Australia’s housing prices have soared by more than 500% over the past 25 years, the Real Estate Institute (REIA) has found.
Historic REIA data shows, in fact, that the median price for housing in Australia inflated from $160,000 in 1996 to $825,000 in 2020. Yet while capital values have grown, yields have not kept pace.
REIA President, Adrian Kelly said housing investors have been driven more in recent times by expected capital gains rather than rental yields.
“It’s a tale of two cities with other dwellings, such as units and apartments, seeing capital values increase by just over 400% in comparison; however, these assets produce higher yields”, Kelly observed.
The data shows that over the past five years, housing grew by 25%, from a median of $683,000 to $825,000 while ‘other dwellings’ rose by 10% to $600,000.
Kelly noted that over the 25-year period, Australian housing yields tightened from 5.1% to 2.9%, while other dwellings recorded a drop in yields but less dramatic, falling from 5.2% to 3.7%.
“Houses in Darwin have the highest return averaging 4.2%”, he said, adding that in 1996, housing investments in Darwin were yielding 6.4%.
“Melbourne and Sydney have always had the lowest yields, both falling from around 4% in 1996 to just 1.8% in 2020.
“The pandemic saw Melbourne and Sydney experience rising vacancies with Melbourne now the highest in Australia at 5% while Sydney is currently at 3.7%,” he said.
Kelly has observed a decline in investors in the market in recent times, particularly as concerns have emerged with moratoriums on evictions and rising vacancies.
The increasing vacancy rates had made residential property less attractive as a proposition for investment, particularly in inner Sydney and Melbourne.
“Despite rising vacancies and the low yields, we are starting to see investors re-emerge as they respond to a rising market with further growth expectations and low borrowing costs,” he concluded.
