Over the past year, we've seen this divergence become even more pronounced, with some markets booming while others have struggled.
|
City |
Month |
Quarter |
Annual |
Total return |
Median value |
|
Sydney |
0.3% |
1.1% |
5.6% |
8.8% |
$1,174,867 |
|
Melbourne |
-0.4% |
-0.9% |
0.2% |
3.9% |
$781,949 |
|
Brisbane |
1.1% |
3.8% |
16.0% |
20.6% |
$873,987 |
|
Adelaide |
1.8% |
5.0% |
15.5% |
20.2% |
$776,597 |
|
Perth |
2.0% |
6.2% |
24.7% |
30.6% |
$773,335 |
|
Hobart |
-0.5% |
-0.8% |
-1.2% |
2.8% |
$646,863 |
|
Darwin |
-0.2% |
-0.3% |
2.3% |
8.8% |
$507,097 |
|
Canberra |
0.0% |
0.5% |
1.7% |
5.8% |
$870,910 |
|
Combined capitals |
0.5% |
1.8% |
7.9% |
11.8% |
$884,412 |
|
Combined regional |
0.4% |
1.3% |
6.9% |
11.6% |
$630,565 |
|
National |
0.5% |
1.7% |
7.6% |
11.8% |
$798,207 |
Understanding the reasons behind these disparities is key to making informed investment decisions in today's market.
So let's dive into the factors driving the varied performance across Australia's housing markets in 2024.
1. Economic fundamentals: local and national influences
The economic conditions that underpin each housing market are a significant driver of performance.
Australia's major cities-Sydney, Melbourne, Brisbane, Perth, and Adelaide-have all seen different economic trajectories over the past year, influenced by factors such as employment rates, wage growth, and the strength of local industries.
For instance, Brisbane and Perth have experienced robust economic growth, largely due to strong performance in sectors like construction and mining.
This economic strength has translated into increased demand for housing, pushing property values up.
In contrast, Sydney and Melbourne have faced more subdued growth, partly due to higher interest rates and a cooling in the tech and finance sectors, which have historically driven much of the demand in these cities.
For example, Melbourne has been Australia's strongest-performing housing market over the last four decades; however, over the last couple of years, it has underperformed.
In fact, over the last 12 months dwelling prices have been basically stagnant, while many other capital cities enjoyed double-digit capital growth.
The underperformance of Melbourne's residential property market can be attributed to several factors, but the root cause boils down to its current economic challenges.
2. Population growth and migration patterns
Population dynamics play a crucial role in shaping housing markets.
In recent years, Queensland has seen a surge in interstate migration, as Australians sought a more affordable lifestyle compared to the southern states.
This influx of residents has driven up demand for housing, particularly in Brisbane and the surrounding regions.
Conversely, Melbourne has seen a slower population growth rate, despite getting more of its fair share of international immigrants.
This initially started because of the prolonged lockdowns during the pandemic and has now been exacerbated by a shift in migration patterns with locals moving to sunny Queensland.
The slower growth has translated into a more tempered housing market compared to its peak years.
3. Supply and demand imbalances
The balance between supply and demand remains a fundamental driver of housing market performance.
Markets like Adelaide and Perth have experienced significant price growth due to a limited supply of new homes, which has been unable to keep up with increasing demand.
In these cities, tight supply conditions have created upward pressure on prices, even as the broader economic conditions have remained relatively stable.
In contrast, Sydney and Melbourne have seen a greater balance between supply and demand, particularly with an increase in apartment construction over the last few years.
This has somewhat dampened price growth, as buyers have more options to choose from.
However moving forward there is very little new construction occurring, particularly in the apartment sector and the supply/ demand imbalance will mean a continuing skyrocketing race and increase in property values.
4. Interest rates and affordability
Interest rates have been a central theme in 2024, with the Reserve Bank of Australia (RBA) maintaining high rates to combat inflation.
Higher interest rates have had a cooling effect on housing markets, particularly in more expensive cities like Sydney and Melbourne, where affordability was already stretched.
Regions like Brisbane and Perth, however, have remained relatively more affordable despite the rate hikes.
While this affordability has allowed these markets to maintain momentum, as both investors and homebuyers saw value in entering them despite the higher cost of borrowing, this affordability advantage has now disappeared.
In fact, today, Melbourne has a clear affordability advantage, being at the stage of its own property cycle, whereas Brisbane and Perth were three years ago.
5. Government policies and incentives
Government policies, including taxation and incentives for first-home buyers, continue to influence market dynamics.
For example, recent changes in stamp duty concessions in New South Wales have provided some relief for first-time buyers, helping to sustain demand in certain segments of the Sydney market.
In contrast, Victoria has seen less aggressive policy interventions, which, coupled with a more subdued economic environment, has resulted in a more modest market performance compared to the other states.
6. Regional vs. urban market dynamics
While Australia's major cities often dominate headlines, regional markets have also seen significant divergence.
Regional Queensland and Western Australia have benefited from lifestyle shifts, with many Australians opting for coastal or rural living post-pandemic.
These areas have seen strong price growth, driven by demand for more space and a different pace of life.
In contrast, some regional areas in New South Wales and Victoria have struggled due to a combination of factors including lower population growth, limited employment opportunities, and less attractive investment prospects.
7. Investor sentiment and market perception
Finally, investor sentiment has played a significant role in shaping market outcomes.
Markets perceived as having strong long-term potential-like Brisbane and Perth-have attracted more investor interest, which has helped sustain demand and support price growth.
Meanwhile, Sydney and Melbourne have seen a shift in investor sentiment, with some investors looking to offload properties due to concerns over rising interest rates and potential future regulation changes. This has contributed to a softer market in these cities.
At the same time, property investors are increasingly abandoning the Melbourne market, driven away by stricter residential tenancy legislation and higher land taxes.
Recent reforms in tenancy laws have tipped the balance heavily in favour of tenants, making it more challenging for landlords to manage their properties effectively.
These changes include mandatory minimum standards for rental properties and stricter eviction rules.
While these regulations aim to protect tenants, they have also increased the administrative burden and costs for landlords, making property investment less attractive.
In fact, many investors feel control is being taken away from them by government interference.
Additionally, the Victorian government's decision to hike land taxes has further compounded the woes of property investors.
The introduction of a higher land tax rate for properties valued over a certain threshold has significantly increased the holding costs for investors.
This has eroded their profit margins and forced many to reconsider the viability of their investments.
And let's not forget Victoria's absentee owner surcharges, stamp duty surcharges and vacant residential land taxes.
Combined with the impact of stricter tenancy laws, the increased financial burden from all these taxes has led to a growing exodus of property investors from Melbourne.
Conclusion
Australia's housing markets continue to perform differently due to a complex interplay of factors including economic conditions, population growth, supply and demand dynamics, and government policies.
While the property markets will create significant wealth for many Australians, statistics show that 50% of those who buy an investment property sell up in the first five years.
And of those who stay in the investment game, 92% never get past their first or second property.
That's because attaining wealth doesn't just happen; it's the result of a well-executed plan.
Planning is bringing the future into the present so you can do something about it now!
To make things clear...buying an investment property is NOT a strategy!
It's important to start with the end game in mind and understand what you need and what you want to achieve.
And then you have to build a plan, a strategy to get there.
The property you eventually buy will be the physical manifestation of a whole lot of decisions that you will make, and they must be made in the right order
That's because property investment is a process, not an event.
Photo by Lara Jameson via Pexels
