Introduction
Advantages such as "freehold property rights, no inheritance tax, private land and real estate, and overseas people can get loans" make Australia a country that truly formulates policies from the perspective of "house buyers" and "investors". After comparing the property markets of different countries, investors can better appreciate the appeal of Australia. At the same time, Australia has the most stable real estate investment environment, complete social systems and stable political systems, making it one of the few countries in the world with stable economic development.
As the craze for investing in Australian real estate continues to heat up, more and more investors, even overseas investors, choose the Australian property market as their first choice for investment. So, how will the Australian property market develop from 2024 to 2025? What mentality and strategy should investors adopt to face the future Australian property market?
This article will take you to review the history of the Australian property market, analyze and predict the future direction of the Australian property market, and help you clarify your investment ideas.
Review of the Australian property market in 2023
A review of major events in the Australian property market
Many major events have occurred in the Australian property market in 2023. Let us review the key points and development trends during this year.
Starting in May 2022, the RBA (Australia's central bank) began a round of aggressive cash rate tightening policies to control inflation. In mid-2023, the RBA raised the cash rate several times in February, March, May and November, eventually staying at 4.35% and remaining unchanged, which led to increased cost pressure on lenders. On May 7, 2024, the RBA’s latest interest rate decision announced that the cash rate would be maintained at 4.35%.
On March 10, 2023, Silicon Valley Bank in the United States collapsed due to a run. This was the largest bank failure since the 2008 financial crisis and the third largest bank failure in U.S. history. Australia's four major banks have also been affected by this, and their stock prices have come under pressure. This has made investors realize that it is not safe to rely solely on bank deposit income, so some investors have chosen to invest their funds in real estate to resist inflation and banking crises.
As the most developed and popular property markets in Australia, Melbourne and Sydney attracted a large number of investors during the epidemic. However, in 2023 after the epidemic, the growth rate of Sydney's property market slowed down, with the growth rate in November 2023 being only 0.3%, the smallest monthly growth rate of the year. Melbourne experienced negative growth, with a monthly decrease of 0.1%. These data show that the Sydney and Melbourne property markets may be about to reach an inflection point.
On the other hand, the property markets in Brisbane, Adelaide and Perth have performed outstandingly. Due to the pressure of inflation and interest rate hikes, housing prices in these cities have become more affordable and have become the new favorites of investors, replacing traditional Melbourne and Sydney. popular cities.
2023 Australian Property Market Data Review
Image source: PropTrack
This is the specific performance of the Australian property market and housing prices in the last month of 2023. Overall, house prices increased by 5.52% in 2023. House prices fell in December in Sydney (-0.08%), Melbourne (-0.55%), Hobart (-0.41%) and Canberra (-0.66%). In comparison, Perth (+0.69%) and Adelaide (+0.59%) continued to grow, while Brisbane (+0.27%) and Darwin (+0.1%) also saw house price increases.
In stark contrast to the mixed increases and decreases in Australia's capital cities, house prices in the comprehensive areas of each state increased in December, with a monthly increase of 0.23%. Housing prices in comprehensive areas hit a new high, rising 3.2% from 2023. Economic growth in Queensland and South Australia became the main driving force, rising by 0.51% and 0.5% respectively for the month.
In 2023, Perth became Australia's strongest property market, with the median price increasing by 14.75% compared to the previous year. Adelaide followed closely behind, with a full-year growth rate of 10.98%. However, Hobart fared the worst in 2023, with house prices down 3.5% year-on-year, and Darwin down 1.49%.
The impact of economy, policy and epidemic on the property market in 2023
In general, the key factor affecting Australian property prices is the relationship between supply and demand. However, in 2023, the Australian property market will still be in short supply and the situation will become more severe. According to the housing approval report of the Australia Bureau of Statistics in December 2023, the total number of housing approvals fell by 9.5% to 13,085 units, the number of private residence approvals fell by 0.5%, and the number of non-detached private residence approvals fell by 25.3%. Although the cost of construction materials has fallen from the highs during the epidemic, the labor shortage problem is serious, and construction costs are expected to increase by 3.5%-5.1% in 2024.
Image source: Gov.au
Although the Australian government is committed to balancing supply relationships in 2023, the results are limited, and the market will ultimately bear all costs.
2. Australian property market outlook in 2024
1.The latest data performance of the Australian property market in 2024
As of May 2024, the CoreLogic National Home Value Index (HVI) increased by 0.6% monthly and 9.6% annually, increasing the national average house price by approximately AU$4,720. Sydney house prices rose 0.1% last week, an annual increase of 8.4%; Melbourne fell 0.1% last month, an annual increase of 2.8%; Brisbane rose 0.9% monthly, an annual increase of 16.0%; Perth rose 1.9% monthly (the highest), an annual increase 21.0%.
Image source: CoreLogic
Market performance varies from place to place. The asking price of the Sydney housing market has reached 1.4567 million (apartment $807,226, detached house $1,894,694); Melbourne is 1.0531 million (apartment $605,522, detached house $1,256,244); Brisbane is $973,255 (detached house $1,094,860, apartment $606,249); Perth is $847,565 (apartment $506,757, house $506,757); Adelaide is $817,754 (house $895,331, apartment $462,728); Canberra is $965,207 (house $1,176,210, apartment $594,121); Darwin is $544,401 (house $462,728) 657,837, Apartments $368,626); Hobart is $751,415 (houses $791,273, apartments $526,163).
In terms of clearance rate, Sydney continued to lead with a strong preliminary clearance rate of 78.1%; Melbourne reached 71%, slightly higher than the previous week's 69.8%. Brisbane had the highest number of auctions, but clearance rates fell to 68.0 per cent, the lowest level since Easter. Overall, the number of properties listed last week was significantly higher than the same time last year.
Data source: CoreLogic
2. The development trend of Australian property prices in the next year
The severe supply and demand relationship of the past few years will continue to be the main factor driving the rise in housing prices. The shortage of new homes is likely to continue after 2024, as the number of new dwelling consents continues to fall and has reached its lowest level in 12 years. Economists believe that the supply of housing required by the Australian property market will be difficult to achieve.
There is currently a shortage of quality residential and investment properties on the market, with well-located properties being snapped up quickly as buyers return to the market. However, sellers are becoming more cautious before listing their properties, and the number of new homes listed for sale has been below average since last spring.
Overall, the average time for real estate sales is slightly longer than the real estate boom period in 2020 and 2021, but it is still relatively short, and the discount for selling houses is still at a low level. In general, houses are selling faster than apartments, with Class A properties selling quickly at tight discounts due to a shortage of quality properties on the market.
In the coming year, Australian property prices will continue to rise due to insufficient supply. However, the increase will vary between different regions, and you can continue to pay attention to my channel and website for specific region data.
3. Analysis of factors affecting the Australian property market in 2024
Approvals are slow, residential supply is limited and government efforts fail to meet demand
Construction activity slows and construction costs rise, with the market ultimately bearing all costs
Interest rate cuts may stimulate purchase demand, and the era of interest rate cuts may enter at the end of 2024
After inflation is brought under control, sellers' confidence gradually recovers
The fear of missing out (FOMO) is spreading, easily stimulating market consumption
Immigration continues to increase and the rental market remains tight
The government will promulgate various policies to maintain a balanced supply of real estate and stimulate consumption
Affordability drops for first home buyers
Cash buyers (pay by cash) increase, and high-value transactions are concentrated in the city’s CBD
Increased demand for affordable and affordable housing, fastest growing
3. Analysis of the future trend of the Australian property market
Four major trends in the Australian property market in the future
The key to investment success is to "spot the trend", that is, observe the performance of the market in which you plan to invest. The five major trends in the Australian property market in the future have begun to take shape.
According to the "Australian Financial Review" report, the epidemic has had a profound impact on the Australian real estate market. CoreLogic said that the record-breaking housing prices caused by the epidemic and the subsequent increase in rents or decreases in income are all obvious changes caused by the epidemic in the past two years. , these changes will have a long-term impact on the real estate market.
The diversification of market cycles means that many investors’ “fantasy” Australian property market is a thing of the past. In the past, people generally believed that the Australian property market was growing steadily, but now facts have proven that the era of double-digit growth no matter where you buy a property is over! While peak periods may bring rapid growth, such growth is unlikely to last, and investors should be wary of a property market that experiences sharp short-term value fluctuations.
As of September 2023, the time it takes to save a down payment for a house (calculated at 20%) has climbed to ten years per capita - 10.7 years for a single-family home and 8.4 years for an apartment. Therefore, with soaring house prices and high loan interest rates, future buyers are likely to choose areas with greater affordability.
Areas with lower house prices have grown faster over the past year and a half, especially areas with low house prices and solid rental yields, which are expected to continue to attract more buyers in the future.
In Australia, in addition to capital cities, more and more regional cities have become the first choice for new immigrants. As of April 2024, the monthly rental growth rate is 0.8%. Although the growth rate has slowed down, supply is still in short supply, and rental growth is expected to remain above average in the short term.
Notably, apartment rents in capital cities continue to grow faster than house rents. Capital cities such as Perth, Sydney, Adelaide and Brisbane have all seen higher rental growth rates for apartments than for houses.
As of 2024, the national gross rental yield has increased from a historical low of 3.16% in January 2021 to 3.75%, reaching the highest level since October 2019.
According to CoreLogic’s latest survey, more than 70% of real estate professionals expect interest rate changes to have an impact on the market in 2024. Among them, 59% believe that rising interest rates will have the greatest impact, and 12% expect that falling interest rates will have the greatest impact on the property market. 15% of professionals believe that immigration and population growth will affect the property market in 2024, and 2% believe that government policy changes will affect the direction of the property market. In the "Five Predictions for the Housing Market in 2024", we expect interest rates to fall in the second half of 2024. After two years of suppression, any interest rate cut can boost consumer confidence.
Property price performance and potential opportunities in different cities and regions
Up to now, the annual growth rate of house prices in Australia has reached 12.9%, with the median price reaching $779,817. The average median price in the eight major capital cities is $847,139, all of which continue to rise. The low-price market in almost every capital city has shown stronger growth momentum. .
Melbourne’s property market (6.5 per cent) has not performed as strongly as other capital cities over the past year or two, with the average house price in Melbourne close to its lowest level in two decades. However, certain areas of the Melbourne property market fared well in 2023, with more than 50 Victoria suburbs seeing house price growth outpace the national average. Sydney house prices have risen steadily (11.9%) and auction clearance rates have been strong throughout the year, indicating significant market depth, with sales prices expected to continue rising this year. Brisbane (20.8%) has seen prices soar during the pandemic and is still on an upward trend. Perth continues to perform well, with growth well outpacing other regions, with growth of 2.0% for the month and 26.8% for the year. Adelaide (18.7%) is growing slightly slower than the east coast capital cities, but increased competition due to lower house prices makes it one of the best performing capitals.
If you are interested in the investment opportunities in each capital, please refer to the "Guide to the Ranking of Money-Making Opportunities in Eight Capitals".
Conclusion Generally speaking, the Australian property market in 2023 has proven its investment value, and the prospects for the Australian property market in 2024 are still promising. In the journey of exploring the Australian property market investment, we will face unlimited opportunities and challenges. This environment is both challenging and opportunistic, providing investors with valuable opportunities to learn and grow. Before investing in the Australian property market, it is crucial to conduct an in-depth analysis of property market trends. Understanding the dynamics and trends of the Australian property market can help investors more accurately assess risks and potential returns. Therefore, when considering investing in the Australian property market, it is important to conduct adequate market research and risk assessment. This not only helps you make informed investment decisions, but also reduces risk and increases your success rate.
At the same time, the Australian teacher Alison channel provides you with more latest information on Melbourne property prices every week to help investors better grasp market dynamics. Through professional property market reports, online resources or expert opinions, you will receive more comprehensive and accurate information support. These resources can not only help you understand market trends, but also guide you to formulate more effective investment strategies and improve investment success rates and returns. level.
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