How much have real estate prices increased in the past 30 years?

In most regions, house prices rose significantly more than unit values.

“Most [cities] saw annual growth of between 5 and 6 percent,” Lawless said, adding that dispelled the long-held housing myth that real estate prices doubled every 10 years.

Sydney’s average real estate price has risen from nearly $222,000 in 1991 to about $1.38 million today.Credit:Peter Rae

There have been six cycles of price growth and decline in the national index over three decades, Lawless said, depending on tax policy, monetary policy decisions, economic shocks, fiscal stimulus and broader economic conditions. There were also large differences between regions.

The Yarra statistical region in Melbourne, which includes suburbs like Fitzroy, Carlton North and Richmond, posted the strongest growth as values ​​rose 779 percent. It was followed by Melbourne City (760 percent), the Gungahlin region in the ACT (754 percent), and the Boroondara (734 percent) and Maribyrnong regions of Melbourne (710 percent).

Sales agent Nick West, a Nelson Alexander director, said the demographics of areas like Fitzroy and Carlton North had changed over the course of his 33 years in the market. A surge in the number of cashed-in downsizers moving to the area, and more young families staying there, had boosted buyer demand.

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“There’s no question that the demographics of the baby boomers contributed to the price growth, and many were contracting … and able to spend 10 to 20 percent more to secure the right home,” he said.

More home renovations in recent decades and the gentrification of high streets also impacted prices.

Drops from Sydney’s Eastern Suburbs and Inner West, and Brisbane’s interior also made the top 20.

Inner and coastal suburbs largely had the strongest growth, Lawless said. While the premium market led to ups and downs of the market, blue chip properties tended to grow stronger over time.

Going forward, he expected price declines to level off as interest rates hit their ceilings, then grow as interest rates fell. He noted that the longest downturn in the combined capitals since the early 1980s lasted 21 months.

Values ​​in some Melbourne suburbs have risen by more than 700 percent over the past three decades.

Values ​​in some Melbourne suburbs have risen by more than 700 percent over the past three decades.Credit:Paul Jeffers

Predicting how the market would follow in the next decade would be a hopeless exercise, he added. While average annual growth of 5 to 6 percent could continue, there could be significant volatility.

Shane Oliver, chief economist at AMP Capital, said the market declines over the 30-year period had been largely short and mild – price declines of less than 10 percent. Prices were then on a rapid recovery as interest rates typically resumed their protracted downward trend, while demand has been boosted by strong population growth since the mid-2000s.

“I suspect it will be a little different this time,” Oliver said. “It will take longer for prices to reach new record highs and recover from the slump we are seeing now.

“We are seeing a cyclical downturn coupled with the likely end of the protracted upswing that has been going on for much of the past 30 years, leading to a deeper downturn and a slower recovery.”

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Oliver expected slower price increases over the next decade, as spot and fixed mortgage rates were unlikely to return to the lows that fueled price growth. Very high debt-to-income and price-to-income ratios, increasing bank regulators’ focus on risky lending, and community concerns about poor affordability may also limit price growth more than in previous cycles.

Oliver has predicted that real estate prices in the capital will fall 15 to 20 percent from peak to trough, assuming cash interest rates rise to 2.6 percent. Prices could then start to recover in the second half of next year, when the Reserve Bank could try to cut interest rates. However, if rates were to rise higher, there could be greater price falls.

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