Welcome to this week’s edition of Property Edge, your go-to source for the latest updates and insights in the Australian property market. In this issue, we delve into the key trends and challenges shaping the housing landscape, offering valuable perspectives for property entrepreneurs like you.

Boomers Benefit Most from Property Gains

A recent report by the Productivity Commission reveals a significant disparity in wealth distribution across age groups in Australia, with baby boomers reaping substantial benefits from property investments. Key findings include:

Australian Wealth Breakdown: The majority of Australian wealth is concentrated in residential property, especially among middle and higher-income households. This highlights the pivotal role of property in wealth accumulation.

Wealth by Age: Australians aged 65 and over have experienced the strongest growth in wealth over the past two decades, largely due to higher home ownership rates. This age group has seen their wealth grow at a compound rate of around 4% annually, double the rate of younger households.

Savings Trends: Data from the Commonwealth Bank of Australia shows that older households have significantly increased their savings, with those aged 65 and over growing their savings by 6.5% last year. In contrast, younger households have seen a reduction in savings.

The report underscores that older Australians, particularly baby boomers, have managed to maintain financial stability and increase their spending power, largely due to their substantial property holdings and savings growth.

China’s Property Crisis Spreads to Australia

The Chinese property crisis has begun to impact the Australian property market significantly.

Key points include:

Shift from Buyers to Sellers: Overseas Chinese, once the primary buyers of Australian apartments, particularly in Sydney, are now selling their properties, often at a loss, due to financial difficulties at home.

Market Dynamics: This shift coincides with a plan by Federal Opposition Leader Peter Dutton to halt foreign investors from buying existing dwellings for two years, a move seen as closing the stable door after the horse has bolted.

Developer Response: Sydney’s apartment market, dominated by Harry Triguboff and his Meriton group, is undergoing changes. Triguboff has slowed down new developments and is retaining a significant portion of new apartments for rent rather than sale, influencing the rental market dynamics.

Political and Economic Ramifications: This trend is likely to lead to a rise in rental communities, particularly as younger Australians struggle to buy homes due to high interest rates and stringent bank lending conditions. This shift could have substantial long-term implications for Australian society and politics, as renters tend to vote differently than homeowners.

Property Council of Australia Welcomes Construction Skills Boost for Housing Supply Increase

The Property Council of Australia has expressed strong support for the Coalition’s emphasis on boosting construction skills to increase the supply of new homes.

Key insights include:

Skilled Workforce: The Coalition plans to ensure enough skilled and temporary skilled visas for construction professionals to support local tradies and increase housing supply.

Migration Management: Federal Opposition Leader Peter Dutton emphasised managing net overseas migration to avoid overstretched local services, proposing a cap of 160,000 migrants.

Industry Gaps and Ageing Population: Mike Zorbas, Chief Executive of the Property Council, stressed the need to prioritise skills that support the ageing population and fill gaps across various industries. Only about 1.8% of migrant workers over the past two decades had construction skills, highlighting a critical shortage.

Housing Affordability: Zorbas pointed out that addressing housing affordability requires building more homes through domestic and global investment, improved investment settings, and streamlined planning processes. Additionally, he noted that international students are not the cause of the housing crisis, as they only account for 4% of the rental market.

Home Buyers Fighting A Losing Battle

Australia’s housing affordability crisis has eroded faith in the Great Australian Dream, as property prices soar beyond the reach of average earners. Even with both partners working, many families can’t afford homes in major cities. Single buyers are even worse off, with budgets falling short in all capitals except Perth and Darwin.

Interest rate hikes and stagnant property prices have slashed borrowing power, pushing once-affordable suburbs out of reach. Jarden chief economist Carlos Cacho noted, “We effectively capitalised zero interest rates into house prices during the boom over 2021… The person who could afford to buy when rates were zero can no longer afford to buy.”

Wealth transfers from family have helped some buyers, but many are left to either move further away or rent long-term. Demographer Simon Kuestenmacher highlighted the distress, saying, “People feel cheated out of the absolute basics of life… you can’t out save the house price growth, so, ‘screw it, let’s not even try’.”

Experts emphasise the urgent need for policy reform and increased housing construction to address these challenges. AMP chief economist Shane Oliver pointed out the double whammy: “The combination of very high house prices relative to people’s incomes along with the rapid rise in interest rates… dramatically blowing out the shortfall that an average home buyer would have in trying to get into the property market.

Until next time, keep pushing forward and exploring new opportunities in the property world!

Warm regards,

The Property Lovers Team

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