Property in the media

Construction Costs Stabalise

National construction costs continued to stabilize. The annual change in the Cordell Construction Cost Index (2.8%) is the smallest annual rise since the year to March 2007 (2.7%) and well below the pre-COVID decade average (4.0%). Current building costs are still 27.6% higher than at the start of the pandemic.

Regional Housing Prices Outpace the Capitals

Home values in regional markets are rising faster than those in the capitals as higher interest rates hit the cities harder and migration to the region escalates amid cost-of-living pressures. In the past three months to January, home values across the combined regional markets increased by 1.2%, compared with the 1% gain in the combined capitals.

The gap widens between house and unit values

Underlying land value, scarcity factor and desire for more space through the pandemic has led to a substantially larger rise in house values relative to unit values over the past four years. At the onset of the pandemic in March 2020, the house premium, or the difference between median capital city house and unit values, was just 16.7%. Four years later, and that premium has jumped to 45.2% or $293,950.

New housing target behind by over a third

Australia will fall 90,000 homes short of this year’s national target of 240,000 new dwellings. Dwelling commencements over the last calendar year undershot the national cabinet total by almost one-third, falling to 163,836. This was the weakest since the 2012 total of 153,580. The 240,000-a-year figure is the total number of new homes the country needs each year to achieve to secure national cabinet’s target of 1.2 million well-located new homes over the five years starting July 1. source [AFR]

Just 13% of homes for sale are affordable for the average Australian household

In a recent online panel on the state of Australia’s property, NAB senior economist Gareth Spence revealed that less than one in five homes currently on the market are within reach for the average Australian household.

The benchmark for affordability is spending no more than 25% of gross household income on housing.

“Affordability has declined quite sharply,” said Spence. “It’s quite stark.”

In Sydney, dwelling values are now 25.4% higher than they were at the onset of the COVID-19 pandemic in March 2020.

Rents are also rising in Sydney, with houses seeing 9.1% annual growth, and unit rents up 9.4%.

In contrast, wages have grown just 4% over the past year, according to NAB data. This is “its strongest rate in around a decade”, said Spence, but it is still a far cry from the rate of housing cost increases. “It’s in the south, south-west and outer-west Blue Mountains areas that are recording the strongest growth on a quarterly basis,” said Mark Browning, NAB head of valuations.

Property price rebound is ‘remarkably resilient’

Perth is tipped to post house price gains of up to 16% this year – with Brisbane and Adelaide not far behind – as the surging demand for housing in more affordable cities outstrips the supply of homes, according to The Australian Financial Review’s quarterly property survey.

Across the nation, the housing rebound is proving resilient despite higher borrowing costs, and a panel of 10 experts tips median growth of 5% nationally. The price gains are expected to be more subdued in Sydney (between 4.5% and 9%) and in Melbourne (from flat to 4%).