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As we enter the final month of the year, it appears the heat is coming out of the real-estate market, notably in Melbourne and Sydney. Indeed, in Melbourne, the rate of growth during the month of November was slightly negative (-0.1%) the first negative monthly reading in 9 months. Meanwhile the rate of growth in Brisbane remained steady (1.3%)
Despite the current weakening in prices, it’s worth taking stock of the year that’s been. First and foremost, most major predictions on the property market in 2023, namely those led by bank economists have been wildly off the mark. The below is a small snippet of countless headlines which were prominent 12 months ago, predicting sharp declines in 2023. Nationally, prices are up more than 7% in the last year and more than 10% in both Sydney and Brisbane.
The resilience of the property market, despite rising rates and comparatively against the ASX (-2.3% over the same period), has caught most pundits off guard.
As we have written extensively over the year, the primary drivers of this have been low stock volumes (until recently approximately 20% below long-term average) against a backdrop of strong demand driven largely by surging population growth (see chart below) and robust economic conditions, including unemployment remaining under 4%.
Source: Australian Bureau of Statistics
Taking a slightly longer time horizon over the last four years (since before the onset of the pandemic), what becomes most apparent in the three eastern seaboard markets is the relative over-performance of Brisbane relative to Melbourne, with the Brisbane market up nearly 50% over this period vs. 12% in Melbourne. This pattern has been consistent over the last four years and even more recently, Brisbane is now well ahead of its most recent downturn whilst Melbourne has recovered only about 50% of its most recent downturn (see below)
Source: Corelogic
The rental market remains strong.
Rental markets remain extremely tight with Melbourne’s vacancy (0.8%) the lowest, while Sydney (1.2%) and Brisbane (1.3%) continue to record rates well below average levels. Rents have been rising at the national level since August 2020 (40 months), with the quarterly trend ratcheting higher over the past two months.
Looking at the same four year period referenced earlier, asking Median rents in Brisbane are approaching $600 per week, up from $400 per week before the onset of Covid. Rental price growth in Brisbane has therefore been at a similar pace to property prices, up approximately 50% over four years. In Melbourne rental prices have recovered from initial falls during the start of Covid (during 2020) from a bottom of $400 to a current median price of $540, so rental prices in Melbourne have increased considerably more than property prices over the last four years (23% vs. 12%).
Source: propic
In summary, 2023 has been a mixed year between cities in terms of price growth, but overall has delivered a positive recovery against the backdrop of a very strong rental market.
Looking to next year, it’s hard to see vacancy rates moving upwards any time soon given the subdued levels of new property completions, negative investor participation (i.e. more investors selling than buying) and continued new demand driven by strong net overseas migration.
In terms of property prices, it appears unlikely that the price appreciation seen this last year will be repeated in 2024. Louis Chirstopher, one of the more respected (and accurate!) property forecasters is predicting the property market to effectively be flat next year, except for Brisbane (see an extract of Loui’s recent predictions below).
With that said, predicting short-term movements in property prices is very difficult (just ask bank economists!). Further, Residential property, unlike many other asset classes, is usually held for the long-term and importantly the long-term fundamentals for good property remain as strong as ever. We have a saying that you can’t time the market, but you can ensure you buy a quality asset, whether purchasing directly or via our LongView Home Investment Fund.
Finally, I want to take this opportunity to thank you for entrusting us with your property needs in 2023. I hope you and your families have a merry and enjoyable holiday period and we look forward to working with you in 2024.
As we enter the final month of the year, it appears the heat is coming out of the real-estate market, notably in Melbourne and Sydney. Indeed, in Melbourne, the rate of growth during the month of November was slightly negative (-0.1%) the first negative monthly reading in 9 months. Meanwhile the rate of growth in Brisbane remained steady (1.3%)
Despite the current weakening in prices, it’s worth taking stock of the year that’s been. First and foremost, most major predictions on the property market in 2023, namely those led by bank economists have been wildly off the mark. The below is a small snippet of countless headlines which were prominent 12 months ago, predicting sharp declines in 2023. Nationally, prices are up more than 7% in the last year and more than 10% in both Sydney and Brisbane.
The resilience of the property market, despite rising rates and comparatively against the ASX (-2.3% over the same period), has caught most pundits off guard.
As we have written extensively over the year, the primary drivers of this have been low stock volumes (until recently approximately 20% below long-term average) against a backdrop of strong demand driven largely by surging population growth (see chart below) and robust economic conditions, including unemployment remaining under 4%.
Source: Australian Bureau of Statistics
Taking a slightly longer time horizon over the last four years (since before the onset of the pandemic), what becomes most apparent in the three eastern seaboard markets is the relative over-performance of Brisbane relative to Melbourne, with the Brisbane market up nearly 50% over this period vs. 12% in Melbourne. This pattern has been consistent over the last four years and even more recently, Brisbane is now well ahead of its most recent downturn whilst Melbourne has recovered only about 50% of its most recent downturn (see below)
Source: Corelogic
The rental market remains strong.
Rental markets remain extremely tight with Melbourne’s vacancy (0.8%) the lowest, while Sydney (1.2%) and Brisbane (1.3%) continue to record rates well below average levels. Rents have been rising at the national level since August 2020 (40 months), with the quarterly trend ratcheting higher over the past two months.
Looking at the same four year period referenced earlier, asking Median rents in Brisbane are approaching $600 per week, up from $400 per week before the onset of Covid. Rental price growth in Brisbane has therefore been at a similar pace to property prices, up approximately 50% over four years. In Melbourne rental prices have recovered from initial falls during the start of Covid (during 2020) from a bottom of $400 to a current median price of $540, so rental prices in Melbourne have increased considerably more than property prices over the last four years (23% vs. 12%).
Source: propic
In summary, 2023 has been a mixed year between cities in terms of price growth, but overall has delivered a positive recovery against the backdrop of a very strong rental market.
Looking to next year, it’s hard to see vacancy rates moving upwards any time soon given the subdued levels of new property completions, negative investor participation (i.e. more investors selling than buying) and continued new demand driven by strong net overseas migration.
In terms of property prices, it appears unlikely that the price appreciation seen this last year will be repeated in 2024. Louis Chirstopher, one of the more respected (and accurate!) property forecasters is predicting the property market to effectively be flat next year, except for Brisbane (see an extract of Loui’s recent predictions below).
With that said, predicting short-term movements in property prices is very difficult (just ask bank economists!). Further, Residential property, unlike many other asset classes, is usually held for the long-term and importantly the long-term fundamentals for good property remain as strong as ever. We have a saying that you can’t time the market, but you can ensure you buy a quality asset, whether purchasing directly or via our LongView Home Investment Fund.
Finally, I want to take this opportunity to thank you for entrusting us with your property needs in 2023. I hope you and your families have a merry and enjoyable holiday period and we look forward to working with you in 2024.
