Market Update: Boom Conditions Ahead
Australia’s property market is heating up, with boom-like conditions already emerging in selective locations. Over the next 6-12 months, these conditions are expected to gain momentum, with key locations likely experiencing growth of 30-50% over the coming 2-3 years.
Market Update - August 2024:
Capital Growth and Boom Conditions Ahead
Australia’s property market is heating up, with boom-like conditions already emerging in selective locations. Over the next 6-12 months, these conditions are expected to gain momentum, with some locations likely experiencing growth of 30-50% over the next 2-3 years. These markets present fierce competition among buyers, driven by imbalances between supply and demand. As interest rates start to ease and pent-up demand is released, this upward trend is likely to intensify.
Demand Growth Drivers: Confidence, Cash, and a Competitive Market
Several key trends are fuelling demand in today’s property market:
Improved Financial Security: Over the last two years, strong job growth has bolstered financial security for many Australians. The resulting boost in cash savings has given people the confidence and resources to invest in property.
Economic Growth from Large-Scale Projects: Massive multi-billion dollar public and private investment projects across key regions are driving job creation and salary increases. As local economies thrive, people are feeling more secure in their financial futures and are increasingly looking to enter the property market.
Population Growth: Record levels of internal migration and external immigration are fuelling population growth, which is putting pressure on local property markets. The growing number of buyers competing for limited stock is pushing prices higher in many areas.
Supply Constraints: Scarcity and Rising Costs
On the supply side, a variety of factors are contributing to the limited availability of properties:
Shortage of Listings: The number of properties available for sale and rent is 40% lower than five years ago. With fewer options available, competition is fierce, leading to higher prices.
Increased Construction Costs: The cost of building has risen by more than 25% compared to pre-Covid levels, driven by a scarcity of labour & tradespeople and rising prices for key materials like copper, which is in high demand due to electrification efforts. High interest rates have further squeezed profit margins for builders, causing delays in new projects. This is likely to worsen the shortage of available housing over the coming years.
Future Cost Increases: As construction costs continue to rise, building a new home will become more expensive. This will likely drive up demand—and prices—for established properties as buyers seek more affordable alternatives to new homes.
Key Locations Primed for Growth: Where to Invest Next
As Australia’s property market gears up for significant growth, certain locations stand out due to favorable economic conditions, ongoing public and private investments, and a tightening supply of housing. Here’s a look at four markets where these factors combine to create strong growth prospects:
Perth: Scarcity Meets Economic Revival: Perth’s property market continues to shine, with the number of listings remaining low compared to five years ago and current stock levels significantly constrained. This shortage, coupled with a booming local economy driven by the mining and resources sectors, is pushing prices upward. The city is also benefitting from over $8 billion in public and private infrastructure projects, including the METRONET rail extension and major urban renewal initiatives. Additionally, the AUKUS defense project, focused on constructing and maintaining nuclear-powered submarines, is set to inject $10 billion into the local economy over the next 10 years, creating thousands of jobs and enhancing Perth’s position as a critical defense hub. With such substantial investments and strong population growth from interstate migration, Perth is primed for significant capital growth as competition for limited housing intensifies.
Brisbane: Infrastructure Investments and Population Growth: Brisbane is experiencing a substantial drop in available listings compared to five years ago, creating intense competition among buyers. The city’s growth is fueled by over $15 billion in infrastructure investments, including the Cross River Rail project and preparations for the 2032 Olympics. These projects are transforming the city’s landscape, creating thousands of jobs and boosting local economic activity. As Brisbane continues to attract interstate migrants, the limited housing supply is expected to push prices higher, making the city a key market for investors over the next few years.
Adelaide: Tight Listings and Economic Transformation: Adelaide’s property market is characterized by a severe shortage of new listings, with available stock levels much lower than five years ago. This scarcity is compounded by significant investments in technology, defense, and renewable energy, totaling over $7 billion. Key projects include the Osborne naval shipbuilding program and investments in green energy infrastructure, both of which are driving job creation and economic growth. As Adelaide’s economy diversifies and population growth remains steady, the constrained supply of housing is likely to lead to consistent capital growth in the region.
Regional Queensland: Emerging Economic Growth Centers: In Regional Queensland, key growth centers such as Mackay, Townsville, and Rockhampton are experiencing a significant reduction in available listings compared to five years ago. These areas are seeing more than $20 billion in combined public and private investments across sectors like agriculture, mining, and renewable energy. Major projects include the expansion of the Adani Carmichael coal mine and investments in solar and wind farms, driving economic growth and creating employment opportunities. As more people move to these regions for work and lifestyle reasons, the tight housing supply is expected to push property prices higher, making these regional hubs prime locations for future growth.
In each of these locations, a combination of reduced listings, economic drivers, and large-scale investments is setting the stage for considerable growth. Investors focusing on these areas can expect to benefit from both rising rental yields and capital appreciation as demand continues to outpace supply.
Conclusion: Select Property Markets are set for significant growth
The conditions driving Australia’s property market boom are only strengthening. In select areas where supply remains tight and demand continues to grow, price increases of 30-50% over the next 2-3 years are expected. The anticipated reduction in interest rates will boost borrowing capacity, drawing even more buyers into the market and intensifying competition. The fear of missing out (FOMO) is spreading, pushing buyers to act quickly before prices climb further.
For investors, the shortage of rental properties presents another strong incentive to enter the market. Rents are rising due to a lack of new housing developments, the growth of short-term rentals like Airbnb, and restrictive government policies. Investors stand to benefit from both rising rental yields and capital growth in this environment.
At Start2Invest, we predict that the right locations with favourable growth drivers and supply-demand dynamics will see significant price growth over the next 2-3 years. If you’re considering entering the property market, now is the time to act before the next wave of price increases takes hold.
Reach out to us for a chat on how we can help you become a successful property investor.
Disclaimer
This article is intended to provide general information only and does not constitute financial, tax, or legal advice. We recommend seeking independent advice from qualified professionals to address your particular circumstances and ensure compliance with all relevant laws and regulations. Investing in property involves risks, and past performance is not indicative of future results. Always conduct thorough research and consider your financial position before making investment decisions.
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