Australian property prices are an increasingly common topic of conversation in recent years. But just what decides how much your home is worth?

There are a number of factors that determine house prices. Some are logical, based on economic theories and population density. Intangible factors, like the feel of a neighbourhood and expectations for future growth, affect property prices as well.

Outlined below are some key factors that impact property prices.

Supply and demand

Put simply, if home demand increases faster than supply, house prices go up. For house prices to fall there must be a decrease in demand. Property prices are always subject to the current supply and demand in any given area.

Interest rates

Increased interest rates cause increased variable mortgage payments, making home buying less attractive. Since the majority of Australian homeowners have variable mortgages, Página Web even a small interest rate change is significant. Coupled with house values, interest rates clearly impact the affordability of buying a home.

Economic growth

House values respond to economic conditions. Economic growth and increased wages allow more people to buy homes. This raises overall demand, which increases property values.


Demographic factors influence house prices. As levels of migration increase, so does the population, increasing the demand for homes. The rising divorce rate has increased the number of single people living alone, causing an increase in demand, which affects property value as well.

Location and land size

The impact of location on house prices is obvious. Homes that are closer to the beach, the CBD, or transportation, tend to command higher property prices. Australia has a high concentration of housing around the city centres. The majority of people want to live close to work, shopping and recreational opportunities, which naturally causes higher property prices in these areas.

House prices are also contingent upon the size of the property on which the home is situated. Property prices for homes with land will be drastically different than for comparable homes with no land.

Room to grow

The possibility of expansion is key in determining house prices. The potential to add a second storey or additional bedrooms, or a room above a garage or in the garden, can impact property prices. Increasing the floor area increases the value. This relates back to the value of location and land size in determining house prices.

A second bathroom

Amenities also impact house prices. When comparing similar properties within a neighbourhood, house prices for homes with an extra bathroom will be higher. The value of additional bathrooms, however, relates directly to the number of rooms in a home. Second bathrooms in two-bedroom houses, for instance, have less impact on property prices than adding a second bathroom to a five-bedroom house.


Parking is at a premium in the big cities. Property prices for homes that have parking or a garage reflect this significant increase in value.

Home improvements

Various home improvements influence property prices. A kitchen or bathroom update, new flooring, freshly painted walls and landscaping improvements can all add value to a home. To avoid unnecessary expenditures and ensure an adequate return on investment for specific improvements, homeowners should always discuss with a real estate agent what impact certain projects typically have on house prices.

House Prices – How Are They Determined?


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