Australian Property Market: Rental, Auction and Construction Trends

Auctions Surge, Rents Climb, and Construction Costs Spike: Australia’s Property Market August 2024

As the Australian property market continues to shift, both renters and buyers are facing new challenges.

With investor activity on the rise, auction rates climbing, and construction costs surging, the landscape is more complex than ever.

In this week’s update, we’ll break down the latest data, highlight key trends, and explore what these changes mean for you—whether you're looking to rent, buy, or build.

Read on to stay ahead in this rapidly evolving market.

Investors Boost Rental Supply—But Is It Enough?

In July 2024, the rental market showed signs of stabilising as more investors re-entered the market.

This activity has slightly increased rental options, with the national rental vacancy rate dropping to 1.42%.

However, the market remains tight, with vacancies still at half of what’s considered balanced.

Here’s what we’re seeing:

• Rental vacancy rate dropped to 1.42% in July.
• Six out of eight capital cities experienced a slight increase in rental supply.
• Rents surged by 9.1% over the past year despite the increase in supply.

Anne Flaherty, senior economist at PropTrack, points out that while investor activity has helped slow the growth of rental prices, the market remains fiercely competitive for renters.

With building approvals at a decade-low and strong population growth, the future of the rental market is uncertain.

Auction Activity Edges Up as Spring Approaches

If you’re looking to buy, you’ll be interested to know that auction clearance rates across Australia’s combined capitals have risen slightly, reaching 70.4% last week, according to CoreLogic.

This increase is driven mainly by smaller markets, with Adelaide leading at 88.9%.

What’s happening in the auction scene:

• Adelaide recorded an 88.9% clearance rate.
• Melbourne saw 844 homes auctioned, with a clearance rate of 69.5%.
• Sydney hosted 632 auctions, with a clearance rate of 68.0%.

However, Sydney and Melbourne—the major auction markets—saw slight declines.

Kaytlin Ezzy of CoreLogic predicts an increase in activity as we head into the spring selling season, with over 2,000 auctions expected next week.

Rising Construction Costs—A Growing Concern

For those planning to build, the news isn’t so rosy.

After a brief slowdown, construction costs in Australia are climbing again, reversing last year’s trend.

The cost of building a new home had already increased by over 20% in the 12 months to September 2022, but by September 2023, the growth rate had slowed to 3.9%.

However, new data shows an alarming resurgence, impacting housing supply and affordability.

Key factors driving these costs:

• Labour shortages are particularly acute in finishing trades.
• Wage hikes continue to drive up costs.
• Copper prices are rising due to green energy and electric vehicle projects.

The Australian Bureau of Statistics points to low productivity as another factor exacerbating costs.

These escalating construction expenses are widening the price gap between new and existing homes, making it more challenging for Australians to afford new builds.

Next steps: Should you want to learn how the author built his $5m balanced portfolio in 7 years and aspire to own something similar, feel free to get in touch via email at [email protected] or book an appointment here.

Disclaimer: This article is general in nature and does not take into account your situation. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser.