The Australian property market is being slapped left-right-centre with negativity by the media. There’s no denying that the property market is seeing reports on the decline from all directions. While there is speculation that prices are dropping in the Australian property market, it is important to know that we are seeing a drop from prices that were at an unusual high. We acknowledge that the heat is coming off the housing market, but that is because it wasn’t just on fire last year – there was uncontrollable burning.
Australian capital cities saw a combined upswing of about 25% - driven mainly by extremely low interest rates during the peak of the Covid-19 pandemic. The last few years saw an unusual high demand for property due to slower construction of newer projects. This meant that there was little to no new supply that were coming on to the market. As a result, more people had to look at rental housing – shooting rental property prices up.
The undersupply and increased demand in housing has helped prices remain relatively steady. Aside from that, the rising construction costs are continuing to increase. With these growing costs, developers are cornered to pushing house prices up.
Taking South East Queensland as an example, the chart below shows the trends of the Queensland housing supply, with August 2022 seeing a record low of 3.6 months' worth of housing supply over the decade. Zooming into the SEQ apartment markets, there is a mere 3.2 months’ worth of new housing supply available. SQM research based on historical sales has estimated that there would be a shortfall of more than 16,000 new apartments over the next 4 years. Difficulties that arose from the Covid pandemic – labour and material shortages, as well as inflated construction costs could potentially contribute to a greater shortage.
The Australian rental market is also remaining exceptionally strong with rents continuing to grow, particularly in Brisbane where we see clients' rents rising really across the board. In Brisbane alone, vacancy rates are at a record low while rents in the entire Queensland property sector have risen 13.5%.
In the face of rising interest rates and inflation, the SEQ apartment markets remain resilient and will undoubtedly experience sustained growth across various micro-market locations and product types over the short to medium term. Over the medium to longer-term, underlying demand and supply fundamentals indicate that it is only a matter of time until above-average rates of growth return.
We hope you’ve found this article useful in understanding the current state of Australian property.
The Tailor My Property team has helped many clients with overseas properties including Australia over the years, and although it might seem challenging to penetrate the Australian property market, we are here to make those challenges a lot easier for you, whether it be obtaining a mortgage, tax advice, and property options. As always, reach out to have a conversation with us anytime.