This document discusses residential property returns as investments in Australia. It notes that normally property values grow with inflation plus 1-3% annually, equivalent to around 6% yearly price increases. However, factoring in both price appreciation and typical rental yields, past property returns in Australia have averaged around 12% per year. The document cautions that reports often overestimate returns by excluding renovation costs and ignoring that average house sizes have been increasing over time. It also notes that property price growth varies between different local markets depending on local supply and demand factors like gentrification.

1. GENC3003Personal Financial Planning Andrew Hingstonandrew.hingston@unsw.edu.au Unit 11: Property returns

3. Median House prices ($,000s) 3 Sydney Canberra Melbourne Adelaide

4. 4 Investment propertyPrice increases are over-estimated Reports on property price increases are frequently in the media. These reports overestimate returns because: They include the price increase from renovations without taking into account the cost of renovations Average house size has been increasing

5. 5 Investment propertiesMicro-markets Prices increase at different rates in different suburbs Determined by supply and demand factors in that area “Gentrification” is one factor that affects demand: When middle class move into areas that were previously lower socio-economic in nature. Developers buy properties and develop Middle-class renovate their units/homes Council spends more money in area. If areas have large amounts of land being developed then supply will increase and prices may not