What was Australia like last time interest rates were this low? (Part one)
Last year we saw some bad news for property investors in the form of macro-prudential controls, but we also saw some very, very good news. This was lenders cutting their interest rates to some of the lowest points we've ever seen. For example, when Westpac cut rates in May, it noted these were the lowest they had been in nearly 50 years.
According to a recent McCrindle report, the average standard variable interest rate today (5.4 per cent) is the same as it was in 1968. Of course, property has become a lot more expensive since then – the McCrindle research indicates that in 1968, the median house price in Sydney was a mere $19,000!
We thought it might be interesting to look at what else has evolved between now and then in a series of articles. So, how has the property investment landscape changed?
Your taxes were worse
We tend to complain about our taxes a lot, especially when it comes to property investment. Stamp duty, title transfers, income tax on rental yields, will it never end? But believe it or not, we're actually better off now. The McCrindle research indicates that in 1968, if you earned more than $32,000 per year (the maximum bracket) your tax was 68.4 per cent.
Imagine having to pay that now – wealth creation would be a little bit more difficult!
Capital gains would have been incredible
While $19,000 was cited as the median Sydney house price, that doesn't account for inflation. McCrindle says that in today's terms, that's $195,000. As of December 31, the median value in the NSW capital was $914,610.
It's a testament to the power of capital gains. If you can get a foothold in the property market, over time you're very likely to see huge returns.
You earned much, much less
Back then, the average full-time wage per week was $48.
Back then, the average full-time wage per week was $48, the McCrindle report states. In today's terms, that's a measly $567! Considering the actual figure in today's world is $1,484.50, we're quite a lot better off at the moment, it's safe to say.
Of course, comparing economic conditions now to then is a little bit like apples and oranges. But there are still some important pieces of information to be taken out of it.
That was 48 years ago, and 48 years from now it'll be 2064. Who has any idea what our real estate environment will look like then?
Keep an eye out for part two of this series, where we look at more astonishing disparities between 1968 and today.