Published
February 23, 2024
In recent months, Australia’s property market has experienced a remarkable resurgence, marking a full recovery from the impacts of the COVID-19 pandemic with the national median house price has reached new heights, nearing an impressive $1.1 million, as reported by Domain. Let’s delve into the journey of Australia’s property market, from the pre-recovery conditions to the signs of resurgence, regional variances, and the future outlook, exploring how Far East Consortium plays a significant role in this dynamic landscape.
Pre-Recovery Market Conditions
At the commencement of the COVID-19 pandemic, Australia’s property market faced a challenging period marked by a decline in property prices and a slowdown in market activity. The uncertainties stemming from the global health crisis prompted a cautious stance from both buyers and sellers, setting the stage for a period of economic turbulence.
The strategic decisions made in response to the pandemic, such as the unprecedented closure of our cities, historic cuts in interest rates, and substantial economic stimulus, significantly impacted property prices. These measures sparked a notable shift in preferences, with regional areas gaining newfound popularity, and a pronounced inclination towards detached housing over units emerged.
The government’s proactive steps, including home-buying incentives, brought about a change in the composition of buyers, attracting a higher influx of first-home buyers into the market. Early in the pandemic, between April and September 2020, https://www.abc.net.au/news/2022-03-24/six-ways-pandemic-reshaped-australias-housing-market-corelogic/100933182housing values experienced a decline of 2.1 per cent. However, swift and decisive actions taken by the government, combined with the Reserve Bank’s intervention, steered the market towards a positive trajectory.
Government interventions played a pivotal role in stabilising the market during this period. States and territories implemented a range of measures, from stimulus packages to mortgage relief and temporary eviction bans, to cushion the impact on homeowners and tenants. These initiatives effectively curbed a steep decline in property values and provided a safety net for those grappling with financial hardships.
In addition to these measures, the Reserve Bank made historic rate cuts in November 2020, declaring that rates would remain unchanged until at least 2024. However, this projection did not materialise, as multiple rate increases took effect in 2023. This shift in interest rates introduced a new dynamic to the market, impacting borrowing costs and influencing buyer behaviour.
Overall, the pre-recovery market conditions were shaped by a series of unprecedented interventions and economic measures that not only stabilised the property market but also triggered shifts in buyer preferences and regional dynamics.
Signs of Recovery and Regional Variances
As the dust settled from the initial shock of the pandemic, data began to emerge, signalling a robust rebound of the property market. Contributing factors included historically low interest rates and government incentives aimed at stimulating economic activity. Homebuyers, encouraged by these favourable conditions, re-entered the market, driving demand and subsequently pushing up property prices.
A significant portion of housing demand, especially in the initial stages of the pandemic, was driven by first-time homebuyers. This group seized the opportunity presented by more economical housing choices following a previous downturn, coupled with historically low mortgage rates and government incentives.
During 2020 and 2021, migration patterns indicated an increase in the number of individuals relocating from metropolitan areas to regional towns and suburbs outside of lockdown periods. Concurrently, there was a decrease in people moving from regions to cities. Consequently, there was an elevated demand for housing in regional Australia, with listings remaining unusually low in both the sales and rental markets.
Certain regions and cities emerged as leaders in the recovery, with factors such as strong employment markets and lifestyle appeal contributing to their resilience.
While the overall recovery is a positive sign for the nation, it’s essential to recognise the regional variances that exist across different states and territories. Factors such as local economic conditions, population growth, and industry dynamics influence how each region responds to the changing property market.
According to Domain, over the 12 months from October 2022 to October 2023, Sydney, Melbourne, Brisbane, Adelaide and Perth all moved back into positive annual growth. Sydney house prices rose by 8.1 per cent, Adelaide’s by 8.4 per cent, Perth by 10.4 per cent and Brisbane by 3.3 per cent.
During the same period, Hobart, Darwin and Canberra,were still showing declining annual prices. House prices fell 2.9 per cent in Canberra over the past 12 months, 3.2 per cent in Hobart and 8.1 per cent in Darwin.
The three cities saw healthy growth during the COVID property boom but external factors had impacted its markets.
“At the moment, Sydney and Melbourne are benefitting from the return of international migration. The interstate migration boost is felt more in Brisbane, Perth and to a lesser degree, Adelaide. Whereas smaller cities like Hobart, Darwin and Canberra miss out on that,” AMP’s chief economist and head of investment strategy Shane Oliver said.
Shane continued, “These cities benefited a lot during the COVID period when people were less keen on the big cities and it also had more affordable housing available, so it was a big push in migration … but it seems that demand has rescinded and the market has waned.”
More recently, Perth has overtaken its east coast counterparts, to claim the title of Australia’s hottest capital city property market. The city’s property market has seen a surge in demand and rising property prices, challenging the traditional dominance of the east coast in the real estate sector. This shift marks a turning point and opens new avenues for residential property development in Perth.
Oxford Economics Australia released The Residential Property Prospects report in January, which predicts house prices in Perth will rise in 2024 by 9.3%, driven by the city’s relative affordability, strong economy and shortage of housing supply.
Understanding regional variances is crucial for investors and buyers, allowing them to make informed decisions based on the unique conditions of each region.
Implications of the Recovery
The recovery of Australia’s property market has far-reaching implications for various stakeholders. Homebuyers are faced with both challenges and opportunities. The soaring median house prices pose affordability challenges, especially for first-home buyers. However, those who entered the market during the pandemic-induced slump may now find themselves sitting on appreciating assets.
For property investors and developers, the recovery presents a window of opportunity. As property values rise, the potential for lucrative returns on investments becomes more evident. Developers, in particular, may find increased demand for new housing developments as buyers seek modern and upgraded living spaces.
According to Domain people are embracing apartment living as a long-term lifestyle instead of using it as a temporary stepping stone to detached houses. This is largely due to the price gap between house and unit median prices across national cities.
Additionally, a new Melbourne CBD Market Outlook Report prepared by Urbis indicates that over the next five years the City of Melbourne is forecasting an additional 21,615 dwellings needed to support its population by 2028. There are some 12,300 apartments in the current pipeline for Central Melbourne. This suggests a 40% dwelling shortfall within the next 5 years. Given this constrained supply, newly built apartments in the CBD will attract higher demand. Combined with resurging overseas migration, the increased demand may drive apartment prices higher.
Future Outlook
Looking ahead, predictions for the future of Australia’s property market are mixed. While the current recovery is a positive indicator, potential challenges such as rising interest rates, economic uncertainties, and external factors may impact the market’s trajectory. It is crucial for stakeholders to stay informed and adapt their strategies accordingly.
Domain’s Dr Nicola Powell is forecasting more growth for property values in 2024.
“What we are forecasting is largely an increase in property prices Australia wide into the regional markets as well as across our major capitals,” Powell said.
Domain is predicting the strongest increases in house prices in Sydney (7% to 9%), Brisbane (7% to 8%), and Adelaide (7% to 8%). Locations where unit prices are set to increase more strongly include Brisbane (4% to 6%) and the Gold Coast (4% to 5%).
Domain also predicted urban spread and gentrification of overlooked suburbs in 2024 as more buyers chase affordability—a trend they expect to be supported by the Australian Government’s ‘Help to Buy’ program that will offer eligible buyers an equity contribution of up to 40% for new homes and 30% for existing properties.
Final Word
In conclusion, Australia’s property market has successfully navigated the challenges presented by the COVID-19 pandemic, marking a full recovery and witnessing soaring median house prices.
In the context of this thriving market, Far East Consortium stands as a key player, offering unique opportunities for individuals and businesses looking to capitalise on the upward trajectory of the property sector.
With projects in Perth, Melbourne, Gold Coast and Brisbane all on the horizon, Far East Consortium has a pipeline of projects across the nation to support the demand for more dwellings to support population growth.
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