Over the past 25 years, Australian property prices have increased by more than 500%, but while capital values have increased, yields have reached record lows.
According to Adrian Kelly, president of the Real Estate Institute of Australia (REIA), investors in real estate have been motivated more by anticipated capital gains than by rental yields.
Australian housing's median price increased from $160,000 in 1996 to $825,000 in 2020, according to REIA data.
Other homes, including apartments and condos, have seen capital value increases of slightly more than 400% in comparison, but these assets have better yields. This is a tale of two cities.
According to the data, housing increased by 25% over the previous five years, from a median of $683,000 to $825,000, while other residences increased by 10%, to $600,000.
According to Mr. Kelly, Australian home yields tightened during the course of the 25-year period, going from 5.1% to 2.9%, while yields on other types of property fell, albeit not as sharply, from 5.2% to 3.7%.
"Darwin has the highest return on housing, averaging 4.2%. Darwin real estate investments returned 6.4% in 1996.
The lowest returns have historically been found in Melbourne and Sydney, which both saw their rates drop from over 4% in 1996 to only 1.8% in 2020.
"The epidemic witnessed increased vacancies in Melbourne and Sydney, with Melbourne now having the highest rate in Australia at 5% and Sydney currently
According to Mr. Kelly, there has been a decrease in market investors recently, particularly as worries about eviction moratoria and rising vacancy rates have surfaced.
Particularly in downtown Sydney and Melbourne, residential property has become less appealing as an investment due to rising vacancy rates.
"Despite rising vacancies and low yields, we are starting to see investors reemerge as they respond to a rising market with further growth expectations and low borrowing costs," he continued.
In the December quarter of 2020, the weighted average capital city median price for both houses and other dwellings climbed in the Australian residential property market, according to REIA's most recent publication, Real Estate Market Facts.
"The weighted average median price in the capital city climbed by 0.9% for other dwellings and by 6.0% for houses. For the eight major cities, the weighted median house price rose to $825,205. All capital cities saw an increase in the median house price for the quarter.
"At $1,211,488, or 46.8% more than the national average, Sydney's median house price remains the highest among the capital cities. The median house price in Perth, Australia, is $490,000, which is 40.6% less than the national average.
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