- Experts predict a 7% decline in house values, with the losses to be recovered by 2025
- The report highlights an increase in the time taken to sell homes
- As immigration increases, the demand for rental homes is expected to persist
Australia’s property market is set to rebound in 2024 and 2025, while rental markets will remain under pressure according to a new report.
In Knight Frank’s, ‘Australian Residential Review Q1 2023’, property values across the nation will decline 7% by the end of 2023, followed by growth of 4% and 6% in the following two years.
According to the report:
“Residential rental vacancy is at 1.7% and trending significantly below equilibrium of 3%. This resulted in 14% rental growth throughout 2022, to average $525 rent per week in Australia.”
Knight Frank, Australian Residential Review Q1 2023
In the year to December 2022, residential values across Australia fell by 4.9%, with a median value of $897,500. Over the past year, values were lower in cities, with houses witnessing a 5.0% drop and apartments a 4.3% decline. However, houses in regional areas saw values rise by 13.1%.
The strongest growth was observed in greater city apartments (18%) and houses (13%), while regional homes grew by 11%.
Across the country, values fell by the most in Sydney (-10.9%) and Melbourne (-5.6%), while prices ended the year substantially higher in Adelaide (10.2%).
Across regional Australia, values were higher across the board, led by South Australia which saw record growth of 22.4%.
The report also highlighted a 22% decline in Australia’s mainstream residential sales volume in 2022. The time taken to sell a home in Australia has increased by 4 days, averaging 68 days on the market. It now takes 78 days to sell an apartment, while houses in regional areas take 65 days, and houses in cities, 64 days.
A growing population
Pressure on rental markets is will likely be pushed up by a rising population. Among the factors: the reopening of the country’s borders and the government’s immigration push.
Australia’s total population grew by 0.2% to 25.7 million in the year to June 2021, with projections estimating a higher growth of 1.4% per annum by 2041.
Interest rates rise
The Reserve Bank of Australia announced its tenth consecutive cash rate rise since May 2022 earlier this month. Mortgage rates have passed on the rises, with new household loan commitments trending downwards due to lowered borrowing capacity and falling housing market sentiment.
As the Australian economy remains relatively solid despite ongoing global uncertainty, close to full employment continues.
Developers and private owners submitting proposed new dwellings to councils for building approval remain lower than in past years. This, coupled with the current undersupply of rental homes, has led to long-term repercussions in the market.
Building approvals in the same quarter fell by 7.8%, with 27,594 houses and 18,172 apartments approved. The weighted average total residential rental vacancy for Australian capital cities remained at 1.7% in December 2022.
Knight Frank’s report said population growth and immigration will continue to drive demand across Australia’s residential markets. The ongoing chronic undersupply of rental homes and the shift in investment perspectives will also keep on shaping the market dynamics in the coming years
