The Current Landscape: Rising Rates but Persistent Opportunities
Despite the Reserve Bank of Australia's (RBA) interest rate hikes since May 2022 to curb inflation, savvy property investors continue to find lucrative opportunities in the Australian market. These rate increases have inevitably affected borrowing capacities, as lenders are more cautious, evaluating borrowers’ potential to repay at these elevated rates. However, strategic approaches, such as partnering with knowledgeable buyers' agents, can navigate these challenges effectively.
Vacancy Rates, Median Prices, and Growth: A State-by-State Analysis
In our Australian Property Market Update we look at a snapshot of the vacancy rates, median property prices, and growth over the past 12 months across Australian states:
Australian property market Update: State-by-state View
New South Wales
The New South Wales property market is the strongest in Australia, with median house prices up 12.1% in the past 12 months. This is being driven by a number of factors, including:
Strong population growth: New South Wales is the most populous state in Australia, and its population is growing at a faster rate than the national average. This is driving up demand for housing.
Shortage of housing supply: New South Wales has a shortage of housing supply, particularly in Sydney. This is also driving up demand for housing and prices.
Low interest rates: Interest rates are currently at record lows, making it easier for people to borrow money to buy a home. This is also contributing to the strong property market.
Central hub of business: Sydney is the financial and commercial capital of Australia. It is a global city that attracts businesses and migrants from all over the world. This is driving up demand for housing in Sydney and its surrounding areas.
Victoria
The Victorian property market has cooled in recent months, with median house prices up just 7.2% in the past 12 months. This is due to a number of factors, including:
High interest rates: Interest rates are rising rapidly in Australia. This is making it more difficult for people to borrow money to buy a home. This is putting downward pressure on demand for housing and prices.
Affordability issues: House prices in Melbourne are very high, particularly in inner-city areas. This is making it difficult for first-time buyers to enter the market.
Economic uncertainty: The Victorian economy is facing a number of challenges, including rising inflation and supply chain disruptions. This is creating economic uncertainty, which is leading to people delaying their decision to buy a home.
Queensland
The Queensland property market is one of the hottest in Australia, with median house prices up 25.4% in the past 12 months. This is being driven by a number of factors, including:
Strong population growth: Queensland is the second most populous state in Australia, and its population is growing at a faster rate than the national average. This is driving up demand for housing.
Shortage of housing supply: Queensland has a shortage of housing supply, particularly in Brisbane. This is also driving up demand for housing and prices.
Low interest rates: Interest rates are currently at record lows, making it easier for people to borrow money to buy a home. This is also contributing to the strong property market.
2032 Olympic Games: Brisbane will host the 2032 Olympic Games. This is expected to boost the Queensland economy and lead to an increase in demand for housing.
Western Australia
The Western Australian property market is also performing strongly, with median house prices up 21.5% in the past 12 months. This is being driven by a number of factors, including:
Stronger than average population growth: Western Australia is experiencing stronger than average population growth due to returning expats and overseas migrants, not just the mining sector. This is driving up demand for housing.
Shortage of housing supply: Western Australia has a shortage of housing supply, particularly in Perth. This is also driving up demand for housing and prices.
Low interest rates: Interest rates are currently at record lows, making it easier for people to borrow money to buy a home. This is also contributing to the strong property market.
Resources sector boom: The resources sector is booming in Western Australia. This is boosting the economy and leading to an increase in demand for housing.
South Australia
The South Australian property market is performing well, with median house prices up 23.3% in the past 12 months. This is being driven by a number of factors, including:
Strong population growth: South Australia is experiencing strong population growth, particularly in Adelaide. This is driving up demand for housing.
Shortage of housing supply: South Australia has a shortage of housing supply, particularly in Adelaide. This is also driving up demand for housing and prices.
Low interest rates: Interest rates are currently at record lows, making it easier for people to borrow money to buy a home. This is also contributing to the strong property market.
Infrastructure spending: The South Australian government is investing heavily in infrastructure, such as roads, rail, and schools. This is boosting the economy and leading to an increase in demand for housing.
Inflation-Resilient Asset Types: SDA and Dual Income Properties
Two asset types showing resilience against inflation are Specialist Disability Accommodation (SDA) and dual income properties yielding (6-10% gross rental income per annum). SDA, catering to the needs of the disabled population, is a growing segment due to a lack of suitable housing. Dual income properties, such as duplexes or houses with granny flats, offer the advantage of two income streams, providing a buffer against inflation. High-income properties are also performing well, with established properties in desirable locations presenting excellent investment opportunities.
Conclusion: Strategic Investment in a Changing Market
Despite the challenges posed by rising interest rates, the Australian property market still holds ample opportunities for discerning investors. Key strategies include focusing on areas with strong population growth, investing in inflation-resilient assets, and being open to negotiation. Working with an experienced buyers' agent can offer invaluable insights and assist in identifying the most suitable properties for your investment goals.
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If you're considering investing in the Australian property market, don't go it alone. Contact us today to leverage our expertise and insights to find the ideal investment property for your portfolio or to simply engage our services on your next property purchase.
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