Kim Macdonald: The median house price will cross the $2m threshold within two decades

Cast your mind back to mid-2004.

Shannon Noll and Casey Donovan were in the charts, Geoff Gallop was the premier and Mark Zuckerberg had just co-launched Facebook at Harvard.

It was also a time when Perth’s median property price was $262,000.

According to a group called the Property Investment Professionals of Australia, Perth property values have increased 186 per cent over the past two decades to June this year, to hit the current median house price of $750,000.

The PIPA research shows that house price growth has been fairly solid across the country over the past two decades, ranging from 100 per cent price growth (regional Northern Territory) to a 233 per cent increase (regional Tasmania) in that time.

Of the capitals, Adelaide led with 209 per cent growth, followed by Hobart which jumped 193 per cent in the same period. Brisbane is up 190 per cent and Sydney — which has attracted global attention for its recent housing boom — is up by less than Perth, at 181 per cent.

Melbourne — which is now drawing investor attention away from Perth — is up 165 per cent, followed by Darwin with a 136 per cent hike.

It appears that while Perth has been the property market’s national darling for the past two years, WA has been a fairly average performer over the past two decades.

PIPA’s list of every capital and regional areas (except for regional ACT) ranked Perth houses in sixth place of the 15 areas over the last two decades. Regional WA ranked 12th, with 162 per cent growth in that time.

Regardless of the rankings, the figures are a reminder that over the long term, property price growth is pretty solid compared to everything else.

The Reserve Bank of Australia’s inflation calculator shows that a basket of goods costing $262,000 in June 2004 would cost about $436,000 in December last year. This means Perth’s median house price would be about $450,000 right now if growth had matched inflation.

But skyrocketing property prices are highlighted by a Perth median house price of $679,000 in December last year, according to the ABS, and $750,000 now.

So what does this mean for the future?

I calculate that if the trajectory continues, Perth’s median house price will cross the $2 million threshold within two decades to hit $2.145 million in 2044.

This means that by the time primary school students start house-hunting, they will have to pay about $2m to buy in Morley, Ashfield or Balcatta.

At the cheaper end, Armadale, with a current median of about $500,000, will cost close to $1m ($930,000.)

At the upper end, a $3.5m home in Cottesloe will cost $10m by 2044.

Apartments have the potential to disrupt the trajectory if there is a big boom in the supply of these cheaper homes on the market.

It is a circuit breaker that many people hope will happen.