The growth in Australia's housing stock has dramatically slowed in the last 20 years, a surprising outcome given demand. The blame lies firmly with local councils and state governments. Of all the goods and services that we buy in our lives, it is hard to think of one that is more important than housing.
In recent decades there has been a decline in home ownership, especially for younger people with mortgages buying their own home. The rise in precarious employment through casual and fixed-term jobs is further hampering young people's ability to buy a house.
Australia's housing shortage is a direct result of nearly 20 years of excessive immigration, which is officially forecast to hit new heights. Australia will never build enough homes so long as its population continues to grow at a rapid pace due to high levels of immigration.
Australia's current housing crisis is driven by the nation's unique demographics and a shortage of available residential land near jobs and services, with the impact of interest rates and government homebuyer subsidies often overstated.
The bottom line is this: we are not building enough homes to meet the growing demand for housing. That will put upward pressure on property prices this year – despite soaring inflation and rising interest rates.
The downturn in the global housing market is set to continue in 2023, with most Australian cities expected to fall by double digits in what is shaping up to be the deepest property correction in more than 30 years. Few people are willing to buy or sell in a falling market, and stock is hard to find.
Australian property values experienced a downturn in 2022 and prices continue to fall—but predictions of the overall peak-to-trough price decline tend to vary between 15-25%. Read more about whether the Australian property market is going to crash.
"Property price falls are likely to continue and accelerate in 2023," report author Cameron Kusher said, blaming the cooling market on the rising cost of borrowing and its associated drain on household budgets. Australia's most expensive cities will likely see the largest price falls, he said.
If the price rises are maintained for the rest of the year, home values will end up about 4% higher in 2023, defying earlier predictions of sharp falls of 10% or more for this year, CoreLogic says. “Economists are shredding their previous price forecasts,” said Sally Tindall, research director for RateCity.
Analysts say open borders and increased migration have driven demand for real estate – and increases in rental prices. What matters for rents, as for any price, is the demand for and the supply of the product being priced. More demand (more renters wanting properties) and the price climbs.
Australia has recorded its largest decline in property values on record, with values dropping by 7.9 per cent in a year and the median value of dwellings in more than 200 suburbs dipping below $1 million.
The ANZ CoreLogic housing affordability report has found rental affordability – the portion of income required to service a new lease – is at its highest level nationally since June 2014, with 30.8% of an average income required to service a new lease.
In the 12 months to March 2022, the Consumer Price Index (CPI) increased by 5.1%, the highest annual rise reported since the introduction of the GST in 2000. The cost of living can be analysed through various indexes produced by the Australian Bureau of Statistics (ABS).
As of February 2023, more than 640,000 Australian households are under housing stress or homeless. It is forecasted that this figure will grow to almost one million by 2041. According to a recent report by SGS Economics and Planning, 42% of all low-income households are paying more than 30% of their income on housing.
The average annual growth rate for well-located capital city properties is about 7%, which means that Australia's median dwelling price should be around $1.1 million in 2030. But some properties will outperform others by 50-100% in terms of capital growth, so take these house price predictions with a big pinch of salt.
Australia's property market is considered to be among the most expensive in the world, with Sydney and Melbourne regularly featuring among the list of least affordable housing markets, along with some US and Canadian cities. One measure of affordability is the household debt-to-income ratio.
Property Prices Could Potentially Surge in 2024
Evans and senior economist Matthew Hassan in a market update. "Prices are now expected to increase by 5% in 2024, revised up from 2%." Westpac predicts that by 2024, house prices will rise by 5% in both Sydney and Melbourne, 6% in Brisbane, and 8% in Perth.
The extreme pain being felt in the housing market is set to continue with a whopping 331,000 households already in rental stress.
The government has expanded the remit of the National Housing Infrastructure Facility to invest up to $575 million in unallocated funding. This will help new social and affordable dwellings and attract more institutional capital to the sector.
There are signs Australia's housing slump is slowing down after nine months of falling property prices, according to new research released today. CoreLogic's home-value index fell by 0.14 per cent in February from January, mainly driven by limited housing stock.
The Australian property market has been a topic of much speculation and concern in recent years. Between 2020 and 2021, the market witnessed a significant upswing, with prices skyrocketing in the wake of the COVID-19 pandemic.
There are three familiar names at the top of this bubble indicator: New Zealand (156.8), Canada (155.3), and Sweden (145.7).
Prices could fall further
If you buy in a recession, there is always the risk that prices could fall even further. That said, Australian property prices usually tend to rise in the long run, especially in capital cities. So if you're prepared to spend some time owning your property, you're likely to come out ahead.
The data provided exclusively to The Sunday Telegraph showed the median house price would be $1.92m in 2027 and the median unit price would be $1.02m. Sydney prices would also be nearly triple those in Perth, Adelaide and Darwin if the current growth trajectory continued.