State of the market property report for May 2024

Australian housing prices maintained their growth momentum in April, with a nationwide rise on par with gains posted over the past several months.

Uncertainty continues to surround the Reserve Bank of Australia’s (RBA) future monetary policy decisions, however, after the authority once again kept its benchmark rate on hold at the start of May.

Australian home prices rise for the 15th month straight

April saw home values in Australia edge higher, with CoreLogic’s national Home Value Index (HVI) lifting 0.6 per cent.

Home price growth shows no signs of flagging, as the increase matched rises posted in February and March.
April marks the 15th consecutive month that home prices have increased, for a cumulative growth of 11.1 per cent, or a $78,000 rise in national median dwelling values.

Australia appears well and truly out of the trough in home prices that hit in 2022, when rampant inflation prompted the RBA to launch a string of hikes that brought the cash rate target to its highest level in over a decade.

Nearly every capital city saw improved growth in April, although rates of increase showed mark disparities due to the variable conditions of Australia’s regional property markets.

Sydney maintained a monthly change in home values of 0.4 per cent, consistent with each of the past three months. Melbourne’s housing market managed to tread water with a 0.1 per cent decline, which is some improvement compared to the -0.8 per cent dip over the three months to January.

The larger capital cities outside of the south east saw the strongest performance. Perth led growth with a 2.0 per cent rise in April, while Adelaide took second place with a lift of 1.3 per cent, followed by Brisbane with a 0.9 per cent increase.

Uncertainty surrounds interest rates

Following its board meeting on 7 May, the RBA announced it would leave the cash rate target unchanged at 4.35 per cent. The target rate is currently at its highest level in 13 years.

Remarks made by the RBA have dampened widespread hopes for imminent rate cuts. The board said inflation remains high and is falling more slowly than expected, after CPI rose by 3.6 per cent over the year to the March quarter, as compared to 4.1 per cent over the year to December.

Some economists are concerned that inflation could still stage a comeback, with former RBA governor Philip Lowe observing that the monetary authority may need to implement further hikes to keep price gains under control.

Rob Flux, developer and educator at the Property Development Network, said that while interest rate adjustments now lie under a cloud of uncertainty, the RBA will still hold the course towards more accommodating monetary policy by the end of the year.

“The RBA’s moving much slower than anticipated, and there are even some market commentators predicting there will be interest rate rises.

“I don’t think that’s real - it’s just rhetoric. The big four banks are still all predicting rate cuts by December - it’s just slower than expected.”

According to Flux, the RBA is holding off on hasty interest rate adjustments to ensure inflation is well and truly tamed before it puts its foot back on the pedal.

Fundamentals still strong

Given the strength of underlying fundamentals, Flux expects the property market to bounce back rapidly once the RBA starts trimming rates.

Developers and investors should keep an eye out for bargain opportunities while interest rates are still high, in anticipation of a reheating of the market in 2025.

“High interest rates mean people are still being squeezed,” Flux said. “There are buying opportunities out there - you’ve just got to look harder for them.”

Key budget initiatives and implications for property development and construction

The 2024-2025 Australian Federal Budget introduces several measures aimed at addressing the housing supply crisis and supporting construction sectors, but what does this mean for property developers? Here is an analysis from the investment team at CrowdProperty.

Infrastructure investment

The budget allocates $1 billion for trunk infrastructure to support new housing development. This is part of a broader $16.5 billion investment over the next decade for new and existing infrastructure projects, which includes $4.6 billion for 69 new projects. Additionally, $1.9 billion in loans for community housing providers and other charities will facilitate the construction of 40,000 social and affordable housing units, contributing to the government’s ambitious goal of 1.2 million new homes over the next five years.

Skills and workforce development

A significant focus is placed on developing a skilled construction workforce. The budget dedicates $1.6 billion over five years to reform tertiary education and increase funding for apprenticeships and training programs through the Construction Forestry Maritime Mining and Energy Union (CFMEU). This includes $90.6 million for additional fee-free TAFE training places and pre-apprenticeship programs, which are crucial to addressing the current skilled labour shortages in the industry.

Foreign investment and regulatory changes

Reforms to the foreign investment framework aim to attract more capital into the Australian property market by streamlining approvals for repeat investors in non-sensitive sectors like housing and construction.

Support for affordable housing and renters

The budget includes a $2 billion Social Housing Accelerant Payment for 4,000 new or refurbished social houses and a further increase in Commonwealth Rent Assistance by 10 percent, representing a total investment of $1.9 billion. These measures aim to ease rental pressures and enhance affordability, directly impacting the housing market’s dynamics.

Gender equality and industry diversification

To promote gender equality in the construction industry, the budget introduces the Building Women’s Careers program with a $55.6 million investment. This initiative supports women’s participation in traditionally male-dominated industries and provides access to flexible training programs.

Anti-money laundering efforts

The budget earmarks $166.4 million to implement reforms to Australia’s anti-money laundering and counter-terrorism financing regime, including real estate among the sectors required to report suspicious transactions. This move aims to enhance regulatory compliance and transparency within the property market.

CrowdProperty’s conclusion

The additional commitment to the already announced Homes for Australians plan is certainly welcomed by the industry. The focus on increasing supply and an investment into supporting the infrastructure (roads, energy, water and community) rather than reverting to policy that simply fuels demand is a positive, and one that will still create opportunities for property developers.

The recognition that investment in facilitating skills development is also important for the industry that is still feeling the effects of the homebuilder policy stimulus. The training investment needs to include developing skills and capability in modern methods of construction. The lack of these skills and capability is seen as holding back the delivery of Home for Australians.