Table of content
Introduction
"Freehold ownership, no estate tax, private ownership of land and properties, and the ability for overseas individuals to obtain loans“ – after comparing different countries' property markets, investors truly appreciate Australia's approach to regulating its real estate sector from the perspectives of both buyers and investors. Australia boasts the most stable investment environment in real estate, with a well-developed social system and a stable political system. This makes Australia one of the few countries with a consistently stable economy.
With the trend of investing in Australian real estate on the rise, more and more investors, including overseas investors, are choosing to invest in the Australian property market among many countries. So, what will be the trend of the Australian property market from 2024 to 2025? How should investors approach the near future of the Australian property market with the right mindset and strategy?
This article will take you through a review of the history of the Australian property market and analyze and explain the future trends of the Australian property market, providing insights to help you clarify your investment strategy.
1. Review of the Australian Property Market in 2023
1.1 Review of Major Events in the Australian Property Market
Looking back at 2023, the Australian property market witnessed significant events that shaped its development trends over the past year.
Starting from May 2022, the Reserve Bank of Australia (RBA) embarked on an aggressive cash rate tightening policy to control inflation. In 2023, the RBA raised the cash rate in February, March, May, and November, ultimately settling at 4.35%, where it remained unchanged. This move added cost pressures on borrowers. The latest RBA rate decision on May 7, 2024, maintained the cash rate at 4.35%.
On March 10, 2023, after facing a run on deposits, the Silicon Valley Bank in the United States declared bankruptcy. This was the second-largest bank collapse since the 2008 financial crisis and the third-largest in U.S. history. The impact also reached Australia's big four banks, with their stock prices taking a hit. Investors realized that earning interest by keeping money in banks was not always a completely secure investment. Some investors chose to invest in real estate to hedge against inflation and avoid banking crises.
Melbourne and Sydney, as Australia's most developed and popular property markets, became investment havens during the pandemic. However, in 2023 post-pandemic, the growth rate in Sydney slowed, reaching a minimal monthly increase of 0.3% in November 2023. Melbourne even experienced negative growth, with a 0.1% decrease, signaling an impending turning point in these two cities.
On the other hand, Brisbane, Adelaide, and Perth emerged as new favorites, as affordability increased under the dual pressures of inflation and rate hikes. These areas, with median prices around $800,000, replaced the "old" popular cities like Melbourne and Sydney, becoming the preferred choices for Australian investors.
1.2 Australian Property Market Performance in 2023
Source: Proptrack
Our team provides the detailed performance of the Australian property market and prices in December 2023. Overall, property prices rose by 5.52% in 2023. In December, prices fell in Sydney (-0.08%), Melbourne (-0.55%), Hobart (-0.41%), and Canberra (-0.66%). In contrast, Perth (+0.69%) and Adelaide (+0.59%) continued to show strong growth, while Brisbane (+0.27%) and Darwin (+0.1%) also saw price increases.
A stark contrast to the fluctuations in the capital cities was the overall rise in regional property prices in December, with a monthly increase of 0.23%. Regional property prices reached a new high in December, rising by 3.2% compared to 2023. Queensland and South Australia were the main drivers of economic growth, each rising by 0.51% and 0.5%, respectively, reaching new highs in December.
Perth has proven to be the strongest-performing Australian property market in the 12 months to December 2023, with the median price rising by 14.75% compared to 12 months ago. Perth's growth outpaced any other region in Australia. Adelaide followed closely behind Perth as the second-strongest performing city in 2023, with a total growth rate of 10.98%; Adelaide rose by 10.45% in the year after the pandemic.
Hobart performed the weakest in 2023, with prices falling by 3.5% year-on-year, while Darwin fell by 1.49%.
1.3 Impact of 2023 Economy, Policies, and Pandemic on the Australian Property Market
Ultimately, there is only one underlying logic for the factors affecting the development of Australian property prices: supply. However, how was the supply-demand relationship in the Australian property market in 2023?
In the past year, the Australian property market has remained in a state of undersupply, and the situation has become more severe. The Australia Bureau of Statistics' housing approval report for December 2023 showed a 9.5% decrease in total housing approvals to 13,085 units, with approvals for private dwellings decreasing by 0.5% and approvals for non-freestanding private dwellings decreasing by 25.3%. Although construction material costs have fallen from their peak during the pandemic, severe labor shortages are expected to increase construction costs by 3.5%-5.1% in 2024.
Source:ABS
Although the government has been trying hard to balance the supply relationship during the past year of soaring Australian property prices, the results have been less than satisfactory. In the end, all costs still have to be borne by the market.
2. Outlook for the Australian Property Market in 2024
2.1 Latest Data on the Australian Property Market in 2024
As of May 2024, the CoreLogic national home value index (HVI) rose by 0.6% monthly and 9.6% annually, resulting in an average national housing price increase of about $4,720 AUD. Sydney's property prices rose by 0.1% last week, with an annual increase of 8.4%. Melbourne experienced a 0.1% decline last month, with a yearly growth rate of 2.8%. Brisbane saw a monthly increase of 0.9% and a yearly increase of 16.0%. Perth experienced the highest monthly increase of 1.9% and a yearly increase of 21.0%.
Source：CoreLogic
Each market segment has shown different performances, with Sydney's median house price reaching $1,456,700 (apartments $807,226, houses $1,894,694), Melbourne's at $1,053,100 (apartments $605,522, houses $1,256,244), Brisbane's at $973,255 (houses $1,094,860, apartments $606,249), Perth's at $847,565 (apartments $506,757, houses $1,188,802), Adelaide's at $817,754 (houses $895,331, apartments $462,728), Canberra's at $965,207 (houses $1,176,210, apartments $594,121), Darwin's at $544,401 (houses $657,837, apartments $368,626), and Hobart's at $751,415 (houses $791,273, apartments $526,163).
In terms of clearance rates, Sydney continued to lead with a strong preliminary clearance rate of 78.1%. Melbourne's early clearance rate surpassed 70%, reaching 71%, slightly higher than the previous week's 69.8%. Among the smaller capital cities, Brisbane had the highest number of auctions (169), but its clearance rate fell to 68.0%, the lowest since Easter. Overall, the number of properties listed last week was significantly higher than the same period last year.
Source: Corelogic
2.2 Future Trends in Australian Property Prices for the Next Year
Having previously analyzed the challenging supply-demand dynamics of recent years, the current driving factor in the property market cycle is the relative shortage of high-quality property supply compared to current demand, thereby pushing up property values and rents.
Unfortunately, the shortage of new housing may continue beyond 2024, as the number of new dwelling approvals has been declining over the past two years, reaching the lowest level in 12 years. Economists agree that we are unlikely to meet the housing targets required for the Australian property market.
Currently, there is a shortage of grade-A residential and investment properties available for sale. The number of properties on the market available for sincere buyers is insufficient, and with buyers returning to the market, well-located properties are quickly snapped up. However, sellers have been cautious this year before listing their homes for sale, as the number of newly listed properties has been below average since last spring.
Nationally, the time to sell property is slightly longer than during the property boom of 2020 and 2021, but the days on market remains relatively low, and selling discounts are still at very low levels. Overall, houses sell faster than apartments, and due to the shortage of high-quality properties on the market, grade-A properties sell quickly with minimal discounts.
In the next year, Australian property prices are expected to continue rising due to the shortage of supply. Specific regional data can be continuously monitored on my channel and website.
2.3 Analysis of Factors Affecting the Australian Property Market in 2024
Slow Approval Processes and Limited Housing Supply: The efforts made by the government are far from meeting the demand.
Slowed Construction Activity and Rising Construction Costs: Ultimately, all costs are borne by the market.
Potential Stimulus from Interest Rate Cuts: Any interest rate cuts could stimulate purchasing demand, possibly leading to a rate cut era by the end of 2024.
Controlled Inflation after Continuous Interest Rate Hikes: Seller confidence is gradually restored.
Fear of Missing Out (FOMO) Psychology Spreads: This can easily stimulate market consumption.
Increasing Immigration: The rental market is expected to remain tight.
Government Policy Changes: The government will modify and enact various policies to maintain balance in property supply and stimulate consumption.
Decreased Affordability for First-time Buyers.
Increase in Cash Buyers: High transaction volumes are concentrated in the city's CBD.
Increased Demand for Economical and Affordable Housing: This segment experiences the fastest growth in both demand and price.
3. Analysis of Future Trends in the Australian Property Market
3.1 Four Major Trends in the Future of the Australian Property Market
Successful investment relies on identifying trends, which involves observing the performance of the market you plan to invest in. The future trends of the Australian property market have begun to emerge.
According to a report in the Australian Financial Review, the impact of the pandemic on the Australian real estate market, as reported by CoreLogic, has resulted in record-breaking house prices. The subsequent rise in rent and decrease in yield are significant changes caused by the pandemic over the past two years, which will have long-term effects on the real estate market.
The diversification of market cycles means that the "golden age" of the Australian property market that many investors previously envisioned has come to an end. Previously, investors always believed that the Australian property market would grow steadily and never fall. However, it has been proven that the era where any property in Australia could achieve double-digit growth is over. While the market may bring immediate high growth during its peak, this growth is not sustainable. Investors need to be cautious of the rapid changes in short-term property values.
As of September 2023, the time needed to save for a down payment for a house (calculated at 20%) had risen to an average of ten years per person—10.7 years for houses and 8.4 years for apartments . Therefore, in the face of soaring house prices and high mortgage interest rates, future buyers are likely to lean towards areas with strong affordability.
Over the past year and a half, the lower the house price, the faster the growth rate. Particularly in areas with low prices and stable rental yields, they are likely to continue to attract more buyers in the future.
In Australia, apart from capital cities, more and more regional cities have become the preferred choice for new immigrants. As of April 2024, rental prices have risen by 0.8% per month, showing a slight slowdown but still facing a shortage in supply. It is expected that rental growth will continue to far exceed the average level for some time.
Notably, the growth rate of apartment rentals in the entire capital region is currently faster than that of detached houses. The chart shows that in Perth, Sydney, Adelaide, and Brisbane, the rental growth rate for apartments is higher than that for detached houses.
Among all the factors driving the property market, interest rates will have the most significant impact.
According to a new survey by leading real estate data and analytics provider CoreLogic, over seven in ten (71%) real estate professionals expect interest rates to cause ripples in the property market in 2024. Among them, 59% believe that the impact of rising interest rates will be the most significant, while 12% expect that a decrease in interest rates will have the biggest impact on the property market. 15% of professionals believe that immigration and population growth will affect the property market in 2024, while 2% think that government intervention and new policies could shake up the trend in property prices. In the "Five Predictions for the 2024 Property Market," we also analyzed the future trend of interest rates in detail—we expect interest rates to decrease in the second half of 2024. After two years of suppression, any rate cut can boost consumer.
3.2 Performance and Potential Opportunities in Property Prices in Different Cities and Regions
As of now, the median house price in Australia has increased by 12.9% annually, reaching $779,817, with the average median price for the eight capital cities at $847,139, showing a continuous upward trend. Almost every capital city has shown stronger growth in the lower-value market.
Source: Corelogic
Clearly, Melbourne's property market (6.5%) has not performed as strongly as some other capital cities over the past year or two, with the average for Melbourne's detached houses at their lowest level in twenty years. However, in the property market competition, more than 50 suburbs in Victoria have seen price increases exceeding the national average.
Sydney's property prices have surprisingly steadily risen (11.9%), with strong auction clearance rates throughout the year, indicating a significant market depth, and suggesting that sales prices will continue to rise this year.
Brisbane (20.8%) soared early in the pandemic and is currently at a new high.
Perth continues to perform well, with its growth rate far exceeding other areas, growing by 2.0% in the month and 26.8% annually.
Adelaide (18.7%) is developing slightly slower than the east coast capital cities, but due to its affordable housing prices, it remains one of the best-performing capitals, with low inventory levels also intensifying competition.
If you are interested in which area of each capital city to invest in, please refer to the "Guide to the Top Eight Capital Cities for Making Money Opportunities".
Conclusion
Overall, the Australian property market in 2023 has proven its investment value, and the outlook for 2024 remains optimistic. In the journey of exploring investment opportunities in the Australian property market, we will encounter endless opportunities and challenges. This environment is both challenging and full of opportunities, providing investors with valuable learning and growth opportunities. Before investing in the Australian property market, a thorough analysis of price trends is crucial. 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 essential to conduct thorough market research and risk assessment. This not only helps in making wise investment decisions but also reduces investment risks and increases the chances of investment success.
At the same time, Alison's channel provides more resources and references for the latest information on Melbourne property prices every week, helping Australian property investors better and more timely understand market dynamics. Whether through professional property market reports, online resources, or expert opinions, they can provide investors with more comprehensive and accurate information support. These resources can not only help everyone better understand market trends but also guide them in developing more effective investment strategies, increasing the success rate and returns on investment.
Alison’s Story
Born in Hong Kong an moved to Australia, I have been associated with real estate all my life. As the plane slowly landed on the runway of Melbourne Airport, my life and career also changed to another runway. I changed from a Hong Kong real estate agent to an Australian real estate agent, and successfully obtained the Australian lawyer qualification.
When I was working in a law firm, I was surrounded by highly educated professionals. Even though their wages are very well, and they are absolutely the elites in society, but their lives are full of hard labor, and it’s hard for them to get rich through buying properties.
So I spend all my time and effort on learning financial and real estate investment knowledge, hoping to achieve financial freedom as soon as possible, and let my parents who have worked hard for many years live a good life.
Now I will share with you the knowledge and experience of investing in Australian real estate, and embark on the road to financial freedom together.
Alison Australian real estate information platform
The original intention of Miss Alison to establish investwithalison.com is to provide neutral Australian real estate information through this platform and help investors establish the most suitable investment strategy.
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