Wondering how much Australian property prices will grow in the next 40 years? A good yardstick is to examine how much Australian property prices have grown in the past 40 years. This will give you a glimpse into the future as to where prices may go.
Australian property prices have historically doubled every 10 years over the past 100 years. This has made Australian property investing a prime vehicle for growing wealth for many Australians.
That’s why the amount of time you spend in the market, is the safest way to invest in property. Too many people try to ‘time the market’ rather than take a long term approach to investing.
That’s why the earlier you can start investing in property, the better off you will be in the long run. Someone who starts investing in their 20s will build massive equity and wealth by the time they are in their 40s.
This is simply the magic of compounding.
It’s why Einstein said, “Compounding is the eighth wonder of the world”.
Imagine back in 1976, your father decided to buy a property.
These are the average prices he would have paid to get a house.
Sydney – $36,800
Canberra – $35,100
Melbourne – $32,900
Adelaide – $29,800
Hobart – $31,575
Perth – $33,000
Brisbane – $26,275
Of course, it is important to note that the average annual wage in Australia at that time was $6,000 per year. So the average Australian worker in Sydney would still have to work 6 years to buy a house.
In addition, the average family back in those days was a single income family. For the most part, only dad worked. But today most families have dual incomes.
Secondly, bank interest rates back then were at 10%, double what current interest rates are in Australia.
But assuming your father had the foresight to buy an investment property in Sydney. Today, that property would be worth a whopping $881,000! That’s a 24 times increase in property values.
If Sydney wasn’t the place, and he bought in Perth, that property would still be worth $521,400 today, which is still a 15.8 times increase. Definitely not as much, but still a great investment.
For comparison, here’s what the median price of properties in each capital city are today:
Sydney – $881,800
Melbourne – $640,000
Perth – $521,400
Canberra – $628,800
Brisbane – $505,000
Adelaide – $450,000
Hobart – $360,500
Projecting the growth rate of each city forward another 40 years at the same growth rate, you will get the following median prices:
Sydney – $21,129,653
Melbourne – $12,449,848
Perth – $8,238,120
Canberra – $12,522,230
Brisbane – $9,705,994
Adelaide – $6,975,302
Hobart – $4,115,922
Pretty crazy prices right? But that’s probably what they were thinking back in ’76 about property price projections.
There’s a few conclusions that can be drawn here:
1 – Growth rates in various cities are not equal. That’s why it’s important to find out where are the ‘growth spots’ from an expert who knows the market. Your typical real estate agent is probably not going to give you the unbiased professional advice that you need.
2 – Past growth is no guarantee of future performance, but it is a strong indicator nevertheless.
3 – People 40 years ago would have thought property prices were expensive back then. Those who had the financial acumen to let compounding do its work are laughing to the bank today. Will you have the foresight and the acumen today to invest for the future?
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