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Dear Fellow Property Investor,
Did you know that the average homes in Australia may cost up to $6.3m in just 25 years, a bombshell study has revealed.
Projections show median house prices will reach that figure in Sydney by 2043 – up from $1.03m today.
The Aussie Home Loans and CoreLogic survey predicts average prices will hit $5.8m in Melbourne, $2.9m in Canberra, $2.5m in Perth and $2.3m in Brisbane – with the biggest increase in Melbourne.
Wages will also increase over this time – but with Australia enduring one of the lowest rates of wage growth in the world, the prospect of houses becoming less affordable is very real.
The surveyors made their predictions by analysing house price changes over the past 25 years and extrapolating.
Based on national house values rising at the annual rate of 6.8 per cent per annum since 1993, the national median house value would be approaching the $3 million mark in 2043.
The median unit value would be just over $2.1.
Chief Executive Officer of Aussie, Mr James Symond, said: “Housing continues to grow as Australia’s largest asset class. If the changing face of residential property and staggering growth of technology we’ve seen over the last 25 years continues, it’s likely the next 25 years will produce even greater change.”
He added: “I expect the growth trend will continue especially with high immigration levels.”
Byron’s Suffolk Park topped the nation for value growth, with the median house price moving from just $74,250 25 years ago to $1,185,000 in 2018, and increase of 11.7 per cent per annum.
Coastal and lifestyle markets around the Hunter and Illawarra regions were also standouts, comprising four suburbs in the national Top 10.
Melbourne has had the largest annual percentage increase in both house and unit values within a capital city over the past 25 years.
House values have risen at the annual rate of 8.1 per cent or $28,300 since 1993.
At the same rate of growth over the next 25 years, Melbourne’s median house value could rise from $825,000 to $5,825,000 in 2043.
My Symond suggested this meant a housing crisis in the city could be one of the most acute in the country.
He said: “Housing affordability remains a major issue for people in Melbourne, largely driven by the recent and dramatic housing price growth across the city.
Buyers now need to dedicate 160 per cent of their annual gross household income to raise a 20 per cent deposit, with property worth a staggering eight times annual household incomes.”
Simple extrapolations don’t take into account how economic and demographic conditions might play out over the next 25 years or how housing demand and supply may evolve.
But this report may add weight to the growing feeling – especially among Australia’s young – that more houses need to be built to ease such dramatic price increases.
The Korn Ferry 2018 Salary Forecast predicted Australia would have the lowest real wage growth of 97 countries surveyed with an increase of just 0.7 per cent.