What is Happening to the Australian Property Market?

Dan Croke

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Until recently, the Australian property market has seen only modest growth. The average property price in Australia increased by 0.5% per annum, after inflation, from 1890 to 1990. From 1990 to 2017, however, it has grown at a much faster rate, perhaps showing signs of a contracting economic bubble. What is happening now? Let’s look at some of the key issues driving the market. And what can you do about them? Keep reading to learn about the current state of the market.

Demand outstripping supply

According to the latest State of the Nation report released by the National Housing and Finance Investment Corporation, Australia is headed for a housing supply crunch, as fresh demand is outstripping the supply of new dwellings. While the housing market may be healthy now, according to some real estate agents a major supply crunch could be looming in the future, with demand outstripping supply by 2025. A supply shortfall of 163,400 dwellings is expected between 2025 and 2032, despite the current affordability crisis.

Pent-up buyer demand

The Australian property market has continued to be characterized by pent-up buyer demand, with advertised inventories nearly 25% below their five-year average. Sydney and Melbourne have experienced higher than average clearance rates in March, despite a decline in housing values in those cities. At the same time, advertised stock levels have dropped by more than three-fifths from their five-year averages, reflecting strong vendor confidence. As a result, buyers have seen more choice and reduced urgency to purchase.

Interest rate rises

The ANZ bank backs Mr Pressley’s analysis that interest rate rises don’t necessarily lower house prices. The RBA may not be aware that its policies were incorrect until a recession has hit. During the tightening cycle from 2002 to 2008, house prices increased by about 50%, or around 8% a year. The same thing happened in the 1980s, when Australia went through an extraordinary residential property boom. Mortgage rates were higher than 8% and then rose repeatedly, reaching 17% in 1989.

Tax burdens on builders

While the government has a vested interest in the property market, tax policies have a significant impact on the development of new homes. Recent research shows that the Australian tax regime encourages investors to take out loans to purchase property, thereby lowering their effective tax rates. These investors have a real effective tax rate that is around 50% lower than the rate they would pay if they borrowed nothing. The tax system reinforces the drive towards rent extraction and the housing-finance cycle.

Rising vacancy rates

According to the latest data, the national residential vacancy rate is now 1.1%, up from 0.9% in March. In the same month, there were 39,616 vacant properties across the country. However, these figures do not reflect the entire country, and vacancy rates varied greatly across cities. Vacancy rates in the capital cities of Sydney and Melbourne remained under one per cent. On average, rental prices rose by 12.1%, with some regions of Australia experiencing even lower vacancy rates.

Record price hikes

The record price rises in Australian property market come as the country is experiencing a perfect storm of low interest rates and a lack of supply. The median house price in Sydney jumped by over twenty-five per cent in the past year, and the growth was accelerated in other major cities, too. Hobart, Canberra, and Brisbane were among the cities to see the biggest annual rises. Melbourne, meanwhile, rose almost 30 per cent, while prices in Darwin and Perth were both up 13.0%.

Rents in expensive areas

The rents in some of the most expensive areas in Australia are at an all-time high. A basic two-bedroom apartment in Hobart, Australia’s southernmost city, costs $475 a week. The city was once one of the most affordable in Australia, but it has risen to become the fourth most expensive. A recent report by Domain reveals that all suburbs in the city have hit record highs.

As a property investor, one of the most fundamental and essential techniques you can apply in your investing is property investing strategies. There are many property investing strategies, such as renting out a property, purchasing and reselling the property, fix and flip property, etc. There are also many ways to calculate the potentials of property investments like the real estate property calculator, property value calculator, rental rate calculator, and many more. Basically, property investing strategies are based on how you can make money from your investment. Here are some property investing strategies that you can consider building wealth with real estate.

One of the basic property investing strategies you can do is to rent out your rental property. Many investors earn passive income or supplemental income from renting out their properties to their tenants. In order to get the best rental property investing strategies, it is important that you find a great property that suits your needs and you have a lot of potential tenants. This type of investment is very low-risk, but you need to make sure that your property will provide a steady stream of passive income for at least the minimum number of years.

Another one of the best property investing strategies you can use is to purchase investment properties and lease them to create a profit. This is another simple strategy but this time, you need to calculate the market value of the property prior to purchasing it. The market value of the property basically refers to how much the property is worth in the current market. After purchasing the investment properties, you need to fix and resell them to generate the profit. You can create the profit by either leasing them out or reselling them again in the future. This type of strategy can take quite some time to gain a steady stream of income but it is definitely a high-profit business once you obtain a good amount of profits.