The future of property markets. What can you expect?
With houses at an all-time high price and rents constantly going up too, one can only ask the question: will it keep going? Once again, let’s look back to anticipate what’s to come because history is bound to continue repeating itself.
In 1970, the average house in Australia was worth $12,000. The average weekly income was a “massive” $55 a week. Rent was $13 per week, which was a lot of money if you were only earning $55 a week. A car would cost you $2,000 and milk was 8 cents. It’s hard to believe, right?
By the year 2000, a property cost an average of $180,000 (increased by a factor of 15), nationally. The average income was $780 a week (increased by a factor of 14.2) and rent was $190 per week (increased by a factor of 14.6). An average new car cost $30,000 (increased by a factor of 15) and milk cost $1.19 (increased by a factor of 14.9). Do you see a pattern?
If this continues, sometime in the future property is going to cost an average of $2.7 million. You could expect the average weekly income to be $11,700, rent to be $2,855 per week, a car will cost you $450,000, and a bottle of milk will cost $18. That sounds ridiculous, right? But mark my words, it will happen.
*shall upload images here as per doc shared
Figure: Price comparisons for 1970 versus 2000 with future predictions
Let’s look at it a different way: in 1960 Australia’s population was almost 10.4 million people. In 2016, the population had grown to around 25 million and now the Australian population is well over 26 million people.
Can you spot the difference?
Figure: Land size vs. population growth in Australia, 1960-2022
When we look at the Australian continent, nothing has changed in terms of the size of the land and where the capital cities are located. The difference, however, is the size of the population. In the last six decades, the population size has more than doubled – it’s quite dramatic.
As the least densely populated country in the world, Australia has no choice but to increase its population. (And at least the rest of the world has somewhere to go.) In addition, we are currently unable to support ourselves from a birth rate perspective since it is well below the replacement rate. The replacement birth rate is considered to be three children per set of parents: two to replace their parents and one for the general population and the people who can’t or won’t have children. The current birth rate is well below that at only 1.7 births per woman. That’s only half the required replacement rate!
This is why we rely so heavily on migration to keep our population growing. Migration also has the added bonus of bringing skilled professionals into the workforce, who then pay taxes and in turn help to support the ageing and retired population.
As long as our population continues to grow (the demand) and the land mass stays the same (the supply), then we are bound to see house prices continually increasing for many decades to come.
Stay tuned for more daily insights from Wealth Through Property.
~Daimien Patterson