New Government Data Suggests A Big Decade Ahead For Property Values
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New data published by the government agency, the National Housing Finance and Investment Corporation (NHFIC) highlights some significant demographic trends that homeowners and buyers will both want to pay close attention to.
The key finding is that over the next few years, the supply of new homes on the market will outpace the rate with which new households are formed (i.e. either single people looking for a place of their own, or couples form with or without children). This surplus will likely be a factor in some easing of property value in the short term.
However, towards the latter half of the decade, it is expected that migration to Australia will have recovered to pre-COVID levels, and with that the formation of new households. By 2032 household formation is expected to once again outstrip supply, and by a significant margin – a cumulative 163,400 dwellings by 2032.
With that shortage, we should see a disproportionate lift in property prices, relative to what we would have seen were supply meeting demand. This indicates that the property value growth from the looping normalisation of prices will be healthy.
Some other key things to note include
-???????For investors, rental values did deteriorate significantly in recent years, but the recovery has been stronger. As migration starts to lift again, the short supply of rental accommodation should see rental income lift significantly further.
-???????NHFIC confirmed what we all knew; housing affordability is a big concern, especially in cities like Sydney, Melbourne and Hobart. In these markets, the bottom 60 per cent of income earners can afford less than ten per cent of the properties available on the market.
-???????Whether it’s to occupy or as an investment, regional Australia is increasingly appealing for the home buyer. Both regional NSW (40.1 per cent) and regional Victoria (29.9 per cent) saw an increase in property values that were close to or greater than double the gains in Sydney (27.2 per cent) and Melbourne (12.2 per cent).
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-???????New property projects are taking a long time to come online. Key markets like Sydney and South-East Queensland are taking years to bring services and development-ready greenfield land online. Meanwhile, there is a looming shortage of multi-unit dwellings due to the delay in constructing high rises close to the CBDs.
-???????A big problem that is causing many of these delays is supply constraints. Materials such as timber, aluminium and steel are expensive and in low quantities, and the lack of migration is causing shortages in workforces.
What do all these numbers mean?
Firstly, you should be getting into property as soon as you can afford to. Shortages and the time being taken to bring new developments onto the market mean that competition is going to accelerate and it is unlikely that in the short term affordability will be significantly improved. Additionally, as migration returns to normal levels there will be additional competition there, too.
If you can’t afford a house right now, consider purchasing an investment property – perhaps in regional Australia, or an apartment. A house or townhouse with a land component is superior to a unit, as there is a wide gap between prices, and you’ll see greater capital growth when there’s a property with land, but either way, even if you’re still renting yourself, an investment property will generate an income, and rents are set to accelerate. Having that investment property gives you further options when you can buy a house, too.
Finally, don’t let the expected dip in property values this year deter you from making a purchasing or selling decision. The normalisation of property prices will only be temporary, with all of NHFIC’s data pointing to further (and potentially rapid) growth in property values by the latter half of the decade. If you buy now and hold a property for the typical 10-15 years, any declines in its value over the next 12 months will be completely offset by gains further down the track.
Having trouble securing a dream home or investment? Talk to the Hello Haus team today!