Edition #7 - Interstate Buyer Enquiries Surge, Land Tax Changes in VIC Cause Spike In Property Sales, Rental Market Showing Signs of Slowing Down

Surge in Interstate Buyer Enquiries: Affordability Drives the Trend

In 2024, interstate property enquiries surged, with 22% of Australian buyers seeking homes in other states, up from 17% the previous year. The Northern Territory, Tasmania, and the ACT attracted the most interest, with the NT seeing 81% of enquiries from out-of-state buyers, driven by affordability and strong rental yields. NSW, being the least affordable state, had the lowest share of interstate enquiries at 14%. However, NSW residents made up 37% of all interstates buy enquiries, particularly in Queensland and Western Australia, where property is more affordable. Rising housing prices, population growth, and investor demand, particularly in WA, have contributed to this trend.

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Land Tax Changes Prompt Investor Sales Surge in Victoria

Changes to Victoria's land tax thresholds in 2024, which significantly raised costs for investors, have led to a surge in rental property sales. Since the new thresholds were introduced, nearly 5,000 more investment properties have been sold compared to other states. The land tax change, part of a temporary COVID debt levy, reduced the threshold from $300,000 to $50,000, adding around $1,175 annually on a property with an unimproved value of $500,000.

This increase in costs has discouraged new investors, slowed property purchases, and contributed to slower price growth in Victoria. While more first-home buyers are entering the market, fewer new rental properties may result in long-term housing shortages and higher rents.

Victoria's Population Growth Surges as Affordable Housing and Rent Prices Attract Migrants

Victoria is seeing a significant population boost, with both Australians and overseas migrants drawn to its more affordable housing and competitive rent prices. The state's population grew by 2.7% in the year ending March 2024, driven primarily by overseas migration, which accounted for 84% of this increase.

Victoria's lower median home values, which have declined in the past year, make it an appealing destination for those seeking affordable living compared to other states like New South Wales. Median rent prices in Victoria also remain low, making it attractive to new migrants who typically rent upon arrival.

While the state’s diverse economy, job prospects, and high-quality education further enhance its appeal, increased taxes on investors may slow rental market growth. Investor withdrawals could affect long-term rental availability and potentially shift future population trends.

Australia's Rental Market Finally Shows Signs of Cooling After Record Surge

After years of skyrocketing rent prices, Australia’s rental market may be starting to cool. Domain's Rent Report for the September quarter of 2024 reveals that rental growth has slowed significantly, marking the weakest September quarter since 2019 for houses and 2020 for units. While rent prices remain historically high, this slowdown signals the possible end of the post-pandemic rental boom.

Across major cities like Sydney, Melbourne, and Brisbane, rent increases have either slowed or started to decline. For example, Brisbane saw its first drop in house rents in over four years, down 0.8%. Meanwhile, Sydney and Melbourne rents remain high but have levelled off. This deceleration is attributed to affordability issues, easing demand, and an increase in investor activity, which is helping balance supply and demand.

Vacancy rates, though still tight, have improved slightly, indicating a market shift. Although rents remain elevated, experts suggest that steep increases are likely over, bringing some relief to tenants who have long struggled with affordability. Investors, on the other hand, are focusing on potential capital growth as they anticipate a possible RBA rate cut, which may further impact market dynamics.

Sam Giardina - Finance Broker - Clio Financial

PH: 0422 269 868

E: [email protected]

W: www.cliofinancial.com.au

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DISCLAIMER: This article is intended for informational purposes only and does not constitute financial advice. The content is based on current market data and research but may not be applicable to your personal circumstances. Before making any financial decisions or taking action, you should consult with a qualified financial advisor.