By John McGrath
Almost one in two houses and one in five apartments in Sydney have sold for $1 million or more over the past year, according to new research from CoreLogic which reveals a record number of $1 million-plus sales across the country over the 12 months to June 2017.
In Melbourne, one in four houses, but less than 10% of apartments, sold for more than $1 million.
After more than three decades in real estate, I’ve seen a lot change. When I was starting out as a young agent, a million dollars was a serious budget for a new home. Today, it’s the median price of a house in Sydney.
We hear a lot about affordability these days and I’m very supportive of the measures both state and federal governments are implementing to assist young buyers and essential services workers in our two biggest and most expensive cities. But there’s another side to this.
Seeing a record number of $1 million-plus sales across Australia should also remind us what property can do for us if we buy well and hold for the long term.
CoreLogic predicts an even higher number of $1 million-plus sales next year. Good quality property will continue to rise in value – over time; and yes, that goes for Sydney too. Prices can and will go higher in the future.
How is this possible? Well, there’s many factors at play but one of the most basic is we have a small number of capital cities and a huge majority of people living in them. Australia might be a vast land mass with plenty of space available but two out of three people choose to live in a capital city.
The latest Census puts it at 67% – that’s more than 15 million people living in just eight cities. That’s an enormous concentration of the population and it’s growing.
Across our capitals, there was 10.5% population growth between 2011-2016 and that’s double the rate of growth in other areas, according to the Australian Bureau of Statistics.
With a large and growing city-based population, it’s no wonder that new housing isn’t keeping up. And it’s this long-standing imbalance between supply and demand that keeps a floor under prices and continues to push them up – sometimes rapidly like we’ve seen in Sydney and Melbourne and sometimes more slowly with various cyclic ups and downs, like we’re seeing now in other capitals.
When we look at the number of $1 million-plus sales, it’s just another market measure telling us that Australian real estate is robust with plenty of room left for future long-term growth.
Think back 10 or 15 years and recall what you thought of property prices then. Did you think Sydney was expensive? Did you think prices couldn’t possibly go higher?
Take a look at these statistics for $1 million-plus sales today compared to 10 years ago in our major capital cities.
Today – 47.8% of all house sales and 21.3% of apartments sold for $1 million-plus
10 years ago – 13.8% of house sales and 4.7% of apartments sold for $1 million-plus
Today – 25.9% of house sales and 7.4% of apartments sold for $1 million-plus
10 years ago – 5.8% of house sales and 2.7% of apartments sold for $1million-plus
Today – 7.9% of house sales and 2.8% of apartments sold for $1 million-plus
10 years ago – 2.4% of house sales and 2.4% of apartments sold for $1 million-plus
Today – 11.9% of house sales and 2.1% of apartments sold for $1 million-plus
10 years ago – 2.6% of house sales and 0.7% of apartments sold for $1 million-plus
Today – 10.7% of house sales and 3.9% of apartments sold for $1million-plus
10 years ago – 7% of house sales and 4.2% of apartments sold for $1 million-plus
The lesson to be learned from these numbers is two-fold.
Firstly, prices are going to keep going up in our capital cities. We might see a correction in Sydney and Melbourne after more than five years of runaway growth but if so, it’s going to be small.
Secondly, the best time to buy is as soon as you can and then hold for the long term.
Right now in Sydney and Melbourne, there’s a bit of confusion in the marketplace. Some people are holding off on their next move in property, others are rushing to buy or sell as soon as possible. People aren’t sure what the market is going to do next and it’s impacting their decisions.
Timing the market isn’t necessary if you have a long-term view. Sure, buyers should be careful given we seem to be at the peak in Sydney and Melbourne but what really matters, if you want to make money in real estate, is the time you spend IN the market, not the timing of your purchase.
Buyers should keep this in mind this Spring.
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