Price trends
The current upswing in housing values continues to show robust momentum. In August 2024, national housing values increased by 0.4%, marking the 20th consecutive month of growth since January 2023.
This sustained growth is in line with our projections, with cities like Perth, Adelaide, and Brisbane emerging as top performers. Over the past three months, these cities recorded impressive growth rates of 6.2%, 4.7%, and 3.4%, respectively. On an annual basis, these figures translate to substantial increases of 23.2% in Perth, 15.1% in Adelaide, and 13.4% in Brisbane.
Conversely, housing markets in Hobart, Melbourne, Canberra, and Darwin have lagged, with growth rates of -2.4%, -1.2%, 0.9%, and 3.5%, respectively. This slower growth can be attributed to weaker market confidence and an influx of new housing supply, particularly in Melbourne.
Investors in Perth, Adelaide, and Brisbane have significantly benefited from rising prices, with an average property valued at $1 million yielding returns of $230,000, $150,000, and $134,000, respectively, over the past year.
Table 1: Median House Price – August 2024
| City | House Price | House Price Growth (12 months) | Unit Price | Unit Price Growth (12 months) |
| Sydney | $1,660,000 | 6.8% | $900,000 | 3.9% |
| Melbourne | $1,055,000 | -1.2% | $614,000 | 0.2% |
| Brisbane | $1,056,000 | 13.4% | $616,000 | 16.9% |
| Adelaide | $860,000 | 15.1% | $617,000 | 12.4% |
| Canberra | $989,000 | 0.9% | $631,000 | -0.3% |
| Perth | $855,000 | 23.2% | $521,000 | 19.1% |
| Hobart | $755,000 | -2.4% | $620,000 | -0.9% |
| Darwin | $578,000 | 3.5% | $370,000 | -2.8% |
Source: Proptrack and Oxford Economics
Rental Conditions
National rental values have surged by 7.8% in the 12 months leading to July 2024, significantly outpacing the long-term trend average of 3%. This increase is driven by ongoing supply constraints and a surge in population growth.
Although the rental market has eased slightly in recent months, vacancy rates remain tight. As of August 2024, vacancy rates are at 0.7% in Adelaide, 1.1% in Brisbane, 0.8% in Perth, 0.9% in Darwin, 1.7% in Sydney, 1.5% in Melbourne, 2.1% in Canberra, and 1.5% in Hobart.
Given the current construction challenges, it is projected that it will take two to three years for the rental market to return to a normal and healthy vacancy rate between 2% and 3%. During this adjustment period, the low vacancy rates and high rental yields are expected to continue creating upward pressure on property prices, driving growth at a higher rate than under normal market conditions.
Table 2: Rental Market Indicators – August 2024
| City | Vacancy Rate (%) | Median Rent – House ($) | Median Rent – Unit ($) | Rent Growth – House % (12 months) | Rent Growth – Unit % (12 months) |
| Sydney | 1.7% | $1,027 | $694 | 5.8% | 14% |
| Melbourne | 1.5% | $740 | $560 | 6.9% | 5.9% |
| Brisbane | 1.1% | $730 | $570 | 5% | 5.4% |
| Adelaide | 0.7% | $660 | $500 | 12% | 13% |
| Canberra | 2.1% | $780 | $560 | 0.9% | 0.7% |
| Perth | 0.8% | $780 | $620 | 9.8% | 13.2% |
| Hobart | 1.5% | $535 | $455 | 3% | 2% |
| Darwin | 0.8% | $710 | $510 | -0.7% | 9.9% |
Source: SQM Research
Population and Housing Demand
A key driver of Australia’s housing market performance is high population growth. Australia’s population growth rate surpasses that of most other developed countries, with a long-run average growth rate of 1.3%, compared to 0.3% in European countries, 0.6% in the U.S., and 0.6% across OECD countries.
The total population increased by 563,000 in the 12 months leading to March 2023, which translates to an additional 225,000 new dwellings being required based on an average household size of 2.5. However, only 175,000 dwellings were completed during this period, resulting in a significant shortfall of 50,000 dwellings.
Looking forward, the federal government projects that Australia’s population will surge by 1.5 million people—the equivalent of adding a city the size of Adelaide—in the next three years. If the trend continues, Australia’s population is expected to reach 30 million by 2030. This rapid population growth will continue to drive housing demand, particularly in the context of low dwelling approvals and delays in dwelling completions.
Housing Supply
The Australian Bureau of Statistics (ABS) released building activity data in July 2024, highlighting ongoing constraints faced by the building industry. In the three months leading up to March 2024, total dwelling commencements were 39,715, a 13.5% decline compared to the same period in 2023 and down from 60,000 in March 2016.
Several factors contribute to this decline in building activity, including rising material costs, labor shortages, higher funding costs that challenge the feasibility of many projects, as well as the lengthy development application (DA) process, which increase both delays and costs to projects.
Interest Rate Outlook
Considering more favorable macroeconomic trends, including stabilised inflation, a more balanced labor market, and tightening spending by businesses and consumers, the Reserve Bank of Australia (RBA) held the cash rate steady at 4.35% in August 2024.
The RBA noted that the tightening cycle of the cash rate has effectively reduced inflation and balanced supply and demand in the economy. This shift is a significant factor in the RBA’s decision to maintain the current interest rate and consider future cuts.
Our analysis suggests that the housing market tends to experience substantial growth before and after anticipated cash rate cuts, which are predicted to occur in early 2025.
Buyers are increasingly confident in the housing market’s strong fundamentals, as evidenced by the rise in housing loans from $22.8 billion in February 2023 to $29.6 billion in June 2024 (source: ABS).
Investor loan commitments have followed this trend, rising significantly from $7.8 billion in February 2023 to $11.2 billion in June 2024. This increase in investor loan commitments indicates that investors are actively seeking to capitalise on the upward pressure on housing prices driven by the undersupply of housing in most capital cities.
Price Forecasts
Given the current market dynamics and elevated prices in the high-end segments of major capital cities, we forecast continued strong growth momentum in the most affordable segments, particularly in areas close to large-scale infrastructure projects. In some key markets where the supply is tight such as Adelaide, Perth and Brisbane, we project the property values will continue to strengthen at double digits in 2024-25 and beyond, thanks to affordability, high rental yield and proposed large infrastructure projects in pipeline.