InvestDoor's Report on the Australian Housing Market Oct 2023
Aaron Tan · 18 November 2023
Current Environment
The Australian housing market is currently experiencing a recovery in home values, which began in March of this year. From March to the end of August, home values have risen by 4.9% [^1^]. This recovery has already eliminated approximately half of the decline that happened between April 2022 and February 2023 when national home values fell by 9.1% [^1^].
According to a Bloomberg survey, national property prices are expected to climb by 7.7% this year, recovering from a decline of 4.8% in 2022 [^2^]. This positive forecast indicates a strong rebound in the housing market.
The continuous rise in Australian house prices can be attributed to a growing population that is driving demand for housing. However, the supply of housing has not kept up with this increasing demand [^3^]. This combination of factors has contributed to the steady increase in house prices year after year.
In New South Wales, the average residential prices have experienced a significant increase. They are now $284,000 higher than they were in December 2019 [^4^]. This substantial rise in prices highlights the lucrative nature of the Australian housing market.
Forecasts
According to KPMG's new property report on Australia's capital cities, house prices in Australia are predicted to rise nationally by 4.9% over the next 9 months and then surge by 9.4% in the year to June 2025 [^0^]. Apartment prices across the country are also expected to see an average rise of 3.1% by next June, followed by a 6% increase in the next 12 months [^0^]. However, another source from Forbes indicates a different forecast, with a projected 13% fall for houses and 8% for units, and specifically, the greatest fall in house prices in Sydney of around 18% [^1^].
It is important to note that there is some confusion regarding the peak-to-trough change in Australian house prices. According to Corelogic, the change was 9%, while PropTrack reports only a 4% change, which adds to the uncertainty in forecasting house prices [^2^].
Recent data indicates that Australian housing values have been increasing, with an average rise of 1.1% in June. This marks the fourth consecutive month of value growth across Australia's capital cities [^3^].
In terms of future forecasts, CBA predicts a 5% growth across Australia in 2024, with Sydney's house prices expected to rise by 4% and Melbourne's by 5% [^5^].
Strategies
The Australian property market has long been an attractive destination for investors seeking opportunities for capital growth and rental income [^1^]. House prices in Australia have been steadily rising, making it a good investment option for many [^3^]. Additionally, government policies are in place to ensure that prices continue to rise, even in an environment where wages are unlikely to increase [^4^].
Navigating the Australian property market can be complex due to numerous factors that can influence property prices [^5^]. Therefore, it is important for investors to develop smart investment strategies to make informed decisions and maximize their returns [^1^].
Recent research findings on the Australian Housing Market indicate that the value of the market has rebounded to $10 trillion at the end of August. This is the first time it has reached a double-digit figure since June 2022 [^1^]. The increase in value can be attributed to higher property values, with the median home value in Australia reaching $732,886 at the end of the month [^4^]. However, the rising prices and growing demand for housing have led to concerns about affordability and accessibility. As housing prices rise, more people are being priced out of the market, highlighting the need for government intervention to produce affordable housing options [^6^].
The steady rise in Australian house prices has been driven by a growing population, which has increased the demand for housing. However, the supply of housing has not kept up with this demand, resulting in a shortage of new housing options [^2^]. The rebound in prices is seen as a case study of supply and demand dynamics [^3^].
Furthermore, recent research highlights the impending challenges for the Australian housing market due to the effects of COVID-19. Construction cost increases and labor shortages are expected to impact the housing market for the next two years [^5^].
Based on the available information, the Australian Housing Market forecasts suggest a mixture of potential growth and decline, with varying projections from different sources. The forecasted rise in house and apartment prices, along with the attractiveness of the market for investors, indicates potential opportunities for capital growth and rental income. However, the challenges of affordability and accessibility, as well as the impact of COVID-19, should be considered when developing investment strategies.