The value of a standard house has increased from $1,000 in 1903 to more than $1 million in 2023. Reflecting on Collingwood’s recreational, real estate and economic triumphs and tribulations across the last 140-years makes an intriguing Case Study.

It is the year 1903, just 2-years after the Federation of Australia brought together six separately ruled colonies.

Melbourne’s population is 470,000.

You live in a standard 3-bedroom timber house, situated on a 148m2 suburban block in blue-collar Collingwood. Its value has tripled over the last 20-years to now be worth $1,000.

Your local football club just became back-to-back VFL premiers – Collingwood defeated Fitzroy in a 2-point cliffhanger.

By 1910, sewerage has recently been connected to most real estate in Collingwood, including your own home.

Despite a record-high 15,000 new homes being built in Melbourne over the last 5-years (ending 1911), this supply is well short of demand.

This is an era wherein the ratio of owner-occupier households to tenants is 50/50.

Over the 9-year period between Census surveys, Melbourne’s population has increased by 70,000 while the volume of houses ‘vacant’ declined from 2,314 in 1901 to 1,162 in 1910 (a trend that is consistent for much of Australia during the 15-years prior to WW1).

On 3 January 1912, over a quiet beer with John on your front porch, you discussed a story in the Australian Town and Country Journal wherein a symptom-focused politician is suggesting the introduction of nonsensical legislation to freeze the price of rents.

The meat-and-potatoes house that Bob added to the rental pool currently receives an 11 percent rental yield. Once expenses such as municipality rates, insurance, maintenance and management fees are added to his 7 percent interest expense, it’s slightly better than a break-even cash flow.

The release of official government statistics in a story in The Mail on 9 January 1915 confirms the price to rent a house in Melbourne has increased by 49 percent over the 13-years to 1913.

Bigger rent increases occurred in Adelaide (78 percent) and Brisbane (77 percent), while Sydney (45 percent) and various regional townships also saw high increases.

When World War 1 started in July 1914, rental supply was very tight everywhere across Australia.

Over the next 4-years (1914-18), 40 percent of Australia’s male population aged 18 to 44 are abroad, fighting to protect our country.

In 1917, with a large portion of Victoria’s farmers still fighting in the war, a significant drought over the last 2-years has restricted food supply.

The war eventually ends in 1918 with Melbourne’s population at 700,000.

Very few new homes were built during the war years, yet Australia’s population expanded by 330,000 to 5.3 million people.

Your brother, Bob, has just shared with you his frustrations as a supplier of rental accommodation. The rent controls that were brought in for unique wartime conditions are still in force. So, despite the dire housing shortage, the income that Bob receives to rent out his asset is still legislated at the same price as it was in 1913, and his expenses are now significantly higher.

In Victoria, one initiative is to (through to 1924) support approximately 7,000 soldiers who were displaced from their home while fighting in the war by offering re-settlement support via granting them pastoral land.

The supply (and price) of building materials, along with the generally high demand for housing has pushed asset values higher, including your own Collingwood home which is now worth more than 4-times the $300 that you paid for it.

In December 1920, the announcement by the Victorian government to raise rents to a price that represents 30 percent more than where they were when the war started 6-years ago has been met by threats of public protests and strikes by groups of unionists and socialists.

In 1925, Melbourne’s property market is still strong.

This situation is summed up in a story in the Wickepin Argus on 19 February 1925. It reports …investors are not prepared to speculate in buildings to rent under the present system…there is a tremendous shortage of houses to rent in Brisbane and surrounding suburbs….until this Act is repealed, there is little hope of conditions becoming more favourable to those in search of a house.

In 1926, your Collingwood house now has a (albeit primitive) telephone. Electricity has recently been connected to your home. And Melbourne’s CBD building height limit is now 9-storeys.

You’ve recently started commuting to your new job via a new tramline which now connects Melbourne to a ‘small town’ called Box Hill, located 14 kilometres east of the city.

1 in 2 households now own an automobile, including John and Jenny who recently purchased a new Ford, manufactured at the factory that recently opened in Geelong [From rags to riches and real estate booms].

Your life is great in 1928.

Rental yields for a new investor have slipped to circa 9 percent. Once 7 percent interest and other holding expenses are deducted, the cash flow return is in negative territory.

It has taken a couple of years for the 1929 Wall Street stock market crash to fully ripple through to Australia.

By 1931, the grip of the Great Depression is now so strong that 1 in 3 households (including yourself) are without work.

Melbourne’s unemployment rate is 30 percent and very little money is filtering through the community.

Key to keeping your own spirits up during this period of unprecedented poverty is inspiration gained through legendary sporting successes such as Don Bradman (the 1932 Bodyline cricket series), Phar Lap (horse racing) and Haydn Bunton (Fitzroy AFL).

By 1932, rent prices have declined by approximately 30 percent and are now at a similar price to 1925.

Rents remain at this level for a few years until, progressively, employment opportunities improve through to the late 1930s.

While the depressed economy placed downward pressure on rent prices during the 1930s, conditions were not conducive to support the much-needed investment to increase the size of the rental pool.

THINGS HAPPEN IN 3’S

The agriculture industry provides 1 in 3 jobs nationally. But, in 1937, a significant drought has dealt Victoria’s economy yet another blow.

Most other industries have recovered reasonably well from the Great Depression by 1938.

Australia’s population has just ticked over to 7 million (including 1 million in Melbourne).

Your Collingwood house lost approximately 10 percent of its value over the last decade and is now worth $1,800.

Then, just as Spring 1939 kicks off, you’re listening to the wireless with John and Jenny and news breaks that Germany has invaded Poland. A political commitment from England and France sees it join forces with Poland. World War 2 has now began.

For the first few years of WW2, Australia was not greatly affected; the economy was quite stable.

But the lack of investment in rental accommodation which dates back to circa 1905 still has not been overcome.

Each state will now appoint a Magistrate who will determine the ‘fair rent price’, effectively freezing rent prices for the entire 6-years of the war (1939-45).

Communist Russia, for example, had very tight rent controls until (eventually) returning to a free market in the 1990s. While rent prices were kept low (rent in 1960 was approximately 5 percent of the tenant’s income), the disincentive to invest produced such a shortage of accommodation that waiting lists were up to 20-years.

Sweden commenced rent controls in 1942 and they are still in place today. The waiting list to rent an apartment is now between 11 and 30 years. Good luck with that.

1 million Australians served their country during the 6-years to 1945.

It is widely acknowledged that, with only 7.5 million living on it, the huge mass of ‘Land Down Under’, will be extremely vulnerable in future wars.

Hence, the introduction of a ‘Populate or Perish’ overseas migration policy, which includes a very clever marketing strategy to entice 100,000’s of English and European migrants (the 10-pound Poms).

During the initial post-war years, there has been approximately 25,000 marriages per year in Victoria.

You are aware of lots of stories of more than 10-people squeezing into one small rental house and of soldiers living in tents.

Even if one is prepared to invest in an asset which is wrapped up in onerous legislation and has its income-earning potential capped, rental yields have fallen even further to circa 7 percent, meaning annual revenue losses.

By 1948, state governments now have a system which requires landlords to have rent prices assessed by filling in a form and sending it via snail-mail to a team of public servants, who will use a bureaucratic process to come up with a (restricted) rent price for each individual rented property.

Despite the rental market now being in its 4th decade of crisis, the Australian economy is thriving.

High migration levels continue to drive national population growth of more than 200,000 per year and lots of new jobs have been created.

Even though half of the 1940’s involved the war, your humble abode in Collingwood doubled in value during the decade.

Your brother, Bob, now has 3 single men each renting a bedroom of his modest Melbourne rental property.

The irony is that the collection of policies across the last 4-decades that were put in place to ‘protect tenants’ clearly had not made housing any more affordable for them to buy.

Over the 7-years directly after the completion of WW2, house values across large parts of Australia have increased by 60 percent or more.

Your own inner-Melbourne house is now worth $3,500 and a comparable house in Sydney is worth $4,500.

This story in the Sunday Telegraph on 15 January 1950 depicts a growing number of people complaining that homeownership is either beyond their reach or is less financially attractive than renting.

With Melbourne’s population now at 1.5 million in 1953, you enjoy witnessing Collingwood win their 12th VFL premiership.

In 1954, 50 percent of households now own a car and people are getting a real buzz out of going on adventure holidays to different corners of the country.

And Australia’s first ever drive-in theatre has just opened 20-kilometres east of your home, in the suburb of Burwood.

10-years on from the end of WW2, every Australian state except Western Australia still has rent controls in place.

The average price to rent a home in Melbourne now is only 4 percent more than when the war ended, and only 20 percent more than in 1925.

Over the next couple of years, your home city plays host to the Olympic Games (1956) and Collingwood win their 13th VFL premiership (1958).

The property market has continued to boom throughout the entire 1950’s, adding a further 110 percent capital growth to your Collingwood house and increasing its value to $7,500.

But decades of rent controls have eroded rental returns such that rental yields are now 6 percent.

By 1960, property investing is still an environment that very few investors have the confidence to place their hard-earned capital into.

While many have the equity and financial capacity to invest in their future, history will go on to reflect that a low appetite to invest will leave a most unwanted legacy wherein 2-generations end up dependent on modest aged pensions, redirecting important taxpayer funds away from infrastructure spending.

A letter to the Editor of the Canberra Times confirms the price to rent a 2-bedroom brick house is now much the same in 1961 as it was 34-years earlier, in 1927.

Globally, a dire shortage of rental accommodation is a common theme through to the late 1960s.

Unfortunately, things aren’t any rosier for you on the footy front. Throughout the 1960’s and 1970’s, Collingwood lost the VFL Grand Final 8-times and by narrow margins, earning the tag ‘colliwobbles’.

In 1966, when Australia introduced decimal currency, a few state governments had (finally) come to their senses and accepted that the only way to eventually return to a balanced rental market was to restore free market conditions.

It was not until the early 1970’s that sanity prevailed in all Australian states.

While it’s seen a few different coats of paint and some cosmetic improvements, that modest, 3-bedroom timber house is still standing today on the same 148m2 block of land.

Subsequent to 1970, it has withstood Australia’s involvement in the Vietnam War, a couple of serious oil crisis, 4x national recessions, more natural disasters, a global financial crisis and a global health pandemic.

That same Collingwood home is now worth more than $1 million.

Results from the 2021 Census say that Collingwood homes have an average of 1.9 people living in them and the median household age is 33.

These days, most Collingwood households bring in 2-incomes.

64 percent of Collingwood households still depend on rental accommodation.

Nationally, 1 in every 3 households rent.

And the total size of the rental pool is circa 3.3 million dwellings.

While creating decades of carnage from their (many) poor housing policies, the collective state and federal governments have only managed to fund 8 percent of the rental pool.

‘One constant that has remained throughout the last 200-years is that, when it comes to properly understanding the intricacies of housing supply and demand, politicians and their various related departments have always been as ‘useful’ as gumboots on pelicans.’

The other 92 percent of rental homes in this country have been funded by 2.2 million private citizens. These people prioritise financial independence, have demonstrated a preparedness to exercise financial discipline, and have taken educated risks in pursuit of achieving their goal.

According to statistics from the ATO, 90 percent of these everyday Aussies have taxable incomes of $100,000 or less.

Source: Propertyology