It’s no secret the Australian property market has faced its fair share of challenges over the last 18 months.
After booming through the latter half of 2020 into 2022, with a peak of 26.2% in April 2022 the national HVI fell to its lowest point in February 2023 at -9.1%.
However, the last few months have demonstrated some optimistic indicators that have pricked the ears of investors leaving them wondering – what is on the property horizon for 2023 and 2024?
Let’s take a deeper look.
House Value Index
CoreLogic’s national Home Value Index (HVI) marked a sixth consecutive monthly rise, up 0.8% in August. Since bottoming out in February, the national HVI is up 4.9%, adding approximately $34,301 to the median dwelling value.
The recovery trend remains broad-based, with almost every capital city (except Hobart) recording a rise in dwelling values over the month. Gains were led by a 1.5% increase across Brisbane, followed by Sydney and Adelaide where home values were up 1.1%.
Australia’s vacancy rate is steady at 0.9% for the second month in a row – a consistency last seen in April. Conditions are varied across the capital cities, with vacancy rates decreasing in Sydney (1.0%), Canberra (1.7%), Adelaide (0.3%), Perth (0.3%) and Hobart (1.1%). Driven by a fall in rental supply for the second consecutive month, Sydney and Melbourne face the most immediate pressure on rental stock as overseas migrants typically settle here and rent upon arrival. A significant boost in supply is needed to alleviate tight rental conditions.
Australia’s rental market remains locked in favour of landlords as demand has escalated at a time of limited supply, pushing asking rents to historic highs across the combined capitals and combined regionals. The outlook differs slightly depending upon location, with house and unit rents in Sydney, Melbourne, Brisbane, Adelaide and Perth at record highs. The colliding mismatch of heightened demand and supply side constraints has pressured house and unit asking rents to rise for the longest continuous stretch across the combined capitals.
Rental demand has spiralled from a quicker-than-expected return of international students, temporary visa holders, and overseas migrants. With net overseas migration estimated to be at a record high over the previous and current financial year (1) – the rental pressure cooker remains – we estimate roughly 127,000 additional dwellings will be needed this financial year alone.
As of June 2023, asking rents for houses increased 6.3% across the nation, with the biggest increases being seen in Perth (+16%), Melbourne (+13%), Sydney (+12.9%), Adelaide (+12.5%) and Brisbane (11.5%).
Immigration & Population Growth
Australia has already blown well past the May federal budget’s projection of 400,000 NOM and 524,000 population growth over the 2022-23 financial year. The latest monthly arrivals and departure data from the ABS, released earlier this week, also showed the permanent and long-term arrivals shot to record highs in the year to July.
With skyrocketing demand and housing availability at an all time low, the only suitable solution to tackle the current housing crisis is property investment, which is set to drive significant returns for investors.
Australia is headed for a projected shortage of 106,000 homes by 2027. Derived from high-interest rates, surging immigration, and community resistance to new developments, the current housing shortage is set to worsen significantly in the short term with Brisbane and Sydney each facing a shortage of over 10,000 homes within the next five years and Perth experiencing a predicted shortage of 25,200 dwellings.
To summarise what to expect from the Australian property market in the months ahead, our advice to you is this: invest when you can next afford to. The current property market conditions have formed the perfect storm for prospective investors and now provides the best opportunity to get in before the herd and capitalise on the opportunities to come.
The Australian property market has demonstrated resilience amidst the many property cycles over the last few years, and has proven that it can be the most profitable and safest asset class available to you with the right help – and that’s where we come in.
So if you’re thinking about kickstarting your property investment journey and capitalising on these incredible opportunities to help you achieve your financial goals, Book a free consultation with one of our esteemed Property Wealth Planners via the form below or check out our Masterclass!