#19: Construction Decline, Rising Property Prices, Green Home Premiums, Slowing Economic Growth & Investor Borrowing Surge

Residential Construction Falls: Addressing Housing Affordability

The key to improving housing affordability lies in increasing the supply of new homes. However, recent data indicates a decline in residential construction activity. According to the Australian Bureau of Statistics, a total of $19.6 billion was spent on residential construction in the first quarter of 2024.

This figure represents a 1.2% decrease from the previous quarter and a 2.8% decline from the same quarter last year.

Denita Wawn, CEO of Master Builders Australia, expressed concern over this trend, stating that residential building activity has slumped at a time when there is a critical need for new homes. "If we are going to undo decades of under-building and resolve this housing crisis, we need to change the economic environment to encourage investment across all sectors of the industry by reducing the cost of construction work, reducing build times, reducing planning delays, and speeding up approval processes," she said.

National Property Prices Rise for 16th Consecutive Month: Key Insights

CoreLogic's latest property price data for May reveals five key takeaways:

1. Australia's median property price rose by 0.8% in May.
2. This marks the 16th consecutive month of growth.
3. The nation's median property price has reached a record $785,556.
4. Brisbane has overtaken Canberra to become the second-most expensive capital city, with Sydney retaining the top spot.
5. There is significant variation in annual price growth among capital cities, ranging from +22.0% in Perth to -0.1% in Hobart.

These trends highlight the continuing strength of the property market, with sustained growth in prices across most parts of the country.

Green Homes Premium: Benefits of Sustainability

Homes with sustainability features are attracting more buyer interest and selling for higher prices compared to non-green homes, according to Domain analysis. Energy-efficient houses receive 16.7% more listing views and sell for 14.5% more than non-efficient houses, while energy-efficient units receive 6.6% more views and sell for 11.7% more.

Domain identified this premium for energy-efficient homes by analysing listings for keywords such as "solar," "north-facing," "double-glazed," and "sustainable."

Sellers of homes with sustainability features are encouraged to highlight these attributes in their property listings, as buyers actively search for green keywords when looking for a home.

Economy Grows Just 0.1% in March Quarter: Slowing Down

New data from the Australian Bureau of Statistics indicates that economic growth has trended down for six consecutive quarters. Higher interest rates have led consumers and businesses to reduce their spending, resulting in the following quarterly growth rates:

• Dec-22: 0.8%
• Mar-23: 0.6%
• Jun-23: 0.4%
• Sep-23: 0.2%
• Dec-23: 0.3%
• Mar-24: 0.1%

The Reserve Bank of Australia (RBA) has raised interest rates to curb demand and reduce inflation. While economic growth has slowed significantly, achieving this first objective, the second objective of reducing inflation to the target range of 2-3% remains challenging.

Although inflation has decreased from an annualised rate of 7.8% in December 2022 to 3.6% in March 2024, it has not yet reached its target. As a result, the RBA is likely to maintain high interest rates, continuing to impact economic growth negatively.

Investor Borrowing Up 39.1% in 13 Months: Favourable Conditions

As property prices and rents continue to rise, property investors are increasingly active, with borrowing activity nearing record levels.

In April, property investors committed to $10.861 billion in home loans, according to the Australian Bureau of Statistics. This represents a 39.1% increase from March 2023, when investor borrowing hit a low of $7.807 billion in this cycle.

For comparison, the record month for investor borrowing was January 2022, with $11.590 billion in loans. Many see the current market as favourable for investment, given the sustained rise in property prices for over a year and rents for nearly four years.

This trend underscores the attractiveness of the property market for investors seeking to capitalise on rising values and rental income.

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Christian Stevens - #1 Mortgage Broker in Australia

• WINNER - Best Residential Broker in Australia 2021 - 2024
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IMPORTANT DISCLAIMER: This is not advice. Readers should not act solely based on the material contained in this newsletter.