Australian Housing's Stellar Rise

Market Update

Published: 20th October 2023

Key Insights and Latest Developments

Economic indicators and research insights suggest the Australian property market is headed for record-breaking prices in the forthcoming month. With insights from experts like Gareth Spence and Mark Browning from National Australia Bank, we understand that major cities are geared up for significant price escalations. Some of the driving factors:

Supply-demand mismatch: The property availability remains limited, whereas demand shows no sign of slowing down.
Income vs. Price growth: Unfortunately for prospective homeowners, the growth in property prices is outpacing income growth.

CoreLogic's recent data further validates this trend, showing price surges in all major capital cities during the recent September quarter. To put this into perspective, Australia's property market stands at an impressive $10.1 trillion, up from $6 trillion in 2015 and $9 trillion in October 2021.

NAB’s report casts a shadow on the near future, suggesting the property undersupply situation might further deteriorate before it sees any improvement. "Dwelling approvals are at their lowest since 2013, ignoring the brief setback during the early COVID phase," says the report.

Steps Towards Resolving the Housing Crisis

The Housing Industry Association (HIA) has been vocal about attracting more skilled labor to the building sector. They welcome the National Skills Agreement, a massive $12.6 billion commitment to invigorate the Vocational Education and Training sector, aiming to combat the prevalent skills shortage.

Jocelyn Martin, HIA Managing Director, emphasised the need for trained labor to achieve the ambitious target of constructing 1.2 million homes over the next five years. Tim Reardon, HIA's chief economist, outlines a four-point strategy to rectify the housing deficit:

Curtail levies and taxes that increase home prices.
Bring more investors into the fray.
Enhance skilled labor force availability.
Foster multi-level governmental coordination.

Graph illustrating rising Australian property prices in 2023.

The Granny Flat Strategy

A joint report from CoreLogic and Archistar Blackfort reveals a unique solution to alleviate the housing shortage—granny flats. Streamlining approval processes and providing the right incentives could potentially lead to the construction of over 655,000 granny flats across Australia. Tim Lawless from CoreLogic sees them as an economical housing delivery mechanism.

"The process is expedited as these units can be prefabricated and assembled on-site, bypassing conventional building project timelines," he states. The analysis pinpoints potential granny flat opportunities: 242,000 in Sydney, 230,000 in Melbourne, and 185,000 in Brisbane.

Granny flat as a potential solution to Australia's housing shortage.

Rental Landscape: Vacancies and Rates

September saw the national residential vacancy rate plunge to 1.1%. Louis Christopher, the managing director at SQM Research, provides a breakdown: Sydney at 1.3%, Melbourne at 1.2%, and Canberra at 1.8%. Unsurprisingly, as vacancies dwindled, rental rates soared. The past year alone saw a 16.2% hike in national dwelling asking rents

Decreasing residential vacancy rates in Australian cities for September 2023.

The Dwindling Loan Incentives

Borrowers, brace yourselves! The lucrative cashback offers and attractive interest rates are now a thing of the past. Data from the Reserve Bank of Australia reveals that the average variable home loan rate for new customers stood at 5.99% in August, a meager 0.2% less than what existing borrowers are paying. Shane Oliver, AMP's chief economist, attributes this shift to banks’ aspirations for higher returns to appease shareholders.

Construction workers addressing Australia's housing supply crisis.

In Conclusion

The Australian property market is a dynamic and ever-evolving entity. As we progress, it's pivotal to stay informed and make strategic decisions.

If you're keen to delve deeper into your property investment journey or seeking personalised advice, don't hesitate. I'm here to guide you through the maze. Book a personal session with me, Rasti Vaibhav, The Architect of Property Wealth, usingthis link or attend our enlighteningeducational workshops.