As of 31st October 2021 - Property Market Update - searchpartyproperty

As of 31st October 2021 – Property Market Update

As of 31st October 2021 - Property Market update for property investors

Property prices have continued their general upward trajectory, with the national median now up 21.6% over the last 12 months. However, the rate of growth has definitely stalled, with a third consecutive monthly increase of 1.5%. While this is significantly down on the peak seen earlier in the year, it still remains comfortably above the long-term average.

Property Market as of 31st October 2021

Source: Core Logic

Over the last month, we have seen further fractioning of price trends by state. Brisbane has continued to enjoy strong results, building on recent growth to become MVP for the month (up 2.54%). However, it is a very different story in the West, with Perth dipping into negative territory (down 0.11%).

Change in dwelling values - Australian property market
Source: Core Logic

Regional markets have performed slightly better than the capitals, up 1.9% for the month. This has been largely led by a strong regional NSW market, which was up 2.1% for the period. Again, things are less positive in the West, with regional WA also in negative territory (down 0.1%).

Despite the generally strong performance, most market commentators are tipping this growth phase to come to an end relatively soon. Pointing to affordability issues, increasing listing numbers, and tightening lending requirements, many experts believe a downtown is inevitable. However, most concede that it could still be a year or more before we see this eventuate.

Annual change in rents during October 2021
Source: Core Logic

In good news for investors, the national median rent rate also continues to increase – up 0.7% for the month. While this is slightly higher than last month, it is still down on the peaks we saw earlier in the year. As such, it is clear growth in rents has also steadied.

Much like sale prices, we also see significant variation in fortunes between states. NSW and Queensland have seen strong rental market performance, both in the capitals and in regional areas. By contrast, previously strong markets, like Darwin and Perth have seen a significant cooling, the latter only increasing 0.6% over the last 3 months.

Gross Rental Yields - dwelling
Source: Core Logic

Looking at rental yields, the story is less positive, with the national median dropping to a record low of 3.3%. This is driven by the disparity in sale price and rent rate growth, particularly in Sydney and Melbourne. This trend is likely to continue for the foreseeable future, so expect the national median rental yield to fall even lower.

Expectations of what lies ahead

While most forecasts look good for the short term, the long-term view tends to be less positive. There are a few reasons for this, with several factors likely to affect the market over the next few years. This includes:

  • Interest rates and lending restrictions: While the RBA has once again chosen not to lift interest rates, monetary policy is starting to change. This has led many economists to predict that we will see interest rates start to rise within 12 – 18 months. Credit conditions have also been tightened, with the minimum interest rate buffer increasing by 0.5% on 1 November. When combined, these changes are likely to speed up the declining property price growth numbers, potentially pushing them into negative territory.
  • Domestic border restrictions: While there is now free movement between the country’s two biggest states, restrictions remain in place for most other jurisdictions. While this is not negatively impacting some markets, like Queensland, the lack of domestic visitors appears to be affecting others. Western Australia is leading this charge, having seen prices decrease over October, and other closed off markets could soon follow.
  • Reopening of international borders: The resumption of international flights has been great news for the tourism industry and those with family or friends overseas. It could also be a real blessing for local property, allowing additional buyers and renters to access the market. The return of international students will be particularly beneficial and should reinvigorate interest in inner-city apartments.
  • Rethinking working arrangements: It looks like working from home may be here to stay, with many large organisations scaling back their office spaces. This is giving many people extra flexibility and greater control over where they choose to live. As such, we expect strong continued interest in already popular lifestyle locations, like the Gold and Sunshine Coasts.
  • Changing generational priorities: Affordability is now a significant issue for first home buyers – particularly those looking to buy anywhere near a major centre. This has led many Millennials to completely abandon the “Australian dream” in preference for other wealth generation approaches. While it is still early days, it appears Gen Z may have a similar approach, focusing more on other investment types. Over the long-term, this is likely to reduce buyer competition in certain market segments while increasing demand for rental properties.
  • The 2032 Olympics: Much like the other host cities that have come before it, Brisbane is expected to experience the “Olympic bump”. As preparations for the Games begin, thousands will be brought to the city to work on the planned infrastructure upgrades. This will create additional demand for rentals and could even see sales prices increase in a few key areas. 

Suburb Spotlight: Keperra (QLD)

Keperra-suburb-spotlight-property investors
Keperra – Brisbane Metroplitan Area, Property Investment Opportunities

Part of the Metropolitan Brisbane area, Keperra sits about 12km North-West of the city centre. It is well serviced by public transport, with the local Keperra and Grovely train stations connecting the area to the city. Residents also enjoy easy access to a 27-hole Championship golf course, multiple shopping centres, two schools, and a hospital.

What sets Keperra apart from many other Brisbane suburbs is the large housing development planned for the local quarry site. While mining activities are still winding down, building works have begun, progressively transforming the site into a planned community. This will provide an additional 550 homes and a wide range of community amenities, including ample green space.

This development will add depth to the local housing stock and should build on the growing interest in the area. The median price currently sits at almost $620,000 and is up almost 15% over the last two years. However, despite this growth, Keperra remains more affordable than most surrounding suburbs and comes in under the Metropolitan Brisbane median.

And, with a median weekly rent of around $475, investors in the area should expect a healthy yield of around 4%. This is largely due to the significant rental population (over 30%) and a vacancy rate that is hovering around 1%. As such, Keperra offers astute investors plenty of potential for solid returns and reasonable capital 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.

Book your 30 minute property investment assessment here.