What is happening with the Australian property market these days, and more importantly, what does it mean for you? We’ve gathered some of the most recent and relevant insights from leading economists to give you a clearer picture.
Rent is on the rise, but likely not for long
In August, Australian property values rose 0.8%, according to CoreLogic. This is no surprise, as rent has been on the rise for more than 35 months now.
But there’s good news for renters around the corner. Experts predict that rent rates will slow in 2024, although they may not drop again for a while.
Construction of new housing units has also slowed, as, according to CoreLogic economist Kaitlyn Ezzy, both developers and consumers face ‘uncertain economic conditions, weaker capital gains, high construction costs, a tight labour market for trades and rising interest rates.’ This means we’ll likely see a decrease in individual housing units for sale.
The interest rate is holding steady, and that’s good
Some economists point to the Reserve Bank of Australia (RBA)’s steady 4.1% interest rate as a good sign. While that rate has been rising, the RBA has, for now at least, chosen to leave it at 4.1%, which could signal an end to rising interest rates.
Belinda Allen, CBA’s economist, doesn’t expect that number to rise again anytime soon without ‘surprises to inflation, wages and spending data.’
And David Bassense, chief economist for Betashares, mostly agrees: ‘Barring an upward inflation surprise, there’s a good chance we’ve seen the last rate increase this cycle.’ But he warns that ‘sufficient resilience in consumer spending in the coming months will see the RBA raise rates one last time in November.’
For property prices, it’s likely to go up
Meanwhile, experts agree that property prices have likely bottomed out and will now continue to rise. This is due in part to lower listing volumes (meaning, fewer properties are being put up for sale), which helps keep prices steady.
According to the National Australia Bank (NAB), property prices are projected to rise 4.7% in 2023 and 5% more in 2024. This will happen as more buyers enter the market and supply remains low, due to high construction costs, higher interest rates and a shortage of labour.
Another major factor is the unemployment rate which remains relatively low, according to economist Rae Dufty-Jones, since in her words ‘people will find a way to pay off housing with a job, but this becomes impossible without an income.’
What does this mean for everyday Australians?
For a while, at least, housing prices are going to be higher than usual. But this doesn’t seem to be deterring buyers. Many are simply adjusting their budget to purchase increasingly expensive homes. Because of that, new listings will likely go up.
Some real estate agents are advising people planning to sell to act now, before more properties enter the market and the competition rises. Of course, that’s a decision you should make with a real estate agent and adviser based on your individual circumstances.
When it comes to rent, expect high rates in the short term, but don’t be surprised if rates begin to stabilise in 2024. Many Australians are finding it hard to afford rent at its current rates, and to compensate, many are sharing units.
