House Prices in Australia: The Good, the Bad, & the Ugly

They're on the rise again. House prices are riding high in Australia. But as always, there’s a good, a bad, and an ugly side to this story. The good news is that if you own your own home, you’re sitting on serious equity. The bad news is that if you’re renting — or worse still, about to get married and buy your first house together — it’s going to be more expensive than ever. To find out all the gritty details of what makes house prices tick in Australia today, see this article.

A snapshot of the Australian property market right now

Australia’s property market is currently in a bit of a boom. In fact, it’s the 5th most expensive market in the world, after Hong Kong, New York City, London, and Paris. Looking to set up your buy and hold business abroad? Check out our Ultimate Guide to Investing in Real Estate Abroad.

There’s a Good and a Bad

Many property investors in Australia on top of the fact that it’s a really good market, they could get a great return on their money. But there’s a downside to that. Purveyors in Australia are pretty greedy and only care about building up their business. As I believe said in the article on house prices, “it’s a good country with great people, but there’s no limit to the extent to which people will go to succeed in this market.”

There’s real estate and then there’s greedy peddlers. That’s not comfortable for any real estate investor, but it’s what it is. When it comes to house flipping, Australian property prices are typically about 10-15% higher than those in the U.S. There’s a long list of things that draw foreign investors into Australia because Australia is (surprisingly) relatively easy going and the government is quite willing to help out. First-time home buyers in Australia are also comparatively easy to find. When you compare it to all the potential risks you’re taking when investing in real estate in other markets, Australia isn’t too bad for being easy.

But there is also a downside to being a wallflower compared to other countries that’s the creation of purveyors in Australia. Prices are so high that it’s those who don’t see opportunity and continue to believe that country’s a gold mine that make the big bucks at the front.

The good news: if you're already a home owner, you're sitting on serious equity

If you’re already a home owner, you should be sitting on some serious equity. Your home is likely your biggest asset, so it’s important to understand how your current loan works. I’ve written about this subject in the past, if you’re interested.

While interest rates on your loan are set by the government, there are three types of mortgage you can apply for.

Mortgage providers like QuickBooks, Advancit, and Eversline work through a complex system that involves multiple internal formulas, many separate advisors, and is regulated by multiple different laws. They work out your cost of borrowing, your rate of return, and your equity (the cash put into your loan) before you even start making payments.

For many first home buyers, their first point of contact with a lender will be a mortgage process consultant. These people use fancy, highly technical Excel sheets that replicate the math used by the real-world banking industry. These people also punch in a bunch of data based on their experience with lots of complicated variables (basically a master’s degree in finance). They will attempt to predict your ability to service your debt quickly — even though they will be using information derived prior to you owning your dwelling.

Another category of advisors are ‘landed agents’ and they are employed by the banks themselves. This is where the jargon for the individual bank comes from. Let’s say you’re trying to buy a property in Sydney. As an example, this would be an agent for the bank:

The hired help will use lots of proprietary statistical algorithms and specialist software to guess your credit worthiness. An indicator here is whether you have a positive or negative record with another bank. This is crucial because their software will then map your credit history against their algorithms for how likely a property is to sell in your desired location.

The bad news: if you rent, or want to buy your first home together, it's going to be more expensive than ever

Buying a home is a big step, and the costs can be daunting. If you’re looking to buy a home with a partner, you’ll have to pay double the money up front.

But sometimes you’re on the fence. Is it the thought of nabbing a property with a partner, or the ’specially made offer’s that tempt you?

Before we dive in, it’s worth taking a second to acknowledge some historical frustrations related to housing. Firstly, when prices actually go down, it’s as a result of supply constraints, not demand. Secondly, the current state of affairs is very different to the pre-COVID days when every home was affordable. The biggest fault lines emerged around the issue of privacy and the right to buy or sell your property.

Now let’s explore the most recent developments in the context of Australian house prices.

Let’s start with a metaphor.

A buyer (let’s call him Jeff) is walking along a picturesque hedge. On his left is a large brick wall topped with barbed wire. He notices George (let’s call him Georgie) has recently bought a smallholding of land adjoining Jeff’s garden. George confirms Jeff’s suspicion — Jeff will need to extend his hedge to accommodate the new brick.

Jeff is concerned about the adjoining property. He’s not keen on having a track to run over his prized hedge. In order to alleviate this concern — hopefully — George informs him that the wall has been reinforced with special cattle netting, ensuring no cattle enter his front yard.

What does this have to do with Jeff’s purchase?

The fence means George can no longer sell or exchange his property adjacent to Jeff’s garden. This now creates a dilemma of sorts — should Jeff extend his hedge to offer the same protection, or is a fence all that cool?

With this new reality in mind, Jeff decides to ask his lovely, nearby neighbour (let’s call her Amy) for help.

What is causing the house price boom?

The price of housing in Australia has been on the increase for the last few years. The big question is why? So far this year, the average house price in Sydney has increased by 8.5 per cent. In Melbourne it’s risen by 7.3 per cent.

Mt. Gravatt was once a bustling seaside town on Australia’s New South Wales coast but within a few years of its bust in the 2000s, most of the locals were forced to move to other more affordable areas of the state. Today, most of them still call Mt. Gravatt home. The problem is, house prices have been climbing at an alarming rate in recent years and it’s only going to get worse for the locals. The average house price in Sydney has increased by 8.5 per cent. In Melbourne it’s risen by 7.3 per cent. Mt. Gravatt was once a bustling seaside town on Australia’s New South Wales coast but within a few years of its bust in the 2000s, most of the locals were forced to move to other more affordable areas of the state. Today, most of them still call Mt. Gravatt home. The problem is, house prices have been climbing at an alarming rate in recent years and it’s only going to get worse for the locals.

It’s estimated that a median of about four million people will get married this year in Australia. And considering the fact that one of every two people in Australia is currently renting, that means about 4.2 million people will be buying a house of their own within the next five years. And many will be looking to buy new properties rather than existing ones. This is another concern that faces the owners of rental properties – and this does come to a head during the peak weeks of residency in year 2019. The battle for rental housing as we’re currently seeing is only becoming fiercer.

What does this mean for new homeowners?

When you’re looking at purchasing a new home, whether it’s your first home or just the next big upgrade, you should consider the following: 1) Think about how you’re going to use the space. Think about what you’ll use the space, and how often you’ll be using it. Your comfort is key and should always be the number one consideration, but consider how much space you actually need, and how that relates to number of occupants, your budget, and your lifestyle goals. You want floor-to-ceiling windows and a broad front door/window; a well-lit walkway; and a spacious deck that you can access via an elevator or a ramp. How convenient is it to walk between upstairs bedrooms or living areas? How big is the yard, and how heavily landscaped is it? Have you added or removed body ornaments in recent years so your living space is clean and clutter-free? These are all choices that one should consider before investing thousands of dollars into purchasing their home. 2) Think about your maintenance needs and whether you’ll need to drive for your commute, for example. If you have kids, consider if you want to be able to safely commute with them to school or work. 3) Check your local council’s lifestyle (and, indeed, budget) options. Are there community associations, or groups, that can advise you on how to structure your purchase to suit your needs (e.g. group housing), and how those associations can help you shape the community? 4) Check the local government’s suite of local planning tools — website, app, mobile app, etc. Whatever form they take — paper or digital (or both), meet them where they are to get the best information, and then give them your thoughts and input.

This brings us to the ugly side. What do you do if an investor — or other — wants to buy your house? How can you get rid of the takers?

Well, you can’t.

At Premium Finance Group Australia, we offer home loans. We also have the most competitive rates on the market.

To find out more, give us a call on 07 4720 8888 or reach out through our contact form at

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