November Market Smart: New Supply Creates Buying Opportunities
Key Takeaways
- National home values rose just 0.1% in November, marking the slowest growth since January 2023.
- Supply in capital cities increased 16% since winter, with Sydney and Melbourne listings surpassing their five-year averages.
- Slower purchasing activity (-4.6% annually) and reduced auction clearance rates signal softer market conditions.
- Regional markets, particularly in WA and QLD, continue to lead growth, but momentum is easing.
- Opportunities are emerging for buyers as supply increases and competition declines.
Current Market Trends
The Australian housing market’s upswing has slowed significantly, with November showing just a 0.1% increase in home values nationwide. This marks a turning point in the market, with Sydney (-0.2%) and Melbourne (-0.4%) both experiencing declines, while Brisbane, Adelaide, and Perth posted modest gains. Regional WA and Queensland remain growth leaders, but their pace is also tapering off.
A surge in new listings has been a standout feature of the spring season, with capital city stock levels rising 16% since winter. Sydney and Melbourne now have the highest number of listings for this time of year since 2018. However, a simultaneous reduction in buyer activity has created a market where supply exceeds demand, leading to softer selling conditions and extended selling times.
Supply vs. Demand Dynamics: The increased supply has been driven by a seasonal rise in vendor activity. While stock levels have climbed, auction clearance rates have dropped below 60% since October, and private treaty sales are taking longer. Sydney, in particular, has seen a sharp drop in sales volumes (-15.4% YoY).
These conditions suggest a window of opportunity for buyers, as increased options and less competition provide leverage in negotiations. For investors, the combination of steady rental yields (averaging 3.7%) and softening prices could present attractive entry points.
Regional Insights: Regional markets have continued to outperform capital cities on a rolling quarterly basis, with values rising 1.1% compared to the capitals’ 0.3% growth. Key regional markets, including parts of WA and QLD, are leading the charge, but gains are becoming more subdued as the market adjusts to broader economic pressures.
Looking Ahead: The housing market faces headwinds from persistent inflation, tight labour markets, and geopolitical uncertainty. While a rate cut is anticipated in mid-2025, affordability challenges and high borrowing costs will likely constrain demand in the short term.
For buyers and investors, the current market presents a unique opportunity to secure properties at more favourable conditions. As stock levels remain elevated and competition cools, those with a strategic approach can capitalise on the shifting landscape.
Things to keep an eye on
- Interest Rates
October’s unexpected retail sales growth could play a key role in shaping the Reserve Bank of Australia’s (RBA) next move on interest rates. With sales rising 0.6% for the month and 3.4% year-on-year, the data reflects a resilient consumer sector, partly driven by discounting and tax relief.
For property investors, this strengthens the case that rate cuts may be further off than anticipated, as sustained consumer spending could fuel inflationary pressures. While this retail strength signals economic stability, it also means borrowing costs could remain elevated longer, necessitating a sharper focus on yield performance and debt servicing capacity in investment decisions.
- The Rise of Sharehouses:
The growing trend of Australians turning to shared housing, including a notable rise among over-55s, underscores the impact of strong rental inflation on housing affordability. For property investors, this shift highlights both challenges and opportunities. While the move toward shared living arrangements may temporarily ease rental demand pressures, it also signals an evolving rental market dynamic where affordability is critical.
Investors could consider properties that cater to multi-tenant arrangements or offer flexible living solutions, as these may attract a broader tenant base in this constrained market. Additionally, the trend reinforces the importance of targeting locations where demand fundamentals, like employment and infrastructure, can sustain long-term rental growth despite affordability headwinds.
- Rapid Land Value Growth
The sharp rise in Australian land values, which surged by 8.8% in 2023-24 to $7.7 trillion for residential land alone, underpins the long-term appreciation of the housing market. For investors, this trend emphasises the increasing scarcity and value of well-located land, which has driven housing prices relative to both GDP and household incomes over decades.
In markets like NSW and VIC, where land values are highest as a ratio of incomes and state GDP, the opportunity lies in leveraging these value escalations for capital growth, while balancing affordability constraints for tenants or buyers. Rising land costs, however, are also constraining new housing supply, creating opportunities for investors in markets with strong demand but limited new development, as the imbalance between supply and demand is likely to persist, supporting rental and price growth.
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.
