This week in property: Top 5 headlines

Explore the latest real estate market trends in Australia, from record-low vacancy rates to rising new home sales:

1. Vacancy rates hits new low: National vacancy rates hit a new low, signaling rising rents due to rental property scarcity. PropTrack data shows a drop to 1.07%, with significant declines in major cities and a 57% reduction in available rental properties since the pandemic.
2. New home sales rise: Sales of new homes increased by 5.3% nationally in February. Despite this, overall sales remain low, attributed to high borrowing costs and construction expenses.
3. Build-to-rent rising: The build-to-rent sector is gaining momentum, particularly in Victoria. Further regulatory support is needed to address housing demand.
4. Housing hits $10.4 trillion: Australia’s residential housing market has reached $10.4 trillion, with property prices continuing to rise across all states and territories.
5. Strong buyer demand: Despite supply challenges, 44% plan to buy a home in the next five years. Investor interest and owners wanting to renovate are also on the rise, indicating sustained demand for homeownership and property investment.

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Vacancy rates hits new low

The national vacancy rate has reached a new record low, with predictions that the scarcity of rental properties will drive rents up further.

Data from PropTrack shows that in February, the national rental vacancy rate dropped to 1.07% and was below 1% in Brisbane, Adelaide and Perth.

Its analysis reveals that the number of rental properties available is now 57% lower than at the start of the pandemic.

Due to high demand, rental properties are typically listed for only 18 days before securing a new tenant.

PropTrack senior economist Angus Moore emphasises that the only thing that will ease the rental market is more stock.

“That is a slow process,” he says. “The government has a housing target of 1.2 million new homes in five years, but unfortunately, we are not building enough to meet that.”

“Until then, we don’t see relief for renters in the near term, and with the market this tight, it will only result in further price hikes.”

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New home sales rise

Sales of new homes nationally increased by 5.3% in February according to new data from the Housing Industry Association (HIA).

The HIA New Home Sales report is a monthly survey of the largest volume home builders, showing the increase in most large states.

HIA Chief Economist, Tim Reardon, says given the weakness of January data, it is not surprising to see an uptick in February. While sales did increase, they remain at low levels according to Reardon.

“The higher borrowing costs are compounding the elevated cost of land and construction, drying up the pipeline of new home building work despite the significant pent-up demand for housing,” he says.

New home sales increased by 8.4% in Queensland, 6.3% in Victoria and 5% in Western Australia.

Sales dropped by 5.5% in South Australia during the month.

The new figures mean that quarterly sales are up in Western Australia (+39.9%), Queensland (+20.4%) and New South Wales (+16.0%).

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Build-to-rent rising

The build-to-rent sector (BTR) is on the rise according to the JLL Apartment Market Overview Q4, 2023.

It shows that the unit pipeline is increasing with nearly 60% of BTR projects in Victoria, 24% in Queensland, and 11% in NSW.

JLL says it is a way for developers to better deal with rising construction costs.

“The BTR project pipeline continues to grow, buoyed by the advantage of no pre-sales period,” the report says.

“But the BTR pipeline is still small and not large enough to offset the decline in build-to-sell (BTS) supply.”

JLL head of living, capital markets, Jack Bergin, says investors are showing a strong desire to be part of the sector.

But he says further regulatory support is needed to support project viability and unlock the full potential of the build-to-rent sector and deliver new housing.

The report says while BTR in Australia remains in its infancy it has gained momentum, and drivers such as a tight rental market and low BTS supply levels support the need for more of it.

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Housing hits $10.4 trillion

The total value of Australia’s residential housing market has reached $10.4 trillion.

Australian Bureau of Statistics figures show property prices across the country are continuing to rise. In the final quarter of 2023, the total value of Australia’s 11.1 million residential properties increased by almost $200 billion, marking the third consecutive quarter exceeding $10 trillion.

The ABS reports the mean home price in Australia is now $933,800, with all states and territories recording a rise in dwelling values during the quarter.

NSW has the highest mean price at $1,184,500, followed by the ACT ($948,500), Victoria ($895,000), Queensland ($828,300), South Australia ($731,800) and Western Australia ($727,900).

Tasmania stands at $653,800 and the Northern Territory at $489,200.

The report also indicates a rise of 52,500 residential buildings during the quarter.

CoreLogic’s March 2024 Home Value Index (HVI) recorded a national increase in dwelling values of 0.6% in February.

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Strong buyer demand

Supply issues aside, about 44% of Australians say they plan to buy a home in the next five years, according to the latest Westpac Home Ownership Report.

Meanwhile, there has been a 6% increase in the number of investors planning to buy and a 4% increase in owners wanting to renovate.

Westpac managing director of mortgages, Damien MacRae, says the figures show Australians are still keen on homeownership.

“While some buyers have paused their housing plans, the intention to buy remains strong and prospective buyers are becoming more ruthless with their goals,” he says.

“They understand it’s a big task, but they are determined to break into the market and are willing to compromise to get there.”

The report found 75% of prospective buyers were willing to buy in areas they hadn’t considered before, and 50% were going to rent-vest, buying where they want to invest and renting where they want to live, as a means of getting into the market.

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