For the last 100 years house prices have increased by an average of 10% per year. Or so these real estate investment seminar gurus tell us. This means that a house that today sells for $450,000 was worth $32.00 dollars in 1907. I am not sure if this is a realistic figure or not but given population growth in Australia since that time I am guessing that a house bought in 1907 was much closer to the centre of your CBD than a $450,000 house would be today. Averaged out, lets assume for a moment this figure is accurate.

If we also assume that the average salary increase per year is 3 – 4% and the average yearly house price increase is 10% then there is an average 6% gap. Somewhere along the line something has gotta give.

Will house prices just keep on going?

Or have we reached a point of unequilibrium (I just invented a word) where house prices will stagnate for a few years to allow debt serviceability to catch up?

What are your thoughts here??