Past, present & future: Australia’s property
markets in review

The last 12 to 18 months have challenged the way we, as individuals, as businesses, as an economy, function. The monumental global event we came to know as the GFC has driven positive change for many, while for others it has meant ruin.

In understanding where we are headed and what to expect from Australia’s property markets in 2012, it is beneficial to review where we have been.

As Reserve Bank Governor Glenn Stevens put it, we were faced with an emergency and we had to take emergency action. Interest rates were reduced by 4.25 basis points to the lowest cash rate in Australia in almost 50 years. The response to this was overwhelming leading to the beginning of a recovery in national property markets in early 2009.

The cuts were soon followed by the Federal Government’s stimulus scheme offering incentives including cash handouts, assistance to first home buyers and major government spending on infrastructure, schools and public housing.

Despite early criticism of the stimulus package, confidence quickly returned led by first home buyers attracted by a significant improvement in housing affordability. As the scheme gained momentum, first home buyers grew to represent almost 30% of all new owner occupied housing finance commitments, up from a modest 17% only 2 years earlier.

By March 2009 prices had stabilised, margin calls at the top end had abated and investors and ‘upgraders’ showed renewed interest in the property markets.

In the present quarter housing affordability in most of Australia’s capital cities is nearing the best levels in more than 15 years. This together with strong population growth, an undersupply of housing and rising interest from investors will continue to drive the market nationally.

Australia’s population, currently estimated to be more than 22 million, is growing at a rate of 2.1%, this figure representing the fastest population growth since the 1950’s. According to forecasts, if current growth rates continue Australia’s population will reach 35 million by 2040 . This forecast growth will further exacerbate the national housing shortage.

Vacancy rates around the country remain low; 1.2% in Sydney, 1.4% in Melbourne and 2.6% in Brisbane, and they
will not improve until more housing stock is created. Until this occurs, rental growth will continue in the capital cities. Last year rental growth in Melbourne was 6%. These conditions are particularly appealing to investors attracted by the yield/interest rate differential, which has narrowed to less than 1.5% in many cases, making many investment properties a prospect for positive gearing.

New vehicles such as self managed superfunds, which are being opened in record numbers, are also attracting residential investment with new investment products now making it more attractive to gear self managed super fund investments.

So what does this all mean for Australia’s property markets? According to BIS Shrapnel, over the next 12 months property is set to grow with the strongest growth expected in those markets offering the best affordability. Adelaide tops this list with a total forecast median house price growth of 23%, followed by Sydney with 21% and Melbourne with 19%. Growth in both Brisbane and Hobart is anticipated to be more subdued with a modest 15% growth rate while the worst performers are expected to be Perth and Canberra at 12% growth over the next three years. 

WBP News: Issue 27 provides commentary about property markets around the country and includes interesting information about the commercial markets, Owners Corporation and topical articles.

Click to download WBP News Issue 27 - Spring 2009