Wealth Street Journal: Week 16, 2024

Wealth Street Journal: Week 16, 2024

This week in property: Top 5 headlines

Discover the latest in Australia’s real estate, from regional investment potential alongside surging unit values, federal housing support, rising buyer activity and the wealth-building impact of property:

  1. Regional Australia’s investment potential: PRD Real Estate highlights regional areas as lucrative investment destinations, citing affordability and robust capital growth, with higher rental yields and top-performing LGAs.
  2. Surging unit values: Units rising faster than houses due to increased demand, especially in affordability-constrained markets, with Brisbane leading at 4.1% growth in the past quarter.
  3. Federal support for housing supply: The $500 million Housing Support Program aims to boost supply, addressing decades of undersupply. Urgent action is required to streamline planning systems and meet housing demand.
  4. Rising buyer activity: Loan Market reports a surge in pre-approval applications, signaling increasing buyer interest, with post-Easter auction activity resuming, particularly strong in Sydney.
  5. Property increases our wealth: ABS data reveals a 2.8% increase in household wealth, driven by property price hikes and gains in share markets, reflecting ongoing housing demand and seasonal market trends.

Regional Australia’s investment potential

PRD Real Estate’s latest analysis highlights the ongoing potential of regional Australia for investors, despite significant price increases during the pandemic.

Their Roaring Regions report identifies regional towns as prime investment destinations, citing higher rental yields and robust capital growth compared to capital cities.

The analysis focused on various factors including affordability, rental yields, infrastructure development and unemployment rates across LGAs in Queensland, NSW, Victoria and Tasmania.

PRD Real Estate chief economist Dr Diaswati Mardiasmo says the regional areas generally had higher rental yields than their capital city counterparts and either equal or stronger capital growth.

Local Government Areas (LGAs) which made the top ten had a median house price of less than $600,000. In no order, the top LGAs are:

  • Queensland: Mackay, Toowoomba, Townsville
  • New South Wales: Dubbo, Tamworth, Griffith
  • Victoria: Ballarat, Shepparton, Wodonga
  • Tasmania: Burnie

Mardiasmo asserts, “People always ask, ‘if you had a lazy $1 million, where would you invest?’ and I always say regional areas.”

Regional Australia's investment potential

Surging unit values

Unit values across Australia are rising faster than house values, driven by increasing demand particularly from first-home buyers and investors, amid affordability challenges and dwindling supply, according to CoreLogic data.

Tim Lawless, CoreLogic’s research director, suggests that this trend may persist, with units outperforming houses in affordability-constrained markets.

“I wouldn’t be surprised if we see more suburbs where units outperform house price growth from here onwards because of affordability and supply constraints,” he says.

CoreLogic’s figures indicate that in the past quarter, unit values surpassed those of houses in 633 of 1,168 suburbs analysed, with Brisbane experiencing the strongest growth at 4.1%, followed by Perth, Sydney, Melbourne and Adelaide.

Surging unit values: Wealth Street Journal

Federal support for housing supply

Aiming to enhance housing supply, the Federal Government has launched the $500 million Housing Support Program, now accepting applications from state, territory and local governments.

The first phase targets projects aimed at bolstering the planning workforce to expedite construction commencement.

Property Council of Australia, Chief Executive Mike Zorbas says everything that can possibly done to meet the Federal Government’s housing goal needs to be done.

“We need to disrupt decades of undersupply by providing incentives that no state or local political leader can walk past,” he says.

“We know unresponsive planning systems across the country are the biggest barrier to housing supply and affordability, so any initiative to streamline these processes is welcome.”

He says only supply will improve affordability for low-income households.

Federal support for housing supply: Wealth Street Journal

Rising buyer activity

Buyer interest is rising, with Loan Market reporting a surge in pre-approval applications: 1,117 compared to 650 last year.

Following Easter, buyers are back at auctions, with a national clearance rate of 76% – the highest since early February 2024.

CoreLogic figures show Sydney had the highest clearance rate of 82%, followed by Adelaide 77%, Brisbane, 75% and Melbourne 71%.

Clearance rates were lowest in Canberra, at 62%.

Almost 2,000 properties were taken to auction last weekend, although that is well below the 3,500 in the weekend before Easter.

Across regional centres, Ryde in New South Wales was the best performer last week, with 94% of properties taken to auction selling. Sydney’s inner west was the only other region in Australia to achieve a clearance rate above 90% with 92% of properties selling under the hammer.

Rising buyer activity: Wealth Street Journal

Property increases our wealth

Rising property prices continue to bolster Australia’s household wealth, with the latest figures from the Australian Bureau of Statistics (ABS) revealing a steady climb.

In the December 2023 quarter alone, household wealth surged by 2.8%, amounting to $419 billion—a notable increase compared to the previous quarter’s 2.3% rise.

The ABS attributes much of this growth to the increased value of residential land and dwellings, which contributed 1.2% to the total wealth surge, now standing at $15.7 trillion—a 7.8% increase from the previous year.

According to Mish Tan, Head of Finance Statistics at the ABS, both domestic and overseas share markets have also made significant gains, further adding to household wealth.

Additionally, the demand for credit hit $105.1 billion during the December quarter—the highest in over a year.

“Household borrowing reflected continuing demand for housing amid strong population growth. A seasonal boost from spring housing market sales also drove household borrowing in the December quarter,” Tan says.

Property increases our wealth: Wealth Street Journal

“I wouldn’t be surprised if we see more suburbs where units outperform house price growth from here onwards because of affordability and supply constraints.”

Tim Lawless

CoreLogic Research Director
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