There are many supportive factors pushing home values higher this Spring season across many areas of Australia. Property is showing exceptional resilience, even with higher interest rates at play.
This should give homeowners and investors ongoing confidence that Australian real estate will continue to deliver exceptional wealth for us all over the long term.
Here’s why home values are likely to push higher from here.
Ongoing housing undersupply
Dwelling approvals have averaged 13,355 per month over the past six months, which is 23% below the decade average, according to a recent CoreLogic report and The Australian Bureau of Statistics data.
The biggest chunk of this decline in dwelling approvals is being seen in the apartment category. There needs to be a sensible review of rezoning opportunities in areas that would cope with higher-density living to bring new supply into established suburbs where infrastructure already exists.
Strong absorption of new listings
National home values grew at a rate of 3% in the June quarter and 2.2% in the September quarter, according to CoreLogic data.
The slowdown in growth is due to higher advertised stock, however, 2.2% is still a strong rate of growth. It indicates a good absorption rate of new listings, which implies demand still outweighs supply in most markets, but buyers certainly have more choice now than at the beginning of 2023.
Hobart is the only capital city market where supply is notably higher than demand. Stock is about 40% above the five-year average. Since the correction began in May 2022, Hobart values have fallen 13.6%. But this follows an impressive 37.6% gain during COVID. Hobart is at the end of its correction but we are yet to see a sustained rebound. The time to buy is now.
Brisbane had the strongest capital gains of the East Coast capital cities over the September quarter at 3.9%. Advertised stock levels are about 40% below the city’s five-year average. CoreLogic research director Tim Lawless is tipping a new record high home price for Brisbane by the end of October.
Interest rates close to their peak
The Reserve Bank of Australia (RBA) has kept interest rates on hold for four consecutive months now. Inflation is trending down but the RBA thinks we won’t return to its target of 2% to 3% until 2025. Most experts say one more rate rise is likely before this rate hiking cycle ends.
Given strong buying activity in most markets today, it appears buyers and sellers have become accustomed to the new normal of higher mortgage rates.
Massive population growth via migration
Government projections show we are expecting a net increase in migration of 715,000 people over the next two years alone. A huge percentage of migrants start their new lives in Sydney and Melbourne, so this will be a significant driving factor behind higher home values and rents there.
Population concentration in our cities
Census figures show 67% of Australians choose to live in one of just eight capital cities. This is a unique element in the Australian housing market that supports ongoing, long term price growth.
COVID and the opportunity to work from home permanently prompted thousands of families to leave the cities for more affordable housing in the regions. I think this will be an ongoing trend – on a smaller scale than during the pandemic – which means our city populations will remain very dense.
However, there are ongoing trends supporting regional home values, too. COVID opened people’s eyes to the lifestyle on offer and we’ll continue to see WFH buyers heading to the coast or country because of this. Better transport links between our cities and regions will also support growth. And we’ll see more of our aging population choosing to make a seachange or treechange in retirement.
In conclusion…
CoreLogic has identified the official end to the market correction in almost every capital city and regional area.
Hobart, regional Tasmania and regional Victoria are bottoming out, so buyers have limited time to take advantage of corrected prices before these markets start moving up alongside the others.
CoreLogic’s Tim Lawless is tipping the national home value to reach a new record high by the end of November.