High house prices in Australia are primarily driven by supply and demand imbalances, tax policies, low-interest rates, and rising household debt.
House prices in Australia are extremely high compared to income, relative to other countries. The market is propped up by rules that provide tax deductions for property investment, and by repeated state government bonuses for first home buyers. Furthermore, the supply of new homes is hard to generate.
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.
According to Domain figures, the value of Australia's housing market fell by -5% across capital cities in 2022. Sydney dropped by -10.9% and Melbourne was down -5.9%. While Canberra and Brisbane house values fell by -6% and -1.1% respectively last year. Most of the damage was done by the end of spring selling season.
Since the start of the pandemic, the average number of people per Australian household has decreased from about 2.6 residents a household to a bit below 2.55. That may not sound like much, but it means an additional 140,000 houses and apartments are now needed to house the existing population.
Australia is heading towards a severe housing crisis, with a projected shortage of 106,000 homes by 2027. This dire situation arises from high-interest rates, surging immigration, and community resistance to new developments.
Nationwide prices are expected to rise by approximately 2 per cent by the end of 2023. However, as the RBA potentially cuts interest rates before the end of 2023, demand pressures will contribute to a favourable environment for property prices.
Research from the Swinburne University of Technology suggests that the cheapest time to buy a house in Australia is during, just before or just after winter. In Sydney, Adelaide and Darwin the least expensive month to buy was June or July, suggesting that if you buy during winter you may find yourself a bargain.
Data from the 2021 census showed home ownership in Australia had dropped to less than 70 per cent – that is, of the nearly 10 million households in the country, 6.2 million had homeowners as the residents.
Housing Market
According to the 2023 International Housing Affordability Survey by Demographia, three out of the 10 least affordable housing markets are in Australia and New Zealand, two are in Canada and four more are located in the United States. The least affordable housing market is Hong Kong.
Buyers from China dominate foreign investment in Australian residential real estate, with $1.6 billion in proposed purchases approved in the six months to the end of December last year, official figures show.
Housing cost of living comparison
The most expensive place for housing in Australia is Sydney.
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.
Westpac has revised its house price forecasts, with dwelling values expected to stabilise in 2023 (initially forecast a -7% decline). National dwelling values are predicted to rise 5% in 2024, up from 2%.
The mean age of people buying their first home in Australia has edged up from 33 for either a new or established dwelling in 1995–96 to 35 for a new dwelling and 36 for an established dwelling in 2017–18. Figure 1: Age bracket of first home buyers (by percentage) in 1995-96 and 2017-18.
What are the busiest months for real estate? If you are looking at property sales, OpenAgent data generally indicates that the busiest times of year in Australia for buyers are the autumn months: specifically March and May.
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.
au's analysis showed that, even if prices rose at a similar rate to inflation over the next five years, the median house price would still be near $1.5m in 2027.
Domestic and family violence statistics in Australia:
Domestic and family violence was the main reason why more than 72,900 people sought assistance from a specialist homelessness service last year. One in six women, compared to 1 in 16 men, have experienced physical or sexual violence by a current or former partner.
Australian rental crisis will get worse as construction fails to keep pace with demand, report says. Australia's painful rental crisis will get worse in the coming years, a new report says, due to a shortage in supply of new houses and units caused by costs and ongoing constraints in construction.
Under the NHHA, the Australian Government is improving funding for homelessness by ensuring homelessness funding is now ongoing and indexed. This will result in around $129 million from the NHHA being set aside for homelessness services this year. States and territories will match this funding.
Australians are being warned the country's economy is on a “knife-edge“ after the Reserve Bank of Australia's string of interest rate hikes, with a “consumer recession” predicted for 2023.
Australia may continue to be the lucky country and avoid a recession in 2023, but its global peers may not be so fortunate. Chief economist at Australian Retirement Trust Brian Parker says that Australia is relatively well placed to handle the economic turmoil.