#4

Navigating the Shift Towards Unit Living Amid Rising House Prices

According to CoreLogic ’s recent Housing Chart Pack, house values have skyrocketed nearly 40% since March 2020, while unit values have experienced a more modest increase of 17.9%. This disparity is increasingly pushing buyers towards more affordable living options in units and apartments, especially in the capital cities where affordability pressures are most pronounced. Hobart remains an outlier where house values continue to outpace those of units.

Key insights from CoreLogic include:

• The total value of residential real estate in Australia has reached an impressive $10.6 trillion as of the end of April.
• National home values have stabilized, showing a consistent 0.6% monthly increase for three consecutive months, indicating sustained market demand.
• The segments offering more affordable housing are seeing quicker value growth, highlighting a robust demand for reasonably priced homes amid high interest rates.

These trends suggest a potential continued preference for unit living, driven by affordability and the need for financial prudence in a high-interest rate environment. For investors and homebuyers, understanding these shifts can provide strategic advantages in making informed property decisions.

Surge in Post-Holiday Auction Markets: A Comprehensive Overview

As we move past the holiday season, Australia's capital city auction markets have experienced a robust rebound, showcasing the resilience and dynamism of the property sector.

City-by-City Auction Performance:

• Adelaide leads the pack with an outstanding 79.5% clearance rate, setting a high benchmark for other capitals.
• Sydney remains strong with a 73.2% clearance rate, with a notable sale of a 5-bedroom house in Strathfield fetching $6,450,000.
• Melbourne maintains a steady course with a 64.2% clearance rate; the highest bid was for a 4-bedroom house in Hawthorn East, which sold for $4,060,000.
• Brisbane and Canberra show significant activity with clearance rates of 59.2% and 69.0%, respectively, indicating healthy buyer interest.

With a total of 2,004 properties listed this weekend—an increase from the previous week’s 1,977 and a significant jump from last year's 1,552—the data suggests a robust return to market activity and buyer engagement post-holiday.

Despite these strong performances, it’s important to note that clearance rates are still below last year’s peaks, suggesting a normalizing trend as the market adjusts. This transition period offers both challenges and opportunities, making it an ideal time for investors and homebuyers to assess the market for potential entry points or strategic investments.

RBA Holds Steady Amid Economic Uncertainties

In our latest economic update, we focus on the Reserve Bank of Australia 's (RBA) recent decision to hold the cash rate steady at 4.35% for the fourth consecutive policy meeting. This decision reflects the ongoing complexities of the current economic landscape, particularly the slower-than-anticipated moderation of inflation rates, which remain at 3.6%—above the target range of 2-3%.

Key Points from the RBA's Statement:

• Inflation Dynamics: The RBA is maintaining a cautious approach, ensuring that inflation trends back towards the target range sustainably before making further rate adjustments. This caution stems from inflation rates that have eased less quickly than expected, staying elevated and necessitating ongoing vigilance.
• Interest Rate Path: The future trajectory of interest rates is described as uncertain by the RBA. The board emphasized that their decisions will continue to be data-driven, responding flexibly to the evolving economic indicators to best ensure inflation returns to target within a reasonable timeframe.

Implications for the Australian Economy: This careful balancing act by the RBA highlights the central bank's commitment to curbing inflation while also managing potential impacts on employment and economic growth. The cautious stance suggests that while medium-term inflation expectations are aligned with targets, the actual pace of inflation decline is not meeting the desired speed, which could prompt further actions if pressures persist.

Rental Affordability Reaches Crisis Levels, Anglicare Australia Reports

Anglicare Sydney 's 15th Rental Affordability Snapshot has painted a grim picture, indicating that rental stress among low-income Australians is not only growing but is now the worst recorded in the history of the report.

Snapshot Insights:

• The analysis reviewed 45,115 rental listings from realestate.com.au during the weekend of 16-17 March.
• Only 13.4% of these listings were affordable for a two-parent family on minimum wage.
• The situation is more dire for single-parent families, with only 1.8% of rentals being affordable.
• For retirees on the age pension, a mere 0.2% of rentals were affordable.
• Alarmingly, no rentals were found to be affordable for individuals on JobSeeker.

Defining Rental Affordability: A rental is considered affordable if it does not exceed 30% of a household's income. This benchmark highlights the severity of the current market conditions, where the dramatic scarcity of affordable rentals is primarily due to a significant undersupply, pushing rent prices upward aggressively.

Market Dynamics: This scarcity and the subsequent rise in rents are squeezing the most vulnerable groups, dramatically impacting their living conditions and financial stability.

Australian Property Prices Set to Rise Amid Supply Challenges

The latest Australian housing market report the National Housing Supply and Affordability Council reveals a concerning trend that could significantly impact property prices and market dynamics over the next five years.

Key Findings:

• From 2023-24 to 2028-29, Australia is expected to see the formation of approximately 1.08 million new households.
• However, projections suggest that only 1.04 million new homes will be constructed during the same period, indicating a shortfall and intensifying existing supply issues.

Contributing Factors to the Supply Shortfall:

• Rising Costs: Increasing home building costs are directly impacting affordability, making it challenging for many Australians to enter the market.
• Building Delays: Extended completion times for new developments are exacerbating the supply gap, further straining the market.
• Builder Insolvencies: An uptick in builder exits from the market reduces overall construction activity, diminishing the rate of new housing development.
• Land Scarcity: The high cost and limited availability of land are major barriers to new developments, particularly in desirable urban areas.
• Planning Variability: The diversity in state and council planning processes can lead to significant delays in project commencements and completions.

Implications for the Market: The predicted shortage of housing supply relative to demand is poised to drive up property prices across Australia. This situation not only affects potential homebuyers but also impacts investors and the broader economy.