Typical house prices in Australia’s capital cities could very well be higher than $1 million by the end of this decade, property analysts say.
A storm of debate erupted early this year when Metropole Properties founder Michael Yardney suggested median house prices in Australia’s capital cities could conceivably run to seven figures before this decade is over.
The idea of a typical house in the suburbs costing a million bucks might seem inconceivable today, but Australian Property Monitors economist Matthew Bell says it’s far from a silly proposition, especially for the larger capital cities.
“For Sydney, if nominal house prices rise by only 5.5 per cent per year, then in 10 years we’ll have a median price of just over $1 million,” Bell says.
“For Melbourne, we only need an average over 10 years of 6.2 per cent to get to the $1 million median price for houses.
“Remember that if incomes rise at the same level of house prices, then affordability broadly remains the same.”
Yardney says it’s reasonable to think that properties will perform about as well in the coming decade as they did over the past 10 years.
“Last decade we had a recession, we had September 11, we went to war, we had a change of government, we had a period of high interest rates, low interest rates, and property values in all capital cities other than Sydney – because it had a bit of a bad run – more than doubled.
“My suggestion is the same fundamentals are going to drive property prices over the next 10 years, so it’s very likely that property values will be more than $1 million at the end of the decade.”
See API’s July issue for a more thorough analysis of how high property prices could go and leave your thoughts in the comment section below.
Matthew Liddy is the Deputy Editor of Australian Property Investor magazine.