Unraveling the Complexity of Australia’s Property Market

We continue to see a varied graph of growth, stability, and occasional decline in various areas as we travel around Australia’s diverse property landscape in 2024. This year, the differences in the market have been more noticeable, with some areas experiencing big booms while others are facing serious challenges. Let’s dive into the details of this complex market and explore the factors causing these differences.

Key Factors Shaping Australia’s Property Markets

1. Economic Fundamentals: Local and National Factors

Each housing market intrinsically performs in accordance with the underlying economic landscape. Major cities like Sydney, Melbourne, Brisbane, Perth, and Adelaide started to take different routes economically, either because:

• Employed persons
• Increase in wages
• Strength of Local Industries

Brisbane and Perth continue to experience strong growth due to the high demand in the construction and mining sectors, and Perth’s median house price has increased by 8.5% over the last year.

Such factors, in addition to higher interest rates, alongside the cooling in the tech and finance sectors, have subdued growth both in Sydney and Melbourne. Sydney’s median house price growth has now slowed to 3.2% annually.

While Melbourne has been the best-performing housing market within Australia over the past 40 years, it has underperformed in recent times due to the current economic challenges it is facing, with a total growth in prices of just 1.5% annually.

2. Population Growth and Migration Patterns

Interstate migration is accelerating in Queensland, reflected in its net migration increasing by 30% over the past year, with strong demand out of Brisbane and into surrounding regions.

Slower population growth across Melbourne, influenced by pandemic-related factors and changes in migration patterns, is influencing its prospects, with international students remaining 15% below pre-pandemic levels.

3. Imbalances between Supply and Demand

There is no new supply of houses, which has seen Adelaide and Perth posting some of the highest price increases. In the quarter just gone, the rental vacancy rate in Adelaide has squeezed to a record 0.3%.

Supply and demand are also more in check in Sydney and in Melbourne, partly due to the increased apartment construction. Apartment approvals rose 10% in the past year in Sydney.

Future Outlook: With limited new construction, especially in the apartment sector, the supply/demand imbalance may continue to push the values upwards. A shortage of 100,000 dwellings is estimated by experts nationwide by the year 2026.

4. Interest Rates and Affordability

The Reserve Bank of Australia is keeping rates high, albeit unchanged at the last review, and the cash rate in Australia currently stands at 4.35%. This has the effect of cooling expensive markets, such as Sydney and Melbourne, where mortgage stress has risen 15% in the past year.

Brisbane and Perth held momentum, Courtesy of relative affordability, but this advantage is melting away. Since the past year, Brisbane’s price-to-income ratio has increased from 5.9 to 6.3.

At present, Melbourne is offering a compelling case for affordability, quite similar to Brisbane and Perth three years ago. The median house price of Melbourne is now 25% below the level in Sydney-the biggest differential in more than a decade.

5. Policy and Incentives

Government interventions continually reshape the dynamics of the markets.

New South Wales also introduced changes to stamp duty concessions in their support of first-home buyers, increasing the threshold for all exemptions to $800,000.

The less aggressive policy interventions by Victoria have translated to moderate market performance, with the state government investing in social housing rather than intervening in markets directly.

6. Regional versus Urban Market Dynamics

The post-pandemic lifestyle alteration has continued to benefit regional Queensland and Western Australia in price jumps as high as 15% in a year for some coastal areas.

Some of the more regional areas of New South Wales and Victorian economies continue to struggle, less population growth and fewer job opportunities; some inland towns have seen, at times, falls in prices as high as 5% per year.

7. Investor Sentiment and Market Perception

There is increasing investor interest in Brisbane and Perth on the back of perceived long-term potential, according to CoreLogic, with lending by investors up 20% year-on-year in these cities.

The sentiment has flipped in Sydney and Melbourne, where investors want to sell their properties. Listings of investor-owned properties in these capitals are 10% up in six months.

Investors are bleeding out of Melbourne due to stronger residential tenancy legislation and more land tax that forces investors to leave the Melbourne market. New investor loans in Melbourne are 15% down compared to their numbers in the same period of the previous year.

Cutting through the Complexity of Property

This is the reason for the continued performance variance in the housing markets by Australia’s different states and territories in myriad factors, which all interact in a very complicated manner. While it may be true that property investment can build substantial wealth, statistics show that 50% of the buyers of investment property sell within the first five years, while another 92% never progress beyond their first or second property.

Investors take note:

• Success in property investments comes from a properly laid out plan.
• Always begin with the end in mind; understand your needs and objectives.
• Plan an overall approach before buying anything.
• Property investment is a process; it is not an event.
• Understand local market conditions and overall economic trends.
• Diversification may be considered in other regions to reduce the risk probability.
• Consider engaging a professional or an established investor if you’re starting to develop a strategic property plan. 

At Jindal Real Estate, we help you secure the finest properties in Australia. Contact us today to explore and invest in the best opportunities the Real Estate market has to offer.

Now, while considering the Australian property market for 2024, one thing is beyond doubt: one-size-fits-all no longer fits. The variation in performance underlines the need for a tailored, strategic investment plan within the varied regions.

Because the economic trend, population shift, and governmental policies are known, the investors could invest intelligently. A careful negotiation is needed to understand the market nuances for developing any strategic property plan that will keep them in tuned with long-term directions.

Real estate investment is a marathon. With a strategic frame of mind, expert knowledge, and observation of market fluctuation, the investor can successfully compile continuous wealth in real estate.

Whether one is just starting with investments or building a portfolio, 2024 holds a myriad of possibilities. Keep informed, agile, and strategic. The challenges that change brings to the marketplace often become incredible opportunities for growth and security.