Here is our update on the current state of the property market and in light of the recent budget release.
Describing the current market is challenging; however, there are several key trends:
Property Market Trends
- Monthly Growth: The past three months have seen a 0.6% monthly growth due to undersupply.
- Long-term Upswing: Over the past decade, the market has been in an upswing 70% of the time.
- Equity Gains: Homeowners who bought more than four years ago have seen significant equity gains.
- Supply Shortfall: Supply remains insufficient to meet purchase demand.
Recent Trends
- Resales: Short-term resales have increased slightly, coinciding with the expiry of fixed-term loans and strong capital growth.
- Interest Rates: Higher interest rates favour wealthier buyers and those less reliant on debt. The average loan-to-value ratio (LVR) for new mortgages has declined while borrower income and deposit sizes have increased.
- Investor Activity: Investors, who made up less than a quarter of mortgage demand in 2020/21, now account for a more significant portion of home lending.
Migration and Housing
- Migration Impact: Real estate services are closely tied to migration numbers, with 578k migrants in 2023. The majority (90%) are on temporary visas. The government plans to cap these visas, as announced in the recent budget. Student visa intake will be tied to university accommodation availability.
- Rental Yields: Gross rental yields have risen to their highest since August 2019.
Market Outlook
- Fixed Price Cliff: We are past the peak of the Fixed Price Cliff, with many fixed loans expiring this year.
- Millennials: As the largest adult generation in Australia, millennials are driving demand for detached housing due to family growth.
Regional Insights
- Perth: Of Perth, Brisbane, and Adelaide, Perth shows the most growth potential in the short term due to its price point.
- Brisbane & Adelaide: These cities continue to experience moderate growth.
As Damian Collins, former President of the Real Estate Institution of WA, said in a recent article about the national housing targets:
“The situation in WA is particularly dire, with an 18,000 plus shortage already. Demand is running at 3,000 homes a month, yet the approval numbers are around half of that, at 1516. There’s zero chance that the housing crisis will be fixed anytime soon.”
And with the Government’s recent announcement to cap temporary visas and link Student visas to university accommodation availability, this cannot come soon enough.
The property market continues to evolve, so stay tuned for more updates as we navigate these changes. As always, we’re here to help, so reach out to us for any of your finance and property needs.
Please also review our Finance in Focus for more property trends and updates.
Read our recent article on the Budget Wrap.
