Property Prices are Increasing Around Australia
There’s no doubt you’ve seen the media around property price increases over the past few months. As a country, Australia has worked hard to lift itself out of the COVID-19 pandemic-induced recession. Thanks to this, 2021 is looking bright for property prices, with publications from ANZ and other big banks predicting house price increases between 13-19% for every Australian capital city by the end of the year. Perth and Sydney are predicted to be the fastest risers, at 19% while Adelaide is set for a steadier 13%, and all other capitals primed for increase of 16%.
This rapid growth is expected to slow next year, with ANZ predicting just an average 6% increase across the board for 2022.
Why Are Property Prices Going Up?
There are a number of reasons why we’re seeing such astronomical numbers in property price increases at the moment.
Supply vs Demand
The age-old theory of supply vs demand is at play, with huge demand for housing and quality rental accommodation, apart from CBD apartments which are typically filled by students and migrants, demographics that have both seen a marked decrease due to COVID. This high demand, vs a lower supply of quality properties is driving property prices up.
Rental vacancy rates are tight in number of key areas, for example, many areas of South East Queensland have lower than 0.1% vacancy rate, meaning almost every rental property in that location is currently tenanted. Low vacancy rates indicate a tight rental market, easy tenanting, and the need for additional housing.
The opportunity for high rental yields is also driving the popularity, and therefore price of, properties in select suburbs. The rental yield on a $500,000 house and land purchase in the right pockets of Queensland is likely to net $500 (or a 5.2% – far above any bank savings at the moment) per week. When compared with a potential $420 in Melbourne or $400 in Sydney for the same initial investment, it’s clear why prices in these areas are out-performing.
What is the Future of the Australian Property Market?
As we continuously reinforce, there is no one “Australian property market”. The market can be divided by location, type of property, and so much more, and thus, in this article we will focus on what we believe the most prominent section of the market will be in the coming years.
Based on the information and trends we have outlined above, we at Prospa Property Advisory predict South East Queensland will continue to outperform as we continue to see strong demand for housing.
In addition to the general trends, there’s a myriad of additional factors contributing to the boom in South East Queensland.
Queensland, or “The Sunshine State”, boasts a number of desirable lifestyle traits that sets it apart from other states. With warmer weather, high-quality beaches, and none of that “big city” traffic, it’s clear why people are flocking in hoards at the first opportunity.
Internal Population Migration
As a result of the decentralised workforce, meaning professionals are now significantly more able to work from home, many families are choosing to relocate to locations that promise a more desirable lifestyle. Over the 2020-21 financial year, more than 25,000 people relocated to Queensland.
“Anecdotally, we’ve been told some NSW & Victorian families have been living in caravan parks and other forms of temporary accommodation while waiting to secure a rental property,” Adam Hindmarch, of Prospa Property Advisory, notes.
In particular, regional areas such as the Sunshine Coast, Hervey Bay, Cairns and others are strongly impacted, reporting the lowest vacancy rates and making them a definite winner for potential investment markets.
Adding to the driving factors for this stream of internal migration is the affordability of quality housing in Queensland compared to Sydney and Melbourne. People from the big city locations are likely to sell their homes for upwards of $1.5m, and are then able to potentially purchase a quality home that ticks all the desired lifestyle boxes for less than $1. If you do the math, this leaves a fair chunk of change in their pocket to invest elsewhere.
Australia is a country with a broad reach. Our citizens have always spread across the globe, but due to the impacts of COVID, especially overseas, many Australian expats have chosen or been forced to return home seeking safety. Some of the expatriates have lived overseas for a number of years, and are also looking to rent or buy properties, further pressing the tightness of the market.
What to Expect into the Future & Beyond
Looking further than the next few years, it is clear that Australia will become a popular place to be. With an impeccable track record in combating COVID-19 in terms of response and control of the spread of disease, Australia has become a remarkably safe place to be. Add to this the current economic growth we’re seeing, and the appeal to international migrants is tenfold.
As a country, we have a skill shortage in a number of trades, so when the borders do open, we will need to rely on both skilled and unskilled migrants (the backpacker economy) to boost our success.
And all these people will need somewhere to live.