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5 charts show why real estate is a long-term play

By Mo Zeitouneh

When owning a property, it can be easy to focus on the short-term changes in value and forget that over many years of ownership, prices are likely to rise.  

Home prices have fluctuated wildly over the past few years, with values in most cities staging a surprise recovery last year after interest rate rises triggered a downturn in 2022.

But price growth has slowed over the past few months compared to what was experienced in mid-2023.

The spring selling season saw a large volume of new listings come to the market, particularly in Sydney and Melbourne, and an uplift in sales volumes.

The lift in stock led to slower rates of price growth and an additional rate rise in November and the pre-Christmas slowdown tempered price growth.

Price changes have been volatile over the past two years, mostly driven by interest rate rises putting pressure on household budgets and reducing the amount that buyers can borrow by approximately 30%.

However, the recovery in the past 12 months has helped put most capital cities and regional areas back into positive year-on-year growth.

Perth is leading the pack with annual growth of 15.45% and Brisbane and Adelaide have also experienced strong rises.

Hobart (-2.41%) and Darwin (-1.47%) are still down year-on-year, as are regional Victoria (-1.36%) and regional Northern Territory (-3.24%).

Home values in Australia have never been higher and since 2014, have increased by about 80%, despite two short downturns between then and now.

If this seems like a long period of time, bear in mind that the average time a person owns a home for in Australia is currently 11 years.

Metro and regional growth compared

Regional areas have experienced stronger price growth than capital cities largely driven by city dwellers moving to regional areas and interstate during the pandemic lockdowns.

Despite the downturns in 2019 and 2022, city home values are 75.7% higher than in 2014 and regional areas are 92.5% higher.

And while Hobart has been slowest to recover from the most recent downturn, since 2014, home values have increased by more than the other cities, more than doubling in 10 years.

Adelaide and Brisbane have also experienced outstanding growth since 2014, and values in all capitals except Perth have increased by more than 50%.

While Perth had the slowest price growth since 2014 at 26.53%, most of that growth has occurred in the past few years, defying the 2022 downturn.

Parts of regional Tasmania and New South Wales have experienced the strongest growth since 2014.

Most of this growth came during the pandemic years, when lockdowns and high rates of infection in the cities drove many homeowners to move out to less populated areas with bigger houses.

Houses have outperformed units over the long term

The variance between house and unit prices has also increased over time.

In the years preceding the pandemic, the national median sale price for houses was approximately 10% higher than for units.

However, from mid-2020, the gap between the two values grew substantially and has now reached 31.9%. This is roughly a $195,000 difference.

The variance increased from 2020 as houses were in higher demand during the pandemic due to the need for more outdoor space and extra rooms to work from home.

Looking ahead

Further price growth is expected this year, albeit at lower levels than in 2023. With some cities and regional areas already at their price peaks, we can expect further areas to follow suit and hit all-time highs.

House values have increased by 89.4% since 2014, compared to 44.4% for units, therefore we can expect to see the gap widen between houses and units in the coming year.


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