Realtisan Weekly Review – Australian Housing Market Unfazed by RBA Rate Hike, Multiple Regions Report Double-Digit Yearly Price Growth

Weekly News

  • Australian Property Market Unfazed by RBA Interest Rate Hike, Several Regions Report Double-Digit Annual Price Growth
  • Housing Industry Warns Labor Shortage Will Impact Housing Construction Goals
  • Australia’s Population Could Double in 50 Years! Greater Pressure Expected on Housing Supply

Australian Property Market Unfazed by RBA Interest Rate Hike, Several Regions Report Double-Digit Annual Price Growth

Despite frequent interest rate hikes by the Reserve Bank of Australia (RBA) over the past year, according to the latest report from CoreLogic, as of October this year, 82.4% of suburbs in Australia saw an increase in prices for standalone houses and apartments within a three-month period among the 4,506 suburbs analyzed. This data was collected before the RBA’s 13th interest rate hike in November, which pushed the cash rate to a 12-year high of 4.35%.

Despite rising interest rates and weakened economic conditions, several suburbs in cities like Sydney, Melbourne, Brisbane, Adelaide, and Perth have experienced double-digit price growth. For example, in Sydney, the Northern suburbs of Thornleigh, Inner West suburbs like Strathfield and Five Dock, have all seen significant price increases within a year, surpassing the median prices in the wider Sydney area. Similar price growth has been observed in suburbs like Bankstown and Blacktown in Sydney’s southwest.

In Melbourne and Brisbane, certain suburbs have also witnessed substantial price increases, with Brisbane experiencing more widespread double-digit growth, partly due to interstate migration. Suburbs such as Macgregor and Coorparoo in Brisbane have seen substantial price growth within a year.

Certain areas on the Gold Coast and in Adelaide have also reported double-digit price growth. Examples include Gilston on the Gold Coast and Taperoo and Toorak Gardens in Adelaide.

Within the year ending August, over 400,000 immigrants moved to Australia, and if this trend continues, the number of skilled migrants and international students may exceed the Treasury’s projected figure of 315,000. Additionally, Australia’s inflation rate reached 5.4% over the past year, well above the RBA’s target range of 2% to 3%, making it one of the countries with higher inflation rates among the member nations of the Organisation for Economic Co-operation and Development, second only to New Zealand.

The only large-scale master-planned garden House project in Rouse Hill is now available for selling

Housing Industry Warns Labor Shortage Will Impact Housing Construction Goals

Despite the ambitious goal set by the Australian government to build 1.2 million new homes by 2029, the current reality presents significant challenges to achieving this target. Key tradespeople and apprentices are being lured away by high-paying infrastructure projects, thereby affecting the much-needed residential construction capacity nationwide.

According to Michael Hopkins, CEO of Master Builders in the Australian Capital Territory, residential builders are currently competing for labor resources with public-funded projects such as light rail construction, hospital renovations, and the Snowy 2.0 hydroelectric scheme. This phenomenon is particularly pronounced in the Australian Capital Territory due to the abundance of publicly funded projects, posing a significant risk to the housing sector in terms of skilled labor shortages.

Both federal and state governments have expanded the initial target of 1 million new homes to 1.2 million, but the difficulty of achieving this goal has been steadily increasing due to deficiencies in the planning system and labor shortages. Additionally, the slowdown in new home construction has led to rising housing prices and rents, subsequently contributing to inflation.

Hopkins emphasizes that to address this challenge, the nation must expand its skills base, especially considering that the Australian construction industry needs to add 500,000 workers by November 2026. Enhancing the quality of vocational training and attracting more women to join the construction industry will be crucial in addressing the labor shortage.

Currently, with Australia planning to invest up to $80 billion in infrastructure over the next 18 months, the national housing goal faces further threats. Infrastructure projects can offer higher wages, making it challenging for residential developers to compete. For instance, some infrastructure projects provide hourly wages of $70, significantly higher than the $40 offered by residential developers.

Finally, private developer MAB Corporation in Melbourne also states that competition from public infrastructure projects has driven up the costs and timelines for medium and high-density residential development. This further underscores the multiple challenges Australia faces in achieving its housing construction objectives.

Australia’s Population Could Double in 50 Years! Greater Pressure Expected on Housing Supply

According to the latest projections from the Australian Bureau of Statistics (ABS), Australia’s population could nearly double by 2071, reaching approximately 45.9 million people. Currently, Australia’s population stands at around 26.5 million. This significant population growth will bring additional pressure on housing supply and infrastructure development.

The ABS has put forth two population growth scenarios: one with a higher growth rate projection and another with a lower growth rate projection. In the lower growth rate scenario, the population is estimated to reach 33.4 million by 2071. In the high growth rate projection, states like New South Wales, Victoria, Queensland, and Western Australia are expected to see a significant increase in population.

Importantly, Australia’s population growth is primarily driven by overseas migration. It is projected that 14.3 million immigrants will arrive in Australia, averaging about 275,000 people per year. Without this net overseas migration, Australia’s population would actually decrease over the next 48 years.

Over the year ending March, Australia’s population grew by 563,200 people, with a growth rate of 2.2%. Of these, new immigrants contributed 454,000 people. However, Australia’s average fertility rate is declining, which will reduce population growth in the coming years.

Furthermore, the projections indicate a changing population structure in Australia. The proportion of people aged 65 and over is expected to increase from the current 17% to 27% by 2071, while the proportion of those aged 85 and over will grow from the current 2.1% to 6.4%. This suggests that Australians will have longer lifespans, and the elderly population will be healthier, but there will be fewer children being born. By 2071, the average age in Australia is projected to increase from the current 38.5 years to 47.6 years.

These data underscore the challenges Australia faces in addressing the growing population and changing demographics while ensuring there is an adequate supply of housing and infrastructure to meet these demands.

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