Posted on September 13th, 2023

Unlocking the secrets of Australia’s $10 trillion housing market

The Australian housing market continues to be one of the most competitive in the world. With prices continuing to climb, it is important for property investors to have a good understanding of market trends before entering this highly dynamic sector. The growth of the Australian housing market can primarily be attributed to factors such as population growth, low-interest rates, and increased demand for housing in metropolitan areas. The demand is further fuelled by a rise in the number of overseas investors, particularly from Asia. As of 2023, the Australian housing market is valued at AU $10 trillion according to CoreLogic, making it one of the largest globally.

Australian Housing Market Trends and History

The Australian housing market has shown remarkable resilience in recent times, with its economic bounceback from the fallout of the COVID-19 pandemic. Despite 12 consecutive interest rate increases from the Reserve Bank of Australia, property prices have not only stopped falling but have started to rise. It has been welcomed news for investors that the Reserve Bank has continued to keep interest rates on hold at 4.1 percent for the third month straight.

The RBA cash rate target since 1990

Source: Domain: September 2023 RBA interest rate decision: Cash rate held at 4.10 per cent

The increase of house prices during the interest rate rises earlier this year, has been puzzling for some analysts who were expecting a significant drop in prices. Yet, the peak-to-trough change in Australian house prices was only 4%, according to PropTrack. Since the Australian housing investment landscape has moved into a recovery phase, investors are now focusing more on long-term housing strategies. This has been fuelled by increased consumer confidence, with 1 in 4 Australian households now seeing property investment as a safe and lucrative option for building wealth.

Investment Landscape in Australian Housing Market

The Australian housing market is expected to remain strong for the foreseeable future. This means that investors must be aware of key trends and changes within the industry in order to ensure they make informed decisions.

The increasing popularity of off-the-plan apartments has been a key driver of the housing market’s growth. Off-the-plan apartments are purchased before they are built and offer investors significant savings in terms of stamp duty, allowing them to take advantage of lower upfront costs.

With such favourable conditions for investment, it is no surprise that the Australian housing market is now a popular destination for both domestic and international investors. Demand for rental properties has been steadily increasing, making it an attractive option for those looking to build long-term wealth through property investing. With demand outstripping supply in several capital cities, vacancy rates are at record lows, allowing investors to reap significant returns when renting out their properties.

Key Factors Shaping the Australian Housing Market

First Homebuyer Concessions

In Australia, first home buyer schemes like First Home Guarantee are designed to assist first-time buyers in purchasing properties. Aimed at making home ownership more accessible for many Australians, these concessions impact the market by incentivizing more buyers to enter the market.
Rising Consumer Confidence

With recent data proving that the housing market is now in a full recovery, many Australians are turning to real estate investment in order to expand their portfolio. Positive sentiment about the economy and job security tends to boost consumer confidence, encouraging more people to invest in real estate.
Population Growth

Australia’s population is projected to reach 30 million by 2030. The next few years will be an important time for the Australian housing market, as new policies and trends take shape. With the right investment strategies in place, investors should be able to capitalise on these changes to maximise their returns.
Regional Variations and Hotspots for Real Estate Investors

While it is convenient to speak of the Australian housing market as a singular whole, there are, of course, multiple Australian property markets. Each state has its own unique characteristics, which should be considered when undertaking any real estate investment. In particular, investors should look to regional variations in terms of population and employment growth, infrastructure development, and housing affordability.

Regional Variations and Hotspots for Real Estate Investors

While it is convenient to speak of the Australian housing market as a singular whole, there are, of course, multiple Australian property markets. Each state has its own unique characteristics, which should be considered when undertaking any real estate investment. In particular, investors should look to regional variations in terms of population and employment growth, infrastructure development, and housing affordability.

New South Wales

For the month of August, the median house price in Sydney, New South Wales now sits at $1,359,936. This represents a month-on-month increase of 1.1%. The auction clearance rate is currently 63%, providing insight into a market that is slightly in favour of sellers while maintaining a healthy balance. In terms of the most active suburbs, the top five areas for properties on the market include Dee Why, Penrith, Blacktown, Baulkham Hills, and Bellevue Hill.
Victoria

The median house price in Melbourne, Victoria currently stands at $925,374, which is a month-on-month increase of 0.6%. The auction clearance rate is currently 70%, implying that buyers are in the majority for Melbourne’s real estate market. In terms of active suburbs, the top five areas include Cranbourne, Epping, Preston, Frankston, and Narre Warren.
Queensland

The median house price in Brisbane, Queensland currently stands at $832,247, which is a month-on-month increase of 1.6%. There is a significant demand for high-quality homes and investment-grade properties from both home buyers and property investors. Currently, the supply of new properties in Brisbane is struggling to keep up with demand, which is further driving up home values. Hotspot areas for the month of August include Teneriffe, Morningside, and Bowen Hills.
South Australia

Adelaide, the capital city of South Australia is currently experiencing modest house price growth. For the month of August, the median house price in Adelaide stands at $733,501 which is a 1.1% increase from last month. At 88%, Adelaide’s auction clearance rate is the highest among the major capital cities, indicating that it is a buyers’ market at the moment. The most active suburbs in August have included Greenwith, Norwood, Salisbury Heights, Daw Park, and Glenelg North.

Conclusion

At present, there are several key trends and factors shaping the dynamic Australian housing market.

First and foremost, the resilience of the Australian housing market in the face of economic fluctuations, including a series of interest rate hikes, is noteworthy. This resilience, with only a modest 4% peak-to-trough change in house prices, demonstrates the market’s robustness and potential for long-term growth. The buying conditions in Spring 2023 are continuing to strengthen as the Reserve Bank continues to keep interest rates on hold at 4.1 percent for the third month straight.

Investors should pay close attention to the trend of off-the-plan apartments, which offer enticing cost-saving advantages by reducing upfront expenses. As rental properties continue to be in high demand, thanks to supply shortages in major cities, this creates a golden opportunity for those looking to build wealth through property investment.

Population growth, predicted to reach 30 million by 2030, underscores the importance of strategic investment decisions. By recognising the regional variations across states and adopting a borderless approach to investing, property investors can take advantage of price appreciation and rental yields that are unique to each state.

In conclusion, the Australian housing market is a multifaceted landscape with diverse potential for investors. By staying informed about the key trends and factors influencing the market, individuals can make well-informed decisions to capitalise on the opportunities presented by this dynamic sector. Whether it’s off-the-plan apartments, first homebuyer concessions, or regional variations, a proactive approach and a thorough understanding of the market will be essential for success in the Australian housing market.

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