25 Years Of Housing Trends

Everywhere we turn at the moment, we're seeing news of Australia's booming property market: house prices are soaring at their fastest rate since the late 1980’s; values are rising across each of the capital cities as well as across the rest of state regions; and median house prices are making Australian capital cities amongst the most expensive in the world. Yet amongst all of these positives, there is a sense of fear in the air. Can the boom keep going? Is the market going to crash? What’s going to go wrong? While nobody can predict what is going to unfold in the future, anything is possible. For all we know the boom could keep going. Back in the early 1990’s in major cities like London and New York, people were commenting that there was no way that the housing markets could keep climbing, but they most certainly did. While Australia’s capital cities are not quite as major as London and New York, Melbourne and Sydney are on their way to becoming international cities too.

Reflecting on how the property market has moved and changed over a long-period of time can shed some light on the current housing market. Let's take a look back over 25 years of the peaks and troughs, of the highs and lows that Australia's property market has experienced so that we can gain some perspective on Australia’s housing boom.

CoreLogic’s 25 Years of Housing Trends report illuminates the highs and lows of the Australian residential property market from 1993 to 2018. While the property market has gone through big changes since 2018, it’s worth looking at the trends that occurred during this period of time.

*Note that all graphs and data below have been sourced from CoreLogic and Australian Bureau of Statistics.

Housing price growth over 25 years, from 1993 to 2018

The housing market showed some extraordinary changes between 1993 and 2018, with conditions moving through five distinct growth cycles. This pushed national median house values 412% higher, equivalent to $460,000. Over the same period, the ASX All Ordinaries index rose by a substantially lower 261%.

Back in 1993, the median house value across Australia was just $111,524 and units showed a slightly higher median value of $123,840. In 2018, median house and unit values increased by 412% and 316% respectively, providing homeowners with significant capital gains. The capital gain over this 25 year period equates to an annual growth rate of 6.8% for houses and 5.9% for units.

If we were to experience the same rate of growth over the 25 years from 2018 to 2043, Australia’s national property values could rise to $2.9 million for houses and $2.1 million for units. If the historic averages play out over the next 25 years, Sydney values will be breaking the $6.3 million mark and Melbourne values will be over $5.8 million.

One thing for certain is that housing markets will continue to move through their cycles, with periods of growth, decline and steady values conditions. History has shown that over time, these cycles tend to smooth out the year to year volatility in growth rates. A good example of this is Melbourne's housing market, which showed the highest long-term rate of capital gain from 1993 to 2018, however house values in Melbourne have been through five separate periods of value decline on an annual basis.

From 1993 to 2018, mortgage sizes increased roughly proportionate with property values, up 376% (6.4% per annum). The average owner-occupier loan size broadly increased in line with dwelling values across Australia, with the typical home loan reaching $388,100 in 2018 (based on data to March 2018). Today, the average home loan is about $500,000. Back in 1993, the average home loan was $81,500.

While we know that in the long-term housing prices increase, it's also important to note that Melbourne is recognised as one of the most liveable cities in the world.

Remember - if the current housing boom is being fuelled by the local market, it will well and truly continue to climb when Australia's gates open to the international population once again.

As we’ve heard many experts say - the best time to invest was yesterday.

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