Property prices may go up or down in the short term, but history suggests they increase in the long term.
That’s the key takeaway from a CoreLogic analysis of property prices over the 30 years to July 2022.
Australia’s median property price increased 382% during that 30-year period. Houses outperformed units (453% v 307%) and metro locations outperformed regional locations (409% v 294%).
Crucially, property prices didn’t grow so strongly because there were never any downturns; they grew strongly despite regular downturns along the way.
Over that 30-year period, we have seen six distinct cycles of growth and an equal number of cycles of decline (including the current downswing) across the national index,” according to CoreLogic.
“Each of the upswings and downturns have been characterised by different environments and catalysts of change such as taxation policy, monetary policy decisions, economic shocks, fiscal stimulus and broader economic conditions.”
While past performance is no guarantee of future performance, history suggests that homeowners who purchase quality properties and hold them for the long-term enjoy significant capital growth
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Australians are making increasing use of credit cards and buy-now-pay-later services, which could potentially have implications when they make home loan applications.
Credit card applications in the June 2022 quarter were 6.0% higher than the June 2021 quarter, according to Equifax, one of Australia’s big three credit bureaus.
Buy-now-pay-later (BNPL) applications jumped 42.2% during the same period.
Lenders look at this kind of spending behaviour when they assess home loan applications. With credit cards, lenders generally assume you’ll use your entire credit limit each month, even if you use only part of it and always pay your bills on time. That can affect your borrowing power. So if you wanted to raise it, you could either reduce your credit limit or cancel your credit card and pay by debit instead.
BNPL use can also affect your borrowing power, because lenders may wonder how much of a mortgage you could be trusted with if you make a lot of non-essential purchases and seem unable to pay for them in full at the time. So to protect your borrowing power, you could either reduce your BNPL use or stop it altogether.
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Dip. of Management (Deacon University)
Dip. of Finance/Mortgage Broking Mgt.
Assoc. Cert. of Business (Real Estate)
Assoc. of Mort. Ind. Assoc. of Aust. (AMIAA)
Terry Boag is the founder and CEO of Peel Finance Brokers and has been providing professional and loyal service to the Mandurah and southwest area for 25 years. With a long history of financial experience, Terry is reliable and dedicated to his clients, always ensuring the highest customer service and delivering strong lender relationships.