Wealth Street Journal: Week 18, 2024

Wealth Street Journal: Week 18, 2024

This week’s Australian real estate news: Top 5 headlines

Discover the latest in Australian real estate news, from surging confidence among industry players to the top destinations for first-time investors, doubled property prices, normalising construction costs and Australia’s top-four ranking in global house price growth:

  1. Property confidence rises: Property industry confidence rises with stable interest rates and improved access to finance, despite challenges with government inefficiencies.
  2. First-time investor hotspots: First-time investors favour capital cities, with top locations including Sydney CBD, Melbourne’s West and Brisbane CBD, attracting consistent interest since 2019.
  3. Where prices have doubled: Australian property prices soar, with some areas doubling in the past four years, driven by low borrowing costs and lifestyle changes, particularly notable in Adelaide, Western Australia, Queensland, Victoria and regional New South Wales.
  4. Construction costs normalising: Construction cost growth slows to its lowest since 2007, with a significant easing seen in the first quarter of 2024, despite costs remaining elevated, indicating subdued growth in the upcoming year.
  5. Australia ranks global top four: Australia ranks among the top four countries globally for house price growth over the past five years, with a surge of over 10% since 2019, driven by strong demand in affordable cities, particularly Perth and Adelaide, showcasing further upside potential.

Property confidence rises

Property industry confidence is rising, per the latest Procore/Property Council Survey.

Matthew Kandelaars, Group Executive Policy and Advocacy at the Property Council of Australia, attributes this to a stable interest rate environment and improved access to finance, despite challenges with “broken state planning systems and government inefficiencies”.

He emphasises the importance of collaboration across all government levels to meet national housing targets and encourage investment in the property sector.

Survey results indicate a growing expectation of continued house price growth, reaching the highest level since December 2021.

“This comes off the back of an undersupply of housing, with 40% of participants noting housing supply and affordability as the major issue facing the federal government and 41% for state governments,” the report says.

The survey canvassed the views of more than 500 respondents including, owners, developers, agents, managers, consultants and government across all major industry sectors and regions.

Real estate news: Procore/Property Council Industry Sentiment Survey March 2024

First-time investor hotspots

New report indicates first-time investors favour capital cities.

According to the Active Property Investors Report from the Commonwealth Bank, the average age of property investors in Australia is 43, with an average loan size exceeding $500,000.

CBA’s Executive General Manager of Home Buying, Dr Michael Baumann, says nationally the top location for new property investment purchases in 2023 was in the 2000 postcode of the Sydney CBD including Haymarket.

In Melbourne, the leading postcode is 3029, covering West Melbourne, including Hoppers Crossing.

Another standout area is the 2765 postcode of North-West Sydney, including Marsden Park.

The top Brisbane location for new investment purchases was the 4000 postcode which includes the Brisbane CBD.

Dr. Baumann notes that many of the top-performing postcodes have consistently attracted investors over the years, with three postcodes maintaining their top positions since 2019.

Real estate news: First-time investor hotspots
Source: Commonwealth Bank

Where prices have doubled

Australian property prices remain higher in almost all locations than they were four years ago with new analysis showing some areas have more than doubled.

The data indicates a significantly faster pace of price growth compared to previous four years, primarily due to very low borrowing costs and lifestyle changes.

PropTrack Economist, Anne Flaherty, describes this surge as a “once-in-a-generation boom,” highlighting 2021 as witnessing the fastest episode of price growth in over 30 years.

Adelaide suburbs lead the way in price growth, with Elizabeth North up by 151%, Davoren Park by 142% and Smithfield Plains by 132%.

In Western Australia, Camillo and Armadale saw price rises of 114% and 105%, respectively, while in Queensland, Mount Coolum and Hope Island witnessed increases of 113% and 103%, respectively.

Warracknabeal in regional Victoria experienced a 105% increase and in regional NSW, Ashmont saw a rise of 116%.

Real estate news: Prices have doubled in South Australia

Construction costs normalising

Construction cost growth is slowing, with figures showing the lowest increase since 2007, according to CoreLogic’s Cordell Construction Cost Index (CCCI).

Costs rose by only 0.8% in the first quarter of 2024 and 2.8% in 2023, indicating a significant easing.

While national construction costs are moderating from pandemic highs, CoreLogic Economist Kaytlin Ezzy notes that price levels remain elevated.

“The strong fluctuations seen in building material costs over the past few years have levelled out and are now within normal margins,” Ezzy says.

Despite the slowdown, costs are still 27.6% higher than pre-pandemic levels.

Ezzy anticipates subdued cost growth in the upcoming year.

“National dwelling approvals have held well below average in 2023 and are continuing to do so into 2024, helping to dampen the growth in construction costs,” she says.

Costs rose by 0.7% in the quarter in Queensland and South Australia, while New South Wales and Victoria were both up 0.9% and Western Australia was up 0.7%.

Real estate news: Construction costs normalising

Australia ranks global top four

New data from the International Monetary Fund ranks Australia among the top four countries globally for house price growth over the past five years.

After adjusting for inflation, Australian house prices surged by over 10% since 2019, trailing only the United States, the United Arab Emirates and Japan in real house price growth.

It comes as the Australian Financial Review’s quarterly property survey, tips that prices will keep rising.

Its panel of ten experts are predicting growth of 5% nationally with Perth expected to have the strongest growth of 16% in 2024.

The survey shows that demand is the highest in affordable cities and Brisbane and Adelaide should increase by about 10% this year.

Sydney’s growth is forecasted between 4.5% and 9%, while Melbourne may see up to a 4% increase.

Knight Frank Chief Economist, Ben Burston, says despite recent growth prices in Perth and Adelaide, remain well below that of other capital cities and still have “further upside in the near term”.

Australia ranks global top four for house price growth

Catching up on Australian real estate news?

Read last week’s Australian real estate news article covering:

  1. Investors & first-home-buyers back: In February, mortgage commitments rose by 1.5% to $26.4 billion, with first-home buyer loans increasing by 4.8%, indicating market resilience despite higher mortgage rates.
  2. Millennials & Gen X leading property investment: Over half of purchases attributed to them, showing a growing trend of independent purchasing and “rentvesting” in affordable areas.
  3. Regional house price growth: Regional house prices are surging, led by coastal and regional areas, outpacing capitals, driven by affordability and pandemic-induced shifts in preference, especially in Queensland.
  4. Capital cities to outperform regional markets: Canstar’s Rising Stars Report predicts capital cities to outperform regions in 2024, emphasising urban living’s appeal and Brisbane’s lead in growth prospects.
  5. Rents continue to rise: Rental growth surged in Q1 2024 mostly in capital cities, with the largest quarterly rise in 17 years. Pace is slowing despite ongoing pressure from a supply-demand imbalance.

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Wealth Street: Luke Burgess

“The level at which property prices rose in 2021 in particular was the fastest episode of price growth seen in over 30 years.”

Anne Flaherty

PropTrack Economist
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