Many readers will be aware the cost of housing  in Sydney has increased rapidly in recent times.

Despite a 17% increase in median house prices in Sydney in the year to September 2014, growth in capital value over the ten years since September 2004 is “only“ 6% per year.  From 2004 to 2010 prices only increased at an average of 4% per year, with considerable higher growth in the 2 years to September 2014.

The Sydney housing market is behaving “normally” in that increases in home values do not come at an even pace – there are flat periods, and growth periods (but no periods of falling prices in the last 10 years).

In that time CPI inflation averaged 3% per annum, hence underlying  housing price increases have been 3% per year.

Sydney’s population growth is also a factor in housing demand and prices. The 2011 Census showed a growth of 12% in Sydney’s population from 2006.

Interestingly the Melbourne market over the ten years has also averaged 6% annual growth but “only” 10% growth in the last year. Melbourne has had periods when growth has exceeded Sydney, but overall the rate of growth is almost the same.  Population growth has also been similar to Sydney.

What does all this mean for Sydney and Melbourne property ?

Long-term investors (including owner-occupiers) can confidently expect Sydney and Melbourne housing to continue to be a good investment over time. Of course this is no guide to the timing or extent of future increases in value.

A word of caution:

Over the 10 year period mortgage interest rates averaged a little over 7%. With current interest rates around 5-6% it makes sense for those contemplating buying property to factor higher interest rates into their calculations.

 

For more information contact Lucy Bulla at lucyb@relocationcentre.com.au, or 61 (0)2 9955 3300