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Home values up 400% in 30 years: study

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Malavika Santhebennur 7 minute read

Property values have soared over the last 30 years, while the average mortgage provided by Aussie has grown more than 13 times between 1995 and 2021, a new study has found.

A joint study by major brokerage Aussie and property research group CoreLogic – which explored property values over the decades – has revealed that the average value of dwelling (houses and apartments) has grown from $141,468 in 1990 to $581,806 in 2020.

Furthermore, the value of homes is comparable with the average national mortgage provided by Aussie, which the major brokerage said has grown from $36,262 to $473,609 between 1995 and 2021.

Sydney has led the cities in terms of growth, with the median dwelling value rising from $180,014 in 1990 to $870,583, while Melbourne prices have grown from $141,160 to $700,230 over the last 30 years.

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Brisbane values have been rising steadily, with figures revealing that value have increased from $151,259 to $523,200, while Adelaide values have risen from $170,814 to $470,831, Perth from $143,867 to $4676,890 and Hobart from $120,980 to $514,864.

The study also found that the growth in property values has been uneven over the past three decades.

Between 1990 and 2000, dwelling values increased by 46.9 per cent, while values surged by 108 per cent the next decade, and by “only” 34.4 per cent through the most recent decade, Aussie and CoreLogic said.

The study underscored the reality that housing markets are cyclical and reactive, with values rising and falling in response to various market factors.

For example, the study said the lower rate of appreciation over the most recent decade could be explained by more subdued economic conditions, where Australia’s economy expanded by 24.2 per cent between 2010 and 2020.

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This is compared with a 36.9 per cent economic growth between 2000 and 2010.

“However, stronger economic conditions do not explain the underperformance over the past 10 years entirely, especially considering economic growth was more significant between 1990 and 2000 (39.5 per cent) as Australia emerged from the early ’90s recession,” the study said.

Another factor contributing to the lower appreciation rate is lower rates of income growth, with the study quoting the national accounts data, which showed that household disposable income grew by 46.2 per cent between 2010 and 2020, after more than doubling (104.0 per cent) over the previous decade.

Furthermore, housing affordability has increasingly become a barrier, with housing values rising considerably faster than incomes. The study showed that 20 years ago, the ratio of dwelling values to household incomes was in the low 4 per cent range, but rose to a recent peak of 6.7 per cent in early 2018.

While dwelling appreciation was not as strong in percentage terms in the most recent decade, the study said that there were many factors that supported housing values through the decade, including lower interest rates and stronger population growth.

“The average standard variable mortgage rate averaged 5.8 per cent over the past 10 years, compared with 7.2 per cent between 2000 and 2010, and 9.1 per cent between 1990 and 2000,” the study said. 

“The lower cost of debt, especially towards the end of the most recent decade where mortgage rates reached record lows, has supported housing market activity.”

The study also noted that the 10 years to 2020 was also a period of tighter lending standards, with a trend towards fewer loans being written with small deposits, and less interest-only lending through the second half of the decade, along with less investment.

“Credit intervention played a role through the most recent decade, with two rounds of macro-prudential policy weighing on market activity and price growth, along with a royal commission, which saw a further slowdown in the pace of credit growth,” the study said.

The study listed other policy-related outcomes that have also impacted housing market conditions at various times, including the First Home Owner Boost introduced in early 2009 following the GFC, which resulted in a surge in first home buyer activity through 2009 and early 2010.

First home buyer activity has continued to remain robust on the back of more recent government incentives (including the First Home Loan Deposit Scheme and the HomeBuilder package), which the study said has added to total demand levels.

Commenting on the trends, Aussie CEO James Symond said: “The study shows that property has clearly been a standout performer, with values of both houses and apartments rising steadily over 30 years, delivering long-term owner-occupiers staggering capital gains free of tax.

“There is no doubt that the large cities have experienced strong population growth over the last three decades, and it is a simple demand and supply equation that is lifting the values of both houses and apartments.

“There is very strong evidence that there are high levels of equity in owner-occupied properties, building the wealth of owners but also providing them with flexibility to invest, a buffer against headwinds in their lives and wealth to pass on their children as the bank of mum and dad.”

He continued: “Owner-occupied dwellings has become the country’s most potent asset class, and as the average age of the population grows older, children can expect to benefit from the equity built up by their parents over the years through inheritance.

“Meanwhile, the older Australian owners can also access the equity they have built up to downsize either in their city or town, invest or help their children put a roof over their own heads – a growing trend we are seeing across Australia.”

Aussie launches youth sponsorship program

Aussie has launched a new sponsorship program to support young Australians develop their talent and pursue their goals.

The program, called Little Aussie Sponsorships, includes cash support for young people who need support in their chosen field (including sports and music).

According to Aussie, the major brokerage launched the sponsorship with a 16-year-old Adelaide-based Superkart driver Sebastien Amadio, and his Amadio motorsport team.

Commenting on the program, Mr Symond said: “We are approached all the time to support young people who want to exploit their talents across a range of fields and believe it is the right time to formally introduce the sponsorship program.

“We are excited that our more than 1,000 brokers across the country will be able to get involved in the sponsorships, part of our $16-million investment in marketing program this year.

“We plan to provide a number of small sponsorships throughout the year to help young people in areas like academia, music and sports to develop their potential through financial contributions.”

[Related: Aussie welcomes franchise store growth]

Home values up 400% in 30 years: study
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Malavika Santhebennur

Malavika Santhebennur

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.

 

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