{"id":48273,"date":"2023-03-10T19:30:00","date_gmt":"2023-03-10T08:30:00","guid":{"rendered":"http:\/\/propertyupdate.com.au\/?p=48273"},"modified":"2024-03-15T01:09:02","modified_gmt":"2024-03-14T14:09:02","slug":"property-values-really-double-every-7-10-years","status":"publish","type":"post","link":"https:\/\/propertyupdate.com.au\/property-values-really-double-every-7-10-years\/","title":{"rendered":"Do property values really double every 7 to 10 years?"},"content":{"rendered":"

How long does it take for property values to double?<\/p>\n

After all, capital growth<\/a> is one of the main reasons people invest in residential real estate.<\/p>\n

\"pencil<\/picture><\/span>

Note: <\/span>It\u2019s often said that over the long-term the average annual growth rate for well-located capital city properties is around 7%, which should mean properties double in value every 10 years.<\/p><\/div><\/div>\n

But it\u2019s not that simple.<\/p>\n

The problem here is that naive investors believe this myth and buy any old property thinking it will double in value in a decade \u2013 I guess that's why so many investors fail.<\/p>\n

But as with any good myth, there is always partial truth.<\/p>\n

\"pencil<\/picture><\/span>

Note: <\/span>So the truth is\u2026 some properties do double in value every 7 to 10 years, but many don't! <\/p><\/div><\/div>\n

How much will your house be worth in 10 years?<\/span><\/h2>\n

The rule of 72 states<\/a> that for a simple way to work out how long it has taken a property or an area to double in value, divide 72 by the annual growth rate.<\/p>\n

For example, if you think a property will grow 10% per annum, just divide 72 by 10% and that tells you that it'll take 7.2 years to double.<\/p><\/blockquote>\n

Australia\u2019s property market is around one year into a new property cycle.<\/p>\n

<\/div>After the COVID-19 pandemic\u2019s cheaper lending and low supply caused buyers to flock to the market and ignite a property price surge to record levels, we experienced a rapid cooldown where prices dropped from their peak in 2022.<\/p>\n

But now the property market is in a strong recovery phase and prices will likely continue to rise across the country.<\/p>\n

It truly has been a rollercoaster ride.<\/p>\n

If nothing else, what the past few years have shown us is that no matter how many times you forecast property prices, it will always be difficult to predict exactly where property prices will be in three months' time, let alone in 7-10 years into the future.<\/p>\n

But let's dig deeper\u2026<\/p>\n

The following tables show what happened to dwelling prices around Australia through the pandemic up to their peaks and then to date.<\/p>\n

Summary of median house prices through the current property cycle<\/span><\/h2>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
<\/th>\nOnset of Feb 2024<\/th>\n\u0394 COVID to 2024<\/th>\n\u0394 from peak to Feb 2024<\/th>\nPeak date<\/th>\n<\/tr>\n
Sydney<\/td>\n24.80%<\/td>\n$224,391<\/td>\n-1.90%<\/td>\n22-Jan<\/td>\n<\/tr>\n
Melbourne<\/td>\n11.00%<\/td>\n$77,386<\/td>\n-4.10%<\/td>\n22-Mar<\/td>\n<\/tr>\n
Brisbane<\/td>\n53.50%<\/td>\n$280,881<\/td>\n<at peak><\/td>\n24-Feb<\/td>\n<\/tr>\n
Adelaide<\/td>\n55.30%<\/td>\n$259,070<\/td>\n\u00a0<at peak><\/td>\n24-Feb<\/td>\n<\/tr>\n
Perth<\/td>\n52.90%<\/td>\n$237,678<\/td>\n\u00a0<at peak><\/td>\n24-Feb<\/td>\n<\/tr>\n
Hobart<\/td>\n27.30%<\/td>\n$140,089<\/td>\n-12.20%<\/td>\n22-Mar<\/td>\n<\/tr>\n
Darwin<\/td>\n24.60%<\/td>\n$98,528<\/td>\n-6.60%<\/td>\n14-May<\/td>\n<\/tr>\n
Canberra<\/td>\n31.00%<\/td>\n$198,924<\/td>\n-6.30%<\/td>\n22-May<\/td>\n<\/tr>\n
Regional NSW<\/td>\n46.10%<\/td>\n$227,016<\/td>\n-4.80%<\/td>\n22-May<\/td>\n<\/tr>\n
Regional VIC<\/td>\n33.90%<\/td>\n$143,966<\/td>\n-6.20%<\/td>\n22-May<\/td>\n<\/tr>\n
Regional QLD<\/td>\n54.40%<\/td>\n$217,133<\/td>\n\u00a0<at peak><\/td>\n24-Feb<\/td>\n<\/tr>\n
Regional SA<\/td>\n54.40%<\/td>\n$140,669<\/td>\n\u00a0<at peak><\/td>\n24-Feb<\/td>\n<\/tr>\n
Regional WA<\/td>\n52.70%<\/td>\n$165,557<\/td>\n\u00a0<at peak><\/td>\n24-Feb<\/td>\n<\/tr>\n
Regional TAS<\/td>\n43.40%<\/td>\n$152,172<\/td>\n-5.70%<\/td>\n22-May<\/td>\n<\/tr>\n
Combined capitals<\/td>\n28.50%<\/td>\n$186,867<\/td>\n\u00a0<at peak><\/td>\n24-Feb<\/td>\n<\/tr>\n
Combined regional<\/td>\n47.60%<\/td>\n$197,288<\/td>\n-0.40%<\/td>\n22-May<\/td>\n<\/tr>\n
National<\/td>\n32.50%<\/td>\n$188,039<\/td>\n\u00a0<at peak><\/td>\n24-Feb<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Source: CoreLogic<\/em><\/p>\n

The data shows that from the latest trough in January 2023 to today, Sydney housing values are up 11.9%.<\/p>\n

Similarly, in Brisbane, housing values are up 12.2% from their January 2023 trough.<\/p>\n

The data also reveals that across all cities, values have recovered (and in some cases surpassed) the latest market decline.<\/p>\n

But it\u2019s important to remember that there is not one Sydney, Brisbane, or Melbourne property market.<\/p>\n

\"pencil<\/picture><\/span>

Note: <\/span>History shows that some properties outperform others with regard to capital growth by 50-100%, meaning there is no reason why strategic property investors who buy an investment-grade property in 2024 will not see the value of that property double within the next seven to 10 years (or one full property cycle).<\/p><\/div><\/div>\n

The problem is\u2026 in my mind only around 4% of the properties on the market currently are what I would call \"investment-grade\".<\/p>\n

But let's take a long-term perspective and take a look at what has happened in the past.<\/p>\n

\"Growth<\/p>\n

The annual property growth rate in Australia<\/span><\/h2>\n

Corelogic has done a deep dive into the data for Australian property over a 30-year period<\/a> from 1992-2022, and the findings are very interesting.<\/p>\n

The data shows that the national median dwelling value delivered an annual growth rate of 6.8% during the 30 years to March 2022 - or a total of 382%.<\/p>\n

Across each of the past three decades, at a macro level, it was the 1992-2002 period that provided the largest capital gains, with CoreLogic\u2019s national Home Value Index (HVI) rising by 77%.<\/p>\n

The middle decade (2002-2012) saw the national HVI rise by 59%, while the most recent decade saw national dwelling values increase by 72%.<\/p>\n

\"002\"<\/a><\/p>\n

The report shows that most regions saw house values rise substantially more than unit values over the 30-year period, which is likely a reflection of the scarcity value of land driving a faster rate of appreciation.<\/p>\n

Conversely, the unit sector tends to show higher yields relative to houses.<\/p>\n

Across the combined capital cities, house values rose 453% over the 30-year period, substantially higher relative to the unit sector where values rose 307%.<\/p>\n

The performance gap is less substantial across the combined regional markets, with house values 314% higher while unit values rose 213% over the same period.<\/p>\n

\"003\"<\/a><\/p>\n

The smaller long-term rate of capital gain might be attributable to lower unit supply levels across regional Australia, along with higher demand for holiday-style units or retirement options.<\/p>\n

It\u2019s the old story\u2026who wouldn\u2019t like to buy the home their parents bought for the price they paid?<\/p>\n

Of course, a significant trend in the last few decades has been Australia\u2019s adoption of apartment living.<\/p>\n

Here\u2019s how apartments have performed in the last decade:<\/p>\n

\"004\"<\/a><\/p>\n

Construction of units in Australia surged over the past decade, although it is well below peak levels.<\/p>\n

\"005\"<\/a><\/p>\n

Of course, there are markets within markets, so by geography, some by price point, and some by the type of property.<\/p>\n

That's why you can't really use capital growth figures for a city like Sydney or Melbourne and make broad brush conclusions.<\/p>\n

\"bulb<\/picture><\/span>

Tip: <\/span>You need to examine capital growth in a particular suburb, to be more accurate about a particular neighbourhood within a suburb.<\/p><\/div><\/div>\n

Last 40 years' median house prices in Australia<\/span><\/h2>\n

Let's look back even further\u2026what happened over the last 40 years.<\/p>\n

The REIA stats show that,<\/p>\n