Australia’s Property Market Trends: Affordability & Interest Rates

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From Affordability to Interest Rates: What’s Shaping Australia’s Property Market Today

Australia’s property market is at a pivotal point. From addressing affordability challenges for essential workers to managing inflation’s impact on interest rates, the nation’s housing landscape is shifting.

November’s updates bring insight into the possible solutions for housing accessibility, debates around negative gearing, and a look ahead at what could be a new property boom.

Whether you’re a prospective investor or simply curious about what lies ahead for the Australian property market, here’s everything you need to know.

Australia’s Property Market Trends: Affordability & Interest Rates

Can Affordable Housing Be Achieved in Australia?

With soaring property prices, housing affordability is becoming a crisis for Australia’s essential workers.

Sydney, Melbourne, and Brisbane have some of the steepest housing costs, forcing vital workers—teachers, nurses, ambulance staff—further away from their workplaces.

Recent data shows just how challenging it has become for these workers to find affordable rentals:

Only 3.7% of properties are affordable for teachers
2.2% for ambulance staff
1.4% for nurses
0.9% for early childhood educators

Professor Nicky Morrison from Western Sydney University believes solutions exist if Australia is willing to look internationally.

Many countries have addressed affordability by using innovative strategies, including:

Shared equity models: where the government or investors cover a portion of the property’s cost in exchange for part ownership, easing the initial burden for buyers.
Public land allocation: turning surplus government land into affordable housing, particularly near large public sector employers.

This approach, Professor Morrison suggests, could make housing affordable and accessible for Australia’s essential workers, keeping them close to the communities they serve while preserving housing opportunities for others in need.

Essential workers in Australia seeking affordable housing options.

The Debate on Negative Gearing—Is it Really to Blame?

When an election looms, negative gearing is often blamed for the housing crisis.

Calls to end it have already begun, even though history has shown that removing negative gearing may actually harm the rental market. Consider these cases:

In the 1980s, Australia removed negative gearing only to reinstate it two years later due to rising rents and a significant rental shortage.
New Zealand recently ended negative gearing, yet now faces rental shortages, higher rents, and is considering reinstating the policy.

A recent survey from the Australian Financial Review highlights that many industry experts believe that ending negative gearing could reduce rental stock, hurting renters while creating uncertainty for investors.

Fewer available rentals during a time of record-low vacancy rates could push rents even higher, counteracting any benefit of slightly lowered property prices.

So, while negative gearing may seem like a solution on the surface, it’s important to consider the longer-term impacts. As experts often say, “Be careful what you wish for!”

Chart displaying Australia’s inflation trends impacting the property market.

Australia’s Inflation and Interest Rate Outlook

In promising economic news, Australia’s inflation rate has fallen to its lowest growth level in over three years at 2.8%.

However, this is unlikely to trigger an immediate interest rate cut from the Reserve Bank of Australia (RBA).

The RBA’s analysis uses a trimmed inflation rate, which is still sitting at 3.5%, slightly above their 2-3% target. Michelle Bullock, the RBA governor, stated that they would require more consistent data to confirm inflation’s stability within the target range before making a rate adjustment.

Some economic trends point toward a potential rate cut in early 2025, offering hope to property buyers and investors.

For now, however, interest rates remain firm as the RBA monitors further inflation patterns.

State of the States—The Construction Surge

Across Australia, construction activity has surged in all states except one.

The CommSec State of the States report reveals construction is higher than the decade average in seven of eight states, with Victoria leading by a margin of 13.5% above average.

Queensland is also making strides, topping home lending growth with an increase of 27.4%over the past 12 months.
Other construction highlights include:

South Australia and Queensland following Victoria’s lead with above-average construction activity.
Queensland and Western Australia experiencing solid growth in home lending.

This surge in construction and lending signals a potentially robust housing market.

As we watch these trends, Australia’s regional property landscape continues to evolve, bringing new opportunities—and challenges—for investors.

Is Another Property Boom on the Horizon?

The Australian property market is showing signs of an impending boom. With interest rate cuts anticipated early next year, the potential for increased borrowing capacity could give property buyers a competitive edge.

Domain’s chief economist, Nicola Powell, reports record-breaking property prices in Sydney, Brisbane, Adelaide, and Perth, while Sydney’s median house value continues to hold at $1.65 million. Across various regions:

Brisbane’s house values rose by 1.5% and units by 3.3%.
Adelaide saw a 4.2% increase in house values and 3% for units.
Perth recorded a 3.1% growth in house prices, with units up by 0.9%.

In just two weeks, the total value of Australia’s property market reached $11 trillion for the first time. As inflation slows and labour markets tighten, the conditions are ripe for further growth in the housing market.

The property market’s latest developments show a rapidly changing landscape that affects us all, from essential workers seeking affordable housing to investors considering new opportunities.

It’s clear that understanding these shifts requires a strategic approach, especially as we navigate policies, affordability challenges, and economic factors.

If you're curious about how these trends could impact your personal financial circumstances or if you're considering property investment, let’s connect. Book a one-on-one session with me here to explore how we can tailor a plan that works for you.

Alternatively, join our upcoming workshop on “Pay Off Your Mortgage in 10 Years” for more insights into property investment strategies. Claim your seat nowand take a step towards financial empowerment.

Next steps: Should you want to learn how the author built his $5m balanced portfolio in 7 years and aspire to own something similar, feel free to get in touch via email at rasti@getrare.com.au or book an appointment here.

Disclaimer: This article is general in nature and does not take into account your situation. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser.