Australian Property Pulse - Newsletter #5

Welcome to this week's edition of Australian Property Pulse

This week’s edition is packed with valuable insights and key data points on the current state of the Australian property market.

Across major cities, including Sydney and Melbourne, home values continue to decline, reflecting broader market trends. The latest PropTrack Listings Report reveals a significant surge in listings for August, marking a decade-high record. Meanwhile, the construction industry is grappling with rising costs, as new government regulations make building more expensive and complex.

While house prices are stabilising, profits from property sales have surged, providing opportunities for homeowners to downsize into luxury apartments or assist their children in entering the property market. On the rental front, vacancy rates have stabilised, a welcome development for renters as the sharp increases in rental prices have finally plateaued.

All these updates and more are featured in this week’s newsletter.

New data reveals a significant shift in the Australian property market, with home values declining in a substantial number of suburbs across the country. In Sydney, 25.9 percent of suburbs experienced price drops, with inner west suburbs like Rodd Point, Concord, and Enfield leading the declines. Regional NSW also saw 43.1 percent of suburbs fall in value, marking a major reversal from a year ago when only 3.8 percent of Sydney suburbs were in decline.

Melbourne recorded the largest declines, with nearly 80 percent of its suburbs affected, especially in the Mornington Peninsula, where postcodes like Crib Point and Bittern posted significant drops. Other cities followed suit, with over half of the suburbs in Hobart, Darwin, and Canberra experiencing declines.

As interest rates remain high and more properties hit the market, the downward trend is expected to continue, with more postcodes likely to see similar falls during the spring selling season.

This shift highlights the importance of staying informed and adjusting strategies in a rapidly changing market.

The latest PropTrack Listings Report highlights significant activity in Australia's property market, particularly in Sydney, Melbourne, and Canberra, where new and total listings have experienced the greatest annual increases among the capital cities. These markets posted their highest August new listing numbers in over a decade—since 2012 in Sydney, 2011 in Melbourne, and 2004 in Canberra.

Nationally, total listings grew by 1% over the past month and surged 4.5% year-on-year, marking 11 consecutive months of growth in total listings. This increase in supply provides more opportunities for buyers in key markets.

Interestingly, capital city listing volumes reached their highest for an August since 2012, growing 1.6% year-on-year. However, regional markets experienced a 4.7% decline in new listings, reflecting a contrasting trend.

As we move further into the spring season, these trends could offer valuable insights for both buyers and sellers navigating Australia’s evolving property market. Understanding these shifts will be crucial for anyone looking to make informed decisions.

The rising costs of building materials, labor, and energy efficiency requirements are creating significant challenges for the housing industry. Developers are finding it increasingly difficult to construct affordable homes, especially with the government's mandate that all new homes must meet a seven-star NatHERS energy efficiency rating. This standard has added an estimated $18,000 to the cost of a single-storey home and up to $45,000 for a two-storey home, further straining affordability.

The industry has called for an increase in the number of builders, including recruiting overseas talent. However, this proposal faces resistance from unions, who fear it could lower wages and exacerbate the housing shortage. To address these concerns, efforts are being made to improve the migration system, such as providing a pathway to permanent residency for tradespeople and reducing visa processing times, which have been cut from several months to just 21 days.

As the federal government aims to build 1.2 million new homes by 2029, there is widespread concern that this target will not be met. Economists and housing agencies have already forecast a potential shortfall of up to 300,000 homes. To meet these challenges, policymakers must work closely with the industry to find solutions that balance affordability with the need for sustainable housing development.

Despite some signs of slowing price growth, the gap between property owners and those struggling to enter the market continues to widen. Over the past decade, homeowners have enjoyed significant windfall gains, allowing them to upsize, downsize, or help their children purchase homes. However, this growing divide poses a critical challenge for aspiring buyers, especially those without access to equity or financial support from their families.

Recent data shows median profits for sellers skyrocketing across major cities. In 2024, Sydneysiders who sold their homes made a median profit of $655,000, double what sellers earned in 2015. Similar trends are seen in Melbourne and Brisbane, while Perth has seen more modest growth. While apartment sellers also saw gains, their profits have not kept pace with houses, largely due to the enduring Australian preference for land and the increasing value it holds.

With current market trends favouring those who already own property, it's clear that more needs to be done to bridge this divide. Government initiatives and a substantial increase in housing supply are crucial. One solution lies in expanding the "missing middle"—affordable housing options like townhouses, terraces, and medium-density developments.

Without these measures, the chasm between property owners and those locked into the tight rental market will only continue to grow. Now, more than ever, we need policies that create accessible pathways to homeownership for all Australians.

Over the past 30 days leading up to September 12, 2024, capital city asking rents have shown varied trends across Australia. Brisbane and Perth experienced declines, with combined rents in Brisbane falling by 0.8% and Perth by 0.5%. Hobart and Canberra also recorded decreases, with Canberra's 1.2% drop marking the largest among all capital cities. Hobart followed with a 0.6% decrease.

In contrast, Sydney recorded an increase in house rents, rising by 0.6% to an average of $1,031.09 per week, highlighting continued demand in the city. Adelaide and Darwin also posted positive growth, with house rents in Adelaide increasing by 0.9%. Darwin led the national growth figures, seeing a significant 9.6% surge in house rents, indicating strong demand in the city.

Nationally, the median weekly rent for a dwelling is now $719.80, reflecting the mixed performance across various markets. These shifts highlight the ongoing volatility and demand fluctuations in the rental market, with some cities seeing rising costs while others experience slight relief for renters.

As market conditions continue to evolve, staying informed about these trends is essential for both property investors and tenants navigating the Australian rental landscape. Keeping an eye on these changes helps us better understand how demand is shifting across the country and informs strategic decision-making.

If you're interested in securing your first home, expanding your investment portfolio, or exploring property investment through your Self-Managed Super Fund, please don't hesitate to contact Steven at 0414 759 733.