Australian Property Market’s Rapid Growth Continues as Supply Struggles to Keep Up

The Australian property market is surging to new heights as the demand for residential dwellings consistently outpaces the supply, causing a significant spike in property prices across the country. In a recent report by CoreLogic, property values rose by 1.9 percent over the last quarter, highlighting a sustained uptrend from earlier in the year. “The value of the Australian property market is now three times that of the share market,” said Tim Lawless, CoreLogic’s head of research, emphasizing the enormous scale of the market.

Despite improvements in construction rates, with an annualized output of 210,800 new dwellings, it still falls short of the 240,000 homes needed annually to balance the market. Lawless pointed out, “That lack of available supply, against what seems to be quite high demand, is what’s pushing prices up.”

The escalating prices have effectively sidelined many median-income city dwellers from entering the property market. “When you look at how much income needs to be dedicated to servicing a mortgage in Sydney, you’re going to be spending about 60 percent of your gross income,” Lawless explained. The situation is now beyond the reach for many, making it impossible for households with a median income to afford a median-priced property.

Real estate agencies like Ray White are witnessing a boom in their business due to these trends. Vanessa Radar, Ray White’s head of research, stated, “Our prices have increased so therefore our returns are increasing in turn.” She also expressed concerns about balancing business growth with affordability for clients.

Amidst these challenges, there’s a glimmer of hope for future home buyers. Economists and market experts suggest that a potential stabilization or even a price correction might be on the horizon, though likely not for another 12 to 18 months. Blair Chapman, an economist at ANZ, advises potential buyers to adjust their expectations and consider starting with less ideal properties. “Don’t try to purchase your dream home first up—a lot of people set their expectations a little high,” he mentioned.

The government’s $32 billion Homes for Australia plan aims to address some of these issues, promising the construction of 30,000 social and affordable rental homes, and setting a national target of 1.2 million well-located homes to alleviate the ongoing stress in the property market.

As the Australian dream of homeownership becomes increasingly challenging, the property market’s future remains a critical topic for both economic analysts and potential homebuyers. The coming years will be crucial in determining whether these measures can effectively counteract the rapid growth and make homeownership accessible once more.

References:

https://www.abc.net.au/news/2024-06-12/house-price-growth-to-continue-corelogic-analysts/103964952