Australia has an oversupply of up to 164,000 dwellings which appears to counter suggestions the nation is suffering a housing shortage, a new study has found.
Australia's current housing crisis is driven by the nation's unique demographics and a shortage of available residential land near jobs and services, with the impact of interest rates and government homebuyer subsidies often overstated.
The 2021 Census reveals that 10.1 per cent (1,043,776 homes) of Australia's 10,318,997 private dwellings were unoccupied on the night of the Census.
Key points. A new report ranks global property markets as fair valued, overvalued or in bubble risk territory. Sydney property prices are overvalued despite recent price falls, the report found. Experts warn prices will not necessarily fall back to levels that would be fair value.
High house prices in Australia are primarily driven by supply and demand imbalances, tax policies, low-interest rates, and rising household debt.
According to Domain figures, the value of Australia's housing market fell by -5% across capital cities in 2022. Sydney dropped by -10.9% and Melbourne was down -5.9%. While Canberra and Brisbane house values fell by -6% and -1.1% respectively last year. Most of the damage was done by the end of spring selling season.
“There is also unlikely to be further decline in property prices this year, as the market is stabilizing as interest rate increases start to level off. There are still plenty of buyers in the market and a lack of supply, which is keeping prices up.”
The average annual growth rate for well-located capital city properties is about 7%, which means that Australia's median dwelling price should be around $1.1 million in 2030. But some properties will outperform others by 50-100% in terms of capital growth, so take these house price predictions with a big pinch of salt.
Australian property values experienced a downturn in 2022 and prices continue to fall—but predictions of the overall peak-to-trough price decline tend to vary between 15-25%. Read more about whether the Australian property market is going to crash.
In the three years to the end of 2021, median house prices surged by 43% in Sydney, Brisbane, and Canberra, 41% in Melbourne, and 62% in Hobart. The boom in house prices ended with the rate hikes in 2022.
The busy Sydney harbour or the skyline of metropolitan Melbourne make it seem unbelievable that nearly 40% of Australia's land is uninhabitable. One reason behind this large landmass being so desolate is the shortage of rainfall. More than two-third part of the country only receives less than 500 mm annual rain.
The Outback is a remote, vast, sparsely populated area of Australia. The Outback is more remote than the bush.
This line graph shows that the proportion of owners without a mortgage declined from about 42% in 1994–95 to 30% in 2019–20. This line graph shows that the proportion of owners with a mortgage increased from about 30% in 1994–95 to 37% in 2019–20.
Overall, that means prices are still much higher than they were pre-pandemic. That has made it even harder for people to get on the housing ladder, with new research finding 90% of aspiring first-home buyers are unable to purchase a property.
Australian rental affordability has dropped to its worst levels in nearly a decade, with the average household spending a third of its income on rent, as the impacts of the Covid pandemic continue to be felt on the market.
It showed that there will be a shortage of 106,000 homes by 2027 across Australia as a result of skyrocketing interest rates, soaring immigration, a lack of building and community opposition to development, according to The National Housing Finance and Investment Corporation (NHFIC).
Will House Prices Go Down In 2023? House prices are expected to soften further in 2023 but falls may not be as severe as some expect if the RBA stops increasing rates before the cash rate reaches 4%.
Westpac has revised its house price forecasts, with dwelling values expected to stabilise in 2023 (initially forecast a -7% decline). National dwelling values are predicted to rise 5% in 2024, up from 2%.
If the price rises are maintained for the rest of the year, home values will end up about 4% higher in 2023, defying earlier predictions of sharp falls of 10% or more for this year, CoreLogic says. “Economists are shredding their previous price forecasts,” said Sally Tindall, research director for RateCity.
Nationwide prices are expected to rise by approximately 2 per cent by the end of 2023. However, as the RBA potentially cuts interest rates before the end of 2023, demand pressures will contribute to a favourable environment for property prices.
In Australia, the average life of a brick home is 88 years and a timber home is 58 years (Snow and Prasad 2011). Many homes last much longer than this. Decisions that are made about homes today will continue to have consequences for many decades.
Prices across the country are set to slide by up to 10 per cent by the end of 2023, with Sydney, Brisbane and Canberra to be worst affected by the downturn.
The OECD's stark warning of a “rout” in house prices that ripples across the entire economy has raised the spectre of the crash of 1987.
That is according to the latest CoreLogic data, which shows Sydney recorded the largest decline in values for houses and units, at 13.4 per cent.
Falling house prices and negative wealth effect
When house prices are falling rapidly, there is a negative wealth effect. Consumers see a fall in their main asset. This decline in wealth causes lower spending and higher saving. Many households become trapped in 'negative equity'.