House prices in Australian capital cities have officially rebounded following 2022’s tumble, leaping to end last year at a median $1.09 million, according to Domain’s latest House Price Report.
Meanwhile, CoreLogic has found the cost of renting has never been higher, with Australia’s median rent reaching $601 a week.
That’s likely music to the ears of property investors, who could be realising notable capital gains and strong rental income growth despite previously expecting a lacklustre year.
Though, those in some cities might be reveling more than those in others.
House prices in Sydney, Brisbane, Adelaide, and Perth ended 2023 at record highs, each having risen by around 10% to 13% over the 12 months prior.
The median house price in Sydney is now nearly $1.6 million, while the median unit in the city goes for close to $796,000.
Median houses in Brisbane and Adelaide command $888,000 and $875,000 respectively, while that of Perth goes for $742,000.
At the same time, Brisbane and Adelaide saw record unit prices in the December quarter, while those of Sydney appear to be on track to hit a new high in early 2024.
“While stretched affordability, cost of living pressures, and high-interest rates were expected to put a lid on property prices in 2023, the undersupply of new homes, cost-to-build blowouts, a growing population, and a tight rental market continued to boost housing demand,” Domain chief of research and economics Dr. Nicola Powell said.
And those who hadn’t managed to get into the property market amid rising house prices might also be facing an increasingly challenging rental market.
The new median rental cost comes out at $31,252 a year – up 8.3% year-on-year and over $8,000 more than it was in August 2020, CoreLogic data shows.
Rising interest rates have been one factor driving rent costs higher in recent times, as investment housing activity slowed from mid-2022 to early-2023.
While activity has increased since, more is needed to increase the supply rental properties, CoreLogic notes.
Dr Powell forecasts a “tipping point” for the rental market will come in 2024, telling the Savings Tip Jar Podcast that increasing household sizes and an influx of first home buyers will reduce demand for rentals.
She encourages those looking to buy in 2024 to be realistic in their expectations.
“If you decide to enter the market this year, you may benefit from being flexible with your area preferences.”
“For those looking to sell, focus on the right price before listing.
“Collaborating with an agent to determine the optimal pricing strategy will allow you to leverage the higher demand without discouraging potential buyers.”
Australian property prices are expected to face challenges in 2024, partly due to stretch affordability, Domain notes.
Other headwinds include an undersupply of new homes, the increased cost of building, Victorian investor levies, as well as the cost of living crisis and the high interest rate environment.
On the other hand, increasing population, overseas migration, and the tight rental market will likely bolster demand for properties.
Domain forecasts demand for housing to increase if the Reserve Bank of Australia (RBA) cuts the cash rate in 2024.
Image by Greg Rivers on Unsplash.
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