Forecast : the property market in 2050

If you’re waiting on the sidelines before you make your property purchase, you might want to rethink your approach.  A numerical look into the future previews some breathtaking projections for the property market only a few decades away.

First – let’s be sensible

Before we dive in, keep in mind that no one can predict the future and the further out projections are, the higher the margin of error.  There will be significant changes to the way we live and work over the next few years, and any property purchases should be made with strong demographic fundamentals in mind.  The sensible approach is to build a flexible portfolio that will allow you to adjust and respond as the market and your personal situation changes.

Eye watering prices

While it’s important to keep things in perspective, research released by Finder.com.au this month has attempted to project pricing in 2050.  Their reasoning is as follows . .

“The property market has some dramatic peaks and troughs, however over the longer term it grows at a much steadier pace. Over the past 10 years, combined capital city home values have grown by an average of 5.5% per annum.

Sydney and Melbourne have seen slightly more robust growth, increasing at 6.4% per annum and 7.1% per annum, respectively. Darwin has grown slightly below the average for combined capitals, at 5.4%.

Canberra, Adelaide and Brisbane have fared slightly worse at 4.0%, and 3.7% for both Brisbane and Adelaide. Perth and Hobart have seen anaemic growth, meanwhile, at 2.1% and 1.3%, respectively. If house prices follow this trend, this is how the property market could look by the year 2050.”

finder_2050 property prices

 

Cool off

Of course, there’s quite a few assumptions in the analysis.  Firstly, only looking at the last 10 years as a starting point will skew the percentage increase.  Also, the use of medians should always be treated with caution.  We have numerous markets within markets, so not all suburbs and properties will move with the median.  The other point to note is that we have many flatline years before markets move, and prices do go down as well as increase – look at Perth for a good recent example.

On the flipside though, we do have solid evidence of how property can grow in value.  For example, 35 years ago a house in Haberfield (8kms from Sydney CBD) would have been worth approximately $225,000.  Today, you would be lucky to purchase sub $3,000,000.  However, with the construction of the Westconnex hyper-roadway, we may have seen the last of Haberfield’s intense price growth.

Better in than out

Whatever the prices in 2050, buying property with good price drivers is still one of the best ways to build wealth in 2016.  A worrying trend is that even though we are experiencing the lowest interest rates in more than 35 years, we are starting to see a fundamental change in home ownership.  The Household, Income and Labour Dynamics in Australia (HILDA) Report, released this month, outlined insights into Australian home ownership trends.

HILDA home ownership by age_with references

The HILDA report observed a decline in home ownership between 2001 and 2014, which would suggest there is likely to have been change in the age composition of home owners. In particular, there is factual evidence that rates of home ownership have fallen more rapidly for younger age groups. The chart here shows the visual trend.

Using data gathered from HILDA’s sample group of more than 7,000 households, the trend shows the decline in home ownership has been concentrated on those aged under 55. Home ownership among persons aged 25–34 declined from 38.7% in 2002 to 29.2% in 2014, with much of the decline occurring between 2010 and 2014.

Among persons aged 35–44, home ownership declined from 63.2% to 52.4%, and among persons aged 45–54, it declined from 75.6% to 67.4%. There was also a slight decline in home ownership among persons aged 55–64, from 75.1% in 2002 to 72.9% in 2014. There was essentially no change in home ownership among those aged 65 and over.  This information is the source data behind the recent media headlines heralding the 65+ band as ‘Australia’s wealthiest age group’, as the report highlighted the links between home ownership and personal wealth.

HILDA home ownership by state with references

State by state

The report also graphed the mix of home ownership across the country.

Rates of home ownership have tended to decline in all parts of Australia, but the extent of decline varies. Decline was greatest in Victoria (7.8 percentage-point decline), followed by New South Wales (4.3 percentage points) and South Australia (2.5 percentage points).  There was little net change in Queensland and Western Australia. Tasmania, the Australian Capital Territory and the Northern Territory are not included due to small sample sizes in these jurisdictions.

A national issue

No matter what the price of property is in 2050, it’s in our collective interest to maintain a healthy balance of home ownership alongside a healthy investment market.  Here’s hoping those with their hands at the various wheels of the economy manage to get the job right.

 

Buy smarter = limitless ways to build lifetime income

Crave Property Advisory is a unique property strategy and buyers agent service. As the only independent and unbiased advisory that can help you use any property strategy Australia-wide, Crave’s services extend to home, investment and commercial property.  A highly client focused organization, Crave developed the Modular Investing System (MI System) to provide clients with the ability to use a tailored mix of strategies and efficiently build profitable portfolios that create lifetime income. 

Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business.

Follow us on facebook.com/CravePropertyAdvisory for regular updates, or book in for a strategy session to discuss your property questions.

Disclaimer – This information is of a general nature only and does not constitute professional advice.  We strongly recommend you seek your own professional advice in relation to your particular circumstances.

 

 

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