The 7 key insights into the Australian property market you need to know

Australian home values rose by 1.6 percent over the March quarter following an 8.1 percent increase in 2023, according to CoreLogic data. Historically, home prices have typically fallen as interest rates rise, but the opposite has occurred due to a lack of supply and high demand turbocharged by immigration.

While the optimists theorise that property doubles every seven years, pessimists talk about a bubble and inevitable crash. But AMP chief economist Shane Oliver says the Australian housing market “remains far more complicated than optimists and doomsters portray it to be”.

Here is a summary of Dr Oliver’s 7 key observations regarding Australian property.

1. It’s very expensive

This has been the case since the early 2000s but it’s been getting worse. House price-to-income ratios have doubled since the year 2000. The 2023 Demographia Housing Affordability Survey shows the median multiple of house prices to income at 8.2 times versus around five in the US and UK. The years taken to save a 20 percent deposit for an average full-time wage earner have doubled from five years 30 years ago to 10 years now. The expensive nature of Australian property … is leading to rising wealth and intergenerational inequality.

2. It’s very diverse

This has been seen recently with rapid relative price growth in Adelaide, Brisbane and Perth. This divergence partly reflects a combination of better housing affordability and relative population growth, with Brisbane and Perth benefitting from interstate migration.

3. Mortgage arrears remain low (for now at least)

The low level of arrears partly reflects strong lending standards in Australia combined with the strong jobs market and a high level of savings buffers coming out of the pandemic. That said, arrears are starting to pick up and the risks will rise as buffers run down, scope to cut discretionary spending is exhausted and if the labour market deteriorates significantly.

4. Interest rates still matter

The downtrend in mortgage rates since the late 1980s underpinned the surge in property prices over the same period as it enabled buyers to borrow more relative to their incomes. And rate hikes have been associated with cyclical price falls with rate cuts usually needed for upswings. But of course, the impact of interest rates can be swamped by other factors at times, as has been the case over the last year. Price gains are expected to be around five percent this year with high rates dragging but the supply shortfall supporting prices.

5. It’s chronically undersupplied

This has been the case since the mid-2000s when immigration levels, and hence population growth, surged and the supply of new homes did not keep up. The pandemic’s freeze on immigration provided a brief relief but this was offset by a fall in the number of people per household and the problem has worsened with reopening leading to record immigration levels. This has pushed underlying housing demand to around 250,000 dwellings p.a. at a time when home completions are around 170,000 dwellings a year. So, the shortfall of homes is getting worse and likely to reach 200,000 dwellings by June.

6. Forecasting swings in home prices is hard

Failed property crash calls have been a dime a dozen over the last two decades and forecasting property swings has been hard. For example, Reserve Bank Governor Michele Bullock noted last month that “I wouldn’t like to predict housing prices … every time we tried … we seem to get it wrong…”.

7. Property has similar long–term returns to shares

[Since 1926] both shares and property return around 11 percent pa. Property’s low correlation with shares, lower volatility but lower liquidity makes it a good portfolio diversifier. So, there is clearly a role for it in investors’ portfolios.

Mirvac has topped out Trielle at Melbourne’s Yarra’s Edge, with more than 70 per cent of the riverfront development sold and approximately 80 per cent of purchasers intending to make their apartment a home.

The figures, released on September 22, point to an owner-occupier audience for one of the precinct’s final residential towers. Mirvac began developing Yarra’s Edge in 2003, and its latest addition occupies one of the remaining absolute riverfront sites.

Mirvac CEO of Development Stuart Penklis said existing residents were among those moving up within the neighbourhood.

“Many purchasers already have a connection to Yarra’s Edge,” Mr Penklis said, describing buyers whose changing needs were encouraging an upgrade within the precinct.

“As one of the final residential towers within Yarra’s Edge, Trielle represents the culmination of more than two decades of creating one of Melbourne’s most established and sought-after waterfront communities,” Penklis said.

“Positioned on the Collins Street axis with absolute river frontage, Trielle offers residents a rare opportunity to enjoy sweeping views across the Yarra River, Melbourne skyline and Port Phillip Bay, while remaining seamlessly connected to the CBD. With Trielle now more than 70 per cent sold, we’re continuing to see strong demand from buyers seeking quality homes in established locations.”

The developer also flagged a penthouse and sub-penthouse collection with larger layouts, premium finishes and broad outlooks. The planned wellness centrepiece, The Oasis, encompasses a 900-square-metre elevated urban rainforest.

Mirvac General Manager Residential Development Victoria Elysa Anderson said Trielle had resonated strongly with buyers seeking a rare lifestyle offering in Melbourne.

“Opportunities to secure a new luxury residence on a riverfront site of this calibre are incredibly rare, particularly within a community like Yarra’s Edge,” Anderson said.

“What makes Trielle unique is the combination of exceptional views, world-class residential facilities and the lifestyle that already exists around it. Residents are buying into a mature waterfront community with parks, promenades, dining, wellness and strong community connections already in place.”

The 45-level tower brings a substantial new presence to that waterfront. Its residential offering spans one-, two-, three- and four-bedroom apartments, with Signature, Prestige and Sub-Penthouse collections accommodating different household sizes. The north-facing position connects the apartments visually to the river and city beyond.

Seven storeys above the promenade, the planned Oasis combines planting and a running stream with a Scandinavian-inspired wellness club developed with spa specialist Naomi Gregory. Facilities include a 25-metre lap pool, hot magnesium pool, sauna, hydrotherapy, a gym, yoga and Pilates room, and treatment spaces.

The amenity extends beyond exercise. Residents will have access to The Biblioteca library and workspaces, ground-floor work pods, and The Salone piano lounge. A private Chef’s Table dining room offers a setting for larger gatherings, while a cinema, games room and sports lounge broaden the entertaining options. Concierge services and a dog-wash area support everyday routines.

Trielle comprises a collection of one, two, three and four-bedroom residences. Reflecting strong demand from owner occupiers, approximately 80 per cent of purchasers to date intend to live in their homes, highlighting the project’s appeal to those seeking a long-term waterfront lifestyle.

Mirvac has recently delivered The Albertine, a premium apartment development on the edge of Melbourne’s CBD, and is nearing completion of Prince & Parade in Brunswick, further strengthening its portfolio of thoughtfully designed apartment communities in some of Melbourne’s most sought-after urban locations.