WEEKLY E-MAIL

2 October 2024

THE STATE OF HOUSING IN AUSTRALIA

By Sam Eley

CoreLogic, the leading property data provider in Australia and New Zealand, recently released some interesting statistics around house price growth across Australia’s major cities and what is driving them.

Not surprisingly, the ultra-low interest rate environment during COVID, and social impacts of the pandemic, has led to a dramatic shift in the median dwelling value changes across Australia:

However, for Melbourne, the median dwelling value has stalled in comparison to the other major capital cities. The difference between Sydney and Melbourne’s dwelling value now sits at 52.1% to the end of August 2024, the largest differential between Australia’s two largest cities since June 1999.

When looking at the cumulative change in dwelling values over the last five years, the stark differences become more apparent:

Melbourne house prices rose just 19.8% over the past five years, in comparison to Perth (+76.4%), Brisbane (+71.5%), Adelaide (+70.8%) and Sydney (+43.1%) over the same time period. There are a number of factors at play here as to why this is the case:

• Demographic patterns and migration trends: Melbourne was the city most impacted through COVID with extended lockdowns, which led to departures out of the state and predominantly into Brisbane, Perth and Adelaide. SA and WA saw positive net migration trends through the pandemic for the first time in many years.
• New Housing Supply: Victoria has seen far more dwelling completions than any other state or territory in the past decade, particularly of units.
• Housing Affordability: Brisbane, Adelaide and Perth house prices were far less stretched than Sydney and Melbourne leading into the pandemic, due to a long period where values didn’t rise as high during the growth years prior to the onset of COVID.
• Composition of Housing: Melbourne has densified more substantially and rapidly than the other mid-sized capital cities. The median dwelling value measures the 50th percentile valuation estimate of all houses and units combined. Given Melbourne’s density and larger proportion of units to the other mid-sized cities, this compositional difference in housing types heavily influences the median dwelling value and measures of housing affordability.
  
  As can be seen above, 33% of Melbourne’s dwellings are units, in comparison to 25% for Brisbane and 16% in both Adelaide and Perth.
• Policy Changes: Victoria introduced the 10-year COVID Debt Repayment Plan in 2023, which resulted in a number of significant changes to land tax. In addition, for those who own investment properties and are renting them out for short stays, a 7.5% short-stay levy was also introduced. We have seen many clients re-considering their investment properties as a result of these changes.
  
  With respect to affordability of housing, there are a number of initiatives being researched and debated at present; will the Government make changes to negative gearing and capital gains tax concessions? How does the Government increase supply of housing to moderate prices? Will Super Funds be called upon to assist in developing more housing to assist with this supply deficit? Will APRA reduce the responsible lending standards to increase borrowing capacity to provide home buyers greater leverage into the market?
  
  Until larger tax reform occurs or supply is drastically increased, it remains likely that affordability will continue to be an issue for new entrants into the housing market.

Sam Eley
Senior Financial Planner
Authorised Representative No. 1234685

If you have any questions or comments, please email me at sam@gfmwealth.com.au

Disclaimer: This document is not an offer or invitation to any person to buy or sell any interest in or deposit funds with any institution.  The information here is of a generic nature, and does not take into account your investment objectives or financial needs.  No person should act upon this information without firstly seeking competent, professional advice specifically relating to their own particular situation.

Copyright: © This publication is copyright. Subject to the conditions prescribed under the Copyright Act, no part of it may, in any form, or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced or transmitted without permission. Enquiries should be addressed to GFM Wealth Advisory.