Uncovering Real Property Market Drivers: June 2024 Update

Debunking Property Price Myths: The Real Drivers Revealed

The Australian property market is experiencing some intriguing trends.

Curious about what's really driving the Australian property market?

While population growth often gets the blame, new insights reveal that other factors like labour shortages, rising interest rates, and the growing demand for eco-friendly homes are playing a much bigger role.

Let’s dive into the latest trends and data for the week ending 7th June 2024 to uncover the true influencers behind property prices and rental rates.

Unmasking the Real Factors Behind Property Prices

Migration and population growth are often blamed for Australia’s housing affordability crisis, but new analysis suggests otherwise; “perfect storm” of factors, including labour and material shortages, higher interest rates, and increased investor selling, are the real culprits behind the shortage of supply.

While many believe population growth is the dominant factor influencing the property market, it actually plays a small role.

Using data from the Australian Bureau of Statistics, ranked the population growth of 120 cities and municipalities with more than 20,000 residents over the 20 years to June 2023.

They compared this data against real estate capital growth rates and found no direct correlation between the two metrics.

Key Findings:

• Sydney: Significant capital gains but ranked 43rd in population growth.
• Mandurah, WA: Population grew by 91% but house prices remained unchanged.
• Other locations like Victoria’s Surf Coast (85% growth), WA’s Busselton (81%), Queensland’s Sunshine Coast (70%), and Mount Barker in South Australia (68%) all displayed underwhelming property price growth during the period.

The Premium on Eco-Friendly Homes

Home buyers are willing to pay substantially more for sustainable houses as demand for energy-efficient features rises.

The Domain Sustainability in Property report reveals that properties with eco-friendly attributes such as solar panels and double glazing sell 4% faster on average and attract 17% more buyer interest.

Dr Nicola Powell, Domain’s head of research and economics, notes that in most capital cities, about half of the houses have green features, except for Sydney, where only 38.7% do.

Canberra, on the other hand, has the highest level of 67.2%.

Statistics on Green Homes:

• Environmentally efficient houses sell for 14% (about $112,000) more than houses without those features.
• For units, the difference is 11.7% ($70,000).
• In regional Australia, an environmentally efficient house fetches 20% more, and a unit 30.8% more than their non-efficient counterparts.

Powell emphasises that investing in sustainable features can pay handsomely for vendors as the demand for green homes continues to rise.

Escalating Regional Rent Prices

The search for affordable rent outside capital cities is becoming more difficult, with new data showing that rents in 75% of Australia’s biggest regional towns are at record highs.

Recent Rent Increases:

• Batemans Bay, NSW: Biggest increase in rents in the past three months, up by 6% or about $32 per week.
• Bunbury, WA: Rents up by 4.7%.
• Sunshine Coast, QLD: Rents up by 4.4%.

The CoreLogic analysis shows that no major regional centres recorded a significant fall in rents this quarter.

CoreLogic economist Kaytlin Ezzy explains that rents are rising at about 6% across combined regional markets, which is faster than the usual annual growth rate of 2%.

Ezzy states, “Rents are rising at a much faster pace, taking most regional markets back to record highs.”

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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.