In the past 20 years, prices of houses have gone up with inflation playing its role in house pricing. However, there have been short cycles of up and down as the market has slowly climbed up. For eg. Berwick, a suburb in the outer south east of Melbourne, median house prices has climbed from $350,000 to $655,000 from 2008 – 2019.
The median house prices has increase every year except 2011 and 2019 when it dipped marginally.
Data source: property and land titles VIC.
If you are a long term buyer or if you are buying house in Australia to live in, you should not be worrying about the long term prospects of house value. However, if you are an investor, you should be looking for these small dips when it’s best to buy, it’s not rocket science.
House price trends
Availability of bank financing, rates and affordability
Banks from time to time change their lending criteria based on availability of funds, bank rates and government regulations. Changes in lending criteria directly impacts of the amount of money you can borrow and your serviceability. Relaxing of lending rules / lowering of lending criteria results in more funds flowing through into the market which directly impacts of property prices pushing the house prices upwards.
As the lending rates have come down over the last 20 years. The ratio of house price to income has steadily climbed up and buying a house in Australia has become a very difficult affair the first home owners. We are borrowing more than ever before.
You have to be very careful about your own servicing capacity and the best available deal in the market.
Demand vs Supply
The basic economic theory of demand and supply applies to the real estate industry as well.
As the gap between demand – supply increase so does the house prices and the phenomenon reverses as demand – supply goes negative.