Australian property market

Top 10 things to watch in the Australian property market

PHOTO: Propertyology Head of Research Simon Pressley

Over the past 18-months, the lives of 25.7 million Australians have been tipped upside down.

We have a new ‘normal.’

One thing that is not normal is the current high rates of house price growth being experienced in locations all over Australia.

All things being equal, I think we will look back upon this crazy period with the history books showing that some locations produced a 30 to 50 per cent increase in house prices over a three-year growth cycle.

Plenty of other locations are likely to produce 70 to 100 per cent growth across a cycle that could easily run for five years or more.

Propertyology has always advocated that the biggest influence on property market performance will always be the economic conditions of each individual city along with localised housing supply volumes.

At a macro (national) level, the biggest influences on future real estate performance will be the actions of a few key people in high places.

While it is impossible to get inside the heads of these people, Propertyology believes the 10 most influential macro factors for property markets over the next five-years will be as follows:

1. Rental supply

While Sydney and Melbourne have a significant surplus of rental accommodation (43,607 dwellings advertised vacancies as at the end of July 2021), the 15 million people who live in the rest of Australia only had a (combined) 17,706 dwellings available.

There are countless stories of businesses all over Australia advertising jobs but unable to attract candidates because there is no accommodation available.

Annual rents have already increased by thousands of dollars in more than 40 Australian cities. The problem will get significantly worse before it gets better.

2. Lockdown legacy

Our two biggest cities continue to have the most concerning property market fundamentals in all of Australia.

With every lockdown my fears for their future economic health increases. Melbourne has already been locked up for more than 200 of the past 500 days.

Hospitality businesses and CBD retailers can only survive on a drip for so long.

For the owners, employees and commercial landlords of each of these businesses, the ability to pay mortgages and rents is in serious jeopardy.

It may take a while longer for everyone to properly understand the economic and property market legacy of frequent lockdowns.


3. Regional relocation

Sir Isaac Newton’s law of motion states that for every action there is an equal and opposite reaction.

There has never been a better real estate case study for Newton’s theory than the emotional and financial reaction to big-city lockdowns.

Over the past 18-months, Propertyology has observed an insatiable appetite for open space, natural environments, and work-from-home flexibilities.

The regional relocation trend will continue to gain pace.

Over the first 12-months of COVID-19, regional Australia had a net population increase of 44,000 from internal migration (and 145,284 over the last five years) while Sydney and Melbourne each had a population decline of 32,000.

4. Government debt strategies

The financial statements of each of Australia’s state governments will be tested significantly over the next five to 10 years. State economies and property markets will be affected.