney and Melbourne’s biggest fall was during the 2-years ending mid-2019 when the median house value declined by $190,000 and $134,000 respectively.
That outcome was created by their overstimulated local construction sector triggering an over-supply at a time which coincided with APRA’s tight credit policy.
Despite dipping an additional $150,000 (Sydney) and $100,000 (Melbourne) during the 2022 calendar year, the net increase in house values over the decade ending 2022 was $600,000 and $380,000, respectively.
Perth’s median house price peaked at $585,000 in July 2014. A prolonged global downturn in iron ore prices then became the primary cause of Perth’s falling real estate values that took 8-long years to get back to $585,000.
Many of Australia’s 400 regional townships also produced lean periods at different times.
There has only ever been 1 out of the last 50 calendar years when house values declined in every capital city.
That solitary year was 2011, when a post-GFC hangover caused the combined capital city median house value to fall by just 3.2 percent. But various parts of regional Australia saw house values increase in 2011, so it would be inaccurate to say ‘Australia had a national downturn’ in that isolated year.
Generations of proof confirm that several regional locations have been significantly better performers than every capital city property market.
Ballarat, Bendigo, Coffs Harbour, Orange, Maitland, Dubbo, Albury, Wagga, Launceston, Victor Harbor and Toowoomba have long histories with very few instances of real estate value declines, and the size of those falls were relatively modest.
In fact, the long-term average annual rates of capital growth in many regional locations is superior to higher profile capital cities.
Current Property Market Conditions
Many of the events across the last 50-years represented far greater challenges than the current sooking about interest rates and inflation.
Generally speaking, confidence is the current missing ingredient, but there are already early signs of this improving as people regain composure after interest rate increases in H2 2022.
It is highly probable that the RBA is now at the tail end of its rate increase cycle. Many economists are already predicting interest rate cuts, including Westpac forecasting 7 rate cuts as soon as next year.
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In addition to interest rate cuts, I would not be surprised if APRA relaxes it very tight stance before too long, including a reduction in the current 3 percent debt servicing buffer.
Regardless, the country that 26 million people enjoys living in currently has more jobs than people available to fill them, intense upward pressure on wages and more equity in our assets than we could have imagined.
Comparing the national perspective from 3-years ago to now, resale supply listings are 30 percent lower, and the volume of properties advertised for rent is 56 percent lower.
Even with the international border closed, Australia’s population increased by 700,000 over the last 3-years.
House values in 130 of Australia’s 150 largest townships are now 40 percent (or more) higher than 3-years ago. That’s a lot of pent-up financial capacity.
Over the next 12-months, an additional 700,000 people from overseas (permanent skilled migrants along with international students) are expected to add to Australia’s housing demand.
Where will everyone live?
Property market conditions are incredibly tight in literally dozens of townships across Australia.
Related story: 2023 Property Market Outlook
But that’s not to say that all 3 aren’t capable of producing growth in asset values in the near term.
In every corner of this country, many tens of thousands of people will (again) be displaced from conventional housing this year due to a dire shortage of rental supply.
When this elephant in the room is eventually listened to by the talking heads in high places, the only sustainable policy responses will trigger an increase in buyer activity.
Before too long at all, a sizeable segment of society will (once again) be bemoaning the lost opportunity from getting caught up in the current downbeat national commentary.
A much smaller number of people will have prospered because they drew confidence from understanding the fundamentals and took positive action for their future.
One will always choose their own path. It’s your future, do you choose progress or sitting on the side-line?
I’m all-chips-in with property investing.
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