Shock year when $3.5m homes will become norm in Sydney

Sydney’s median house price may increase to circa $3.5 million – up from $1.5 million – by 2045, new research shows.

The study was based on analysis of historical trends and the typical rate at which prices grew over a 20-year period.

Sydney is currently the most expensive capital in the country by some measure – it’s about 50 per cent pricier than the next most expensive capital, Brisbane, with a median of $1.02 million, the Propertyology research noted.

Propertyology head of research Simon Pressley said the study examined historical trends to understand why there had always been such a large gap between the price of Sydney housing and other capitals – and how this could continue to evolve over the coming years.

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Mr Pressley said in each block of 20 years, wherever the location in Australia, a typical home across Australia has grown somewhere between 3.5 times and six times its value.

“No one has a crystal ball – but drawing upon what property values have done over the last 100 years you can see over a period of time that property prices generally grow by x and y,” he said.

“The smallest rate of growth over the last four blocks of 20 years has been a bit over three times the value.”

The report examines history, stating subsequent to the First Fleet docking in Botany Bay in 1788, Sydney had a 40- to 60-year urban development headstart on every other Australian city.

Infrastructure, essential amenities, a commerce centre and two-full generations of house price growth had evolved in Sydney by the time other cities such as Launceston (1804), Brisbane (1825), Perth (1829), Melbourne (1835), Adelaide (1836), Bendigo (1851) and Townsville (1865) were founded.

Mr Pressley states in the report that a rollercoaster of major events then impacted prices, including gold rushes, the 1890s bank collapse and world wars.

“The whole world changed after WWII,” he said. “The Federal Government at the time came up with the term, ‘populate or perish’. The whole country acknowledged we had to expand our population in a massive way.”

Despite this, Mr Pressley said population size and population growth rate has very little to do with property price growth.

The report stated from the end of World War II onwards, large portions of Australia’s financial capital were directed toward Sydney and this concerted effort to develop Sydney into a globally respected economic nerve centre played a significant role in Sydney house prices consistently leading the nation.

“It’s about revenue within a town’s economy that has the biggest influence on property prices.

“Directly after WWII a lot of our revenue went into Sydney and to a lesser extent Melbourne.”

The report also reveals regardless of the generation, construction costs, property taxes, housing supply constraints, the rental market and housing affordability have always been central to national debate.

Such as dating back to 1924, when Australians were ‘bemoaning’ housing affordability in the paper, when the price of a typical house was circa $2,000.

“I’m absolutely certain it will be one of the most debated topics in every generation,” Mr Pressley said.

“We can look at the current generation and the one before that, the one before that, it’s always been debated and I can understand why, we all want a home.”

According to Mr Pressley, this is also due to a myriad of differences between generations.

“It’s not just the price of a typical home today and how different it is to previous generations,” he said.

“It’s all relative to how difficult or otherwise it is to buy a home.

“So yes, the price of a home in Sydney today compared to 20 years ago and 40 years ago was different but so was the unemployment rate and the availability of credit and in past generations you had to have a 30 per cent deposit.”

According to Mr Pressley, lifestyle also takes priority over price.

“Humans predominantly now and always prefer houses over anything else,” he said.

Mr Pressley said although most people are renting, when it comes to buy a home, very few buy an apartment.

“When that same tenant reaches that stage of life and they want to buy a home and can afford to buy a home, very few put their hard earned money into an apartment,” he said.

“There are large parts of Sydney where someone who may have been renting say last year in an apartment, within 10km from the CBD – they can or could have purchased an apartment for seven, eight, nine hundred thousand and yet they chose to not buy that property and pack up all their belongings into a truck and in some cases move interstate and pay more for a house in a completely different neighbourhood.”

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