Australian Dream Drives House Prices Up
The RBA concedes interest rates and market choices are resulting in suburban sprawl.
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The concept of the Australian dream, to live in a house, is driving people further from city centres according to the Reserve Bank of Australia.
In a housing affordability inquiry, the central bank told a parliamentary committee looking at supply and pricing that “as populations increase and cities expand, some households will need to live further away from the centre of major cities and/or accept further increases in higher-density housing.”
It comes as last week the RBA told the inquiry that low interest rates are the primary driver of Australia’s property boom over dwelling supply issues.
Further, the RBA noted that buyers preferring houses over apartments and over the course of the pandemic regions over cities increases the difficulty of policy-making.
“The experience of lockdowns may also have made apartment living less attractive for some households, said the RBA.
“Some elements of the response to the pandemic could affect preferences between these choices, though it’s unclear how lasting these responses will be.
While the post-covid property market response is still unclear, the great Australian dream of a home in the suburbs remains the goal for many.
“Australia’s dwelling stock remains dominated by large, detached housing, and around one million detached houses have been completed over the past decade,” the RBA says.
The RBA has also noted the importance of rental affordability, noting that over the last 30 years the amount of households that are leasing has increased from one-quarter to at least one third. Home ownership rates have fallen across most age groups, with the most significant drop found in the 25-49 demographic.
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Ray White’s chief economist outlines her predictions for housing market trends in 2024
2 min
Ray White’s chief economist, Nerida Conisbee says property price growth will continue next year and mortgage holders will need to “survive until 2025” amid expectations of higher interest rates for longer.
Ms Conisbee said strong population growth and a housing supply shortage combatted the impact of rising interest rates in 2023, leading to unusually strong price growth during a rate hiking cycle. The latest CoreLogic data shows home values have increased by more than 10 percent in the year to date in Sydney, Brisbane and Perth. Among the regional markets, price growth has been strongest in regional South Australia with 8.6 percent growth and regional Queensland at 6.9 percent growth.
“As interest rates head close to peak, it is expected that price growth will continue. At this point, housing supply remains extremely low and many people that would be new home buyers are being pushed into the established market,” Ms Conisbee said. “Big jumps in rents are pushing more first home buyers into the market and population growth is continuing to be strong.”
Ms Conisbee said interest rates will be higher for longer due to sticky inflation. “… we are unlikely to see a rate cut until late 2024 or early 2025. This means mortgage holders need to survive until 2025, paying far more on their home loans than they did two years ago.”
Buyers in coastal areas currently have a window of opportunity to take advantage of softer prices, Ms Conisbee said. “Look out for beach house bargains over summer but you need to move quick. In many beachside holiday destinations, we saw a sharp rise in properties for sale and a corresponding fall in prices. This was driven by many pandemic driven holiday home purchases coming back on to the market.”
3 key housing market trends for 2024
Here are three of Ms Conisbee’s predictions for the key housing market trends of 2024.
Luxury apartment market to soar
Ms Conisbee said the types of apartments being built have changed dramatically amid more people choosing to live in apartments longer-term and Australia’s ageing population downsizing. “Demand is increasing for much larger, higher quality, more expensive developments. This has resulted in the most expensive apartments in Australia seeing price increases more than double those of an average priced apartment. This year, fewer apartments being built, growing population and a desire to live in some of Australia’s most sought-after inner urban areas will lead to a boom in luxury apartment demand.”
Homes to become even greener
The rising costs of energy and the health impacts of heat are two new factors driving interest in green homes, Ms Conisbee said. “Having a greener home utilising solar and batteries makes it cheaper to run air conditioning, heaters and pool pumps. We are heading into a particularly hot summer and having homes that are difficult to cool down makes them far more dangerous for the elderly and very young.”
More people living alone
For some time now, long-term social changes such as delayed marriage and an ageing population have led to more people living alone. However, Ms Conisbee points out that the pandemic also showed that many people prefer to live alone for lifestyle reasons. “Shorter term, the pandemic has shown that given the chance, many people prefer to live alone with a record increase in single-person households during the time. This trend may influence housing preferences, with a potential rise in demand for smaller dwellings and properties catering to individuals rather than traditional family units.”
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Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
