Residential property prices in Australia are determined by supply and demand...
And, in recent years the demand has been strong. This demand has been driven by a huge surge in population growth, including the biggest increase in in-bound migration in history.
In some parts of the country, governments have increased land supply and rezoned land for housing. As a result dwelling starts are running above long-term averages.
But in other parts of the country, supply – new dwelling construction – has not kept pace. This has been mainly in NSW and Queensland.
And in Queensland building approvals have been weak. Approvals slumped by 15.9% in January alone, although it is expected that there will have been a modest lift of 4 per cent in the month of February.
According to new figures released by The Australian Bureau of Statistics a chronic undersupply of new housing is looming in the sunshine state.
Recently released information shows that there has been a 26 per cent fall in building approvals compared to the same period last year.
The Housing Industry of Australia has also warned that the situation could become even worse as the figures begin to take into account the impact of the recent floods and cyclones.
The HIA has reported that new home construction figures for Queensland could be as low as 21,000 for the coming year – a 15 year low when 40,000 to 45,000 homes are needed to be built each year to meet demand.
Capital City Outlook
Melbourne and Sydney will be among the best investment destinations for capital growth over the next five years, according to a new survey.
A Metropole Property Strategists' latest survey of 2,700 investors has highlighted the two cities as investors' preferred choice for growth potential in the medium term, with 26 per cent of respondents looking to Melbourne and 25 per cent leaning towards Sydney.
It is reported that many Sydney investors feel confident that a change of government will be good for the property market and is likely to renew confidence.
Brisbane was selected as the third most popular investment destination, with 17 per cent of respondents choosing it as their number one pick for capital growth.
This was seen as a promising sign that property investors are looking beyond the recent natural disasters and feel confident about investing in Queensland.
The survey also revealed that while two-thirds of those surveyed believed that the property market would continue through a period of consolidation, 64 per cent were still planning to buy an investment property this year.
Sense of urgency for first home buyers.
A recent survey has revealed that rising rents are the motivation behind more than 50 per cent of those surveyed wanting to buy in the next two years.
The Mortgage Choice Future First Homebuyer Survey revealed potential buyers were also keen to set themselves up for the future.
The biggest concern among those surveyed was the effect that increasing housing prices would have on their ability to enter the market. It seems that this is creating a sense of urgency with many thinking that it was time to seriously consider making a move or they may be left behind.
Many are thinking they need to get in soon or they may not ever be able to afford the type of home that they would prefer.
The rental market will also start to come under increased upward pressure due to the lack of new housing construction.
Rental vacancy rates remain tight
Rental vacancies fell Australia-wide in the month of February.
New figures from SQM Research have revealed that the national average vacancy rate had fallen to just 1.7 per cent in February, down from 1.8 per cent the previous month.
Canberra had the lowest vacancy rate at 0.4%, and Melbourne the highest at 2.4%
And, in recent years the demand has been strong. This demand has been driven by a huge surge in population growth, including the biggest increase in in-bound migration in history.
In some parts of the country, governments have increased land supply and rezoned land for housing. As a result dwelling starts are running above long-term averages.
But in other parts of the country, supply – new dwelling construction – has not kept pace. This has been mainly in NSW and Queensland.
And in Queensland building approvals have been weak. Approvals slumped by 15.9% in January alone, although it is expected that there will have been a modest lift of 4 per cent in the month of February.
According to new figures released by The Australian Bureau of Statistics a chronic undersupply of new housing is looming in the sunshine state.
Recently released information shows that there has been a 26 per cent fall in building approvals compared to the same period last year.
The Housing Industry of Australia has also warned that the situation could become even worse as the figures begin to take into account the impact of the recent floods and cyclones.
The HIA has reported that new home construction figures for Queensland could be as low as 21,000 for the coming year – a 15 year low when 40,000 to 45,000 homes are needed to be built each year to meet demand.
Capital City Outlook
Melbourne and Sydney will be among the best investment destinations for capital growth over the next five years, according to a new survey.
A Metropole Property Strategists' latest survey of 2,700 investors has highlighted the two cities as investors' preferred choice for growth potential in the medium term, with 26 per cent of respondents looking to Melbourne and 25 per cent leaning towards Sydney.
It is reported that many Sydney investors feel confident that a change of government will be good for the property market and is likely to renew confidence.
Brisbane was selected as the third most popular investment destination, with 17 per cent of respondents choosing it as their number one pick for capital growth.
This was seen as a promising sign that property investors are looking beyond the recent natural disasters and feel confident about investing in Queensland.
The survey also revealed that while two-thirds of those surveyed believed that the property market would continue through a period of consolidation, 64 per cent were still planning to buy an investment property this year.
Sense of urgency for first home buyers.
A recent survey has revealed that rising rents are the motivation behind more than 50 per cent of those surveyed wanting to buy in the next two years.
The Mortgage Choice Future First Homebuyer Survey revealed potential buyers were also keen to set themselves up for the future.
The biggest concern among those surveyed was the effect that increasing housing prices would have on their ability to enter the market. It seems that this is creating a sense of urgency with many thinking that it was time to seriously consider making a move or they may be left behind.
Many are thinking they need to get in soon or they may not ever be able to afford the type of home that they would prefer.
The rental market will also start to come under increased upward pressure due to the lack of new housing construction.
Rental vacancy rates remain tight
Rental vacancies fell Australia-wide in the month of February.
New figures from SQM Research have revealed that the national average vacancy rate had fallen to just 1.7 per cent in February, down from 1.8 per cent the previous month.
Canberra had the lowest vacancy rate at 0.4%, and Melbourne the highest at 2.4%
Statistics reveal an ongoing tight rental market nationwide, with some cities experiencing tighter markets than others resulting in higher than average rental growth per annum.
This is the case in Sydney, where rents have grown on a compounded basis by 8.8% per annum for the past five years.
This implies that again this year we will see rents grow faster than the rate of inflation as an undersupply of rental properties and increasing demand due to affordability exerts pressure on the rental market.
It's essential to have long-term investment views
When it comes to residential property investment you can be sure of one thing. It is not a get rich quick scheme, it is a long-term proposition.
The property market can take from around seven to 10 years to move through a full cycle.
This can include periods of low capital growth/high rental yield to high growth/low yield and back again.
Despite this, many property investors choose locations and property styles with little potential to survive and thrive throughout market fluctuations.
Some investors choose locations that lack the long-term underlying demand to drive capital growth, while others choose property styles that don't reflect trends in the way people want to live.
In other words, the property investment decisions that look good today may not prove so attractive in five, 10 or 20 years. It's essential to understand the nature of long-term economic and demographic trends, then select assets accordingly.
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