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.

Looking to build, or renovate, a home in 2024? You’re not alone. According to a recent study from Resolve Finance, over a third of Australian homeowners are planning to renovate their current properties in the next 12 months. And if the Federal Government achieves its ambitious goal of delivering 1.2 million new dwellings over the next five years, there will be many new home owners looking to build their dream home in 2024 and beyond.

But before tackling such a behemoth task, considering all the latest—and future—architectural trends is pivotal in your new build’s success. Award-winning architect and interior designer, Georgina Wilson said sustainability will be at the forefront for many interested in energy efficiency and saving money on power bills.

“Elements of passive design are moving into the mainstream. Improvements in the technology with double glazing, building wrapping and insulation are meaning that more people have access to these materials,” Ms Wilson said. “Solar has proven itself and homeowners are now looking for other ways to make their home more efficient.”

The following eight trends reflect a growing emphasis on sustainability, flexibility, and wellbeing in residential architecture, catering to the evolving needs and preferences of homeowners in 2024.

—

1). Consider your colour palette

The colours you use say everything about the type of spaces you want to foster, whether they be bright and warm, dark and moody, neutral — the list goes on. If we’re looking to trends, earthy, calming neutrals are in — think brown, beige and eucalyptus green. Colours that feel natural and soft, but welcoming provide an inviting environment that’s easy to live with.

However, interior designer and stylist, Jono Fleming said contrast is important to create interest and one of the most powerful ways to do this is through colour.

“It doesn’t have to be a big splash of colour, it could be introduced through smaller decorative objects, a statement furniture piece or an artwork, but the colour should add balance to the space,” he said.

2). Modern, outdoor living areas

Ever since the COVID pandemic and subsequent lockdowns, expanding living spaces to the outdoors has gained in popularity. Features like plant-filled front porches, outdoor kitchens, fire pits, and cosy seating areas create inviting spaces for relaxation and entertainment for all family members.

“There has definitely been a greater appreciation for outdoor living spaces since COVID,” said Ms Wilson. “Outdoor fabrics and mechanisms for shading have greatly improved in recent years allowing people to fully embrace seamless indoor/outdoor living.”

3). The integration of smart technology

Integrating smart home technology throughout your home continues to gain traction with homeowners. As we increasingly look to rely on technology to make our lives all the more seamless, smart technology throughout allows homeowners to control a variety of tasks and zones remotely, enhancing convenience, security, and even energy efficiency. This can include controlled heating and cooling from your phone, automatic lightning, voice control commands, and more.

“The technology for seamless appliances has come a long way. At Salone del Mobile Milano this year, we experienced the new Gaggenau fully integrated induction bench top, which in terms of kitchen design, is a huge advancement,” said Ms Wilson.

Gaggenau, the German manufacturer of high-end home appliances, is at the forefront of smart home technology, paving the way for intelligent cooking appliances that learn and adapt to user preferences. Gaggenau’s essential induction cooktop, the functional and seamless cooking surface Ms Wilson speaks of (pictured below), is designed to be “seamlessly integrated into a kitchen’s worktop”.

4). Health and wellness features

Prioritising health and wellness in 2024 is paramount, and home design that can include features like air purification systems, dedicated exercise spaces, recovering hubs—like saunas and ice baths—and relaxation areas to support physical and mental wellbeing will go a long way in not only adding value to your home, but providing a space that is architecturally on-trend and with the times.

“I’m seeing a lot of demand for in-built saunas, both traditional and infrared, particularly in the homes of our US clients,” said Ms Wilson.

“Bathroom suppliers such as Kohler, Duravit and Toto are offering increasingly sophisticated products that incorporate an almost spa-like experience in your at home bathroom. Examples of this are fantastic multi-nozzle showers and steam showers, Japanese toilets incorporating bidet technology, and elegant and serene bathroom furniture that can be fully customised for clients.”

5). Sustainability is key

A common goal among homeowners and future buyers alike is to own a property that is flexible enough grow with them. Futureproofing your home with sustainable measures will not only ensure its longevity, but it will help homeowners to play their part in addressing their carbon footprint.

“The current cost of living crisis is leading to a lot more multigenerational living, meaning families are prioritising durable materials and sustainable power sources, like solar,” said Ms Wilson.

Consider adding solar panels to your home, utilising sustainable materials in any upcoming renovations or builds, like recycled timber, and utilising energy-efficient lighting throughout your home.

6). Minimalist design

Do as the Scandinavians do – introduce minimalist design into your home. Embrace simplicity and clean lines with a focus on interior design. Decluttering in main living spaces is surprisingly effective. Adopting the approach of ‘Swedish Death Cleaning’, which essentially involves slowly ridding your house of unwanted or unused items once you reach the other side of 50, will also help you whittle your possessions down to the beautiful and the necessary.

Minimalist design in home appliances is also making a resurgence in 2024 according to Ms Wilson.

“What I’ve been interested to see at Salone del Mobile Milano in 2024 is a huge return to stainless steel finishes, and more and more seamless integration of appliances,” said Ms Wilson.

“We’re seeing timeless materials in reimagined applications: copper baths and stainless steel basins are emerging trends with the potential to be timeless. These materials are so practical, and pair beautifully with natural stone and timbers.”

Above all, maximising different spaces through efficient and effective storage options will also do wonders in achieving that minimal aesthetic.

7). Multifunctional spaces

As we move towards greater efficiency of space, it’s useful to consider multifunctional spaces throughout your home. In 2024, we are seeing more homes incorporate multifunctional spaces and trends. This includes using multifunctional furniture in main bedrooms or living spaces—furniture that can act as storage ottomans or convertible sofa beds—as well as transforming wasted space, and open up indoor to outdoor living.

“Multifunctional spaces in homes are a great idea. Particularly in small homes, it makes a lot of sense to achieve maximum value out of the limited space available. The way you use a space can change as your family evolves over time, so it’s always good to design in such a way that allows for flexibility,” said Ms Wilson.

“Make sure that the functions you allocate to a single room are compatible with the space available and each other. For example, it works really well to combine a living room, a dining room and a kitchen in one open plan space because these are all public, lively spaces. It doesn’t work very well to combine, say a study, with these spaces because you will want control over the visual and acoustic privacy in a study.”

8). Think about biophilic design

A buzz word among architects and interior designers, biophilic design is one of the strongest trends in 2024 thanks to its benefits in garnering a sense of harmony and connection between your home and the environment. Consider incorporating natural elements into home design, such as large windows to maximise natural light, indoor gardens, and natural materials like wood and stone.

“Biophilic design is a timeless principle, in that home design should connect people in a positive way with their natural environment by maximising access to, and the ability to control, natural light and ventilation, which really helps to create an enjoyable (and healthier) environment to live in,” said Ms Wilson.

“Increasingly, there is a demand for this positive relationship to the natural environment; by leaning on the principles of biophilic design, you can create a haven and retreat at home that can help with the daily stresses of life.”

Ways to foster that indoor-outdoor connection can be through the addition of smaller internal courtyard spaces filled with greenery, or incorporating indoor plants and adding greenery into different rooms throughout your home.

—