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Key takeaways
Property prices increase significantly over time, and the earlier you start investing, the better off you’ll be.
In 1975, the median house price in Sydney was around $28,000 – almost six times the value of the average annual income and the median price of a property in Melbourne was $19,8–
Today, the median house price is 27 times higher than it was in 1975, and there are more 2 income families than there were 40 years ago.
According to CoreLogic, median capital city property values for April 2024 were as follows: Sydney – $1,145,931; Melbourne – $783,261; Brisbane – $827,822; Adelaide – $747,732; Perth – $721,278; Hobart – $648,074; Darwin – $496,228; Canberra – $847,604
We all have one of these stories.
I’m referring, of course, to the ‘one that got away’ in the property market.
If we haven’t personally looked back on a property that, in retrospect, we could have bought for next to nix, then we know someone who does.
This was the case with a Sydney investor I met recently, who lamented the fact that his grandma sold her prime piece of real estate for a song in 1985.
The family was given the opportunity to buy the apartment, perched on Sydney’s harbour – quite literally on the waterfront, overlooking the Harbour Bridge and Opera House – for around $180,000, but no one was interested.
So some lucky buyer picked up the two-bedroom apartment, which would currently be worth well over $2.5 million.
In these situations, investors can often become annoyed or frustrated over their ‘lost opportunities’, but not much can be gained from that mindset.
After all, it’s not exactly news that property prices increase significantly over time.
Most people are fairly clued up to the fact that the price and value of real estate generally grow as each decade ticks over.
Note: That’s why it’s often said that time in the market, rather than timing the market, is the safest way to invest in property.
That’s one of the reasons I’ve always encouraged young home buyers and investors to get into the property market because I believe that the earlier you start, the better off you’ll be in the long run as compounding (of property price growth) and time work their magic.
The proof of this philosophy is pretty much in the pudding, as property values have grown exponentially over the years.
Let’s assume that you bought your first home or investment property around 50 years ago, in 1975.
Median house prices in Australia 1975
Across Australia’s capital cities in 1976, median house prices looked like this according to McCrindle Demographers :
There are a few interesting things that come out of these figures:
- How cheap property prices seem when you look back today (not that they seemed inexpensive at the time)
- Canberra was moreexpensive than Melbourne.
Tips: It’s important to keep things in perspective, though.
The average wage in the mid-1970s was around $6,000, according to the Australian Bureau of Statistics, so the median Sydney house price was almost six times the value of the average annual income.
Forty years on, both wages and house prices are considered higher, although they haven’t grown at a consistent pace.
Sydney’s median is now 27 times higher than it was in 1975; if wages had matched that pace, the average wage would now be $162,000.
Of course two of the big reasons behind this are:
- There are more 2 income families (both partners working) today than there were 40 years ago increasing disposable household income.
- Interest rates are at historic lows substantially increasing affordability. The standard variable interest rate in 1976 was 9.88%, meaning you needed to pay up to three times as much interest to service the same dollar value of the loan.
Median house prices today
According to CoreLogic, median capital city property values for April 2024 were as follows:
- Sydney – $1,145,931
- Melbourne – $783,261
- Brisbane – $827,822
- Adelaide – $747,732
- Perth – $721,278
- Hobart – $648,074
- Darwin – $496,228
- Canberra – $847,604
And this is a great time to enter the property market.
Sure our property markets have been strong despite all the challenges thrown at them.
And yes, property prices seem expensive in some locations.
But knowing what you know now, who wouldn’t have liked to buy their parent’s house for what your parents paid years ago?
Wouldn’t it be great to have a crystal ball and take a peek into property markets of the future and see where real estate prices will be in another 50 years?
In its absence, I think it’s a pretty safe bet to assume that in the long term, property values will continue to grow, underpinned by our growing population and the general wealth of our nation.
Tips: It’s important to keep this in mind when you’re negotiating your next property deal, as squabbling over $5,000, $10,000 or even $20,000 in today’s dollars is unlikely to have a huge impact on your eventual wealth.
I already owned my first property then and was looking for my second property
I bought my first investment property in the early 1970s for $18,000.
I put down $1000 deposit and my parents put down $1000 – I guess the bank of mum and dad existed then as well.
We took a $16,000 loan for 30 years and had no idea how we were going to repay it.
And we got $12 a week rent and we’re excited.
But the Gough Whitlam Labor Party came into power, inflation raged and the value of my first investment property increased to the point where I could borrow against it to buy a second one in 1976.
My big mistake was selling my half share in my first property back to my parents for half of it new value of $32,000 when I got married and needed the money to buy my first home.
Interestingly I bought that same property in Larch Street South Caulfield back from my mother for $256,000 in the early 2000’s.
I have since demolished the original rundown weatherboard home and replaced it with two townhouses, so I still owned my first investment property so to speak, but today those two townhouses would be worth a combined value of close to $4 million.
So should you buy a property?
That doesn’t mean you should go out and buy any old property.
Just like over the last 50 years, in the next 50 years, some properties are going to outperform others – that is why you need to buy “investment grade properties.”
And remember the location of your property is going to do around 80% of the heavy lifting with regards to its capital growth – so choose your location wisely.
When you invest there are 3 main variables:
- Your budget – and that’s generally determined by the banks
- Location – as I said, don’t compromise on this
- The property you purchase in that location – as I said, is an investment-grade property.
But to ensure you buy the right property let’s look at property market trends I see moving forward…
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