Australian Property Market Shows Resilience Amidst Economic Challenges

Despite ongoing economic challenges, the Australian property market continues to exhibit remarkable resilience, with house prices climbing for the sixth consecutive quarter. This trend was highlighted in a recent report by Domain, which noted record prices in Sydney, Brisbane, Adelaide, and Perth.

Dr. Nicola Powell, Domain’s chief of research and economics, expressed confidence in the market’s strength. “The housing market remains resilient despite low consumer sentiment, economic pressures, and high interest rates,” she stated. The market’s buoyancy is partly due to existing homeowners leveraging their property assets and significant parental contributions, commonly referred to as the ‘bank of mum and dad’. “These factors are likely to become stronger due to persistent price growth,” Dr. Powell added.

However, the supply of housing remains a significant issue. “Supply still remains constrained overall, weighed against a surge in demand from strong population growth and a tight rental market,” Dr. Powell explained. This scarcity of available homes continues to fuel price increases.

Adding to the complexity, Tom Kennedy, a researcher at JP Morgan, pointed out discrepancies in housing supply data. A recent note highlighted a significant gap between new house commencements and completions. “The [2020] surge in commencements was expected to lead an upturn in new dwelling completions,” Kennedy remarked. “To date, this dynamic hasn’t played out, with completions remaining low in the range.”

The growth rate of property prices, however, is showing signs of slowing. While house and unit prices rose for the sixth and fifth straight quarters respectively, the pace of this growth is decelerating compared to the previous year. “The slowdown is more pronounced for units, which grew at a rate more than four times slower than the previous quarter, marking the weakest outcome since early 2023,” the Domain report indicated.

This nuanced view of the Australian property market underscores the complexity of factors influencing real estate prices—from economic pressures and market dynamics to issues within the construction industry. As the market navigates these challenges, the resilience of property prices continues to provide a silver lining for sellers and homeowners.

References:

https://www.abc.net.au/news/2024-07-25/property-prices-remain-strong/104136878