How Property Investing Has Evolved in Australia

Property has long been seen as a solid investment here in Australia. In fact, the Australian property market has largely experienced steady growth and delivered stable returns since the early 1900s. This has only become more pronounced over the last few decades as market cycles create increasingly steeper peaks.

But it is not just the gains you can achieve on an investment property that is different now. Just like the property market itself, the whole investment process is dynamic and constantly evolving. Here we look at how property investing has changed over time and the influence this has on the modern investor.

How the Australian property market has changed

While property has been used to generate income for centuries, property investment really started to become popular in Australia in the 1950s. This was mostly due to the booming manufacturing and service sectors drawing workers back to the city. This significantly increased the demand for properties near major commercial centres which, in turn, drove up prices in these areas.

Up to this point, growth in property values had been fairly consistent, except for during periods of economic depression. However, the rate was generally quite modest, so the 1950s “boom” was essentially Australia’s first significant upswing in property prices. In fact, 1950 remains the most successful year for price growth on record, with the average property value increasing 132.5%.

At this time, property investment was exclusively the domain of those that were already wealthy. Finance was difficult for most people to secure and past market performance suggested the growth trend would not continue. As such, property was mostly seen as a way to keep surplus cash safe while achieving a modest rental return.

Since then, there have been several significant regulatory changes and market developments that have transformed the property market. Most significantly:

• The deregulation of housing finance: Beginning in the mid-1970s, the removal of controls on interest rates significantly increased competition between lenders. This change gave individual financial institutions the power to define their own offerings and better respond to customer expectations. It also made it easier for investors to secure finance and allowed them to shop around for the best deal.
• The rise of negative gearing: There have been allowances for negative gearing in Australian tax law for most of the last century. However, this practice only really became popular in the 1980s, as wealthy property investors realised the potential tax benefits. Since then, it has become an extremely popular strategy, with nearly 70% of investors reporting net losses on their properties.
• Increasing foreign demand: Immigration and foreign investment have become major influences on the performance of the Australian property market. Education is now one of the country’s largest exports and international students drive demand for rentals, particularly in city centres. Overseas investors have also become more interested in the Australian property market, driving up sale prices in many sought-after areas.

How this has affected investors

These changes have had a significant impact on the face of the average property investor. Traditionally, most people investing in property were older, independently wealthy, and almost always male. Today, the investing community is much more diverse, with people of all ages, genders, and socio-economic backgrounds getting into property.

This reflects how accessible the market has become, even for those on more modest incomes. Mortgages have become much easier to secure and there are different investment strategies to suit different financial situations. There is also a wider range of entry-level options, with new property types and locations now available.

The changing profile of the average investor also reflects how highly valued property has become as an investment type. Real estate is now seen as a good way to build real wealth, often without significant effort. This is reinforced by the many television programs focused on home renovations, property flipping, and real estate sales.

Want to discuss this further?

If you would like more information on the evolution of investing in Australia, contact Search Party Property. Our team of property experts specialises in understanding what is driving market performance and predicting what will come next. They can also help you tailor a strategy to make the most of emerging property investment trends.