Australian Property Market to Witness Continued Growth; Population Surge Could Boost Perth’s Commercial Sector

In a recent release, PropTrack’s Property Market Outlook for August 2023 has forecasted that national property prices could see an increase ranging between 2% and 5% by the end of the year. This follows a growth of 2.3% observed in the first half of 2023. “The property market has seen a turnaround this year with six consecutive months of property price growth,” stated Cameron Kusher, PropTrack’s director of economic research.

Notably, the market has displayed robustness despite challenges like rising interest rates and subdued wage growth. A major contributor to this trend appears to be the limited supply of available properties, intensifying buyer competition and propelling price growth. “We expect property prices to increase by up to 5% nationally over the remainder of 2023, with greater growth projected in the larger capital cities,” Kusher added.

While PropTrack’s report paints an optimistic picture for most of 2023, the horizon beyond seems cloudy. “The outlook for 2024 is much less clear… Interest rate changes act with a lag and, as such, the possible impact of higher repayments on these borrowers won’t be seen until 2024,” says Mr. Kusher. However, Rae Dufty-Jones, an economist from RPS Group, brings attention to the potential risk posed by the unemployment rate. She mentions, “Unemployment is the biggest risk to the housing market crashing because people will find a way to pay off housing with a job, but this becomes impossible without an income”.

Meanwhile, in the commercial property market, especially in Western Australia, there seems to be a potential booster waiting in the wings – population growth. Jeremy Robotham, Knight Frank’s managing director of WA, opines that an increase in the population would undoubtedly provide a major uplift to the sector. “Once the population in Western Australia starts to really grow, each of the real estate sectors will strengthen further,” he emphasized.

Robotham highlights the affordability of residential capital values in Western Australia and plentiful employment opportunities as significant draws for a burgeoning population. He also mentions that while expectations of China’s post-lockdown phase uplifting West Australian real estate markets haven’t entirely manifested, Perth boasts many positives, including a robust economy2. Vanessa Rader, Head of research at Ray White, concurs, pointing out that a more vibrant labor market could push Western Australia further ahead in terms of population and commercial sector growth.

In summary, while Australia’s property market continues to show resilience and potential for growth, the evolving dynamics of interest rates, unemployment, and regional population growth will play pivotal roles in shaping its trajectory in the coming years.

References:

“New report shows national property market increase to continue” by The Drum. https://www.abc.net.au/news/2023-08-03/national-property-prices-forecast-to-increase/102680278 

“Could a population boost help commercial property markets?” by Lucas Meyer. https://thepropertytribune.com.au/commercial-real-estate/population-growth-a-catalyst-for-boosting-perths-commercial-property-market/