Welcome to this week’s edition of Property Edge, where we cut through the noise to bring you the most important insights shaping the property market. From Australia’s looming housing ‘super cycle’ to the rise of house and land packages as the preferred choice for buyers, this week’s updates reveal where the real opportunities—and challenges—lie.

Australia’s Housing ‘Super cycle’ is Here

Australia is entering a housing “super cycle”, driven by years of undersupply and soaring demand for new apartments. According to Qualitas Managing Director Andrew Schwartz, this catch-up phase could see annual apartment construction triple from 25,000 to 75,000 starts per year—but only if the industry can overcome serious capacity constraints.

Key Takeaways:

• Massive Demand: Apartment supply is far below demand, requiring a 15-20% price rise to make new projects viable.
• Funding Surge: Qualitas invested $2.4 billion in private credit over six months—85% of it for housing developments.
• Labour Shortages & Industry Struggles: Sydney and Brisbane are hardest hit, with contractor shortages and rising costs slowing development.
• Construction Boom vs. Industry Limits: While Australia once peaked at 116,861 housing starts in 2016, hitting 75,000 apartments per year now will require structural changes in the sector.

Investor Insight:

With institutional capital ready to flow and housing demand stronger than ever, developers who can navigate construction constraints will be well-positioned to ride the super cycle. However, supply bottlenecks could limit how quickly new projects hit the market, keeping pressure on prices.

The question for property entrepreneurs: Are you ready for the opportunities—and challenges—of this next property wave?

Latest Big Bank Report – Signs of a Slowdown or The Start of a New Boom?

The National Australia Bank’s (NAB) latest survey indicates a continued slowdown in Australia’s housing market for the final quarter of 2024. The NAB Residential Property Index declined for the third consecutive quarter, dipping below the long-term average for the first time since March 2023. Sentiment turned negative in the Australian Capital Territory (ACT), Victoria (VIC), and New South Wales (NSW), while remaining positive but subdued in Queensland (QLD), Western Australia (WA), and South Australia (SA).

Key Findings:

• Market Sentiment: Property professionals report widespread uncertainty, with varying assessments of market conditions across states. In VIC, 62% believe the market is declining or at its lowest point, whereas in WA, 82% view it as rising or peaking.
• Price Expectations: The average forecast for house price growth has been adjusted downward to 1.2% over the next 12 months and 2.3% over the next two years. Notably, QLD and the Northern Territory (NT) are expected to see higher growth, while the ACT and VIC may experience price declines.
• Rental Market: The availability of rental properties has slightly improved, though shortages persist, especially in WA. Rental growth projections have been moderated for the coming years.

NAB’s Outlook:

NAB has revised its property price forecasts, anticipating a 3% increase in the 8-capital city dwelling price index for 2025 and a 6% rise in 2026. The Reserve Bank of Australia (RBA) is expected to gradually ease monetary policy, with the cash rate potentially falling to 3.1% by early 2026.

For property entrepreneurs and stakeholders, these insights suggest a period of cautious optimism, with regional variations playing a significant role in market dynamics.

‘Rentvesting’ Gains Momentum Among Australian Property Investors

In response to escalating property prices in major Australian cities, a growing number of first-home buyers are adopting a strategy known as ‘rentvesting.’ This approach involves purchasing investment properties in more affordable areas while continuing to rent in their preferred locales.

Key Highlights:

1. Rise in ‘Rentvesting’: Recent data indicates a 21.4% increase in first-home buyers acquiring properties intended for rental rather than personal occupancy. This trend is most pronounced in New South Wales, where nearly 1 in 10 first-home buyer loans are for investment purposes.
 
2. Millennial Investors Leading the Charge: Millennials are increasingly entering the property market as investors. By focusing on regional hotspots with lower entry costs and strong rental yields, they are building substantial property portfolios. For instance, areas like Bendigo offer attractive opportunities for these young investors.
 
3. Alternative Investment Models: Innovative co-ownership schemes are emerging, allowing investors to collectively purchase properties. This model provides access to premium real estate at a fraction of the cost, democratising property investment and enabling broader market participation.

This shift towards ‘rentvesting’ and collaborative investment models reflects a strategic adaptation by new entrants to navigate the challenging property landscape, aiming to build wealth and secure financial futures despite high urban property prices.

Why Buyers Are Choosing House & Land Packages

A shift in buyer demand is reshaping Australia’s property market, with house and land packages gaining popularity over off-the-plan apartments. According to Oxford Economics Australia, new home construction is set to rise 4.5% in FY25 to 166,900 dwellings, with another 4.3% increase in FY26—but still falling well short of government housing targets.

Key Trends:

• Investors Driving House & Land Demand
• Investor purchases of house and land packages have surged, particularly in NSW (up 71%) and VIC (up 76%) over five years.
• Off-the-plan apartments are in short supply, leading investors to shift towards detached homes instead.
• Major States Struggling to Meet Housing Targets.
• Government targets 1.2 million new homes over five years (~240,000 per year), but actual forecasts remain well below that.
• Labour shortages, rising land & construction costs, and slow planning approvals are key obstacles.

State-by-State Breakdown

• WA, QLD, and SA seeing stronger growth, while NSW & VIC face price softening, land constraints, and investor pullback.
• Sydney’s apartment market is undersupplied, worsening rental stress.

Interest Rate Cuts vs. Structural Challenges

The RBA’s recent rate cut to 4.1% could boost new home demand, but labour shortages and high costs remain limiting factors.

Investor Outlook

With standalone houses leading new construction, investors targeting high-growth, lower-cost states may find better returns than in major cities. However, supply chain issues and policy roadblocks mean Australia remains far behind in solving its housing shortfall.

The big question:  Will Australia ever hit its housing targets, or are we set for another decade of undersupply and what opportunities does this present for property entrepreneurs? The market’s shifting- are you keeping up? Adapt, act and stay ahead. See you next week.

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