The uncertainty of the global economy makes it difficult to predict where property prices would be in the next six months, let alone seven to 10 years into the future.

Metropole Property Investment Strategists director Michael Yardney said there are no reasons why the large majority of investors who make an educated purchase would not see the value of that property double within the next seven to 10 years.

"In order to examine the factors which have had an impact on property prices doubling every seven to 10 years, you need to look back at history and the longer you look back, the more accurately the seven to 10 rule actually does play out,” he said.

What is the rule of 72?

To determine how long the property could potentially double its value, Mr Yardney said one simple way is through the rule of 72.

The strategy has simple math: divide 72 by the annual growth rate in house prices to get how long it would take for the property to double its value. If you want to know how many times it has doubled over a particular time frame, replace the annual rate with the average annual rate over the same time period.

For example, if you think a property will grow 10% per annum, just divide 72 by 10% and that tells you that it would take 7.2 years to double.

Macro and micro influences

There are a large number of growth factors to consider when working out how long it takes property prices to double, and the seven to 10 rule isn't accurate 100% of the time.

It is extremely important for investors who may rely on current annual growth rates to predict the viability of a purchase. Property growth occurs in phases, where some properties will double in one ten-year period and remain flat in the next.

Mr Yardney said there are both macro and micro factors that help determine how long it takes for property prices to double.

The big picture factors are those nationally and globally, such as supply and demand, consumer and business confidence, interest rates and affordability, availability of finance, government incentives, the cost of renting and the global economic markets.

"On the micro levels, it is the economy of each state which can affect the rates at which property prices grow," he said.

How much have property prices increased in the past 25 years?

A study by CoreLogic and Aussie analysed the movement of prices between 1993 and 2018 and found that over the 25-year period, the median house value across Australia increased by 412%, equivalent to $459,900 to $571,441.

Meanwhile, the median unit value went up by 316% or $392,000 to $515,610 during the same period.

In 1993, units had a higher median unit value at $123,840 than houses at $111,524.

The capital gains over the past two and a half decades equate to an average annual growth rate of 6.8% for houses and 5.9% for units.

While there was diversity in terms of how each capital city performed, the general direction of capital gains remained positive.

Of the capital cities, Melbourne posted the highest annual growth rate for houses over the period at 8.1%. This translates to a $28,325 increase in house value yearly.

The Victorian capital also recorded the highest annual gain for units at 6.6%, equal to a yearly increase of $18,331.

25-year change in house values (1993-2018)

Region

Median value 2018

Annual percentage change, 25yrs (%)

Average annual dollar value change, 25yrs

National

$571,441

6.8

$18,397

Adelaide

$462,049

5.9

$14,027

Brisbane

$535,292

5.9

$16,290

Canberra

$678,765

6.0

$20,848

Darwin

$496,498

6.3

$17,937

Greater Hobart

$452,935

6.5

$14,393

Melbourne

$824,955

8.1

$28,325

Perth

$487,992

6.7

$15,679

Sydney

$1,026,638

7.6

$34,426

25-year change in unit values (1993-2018)

Region

Median value 2018

Annual percentage change, 25yrs (%)

Average annual dollar value change, 25yrs

National

$515,610

5.9

$15,671

Adelaide

$328,274

5.2

$9,462

Brisbane

$384,970

4.5

$10,255

Canberra

$435,072

4.7

$11,929

Darwin

$334,436

4.1

$9,424

Greater Hobart

$353,292

5.5

$10,402

Melbourne

$574,003

6.6

$18,331

Perth

$400,717

6.0

$12,255

Sydney

$753,304

6.3

$23,594

House prices in 2043

Using the data over the 25 years to 2018, markets could potentially reach a median value of $2.9m for houses and $2.1m for units by 2043.

While it is true that this historical data isn’t necessarily the best predictor of where prices would be in the future, it still provides a useful benchmark for adjusting market expectations in the long term.

Without taking into account economic and demographic conditions that could play out in the years to come, median house prices would be above $2m across all capital cities except Adelaide by 2043.

Meanwhile, median unit values would be worth at least $1.2m by 2043, except in Darwin, which would only see its median unit price hit $917,039.

Predicted median prices by 2043

 

Median house price

Median unit price

Sydney

$6.35m

$3.47m

Perth

$2.48m

$1.70m

Melbourne

$5.82m

$2.84m

Greater Hobart

$2.20m

$1.34m

Darwin

$2.28m

$917,039

Canberra

$2.92m

$1.38m

Brisbane

$2.24m

$1.15m

Adelaide

$1.91m

$1.17m

National

$2.92m

$2.15m

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