May Market Smart: Perth Powers Ahead, National Growth Steady
Key Takeaways
- Consistent Growth: The Australian housing market recorded a national increase of 0.8% in home values during May, maintaining steady growth and adding around $6,284 to the median national dwelling value.
- Top Performers: Perth led the growth with a notable 2.0% increase, followed by Adelaide at 1.8%, and Brisbane at 1.4%.
- Market Diversification: Different regions showed varied performance, with smaller capitals like Canberra experiencing mild increases in home values. In contrast, Hobart saw a decline of -0.5%, and Darwin fell by -0.3%.
- Rental Trends: Nationally, rental growth slowed down with a 0.7% increase in May, likely influenced by seasonal adjustments and a slight easing in net overseas migration.
Current Market Trends
May 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.
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 2.0% increase compared to 1.9% 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.
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 (13.5%) and Melbourne (9.7%) 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 8.9% and 9.5%, respectively.
In contrast, the unit rental market experienced the highest annual increase in Perth at an impressive 14.7%, 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 9.6% and 9.0%, 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.
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
- Inflation
As has been widely reported already, inflation actually accelerated in April to 3.6% – a 5-month high. This was a 0.1% increase on March’s 3.4%, and 0.2% higher than earlier forecasts for April, which were down at 3.4%.
Despite this unexpected turn, expectations of a knee-jerk rate hike remain low, and the bulk of commentators are sticking to a late 2024 rate cut, perhaps in November or December.
The minutes of the latest RBA meeting also confirm the RBA’s aversion to ‘excessive fine-tuning’:
…in other words, the RBA is fairly content with how things are going right now, and seem happy to continue waiting and watching before doing anything too hasty.
- Consumer Confidence
Consumer confidence has again taken a hit across the board, in some part due to the recent inflation figures:
Housing-related sentiment specifically remained poor, with ‘time-to-buy’ assessments extremely low despite strong expectations for house price growth.
For those in the market right now, buyer competition may be as good as it is likely to get.
- Housing Supply
Sales of new homes soared 22% last month, with many buyers attempting to beat changes to the National Construction Code coming into effect in Queensland and Victoria. Already in place for New South Wales, the Northern Territory, the Australian Capital Territory and Tasmania, the changes impose additional costs via new standards for minimum energy efficiency.
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.
