There is an old rule of thumb that house prices double every seven to 10 years.
Over generations, this rule of roughly seven percent annual growth holds up fairly well.
But as with all markets, timing is everything. It depends on which seven to 10 year period you are looking at.
And while some houses have doubled in the last 10 years, most have not. Not quite.
According to the ABS, the median house price in Victoria went up 74 percent between 2011 and 2021.
In Stonnington, the last 10 years have looked something like this…
2012 – 2017: Prices rallied 70% in five years
Nov 2017 – May 2019: Prices fell 10 – 15% in 18 months
Mid 2019 – Oct 2021: Prices soared 30% in 18 months
Nov 2021 – present: Prices have eased 5 – 10%
Please note, these numbers are based on various data points for houses (not apartments or townhouses), including many observations of the same properties selling twice (or even three times) within the last decade.
It should also be said that many properties (i.e. A-grade position, move-in ready) don’t seem to have come off in price at all since last year, while others (i.e. compromised position, unrenovated) appear to have come off by more than 10 percent.
But for simplicity, let’s take a numerical example. Let’s imagine a single fronted home in Prahran that sold for $1,000,000 in 2012.
This is what it theoretically might have been worth along the journey:
2012: $1,000,000
November 2017: $1,700,000 (+ 70%)
May 2019: $1,450,000 – $1,550,000 (- 10-15%)
October 2021: $1,875,000 – $2,000,000 (+ 30%)
Today: $1,700,000 – $1,900,000 (- 5-10%)
And this is pretty much what we have observed on the ground over recent times.
If you bought (well) in 2011-2013 and sold at the peak last year your property may have doubled in value.
If you bought in 2016-2017 and are selling again now, you should expect to achieve a similar number to what you paid, maybe as much as 10-15% more. We have seen examples of properties selling for less.
If you bought in 2019 you should be sitting on 20-30% equity today.
If you bought before 1999, your house has probably quadrupled in value.
If you bought before 1979, you are probably a baby boomer and sitting on a golden goose that has 10X’d in value.
Of course, every real estate transaction is different, just as every house is different.
You cannot simply overlay a median house price graph onto your ownership timeline to determine price or punch some numbers into a capital growth calculator. If only it were that easy, we would be out of a job!
There are so many variables – timing, stock levels, renovation costs, interest rates, sentiment, banking regulations, luck, immigration, presentation, strategy, agent, etc.
And while it is nearly impossible to time the market, it is possible to outperform the market by making smarter decision and getting the right advice from the right people.
Please let me know if I can help.
Feature Image: 17a Egerton Road, Armadale
David Sciola 