Welcome to the latest edition of Property Edge, where we delve into the dynamic world of real estate. In this issue, we explore the key trends and challenges shaping the property market, from surging demand in certain suburbs to the critical need for enhanced productivity in the building industry. Stay tuned for insightful analyses and expert opinions that will keep you informed and ahead of the curve in the ever-evolving property landscape.

Suburbs on the Rise: Property Searches Indicate Growth Potential

Recent data from realestate.com.au reveals a surge in property searches in key suburbs across Australian capitals, hinting at potential price increases due to rising demand. Perth leads the way with significant search growth, particularly in suburbs like Balcatta, Tuart Hill, and Padbury, where searches have increased by over 40%. This growth is attributed to Western Australia’s strong population expansion, with 18 of the top 20 suburbs for search growth located in the state.

In Sydney, affordability challenges have pushed buyers towards western suburbs like Fairfield, Campbelltown, and Blacktown, where searches have risen by up to 18%. These areas offer good connectivity and value, with most median house prices below $1 MIL.

Melbourne’s northern suburbs, including Coburg North, Pascoe Vale, and Glenroy, have seen search increases of up to 19.2%. These areas attract younger buyers looking for affordable homes with a community vibe.

Brisbane’s inner north is also in demand, with suburbs like Alderley and Lutwyche experiencing search growth of over 21%. Proximity to the city and relatively lower entry prices make these areas appealing to first-home buyers and young families.

Overall, the data suggests that well-connected suburbs offering good value are poised for growth, driven by strong population growth and increased buyer activity.

It doesn’t seem that the market will hit a pause button either in spite of upcoming holidays and long weekends.

Property Market Unfazed by Easter: Experts Predict Continued Momentum

The Australian property market is showing no signs of slowing down this Easter, with experts predicting a continued surge in activity throughout autumn and into winter. Despite the traditional holiday lull, the market is riding high on the back of record-breaking prices and robust activity in the combined capital cities. Ray White Group chief economist Nerida Conisbee expects a busy April, with the market maintaining its momentum without any significant slowdown.

The early arrival of Easter this year, coupled with school holidays and Anzac Day, is unlikely to dampen the market’s enthusiasm. With strong demand, more stock entering the market, and motivated buyers and sellers, the market is set for a bustling period. The recovery is evident across various cities, with house prices in Sydney, Brisbane, Adelaide, and Perth at record highs, and Melbourne expected to complete its price recovery this year. Unit prices are also soaring in Canberra, Brisbane, and Adelaide, with Sydney and Melbourne’s apartment markets showing signs of recovery.

Consumer confidence is on the rise, with the Westpac–Melbourne Institute Consumer Sentiment Index reaching its highest level in 20 months. This optimism, fuelled by easing inflation and hopes for a cash-rate reduction, is driving the market’s resilience. Agents in Melbourne, Sydney, and Canberra report strong sales and anticipate that the momentum will persist throughout autumn, with the market favouring sellers and offering a diverse range of properties at various price points.

This fast paced market has resulted in continued gains across the board Australia-wide.

Australian Property Market Continues to Thrive: Insights from CoreLogic’s Pain & Gain Report

The latest Pain & Gain Report by CoreLogic for Q4 2023 bears witness to the robust Australian property market, with an impressive 94% of the approximately 90K resales resulting in nominal gains. The median gross profit has risen to $310K, reflecting the sustained growth in home values throughout the year.

According to Eliza Owen, CoreLogic’s Head of Research, the housing market’s profitability has improved since the recovery trend began in early 2023. Loss-making resales have decreased to 6% with a median loss of $40K, and the total nominal profit from resales reached $29.9bil.

The report also highlights a shift in short-term resale conditions, with a slight reduction in the portion of resales within a two-year hold period. Regional markets have outperformed capital cities in terms of profitability, with 95.5% of resales in regional Australia making nominal gains compared to 93.2% in combined capitals.

Adelaide remains the most profitable capital city market, with over 98% of resales making nominal gains. Perth has shown significant improvement, marking its most profitable period since July 2015. Houses have continued to outperform units in profit-making sales, although the gap in profitability between the two is narrowing.

The median hold period for resales across Australia was 9.0 years, with national home values increasing by 63% since the median initial purchase date in November 2014. The report suggests that the incidence of loss-making sales is associated with relatively short hold periods, especially for houses, while loss-making unit sales tend to have longer hold periods due to weaker capital growth performance.

Overall, the Pain & Gain Report for December Quarter 2023 highlights the continued resilience and profitability of the Australian property market, with sustained growth in home values and an increasing rate of profit-making sales.

So why are prices rising so rapidly and how can affordability improve?

Is Lack of Property Supply Due to Productivity Constraints?

Australia’s construction industry is facing challenges in productivity and labour shortages, which are impacting its ability to build new homes efficiently. Westpac’s chief economist, Luci Ellis, this week highlighted that construction productivity has fallen slightly since 2015, while the economy as a whole has grown by 2.5%. The industry needs to improve productivity through better program management and make better use of existing resources.

One solution to improve productivity is through prefabricated and modular construction, which can speed up building times and reduce wastage. Companies like Mirvac are using pre-made bathroom pods to improve efficiency in their projects. The government is also looking to cut red tape to support the growth of modular housing.

However, even with technological advancements, the industry still needs more workers. Master Builders Australia estimates that the industry needs around half a million new entrants over the next three to five years to meet the National Cabinet’s target of building 1.2 MIL new homes over the next five years. Industry groups are calling for increased skilled migration to address this shortage, with proposals to fast-track visas for overseas construction workers and focus on migrants who can contribute essential skills to the industry.

But are we just chasing our tail given that more immigration will obviously mean more pressures on housing supply?

Thank you for joining us in this edition of Property Edge. We hope our insights have provided you with a clearer understanding of the current trends and challenges in the property market. As we navigate through these dynamic times, staying informed is more crucial than ever. Join us again in our next issue, where we will continue to bring you the latest developments and expert perspectives from the world of real estate and construction. Until then, happy Easter and stay ahead of the edge!

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