Why we need to invest for the long-term

The plight of property prices across the country has been getting a fair bit of attention over the past few weeks as the air has come out of the tyres in most property markets.


While there are plenty of experts talking about the state of the market, I think it’s a pretty good opportunity to understand just how property prices have evolved over time. We all know the stories that house prices double every 10 years and that property always goes up in value, but what’s the truth of the matter?


New data from CoreLogic, lets us take a pretty close look at just how well property has done over the past 30 years and where the best places to invest have been.


According to the data, home prices across the country have increased 382% over the past 30 years, or in annual compounding terms, rising by 5.4% on average since July 1992.


Interestingly, it was the 1992-2002 period that provided the largest capital gains, with CoreLogic’s national Home Value Index (HVI) rising by 77%. The middle decade (2002-2012) saw the national HVI rise by 59%, while the most recent decade has seen national dwelling values increase by 72%.


Over the past decade, none of the capitals and only one regional market (Regional Tasmania) recorded a growth rate of 100% or higher. In the previous 2002-2012 decade it was only Perth and Darwin where housing values doubled.


Notably, Sydney property has been a real standout performer, rising in value by 98% over the past decade. Across all of NSW, property prices are also 98% higher in ten years.


Over the past 30 years, Sydney home prices have increased by 449% (5.8% per annum), with the 10 years ending July 2022 recording the highest rate of growth over the past three decades. Notably, price growth also outperformed the average.


In dollar terms, Sydney’s median house value has increased from approximately $221,770 in July 1992 to $1,346,190 in July 2022; an increase of approximately $1,124,420. Unit values are approximately $623,080 higher over the past 30 years, rising from $183,230 in 1992 to $806,310. 


The best performing region of Sydney have been houses in Marrickville-Sydenham–Petersham, where values have risen by 660.1%. Followed by the Eastern Suburbs at 642%. Canada Bay, Botany and Ryde also saw strong growth over the past 30 years.


Given Sydney residential real estate has on average seen an increase each year of 5.8%, then you can see just how impressive the returns on property really are. If you’re purchasing an asset that is better than average in terms of its location and overall demand, then you should theoretically expect that asset to outperform the average as well. That’s why blue chip locations are the ones that generally see such strong capital growth.


What’s also notable has been the periods where property has fallen in value. Each of the upswings and downturns has been driven by different factors including changes to taxation policy, monetary policy decisions, economic shocks, fiscal stimulus and broader economic conditions.


Looking at each downturn from the early 1980s shows the longest period of falling values has been 21 months, recorded over the most recent down phase (2017-2019) and also through the 1989-91 downturn.


The downswings have always been shorter and smaller than the subsequent upswings. The longer you’re able to hold onto your property, the less impacted you’re going to be by the ebbs and flows of the overall market.


According to CoreLogic, the decline we are seeing at the moment will eventually level out and is typically followed by a period of stability then further growth.


The time to purchase the very best assets that will see growth annual better than the 5.4%, is when there are fewer people looking at them. You’re going to be facing less competition, giving you more room to negotiate and ultimately getting you set in an A-grade asset at a far better price.

If you are interested in the above, feel free to reach out to a Henderson buyers agent today for more information.


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