By Rich Harvey, CEO & Founder, propertybuyer.com.au
New median price records were achieved in the September quarter according to the latest figures. Sydney, Brisbane, Adelaide and Perth house prices all reached a new peak level.
In the apartment market, new peaks were achieved in all capital cities except for Darwin and Melbourne.
However, the pace of price growth has slowed and will continue to slow while interest rates remain at the current levels. Cost of living increases have dented the borrowing power of home buyers and investors with many potential buyers sitting on the fence. This deceleration of price increases is simply a natural part of the property cycle. When affordability bites, buyers pull back and reassess their options.
In our own business, we have seen a consistent level of enquiry, but observed buyers are hesitant to pull the trigger on an immediate property search. It seems everyone is waiting for fair weather or writing in the sky to indicate the right time to buy.
The latest median house prices show Sydney has reached a record $1.65m, Brisbane $995k and amazingly, Adelaide at $973k. Perth’s hot market has driven prices to $895k, while Canberra is sitting at $1.08m, Hobart at $710k and Melbourne surprisingly sluggish at $1.02m.
The demand for prestige real estate in Brisbane remains robust, with affluent buyers attracted to the city’s high-end suburbs, which offer lifestyle benefits that are more affordable compared to Sydney and Melbourne. Suburbs like Ascot, New Farm, Hamilton, and Bulimba continue to dominate the upper end of the market, offering a mix of character homes, riverfront properties, and proximity to exclusive amenities such as private schools and boutique shopping districts.
The latest figures from the Australian Bureau of Statistics reveal a consumer price index (CPI) increase of just 2.8% over the year to September, down from 3.8% in June. This marks the lowest annual inflation rate since March 2021, with a quarterly rise of only 0.2% - a level not seen since June 2020 when COVID-19 was impacting economic conditions.
Despite the significant cooling in inflation, an interest rate cut is unlikely in the next three months as the Reserve Bank remains cautious about sustained economic stability and inflation management.
The higher cash rate has helped temper the rate of property price growth - but despite the higher interest rates, property prices are still rising, driven by a fundamental shortage of supply.
I’m predicting the first rate cut of 0.25% in either Feb or March 2025, followed by two more cuts later in the year. The timing might be slower than everyone wants. But the impact of each rate cut will be significant…
First rate cut will restore a little confidence.
Second rate cut will cement confidence.
Third rate cut will see the market re-accelerate.
Every rate cut takes up to 12 to 13 months to wash through the economy and will provide buyers with more borrowing power and mortgage affordability which drives property prices.
In August, just under 14,000 dwellings were approved. Unit building approvals are 37% below the long-term average, while houses are down 4% below the average.
With construction costs surging by 31% since September 2020 (ABS data), the Australian Government’s target to build 1.2 million homes over the next five years seems overly ambitious. Achieving this goal amidst high material costs and labour shortages presents substantial challenges, making it increasingly unlikely without significant shifts in the construction landscape, or targeted measures to increase land supply or change zoning densities.
This is one of the primary reasons I am excited to be an active property investor. Knowing that buying and holding high quality properties in top locations that will appreciate due to intractable supply constrictions, and deliver strong rental increases, helps me sleep well at night.
Auction clearance rates have dipped in recent weeks indicating buyer reluctance to overpay. Last weekend saw Sydney with 1307 auctions and a clearance rate of 65.2%, while Melbourne hosted a massive 1782 auctions clearing 65.1% (according to My Housing Market figures).
With higher interest rates hanging around in the months ahead, this is creating some areas of price softness in the market, particularly in Sydney and Melbourne. In speaking with many of the top agency heads and their key offices, they are not seeing the same volume of buyers that we saw during boom times. Many “price adjustments” are occurring and some difficult conversations are taking place with vendors to get some properties sold.
Smart buyers can now capitalise on realigned price expectations and get in ahead of the next property boom. For example, quality properties on Sydney’s Northern Beaches and Lower North Shore are still selling well, but instead of competing with 10 bidders, there are sometimes just 2 or 3 genuine bidders. In these circumstances, price records are not being set and often the reserve price needs to be adjusted during auctions.
This provides the opportunity for buyers that are ready to make a move to get into these more tightly held markets at prices that will look very attractive in 2 years’ time.
Similarly, the Melbourne market is providing a plethora of opportunities to secure established properties at good prices that will be primed for capital growth once the market resumes its growth cycle.
Brisbane is still performing well delivering both capital growth and strong yields for investors. The high rate of interstate migration, strong infrastructure growth and future Olympic construction will continue to drive higher demand for properties.
The Gold & Sunshine Coasts are providing sound lifestyle and investment opportunities for home buyers and investors alike. Strong population growth and affordability will underpin growth.
The NSW Central Coast and Newcastle have been, and will continue to be, solid performers. Within 1-2 hours drive of Sydney, these regions enjoy the ripple impact of growth from Sydney as first home buyers, investors, retirees, holiday buyers and sea change buyers drive demand.
Despite Adelaide’s recent dramatic jump in median price, there’s still room for more growth as its robust economy driven by education, healthcare and manufacturing will help drive employment opportunities. The strong rental market is making it attractive for investors looking for lower entry price points.
Finally, larger regionals towns such as Townsville, Mackay, Bundaberg, Airlie Beach, Rockhampton, Mandurah, Rockingham and Bunbury will also offer good opportunities for investors looking around the $500k price mark.
Wherever you are at in your property buying journey, the message is clear – In 2025, market conditions will be more favourable for borrowing and more buyers will be out in force. The opportunity to buy before the rush is available over the next three months.
Take advantage of current market conditions and secure your financial future. If you’d like to discuss your property plans and put ideas into action, please reach out today and send us your enquiry or call us on 1300 655 615. We’d be delighted to work with you.
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