To mark the major brokerage’s 30th year in business, the Lendi-owned company commissioned property research group CoreLogic to review how the housing market had changed over the past three decades, and what trends are expected to emerge in future.
The Aussie Progress Report reviewed how significant events, including major economic and financial reform, commodity booms, a global financial crisis, and most recently – a global pandemic – had shaped the Australian housing market over the last 30 years (December 1991-December 2021).
Noting that 30 years is the average length of a home loan in Australia, the report showcased how much property trends and markets can change over the term, and what might drive property decisions moving forward.
Climate resilience a growing consideration
The Aussie Progress Report suggests that the issues expected to impact the Australian property market moving forward include: a rising cash-rate environment; remote working capability; affordability constraints (which may hinder demand), and climate change and extreme weather.
This has been brought into focus recently with the flooding in Queensland and NSW, as well as the bushfires in Western Australia, and has been flagged as being of increasing importance to home buyers from real estate groups, too.
“Rising average temperatures may deter buyers from areas with low tree canopy shade, and the increased incidence of extreme weather events have already contributed to higher insurance premiums in pockets of the market, which may make housing costs prohibitive for some prospective buyers,” the researchers outlined.
“Meanwhile, there is evidence of some markets seeing an increase in demand for their cooler climates, which has been cited as a motivation for internal migration in Australia. Cooler-climate areas like the Blue Mountains of Sydney, and parts of Tasmania and Victoria may be at an advantage long term, should average temperatures continue to rise.”
Affordability will also be increasingly important, with the Aussie Progress Report, finding that the time taken to save a 20 per cent deposit at the national level has increased from 5.8 years in 2001 to 10.2 years in 2021.
The report highlighted that the most recent upswing in the Australian housing market has produced the highest annual rate of growth in housing values for the past 30 years (with a peak of 22.4 per cent in the 12 months to January 2022) but noted that while the current conditions “won’t last forever”, property remains a long-term wealth creation strategy for Australians.
“There has already been a rise in innovative approaches to finance for first home buyers to get their foot on the property ladder, whether it be the introduction of the First Home Loan Deposit scheme in 2020, the rise of ‘rent-vesting’, or finance solutions that have allowed first home buyers to tap in to ‘the bank of mum and dad’. Innovative finance solutions are likely to remain a crucial part of addressing the high costs of entry for first home buyers,” it said.
How the property and lending market has changed
When reviewing the past three decades, the researchers found that Australian house values have increased 414.6 per cent and units have risen by 293.1 per cent. On an annualised growth rate, values have risen 5.6 per cent across the combined capitals over the past 30 years, and 4.5 per cent across the combined regional market.
The report revealed that there have been seven periods of sustained increase in values at the national level, and seven periods of decline. The growth cycles have had an average length of 41 months with average cumulative growth of 34 per cent, while periods of peak-to-trough declines have on average lasted 12 months, with an average fall in values of -4.3 per cent.
The current national housing market upswing, which commenced in October 2020, has lasted 17 months to February 2022.
Moreover, the researchers detailed that the lending environment was markedly different in 1991.
At the beginning of 1991, the cash rate was 12 per cent (off the back of a high inflationary environment), compared to just 0.10 per cent now (marking the lowest-ever figure and one that has been held at this rate since November 2020).
Further, the mortgage broking industry had only just started – and the financial system was just starting to be deregulated, which contributed to increased competition in the mortgage space.
Brad Cramb, chief executive of distribution, Lendi Group (parent company of Aussie), commented: “When Aussie entered the market 30 years ago, the property and home loan industries looked very different to what we know today.
“Interest rates were around 12 per cent, the margin charged by banks on home loans was around 5 per cent, residential mortgage broking was not an established industry and customer choice was limited by proximity to bank branches.
“Fast forward to today, mortgage brokers have never been more important, writing over two-thirds of home loans in Australia, interest rates are slowly moving up from all time lows, customers can choose from thousands of home loan products and manage their banking and home loans digitally.
“Whether you’re looking to buy your first home or expand your portfolio, mortgage brokers play a pivotal role in helping customers protect their best interests while understanding how to maximise opportunities and option.”
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.