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

Leading Australian economist Dr Shane Oliver navigates the complicated residential property market for buyers and investors

By Bronwyn Allen
Thu, Apr 11, 2024 9:27amGrey Clock 3 min

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 longterm 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.



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Owning a Home in an LGBTQ-Friendly Area Comes With a Hefty Price Premium
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The cost of owning a home in an LGBTQ-friendly area in the U.S. comes with a hefty price premium of almost 50%, according to a report Wednesday from Redfin.

In a metropolitan area with state laws protecting LGBTQ people from housing discrimination, a home buyer needs to earn an annual income of $150,364 to afford a median priced home. That’s 46.8% more than the $102,435 buyers need to earn to afford a home in places without such protections, the online property portal said.

For the purposes of their report, a metro is considered to have protections if the state it’s located in prohibits housing discrimination based on sexual orientation and/or gender identity, Redfin explained. In the case of metro areas which span multiple states, Redfin considered the metro to have protections if at least one of the states it’s located in prohibits such discrimination.

“LGBTQ+ Americans face disproportionately large barriers to homeownership,” said Redfin senior economist Elijah de la Campa in the report. “On top of paying a premium to live somewhere that feels safe, many LGBTQ+ house hunters are earning less than the typical U.S. worker, and face discrimination while shopping for homes despite laws that prohibit it.”

The locales where individuals identifying as LGBTQ make up the largest share of the adult population are also those where housing is the least affordable, the report found.

In San Francisco, where 6.7% of the adult population identifies as LGBTQ—the highest share of any of the 54 metropolitan areas Redfin analyzed—only 5.1% of listings last year were affordable based on the median local income, one of the lowest shares in the country.

In Portland, Oregon, which had the second highest share of LGBTQ adults at 6%, only 6.7% of homes for sale were affordable; in Austin, Texas, where 5.9% of the adult population identifies as LGBTQ, 2.9% of listings were affordable.

And in Seattle and Los Angeles, where LGBTQ adults make up 5.2% and 5.1% of the population, 4.8% and 1.9% of homes for sale were affordable, respectively.

All but one of those top LGBTQ metros—Austin—has state-level protections, the report said.

MOST POPULAR
11 ACRES ROAD, KELLYVILLE, NSW

This stylish family home combines a classic palette and finishes with a flexible floorplan

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Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.

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