While the title of this story might seem like something a motivational guru might say to their followers, the truth of the matter is that life is ever-changing.
We grow older, if lucky enough; we have big or small families, if we decide that’s what we want; and we realise that weekends offer precious moments with our loved ones, rather spent nursing hangovers and regret like some of us did during our younger years.
When it comes to property, similarly, change is constantly afoot – even if it is slow moving – just like life fundamentally is, too.
It’s not as if we wake up one day and are no longer scrawny pre-teens with breaking voices or teenagers who’ve decided to stop talking to their parents because they’re “dumb”.
It’s the same with property because markets change depending on a number of factors such as housing supply, affordability, local economic strength or weakness, migration trends, government policies, interest rates, credit supply and lifestyle factors.
I guess what I’m trying to say is that change is continual, which means that in the supposed bad times, good times are likely just around the corner and, of course, vice versa.
Here are five factors to illustrate my point.
1) There are booms, and then there are booms:
Once upon a time, it seemed like property prices always boomed in Perth and Darwin. Across the five calendar years ending 2008, the median house price increased by more than 100 per cent in Perth and Darwin. Hobart (88 per cent), Brisbane (64 per cent), and Adelaide (62 per cent) were also particularly strong. Yet, Melbourne’s cumulative growth of 36 per cent was more subdued and prices declined in three out of those five years in Sydney (its cumulative change was four per cent over the five years). So, as you can see, back then, people thought that Sydney’s market was woeful, yet we know it didn’t stay in that state forever.
2) Credit supply:
The RBA cash rate today is one per cent, making home loan interest rates currently circa 3.5 per cent. Most economists are currently forecasting interest rates to drop a further 0.5 per cent in the short-term. So, it seems like happy interest rate days are upon us, but we if we look back it tells a different story. Immediately prior to the onset of the Global Financial Crisis, home loan rates started with a ‘9’ and this time 30 years ago, it was 19 per cent. While the cost of money now is the lowest ever for a couple of generations and we’ve got dozens more lending institutions than the old-fashioned ‘Big 4’ that our grandparents were limited to, the criteria for being granted a loan is significantly tighter. A little over a decade ago, it was possible to borrow as much as 100 per cent of a property purchase price while low-doc loans also made life easier, but not anymore – which is probably a good thing. That said, borrowers today have to jump through far too many hoops to secure a loan – hopefully this is changing, too.
3) Population Growth:
For much of the pre-GFC decade, Queensland consistently boasted the strongest economy of all states and its annual population growth was the highest in the country from 2000 to 2008. For example, in the 2003 calendar year, population increased by 87,769 in Queensland, 55,152 in Victoria, and only 34,607 in New South Wales. Fifteen years later, Victoria’s population grew the most (139,430 in 2018), New South Wales increased by 123,813, and Queensland by 89,905. The principle cause of these changing population trends is economic conditions. Job creation is often the precursor for population growth.
4) Quarter Acre Block:
While the baby-boomer generation aspired for the quarter-acre block with a Hills Hoist, a cricket pitch, and solid house on it, Australia’s housing supply model has changed, especially in our biggest cities. As density has increased, so, too, has the drain on infrastructure and the cost of housing. Since the start of this decade, demand for apartment living has accelerated. Whereas 7 out of 10 Australian dwellings built used to be detached houses, we are now close to a one to one ratio – and in Sydney, Canberra and Darwin we have been building more apartments than houses for several years. While some of our younger generations are choosing apartment living as their first choice in cities, the lure of house ownership remains strong amongst first home buyers who are prepared to move to make it happen.
Back in 2003, the Sydney median house price was $460,000. Today, it is circa $870,000. While the price of property back then does seem cheap in comparison, it’s important to recognise that Sydney was still the most expensive market in the nation at the time and interest rates are a lot lower today – there will always be several aspects to the “affordability debate”. One of the biggest changes in property markets over the past 15 years has been the importance of affordability. Even with today’s historically low interest rates, property buyers in all segments (first-time buyers, secondary owner-occupiers and investors) now have to think more laterally. Does one buy a detached house further out of a town, an apartment which is more affordable and closer to the CBD, does one relocate to a more affordable city, or rent-vest? First homeowner grants have also changed over the years, with today’s policy more of a government lever to steer people in to buying a property developer’s brand new property – the quality of which has also changed significantly.
A few years ago, I went out on a limb – as one does on occasions – and said in a television interview with Peter Switzer that a so-called national affordability crisis was “horse-shit”.
Now, this was a time when Sydney prices were skyrocketing, and media attention was focused solely on our biggest capital city.
Back then, Propertyology provided evidence of a plethora of affordable locations across Australia where buying a property was well within reach for most genuinely motivated buyers – it did require people to think outside of the “blue-chip is best” investment box. Those that did, have experienced strong capital growth as well as enviable lifestyles if they made the move themselves.
You see, our nation has changed fundamentally over the past 100 years with a large portion of people now living in a handful of cities versus on the land. However, now that availability of urban land isn’t as plentiful and costs much more, we’re seeing yet another change – migration away from big expensive cities to more affordable towns and cities with property markets in those locations poised to benefit.
Propertyology is Australia’s premier property market analyst and award-winning buyer’s agency. Every capital city, every non-capital city, we 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.