It’s the question every Australian homeowner asks themselves at least once a year.
The only time we will ever truly know what our house is worth, is if we sell it.
So, in the meantime, most of us defer to house price data to give us an idea of whether our house is increasing, decreasing or holding value.
In this respect, property isn’t like the share market; every house is different so there isn’t a black and white value for the asset at any point in time.
Even so, house price data is just a guide.
In 1990 the Brisbane median house price was $110,000.
Today, the Brisbane median house price is worth $773,000.
That works out to be an increase of seven times, or roughly 6.3 per cent per annum (compounding).
But that only tells you half the story, because those numbers don’t compare apples with apples.
What you were buying for $110,000 in Brisbane in 1990 would be a 600m2 block of land with a four-bedroom, two bathroom house on it, located roughly 10 kilometers from the CBD.
Today, a 600m2 block of land 10 kilometers from the CBD is worth more than $1 million.
In fact, a house that sold in July 1990 for $110,000 was recently sold for $1,025,000, with hardly any changes made to the house over that 30-year period.
So, if we are comparing apples with apples, the median house price has actually increased by more than the data suggests. I’d say a multiple of at least ten, roughly 7.2 per cent per annum (compounding).
That’s the thing about house price data, it’s as close to a guide as you can get on what’s happening in the market, but it’s not entirely accurate.
The recent sale of a similar house to your own is more reliable than the data itself and is the most accurate read you can get on the value of our house.
I’m not sure what house prices will do in the future, but I am certain that the value of land will increase, and I see no reason why history won’t repeat itself when it comes to land.
The average size of a block of land in 1990 was between 600m2 and 800m2.
In 2022, there were more 350m2 blocks of land sold and created than any other size of block, so the reality is that the size of a block of land is getting smaller and smaller with time.
How can they not?
As I wrote in Bulletproof Investing, land is the best performing asset class in Australia. To me, it’s also the safest, because it’s easy to understand why its value will increase over time.
After all, land is a finite resource; it’s not something you can go and produce more of. For as long as our population continues to grow, we will see blocks of land get smaller.
The Brisbane example I cited above is testament to that. The house sold in 2022 for $1,025,000, while in the same street a block of land (no house on it) sold around the same time for $1,000,000.
Land is the part of a property that grows in value. It was true in 1990 and it’s still true today.
