30th April 2024 - Property Market Update - searchpartyproperty

30th April 2024 – Property Market Update

April Market Smart – Undersupply Fuels Continued Growth

Key Takeaways

  • Consistent Growth: The Australian housing market saw a national increase of 0.6% in home values during April, maintaining a steady pace similar to previous months, and adding around $4,720 to the median national dwelling value.
  • Top Performers: The breakaway trio continue to Perth led the growth charts with a notable 2.0% increase, followed by Adelaide at 1.3%, and Brisbane at 0.9%.
  • Market Diversification: Different regions showed varied performance, with smaller capitals like Hobart and the ACT experiencing consistent, albeit mild, increases in home values. Melbourne continues to experience the poorest performance in the country, falling -0.1% in April.
  • Rental Trends: There was a slight slowdown in rental growth nationally, with April witnessing a 0.8% increase, likely influenced by seasonal adjustments and a peak in net overseas migration.

Current Market Trends

April continued to underline the robust growth trajectories of Perth, Adelaide, and Brisbane, as depicted in the rolling three-month change in dwelling values. Perth led with a staggering 6.0% increase, reinforcing its position as the growth leader among Australian state capitals. Adelaide followed with a commendable 3.3% rise, while Brisbane also showed strong growth at 3.1%. These cities have not only outpaced the typically more subdued movements seen in Sydney (1.1%) and Hobart (0.8%), but they also starkly contrast with Melbourne, which remained flat with a 0.0% change.

Source: CoreLogic, 2024

This pattern suggests a continuing divergence within the Australian property market, where mid-sized capitals are not just recovering but flourishing, even as larger markets like Melbourne show signs of stabilization without significant growth.

The recent trend between regional and capital city markets shows a narrowing gap between the two, with regionals at a 2.1% increase compared to 1.7% for capitals. This indicates a strengthening of regional markets, which may be attributed to ongoing lifestyle shifts post-COVID and the appeal of more affordable housing outside of metropolitan areas. The convergence of growth rates between capitals and regionals highlights a redistribution of growth across broader geographic areas, potentially signalling a new equilibrium in the housing market’s recovery phase. This trend is crucial for stakeholders to monitor as it may indicate shifting investor and residential preferences towards regional areas, driven by factors such as remote working trends and search for better lifestyle options.

Source: CoreLogic, 2024

The rental market presents a varied landscape that mirrors the broader economic conditions impacting property values. The annual change in rents for houses shows Perth (13.3%) and Melbourne (10.2%) leading the pack, indicative of strong demand and possibly tighter supply in these regions. Sydney and Adelaide also showed significant year-on-year rental increases for houses at 9.2% and 9.1%, respectively.

In contrast, the unit rental market experienced the highest annual increase in Perth at an impressive 15.5%, suggesting a shift in renter preferences or possibly an undersupply of affordable housing options in the area. Brisbane and Adelaide followed closely with increases of 10.5% and 9.3%, respectively. This trend highlights a growing renter market in these cities, potentially driven by demographic shifts and the affordability challenges seen in the purchase market.

Source: CoreLogic, 2024

The dynamics in dwelling values and rental changes are indicative of a multifaceted property market where geographical and property type distinctions are becoming more pronounced. Cities like Perth, Adelaide, and Brisbane not only continue to experience value growth but also face increasing rental demand, which may continue to push rents upwards. Melbourne’s stagnant growth in dwelling values coupled with substantial rent increases could indicate a mismatch between buying capacity and rental demand, possibly driven by affordability constraints.

Things to keep an eye on

  1. Interest Rates

As we’ve explored in some prior articles, the interest rate narrative has grown increasingly nuanced in recent weeks. Expectations of a rate rise have risen dramatically in light of unexpected inflation and some concerning developments in the US economy.

DStill, it should be stressed that a rate hike remains unlikely, and the rise in expectations for one seems largely overblown for now. If anything, we’re probably heading for a longer wait than expected before we’ll see a first rate cut. Most expectations are that RBA will stick to a highly cautious ‘wait and see’ approach, rather than leaping into a knee-jerk course reversal.

  1. Immigration

Towards the end of April, the ABS released official numbers for permanent and long-term arrivals. Unsurprisingly, immigration continues to breaks records on every level:

Concerning the rental market in particular – there has also been a record number of temporary migrants, as evidenced by the number of temporary visas on issue:

  1. Building Approvals

Rates of building approvals have picked up in recent months, driven mainly by approvals for detached houses. However, despite the increase, approval rates remain well short of what is required to match pace with immigration:

As you might expect, Perth is experiencing by far the largest boom in residential building approvals, as Perth’s ongoing house price exuberance further drives speculation and profit-chasing. For now, Perth’s growth has continued to accelerate, apparently unperturbed by rapidly growing levels of housing supply. We would normally expect some lag between a spike in building approvals and the commensurate downwards pressure on prices that this creates, but other factors will also continue to play a role – particularly immigration.

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