Wealth Street Journal: Week 20, 2024

Wealth Street Journal: Week 20, 2024

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

Explore the newest developments in Australian real estate news:

  1. Rising house building approvals: Building approvals for houses and units increased, notably in VIC and NSW, despite higher construction costs. House approvals rose by 3.8% in March, with residential building values up by 8.7%.
  2. Buying over renting: Rents are rising faster than mortgages, prompting interest in buying. Rental prices rose by 7.7% in the past year, the sharpest increase since 2009, while new mortgage inflation increased by 5.1%.
  3. Regional growth outpaces cities: Regions are outpacing capital cities in property price growth at 0.8%, with combined regional property values nearing $623,000 by April 2024, compared to a mere 0.6% increase in capital city prices during the same period.
  4. Build-to-rent sector growing: Australian build-to-rent (BTR) sector is growing, labelled as a “resilient asset class” by Savills Australia. Investment in the sector surged in 2023, more than tripling compared to the previous five-year average.
  5. Buyers targeting units: Buyers are favouring units over houses due to the widening value gap, especially in major urban areas where existing units are more affordable than new properties.

Rising house building approvals

Building approvals are up for both houses and units, as per the latest Australian Bureau of Statistics data.

House approvals rose by 3.8% during March, and the value of residential buildings increased by 8.7% to $6.35 billion.

Approvals for attached properties and units also rose by 3.6% during the same period.

In March, 12,947 new dwellings were approved, marking a 1.9% increase from the previous month.

Victoria had the biggest increase in approvals for houses in March at 6%, followed by New South Wales (4%), Queensland (3.2%) and South Australia (1.1%). Western Australia was down by 1.8%.

In the attached dwelling market, Victoria had the biggest increase of 3.2% in March, followed by Western Australia, up by 1.5%.

ABS Head of Construction Statistics, Daniel Rossi, says the average approval value for a new house also rose to $468,800 per house.

He says the pace of growth in average approval values has slowed.

“Higher construction costs continue to weigh on dwelling approvals, with the average approval value for a new house rising in all states,” Rossi says.

Real estate news: Rising house building approvals
Source: Australian Bureau of Statistics, Building Approvals, Australia March 2024.

Buying over renting

New data reveals that rents are increasing faster than mortgages, making buying a more appealing option for many.

The latest inflation figures from the Australian Bureau of Statistics (ABS) indicate a 1% rise in the consumer price index (CPI) for the most recent quarter, bringing the total increase over the past 12 months to March to 3.6%.

Aggregate rental prices have surged by 7.7% in the past 12 months, marking the sharpest increase since 2009, while new mortgage inflation has risen by 5.1%.

ABS data highlights that rental inflation has surpassed mortgage inflation since June 2023.

Inner-city suburbs within 12.5km of the CBD are experiencing the highest rental inflation rates in Australia.

According to an ABS spokesperson, rental inflation rates in areas further from the CBD have been moderating since mid-2023.

Additionally, the CPI data indicates a moderation in inflation across other sectors, including food.

Buying over renting


Regional growth outpaces cities

Regions are continuing to outpace capital cities in terms of property price growth.

New house price data shows that the combined regional property value rose to almost $623,000 in the year to the end of April 2024.

During the same period, combined capital city prices increased by only 0.6%, contrasting with the 0.8% rise in regional areas.

CoreLogic figures show that since April 2023 the regions with the biggest price increases are: Bunbury (WA) up 19.9%, Barossa (SA) up 17.9%, York Peninsula (SA) up 17.3% and Southport (QLD) up 16.6%.

Regional areas have gained 2.6% so far in 2024, compared to 2.1% for the combined capital cities.

Western Australia, South Australia, and Queensland lead in price performance this year, with increases of 6.3%, 4.4%, and 4.1%, respectively.

According to CoreLogic Research Director Tim Lawless, April marked the 15th consecutive month of price increases, with the national median rising by 11.1% ($78,000) since January 2023.

Real estate news: Regional growth outpaces cities
Source: RP Data Pty Ltd t/as CoreLogic Asia Pacific.

Build-to-rent sector growing

New analysis reveals a growing Australian build-to-rent (BTR) sector, labelled as a “resilient asset class” by Savills Australia.

Investment in the BTR sector surged in 2023, more than tripling compared to the previous five-year average.

With 13,265 BTR apartments currently under construction nationwide, the expected completion is within the next three years.

Additionally, there’s a pipeline of over 32,000 BTR apartments awaiting approvals and construction, with a potential completion by 2028; however, only 42% are funded and likely to be finished.

Conal Newland, Savills’ Head of Operational Capital Markets, highlights the significant BTR project pipeline, suggesting it could aid Australia in achieving its target of 1.2 million new homes in the next five years.

Newland says tax changes for foreign investment in development would encourage further projects.

“Policy changes at a federal level are fundamental to ensuring that the true growth potential of the BTR sector is fully realised,” he says.

Build-to-rent sector growing


Buyers targeting units

There has been a noticeable shift in buyer preferences towards apartments and townhouses, according to new analysis by valuation firm Herron Todd White (HTW).

According to HTW Brisbane Managing Director Gavin Hulcombe, the growing value gap between houses and units is driving buyers towards attached housing.

Hulcombe notes that this trend is particularly evident in major population centres, where existing units are more affordable than new properties.

“I see opportunities in unique, well-located units, whether CBD, city fringe or even a little further out, which offer an attractive space to live,” he says.

HTW’s latest Month in Review shows that demand for housing remains high, despite increasing cost-of-living pressures and higher interest rates.

The report predicts continued strong demand amid supply-demand imbalances across most markets.

“Demand for housing is extremely strong, fuelled in large part by population growth. This is coming up against limited supply caused by a lag in building approvals, a shortage of materials, scarcity of labour, and even builders being impacted by torrid financial conditions,” Hulcombe says.


Catching up on Australian real estate news?

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

    1. Steady auction market performance: The auction market remains robust with a 72.9% clearance rate & over 1,950 properties listed in capital cities. Already, 2.2K auctions booked for next weekend.
    2. Affordable suburbs revealed: These suburbs, some even just 10km from the CBD, offer affordability, based on buyers allocating 25% of their pre-tax income to mortgage repayments.
    3. Superannuation for first home: Soon, first-home buyers can save their home deposit using their superannuation fund, with up to $15K in voluntary contributions eligible for withdrawals.
    4. Tax cuts solution to housing crisis: Reducing taxes on home building is seen as a crucial step to address Australia’s housing crisis, according to HIA’s Chief Economist, Tim Reardon.
    5. Home financing hotspots: Queensland leads home loan activity, surpassing all other states in owner-occupier loans in the past quarter. The value of home loans in Queensland is up by 21.1%.

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Wealth Street: Luke Burgess

"Demand for housing is extremely strong, fuelled in large part by population growth."

Gavin Hulcombe

Managing Director, Herron Todd White Brisbane
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