CoreLogic is the leading provider of property data, analytics and related services to consumers, investors, real estate, mortgage, finance, banking, building services, insurance, developers, wealth management and government.
Whether you are an avid property investor or about to leap into home ownership for the first time, you should be keeping a close keen eye on the property market.
A bumper last couple of decades (for most)
It is no surprise that in the last couple of decades dwelling values have increased significantly and mortgage rates have considerably reduced.
Of course, different regions and capital cities have seen varying levels of home values.
Housing affordability has become more challenging with dwelling values rising faster than household incomes. Affordability pressures are most felt in markets where home values have risen dramatically such as Sydney and Melbourne.
First home buyers (FHBs) relative to investors in the housing market have diverged over the past quarter of a century.
FHBs have become a smaller proportion of the housing market, making up just 17.4% of the mortgage demand in 2018.
Conversely housing as an investment asset was at an historic high of 55% in May 2015.
According to the CoreLogic/Aussie ’25 years of housing trends’ report, strong market conditions have boosted household wealth over the past quarter of a century. Growth cycles have pushed the national median house values 412% higher.
But with this boost in house values come other considerations such as mortgage rates and sizes, affordability versus serviceability and FHBs versus investors.
More buyers are choosing to purchase units over detached houses owing to the cheaper price points.
Unit sales as a proportion of all dwelling sales
Source: CoreLogic The percentage of unit sales is based on dwelling sales over the 12 months ending April 1993 and April 2018, except for Darwin where data commences from 1999.
Activity in the housing market has slowed since 2015 with the number of settled residential property sales down 7.7% year on year.
Housing credit has tightened
CoreLogic’s head of research Tim Lawless says “Although interest rates are set to remain on hold for the time being, the availability of housing credit has tightened substantially, which is the primary driver of slower housing market activity and falling home values.”
Best performing suburbs
Across the top 100 suburbs for price growth over the past 25 years, 81 were located in a capital city.
The vast majority (41) were actually located in Melbourne with the second highest proportion based in Sydney (25) followed by Perth (12).
The suburbs of Perth may seem surprising given values have been lower since 2014. We won’t forget that Perth was once one of the hottest markets in Australia before the mining downturn.
Where to from here?
Corelogic makes a startling observation. If home values increase at the same annual rate as they have over the past 25 years we will see a median dwelling value nationally of $2.9m by the year 2043!
But of course we know that housing markets go through cycles of growth, decline and steady values. With these cycles, coupled with tougher lending conditions mentioned earlier, we can only hope those astounding median values don’t come to light.
Property has long been considered a popular path to wealth creation for many Australians. It has the potential to generate capital growth (an increase in the value of your asset) as well as rental income.
When buying a property, it is wise to remember that you are making a decision that is worth taking the time to research and plan.
Do your homework
It is important to assess
- the property market
- mortgage rates
- where you want to live or invest, and
- your current AND future financial position
National top 20 best performing suburbs for growth in median prices over the past 25 years
When assessing the property market and mortgage rates, it is imperative to keep potential interest rates movement, affordability and serviceability (the ability to meet loan repayments based upon the loan amount, income, expenses and other commitments) in mind.
After all, when you take the plunge into your next property, be it owner occupied or investment, you want to ensure that you can meet any future potential interest rate increases, or for investors any changes in rents, occupancy, repairs and maintenance.
Disclaimer: This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply. © 2018