Double-digit rates of capital growth have already been produced over the last 6-months. With housing supply listings reducing and real estate moving faster than Usain Bolt, the property boom is gaining speed.
The second half of the 2023 calendar year has seen records smashed in suburbs across the country.
Some people are scratching their head in amazement and others are living in denial that property markets across Australia are booming at a time when interest rates have increased.
They shouldn’t be surprised. History is littered with instances of situations just like this.
Housing will never go out of fashion – it is as essential as water.
Right now, and for quite some time yet, there remains a significant shortage of housing available to buy and to rent.
When supply is so tight, fewer buyers are needed to create upward pressure on prices.
Intelligent households who have financial capacity are actively seizing the moment.
Over the last 6-months to the end of October, property markets have already boomed in Sydney (11.4 percent increase in median house value), Perth (10.2 percent), Brisbane (10.1 percent) and Adelaide (8 percent). Extraordinary growth!
A solid recovery is underway in Melbourne (3.4 percent) and Hobart (2 percent), while moderate growth – but growth nonetheless – was produced in Canberra 1.6 percent and Darwin (0.4 percent).
A review of real estate data for the property markets of Australia’s 400 regional locations confirms other anecdotal evidence that records are being broken in large parts of Queensland, South Australia, Western Australia and New South Wales.
Bearing in mind that a ‘property boom’ is defined by 8 percent capital growth in a year, below are samples of locations that recently produced quarterly growth of 2+ percent (in alphabetical order).
- Queensland: Bundaberg, Gatton, Gold Coast, Gympie, Hervey Bay, Maryborough, Rockhampton, Warwick, Toowoomba
- South Australia: Barossa, Goolwa, Hahndorf, Mount Barker, Mount Gambier, Port Lincoln, Port Pirie, Victor Harbor, Whyalla
- Western Australia: Bunbury, Esperance, Mandurah, Port Hedland
- New South Wales: Bathurst, Muswellbrook, Narrabri, Newcastle, Tamworth, Tweed, Wagga Wagga
Tighter supply to come
At a national level, the strong rates of capital growth in recent years are a reflection of tightening of the gap between the volume of properties listed for sale (supply) and the volume of active buyers (demand).
The tightening commenced in H2 2019 and peaked throughout 2021 (despite declining population growth).
The RBA cash rate increased in 2022 (from 0.1 percent to 3.1 percent) and again in 2023 (to 4.35 percent). The initial rate hikes significantly jolted confidence (refer green columns in H2 2022 below) but did not have a material impact on property listing volumes (supply).
As explained a couple of weeks ago, supply volumes are expected to dip significantly lower in December-January, thereby creating a pressure barometer which typically produces annualised rates of capital growth in the vicinity of 20 percent.
Propertyology measures pressure within a property market in a variety of ways. One such example is the average time that it takes for properties to sell, including the metric trendline in each township.
- Adelaide: suburb records are getting smashed every week in the Adelaide. Municipalities with the shortest days-om-market include Marion (32-days), Onkaparinga, Gawler and Tea Tree Gully.
- Regional SA: more buyers than properties is resulting in rapid real estate sales in Adelaide Hills (34-days), Mount Barker (35-days), Port Lincoln (39-days) and Murray Bridge.
- Brisbane: one of the tightest pockets is Bray Park (17-days). Generally speaking, the pressure is highest within the belt which is between 5 and 10 kilometres from the CBD, including Kedron (29-days), Mitchelton, Kelvin Grove, Clayfield and Holland Park.
- Regional QLD: properties are selling in less than 25-days in Cairns, Townsville, Toowoomba, Bundaberg and Rockhampton [refer internal migration patterns]
- Sydney: conditions are segmented in Australia’s biggest city. From the more affordable municipalities such as Penrith (20-days), Blacktown (25-days) and Camden (24-days), to Parramatta (30-days) and Strathfield (39-days) in the mid-west, Hornsby (30-days) in the north. Conversely, notable slowdowns are evident in Hawkesbury (51-days), Ryde and Wollindilly.
- Regional NSW: agents in beautiful Albury (39-days) have reported $1 million+ sales, while Dubbo, Griffith, Newcastle and Wollongong are all moving at a faster clip than 40-days.
- Perth: after producing zero capital growth over 14-years to the end of 2020, Perth is now booming. Some of the tightest pockets are middle ring municipalities including Gosnells (13-days), Melville, Fremantle and Nedlands 21-days.
- Regional WA: fast moving regional cities include Albany (21-days), Busselton (23-days), Esperance, Mandurah, and Bunbury.
- Melbourne: the eastern municipalities are moving the fastest, including Frankston (24-days), Glen Eira, Knox, Stonnington, Boroondara and Bayside. In Melbourne’s west, Maribyrnong (41-days) and Hobsons Bay (37-days) are firming up.
- Regional VIC: market conditions are brisk in Mildura (23-days), Horsham (28-days), Warrnambool and Wodonga.
- Regional TAS: real estate in the stunning Treasure Island of Tasmania is selling within 40-days in Burnie, Devonport, Launceston (32-days), Meander Valley and Central Coast.
Last but not least, the evidence confirms that buyer activity / demand is (once again) making the doomsayers of the world look particularly silly. The pace is accelerating.
Comparing apples with apples, the above chart confirms that the volume of real estate transactions across Australia during each August for the 5-years to 2020 was consistently around 32,000 for the month. It then went through the roof to 41,609 in August 2021 (with declining population).
Multiple interest rate rises occurred in the months directly prior to August 2022 and August 2023, yet buyer activity was 20 percent higher than the historical ‘norm’. Boom!
A full-house labour market, record high levels of household equity, record high wage growth and positive people with a drive to pursue important life goals is a powerful combination. Frankly, it is something to be proud about.
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