Bouncing back from a 10-month slump, the Australian property market is showing some newfound resilience. March’s uptick in aggregate home value was no fluke and April has followed suit with a similar upward trend, despite interest rates remaining high.
Curious about what has fuelled this turnaround, and what it means for the future? Stick around as we dive into the nitty-gritty, exploring the factors behind this comeback and what lies ahead for Aussie homeowners and investors!
An ongoing upwards trend in prices, occurring alongside high interest rates, would seem to defy conventional logic… so what’s going on?
In short, we’re experiencing a worsening disparity between supply and demand. Supply remains extremely tight, while demand is mostly holding steady (or maybe even starting to rise – depending on how you look at it). Let’s explain why:
As it stands, the market does appear poised to continue this recent upward trajectory. The current supply-demand mismatch remains a difficult problem to tackle, and any potential price-driven supply increase is unlikely to be commensurate with demand expectations. Poor economic conditions elsewhere mean that an increase to supply is also unlikely to occur via an uptick in investment, due to poor serviceability.
That said, two key things to keep an eye on are:
Of the demand factors outlined above, population growth will be the most crucial. According to research conducted by Domain, using ABS data, population growth corresponds with disproportionate property value growth among all Australian capital cities (see below). This will only be exacerbated if existing vacancy rates and listing levels remain low, as expected.
As of the 2nd of May, the cash rate has risen by an additional 0.25% to 3.85%, in an extension of the ongoing rate hike cycle. The announcement has come as a shock given positive inflation news, with markets and most experts predicting a rate pause.
As discussed in our March market update, the full effect of interest rates upon the economy is yet to be realised, and this recent increase will of course have an added effect on any fixed rate home loans rolling over to variable.
Obviously, an increase to the cost of credit has a mitigatory effect upon real estate demand, but this announcement seems unlikely to completely erode the current upwards pressure on property prices.
According to RBA estimates made last year, an increase of the cash rate by 25 basis points should, in abstract, decrease real property values by somewhere close to 2% across a 2-year period.
Given this, and a variety of other factors, our expectation is for overall property growth to continue into May.
Despite the potential challenges and uncertainty ahead, it’s clear that the Australian property market is showing promising signs of recovery. Here at Search Party Property, we are well-equipped to help clients navigate this changing landscape and make data-driven, informed decisions about their property purchases. If you’re looking to enter the property market, get in touch with us today to discuss how we can help you achieve your goals.
Suburb Spotlight – Lawnton
Spotlight Suburb – Griffin
In this month’s Market Smart, we’ve chosen Griffin, QLD as our spotlight suburb, to highlight its exceptional investment potential. Griffin’s median house price stands at $701,000, while the median rent comes in at $540. With a low vacancy rate of just 0.9%, Griffin presents a compelling opportunity for investors.
The suburb boasts a diverse age demographic, a growing population and healthy rental demand. Griffin’s combination of growth and stability make it an ideal candidate for further exploration. Get in touch today to secure your next investment property in this flourishing suburb!
At Search Party Property, we specialise in developing tailored investment strategies and will work with you to come up with a suitable plan of attack. We also regularly assess your strategy ensuring that it is fit for purpose and delivering the desired results.