This article was first published by
EVERY time the capital city property market notches up another milestone — a derelict Sydney cottage goes for millions at auction, just say — renters die a little bit more inside.
It’s no secret that property along Australia’s east coast is seriously unaffordable, with many young people struggling to afford even a studio apartment in Melbourne or Sydney.
Surely, the bubble has got to burst at some point, right?
Or does it? Remember when it was inconceivable that the median house price in Sydney would ever reach $1 million but, low and behold, that’s the situation we are now in.
News.com.au asked some of the nation’s property experts to consult their crystal balls and deliver their verdict on the Australian property market in 2040.
IT WILL BE EXPENSIVE … STILL
Author and property investment adviser Niro Thambipillay says those waiting for a bubble to burst should not hold their breath.
“With Australia’s growing population, especially in Sydney, Melbourne, Perth and Brisbane, prices will be higher,” he said.
“These cities will also become extremely apartment dominated, similar to New York with fewer people living in houses.”
Mr Thambipillay also said there would be no US-style property crash in Australia either.
“This is mainly because of the growing population and the fact that Australian mortgages are also generally full-recourse, which means homeowners can’t just walk away and hand back the keys as lenders will chase them and borrowers must pay costs unlike in the US,” he said.
“So although there will be periods of flat growth in our major centres, over the next 20 years, you’ll see prices be at least 50 per cent higher than what they are today, if not closer to double.”
High-profile property investor Nathan Birch agrees.
“The eastern seaboard will be the winner in 20 years’ time,” he noted.
“I expect that we will see another two boom cycles go through most parts of the country. The more houses we can build, the more affordable house prices will be, but I don’t believe we’ll be able to keep up with demand from population growth.”
Founder of residential property investment firm Meridian Australia Glenn Piper said Sydney was most likely to stay out in front.
“Anything could happen over a 20-year period, however, it would be hard to see any city top Sydney for the most expensive city in Australia,” Piper said.
“It is Australia’s largest economy and has the Sydney Harbour where the most expensive homes in Australia are located.”
THE REGIONS
The regional areas of Australia are much more affordable than the capital cities, but will this be the state of play in 2040?
According to Mr Birch, people will be forced to move to regional areas, so strong large regional towns will benefit from this push and there could be a spike in prices and population.
“I believe there will be growth in some of the key large regional areas, be it Tamworth, Orange, Wagga Wagga, or Goulburn,” Mr Birch said.
“Places on the fringe of the cities will become larger and people will have more incentives to move there.”
Mr Thambipillay also said the fate of the regional property market was dependent on a growing population and increased investment in infrastructure, such as high-speed rail.
“I think you’re going to see the major regional centres like the Gold Coast and Sunshine Coast in Queensland experience price growth,” he said.
“As prices in capital cities rise, there will be those who are willing to move for a better quality of life. These larger regional cities will see price growth but mainly around houses as that is what people moving from the cities will want.”
A NEW NEW YORK?
Mr Thambipillay, however, doesn’t believe we will ever reach the stratospheric levels of growth seen in cities like New York.
“Our reduced population growth levels relative to available land — Sydney is about twice the size of New York — will keep prices well below those of New York,” he said.
“New York also has a more prestigious brand image internationally than Sydney does so the wealthy from overseas will always be willing to pay more than for Sydney.”
Mr Birch however sees Sydney mimicking certain parts of the Manhattan property market.
“New York is a financial hub and I think over the next 20 years the same thing will happen in Sydney,” Mr Birch said.
“The population will have doubled, and Sydney will be built out. A lot of people will be going to smaller accommodation; blocks of units will be more common.”
So what is a young (or older) renter to do? Mr Birch is unequivocal: buy something now.
“If you can’t afford where you want to buy today, it’s important to look at other options and alternative locations for where you can invest with your budget and capture a foothold in the market,” he said.
“That way you can go back and use those properties that you’re buying today to reach your end goal.”