Real estate markets across Australia remain busy, with solid price outcomes, with a couple of notable exceptions.
While media headlines have suggested that market decline and falling prices are widespread, our research shows this is not the case.
Our latest quarterly analysis of sales activity shows that most capital cities and most major regional markets continue to deliver busy markets with little evidence of price decline.
Our examination of all the price data that’s available from multiple research sources indicates that there are actually very few markets where prices are falling.
Most market jurisdictions still have rising prices, though not at the same rates of growth as in 2021.
The most important and relevant data for property investors relates to vacancy rates and rental growth – and these are the strongest we have observed.
The national average vacancy rate, according to both Domain and SQM Research, is 1% – but most postcodes across Australia have vacancies well below that number, which depicts a rental shortage crisis.
It’s never been harder for prospective tenants to find a rental property and the serious shortage means rents are rising.
In the capital cities, house rents are up 15% in annual terms while unit rents have increased 17%, says SQM Research.
This makes ugly reading for people who rent – but it presents an attractive proposition for investors, because increased rental yields can compensate for rising interest rates.
Now, vacancy rates are likely to continue falling for a host of reasons, including …
- International borders are open, bringing the return of migrants and overseas students
- The Federal Government is planning to lift migration numbers to deal with worker shortages throughout the national economy
- No policies have been announced by Federal or State politicians to deal with the shortage of rental properties
- Many major developments have been deferred or cancelled by developers because rising construction costs plus shortages of materials and tradespeople make them unviable in the current climate
Everything points to a market where investors are in a position of strength.
In addition, there continues to be price growth in most locations throughout the nation.
An analysis by experienced real estate economist Nerida Conisbee, published in August 2022, found that only 1.5% of suburbs had experienced annual price decline. This aligns with our own analysis of the available price data.
The latest price report from SQM Research, published on 23 August, indicates that house prices remain considerably higher than a year ago – nationally and in all eight capital cities.
In the past month, house prices have risen nationally, though only marginally, and all eight capital cities have had monthly growth in either house prices or apartment prices – or both, in the case of Adelaide, Perth and Darwin.
Against that background, we have considered a number of key market factors in considering choices for our new edition of our most popular report, the National Top 10 Best Buys report.
Those factors include the following:-
1. The strongest markets in most cities are the ones that offer affordability, including outer-ring housing precincts and well-located apartment markets
2. The Exodus to Affordable Lifestyle trend continues to be a powerful force
3. Infrastructure spending remains a major influence on residential property markets
4. Locations that offer above-average rental yields are increasingly sought-after
Accordingly, the new edition of Best Buys places emphasis on locations that offer a degree of affordability, have lifestyle factors, low vacancies and the potential for above-average rental returns.
It also features locations where infrastructure spending is likely to energise local economies and create jobs, with consequent strong demand for residential property.
So the Top 10 provides a balance between affordable locations in capital cities with growth potential and regional markets which are poised to out-perform.
The key message, overall, is that investors looking to buy well in locations where rents and yields are rising – and with the potential for future capital growth – have plenty of excellent options around Australia.
