What Will Happen to the Australian Property Market in 2025?

What if you could pinpoint the next Australian property boom before it unfolds? Get ready to uncover the dynamics of supply and demand that could trigger a significant surge in the market. As we usher in 2025 with the Taylored Property Wealth Podcast, we'll explore how anticipated rate cuts might fuel this growth. Our discussion dives deep into 2024's standout markets, offering insights into potential top performers for the year ahead. Armed with the latest CoreLogic data, we’ll guide you through the intricate trends shaping major cities like Sydney, Melbourne, Brisbane, Adelaide, and Perth. Whether you're contemplating a new investment or managing an existing portfolio, this episode equips you with the knowledge to navigate this rapidly evolving real estate landscape.

We delve into key factors influencing the market: net overseas migration, building approvals, and vacancy rates. The latest statistics reveal shifts in property values across capital cities, with Brisbane, Adelaide, and Perth leading the charge in growth. Learn why understanding each market's cycle is crucial for maximizing your investment returns. With Sydney still topping the list as the most unaffordable city, grasp the nuances of market cycles to uncover growth opportunities. From seasoned investors to newcomers in the property world, we provide the expertise you need to make informed decisions as you embark on your property journey in 2025. Join us as we unravel the complexities of the Australian real estate market and offer a roadmap for success in the coming year.

Transcript

Speaker 1: 0:00

What will happen to the Australian property market in 2025? In this episode of the podcast, we're going to discuss the fundamental supply and demand issue that we have going on in this country. We continue to have supply levels not keeping up with the demand required. This is the pressure cooker for growth, and coupling this with rate reductions occurring this year, the next couple of years, is going to see a property boom. We will discuss last year's property performance, who the top performers are and who we believe are going to be the top performers for 2025. We'll also break down net overseas migration, building approvals and vacancy rates. If you're thinking of investing in property this year, or you're not sure if you should be investing in property, this is the episode for you to watch.

Speaker 1: 0:45

Welcome back to another episode of the Tailored Property Wealth Podcast. This is the first episode of 2025. We've had a couple of weeks off, had some rest and recovery over the Christmas break, but we're ready to get back into it and in this episode, we're going to discuss a little bit of what's happened over the last 12 months in 2024. We're going to make our predictions for what we believe is going to happen this year and we're just going to discuss some of the data around the net overseas migration, building approvals, vacancy rates just to get a really good understanding of that supply and demand, because ultimately that's what we can analyze to predict where we see prices going. So let's get into it and what we'll first touch on is just the performance over the last 12 months and this is based on CoreLogic data through to 31st of December 2024. So Sydney it decreased for the month 0.6%. Melbourne decreased 0.7%. We had Brisbane increase 0.5%. Adelaide increased 0.6% and Perth 0.7%. Hobart declined 0.5%, darwin it increased 0.4% and Canberra went backwards 0.5% as well. So combined total is backwards 0.2% for the capital cities and then nationally back 0.1% as the combined regionals increase 0.2%. So it's definitely softened over the last couple of months and we're going to go through some of those annual growth rates and we can't expect things to always be going up 15%, 20%, right, it's just not something that can keep up long term. But there will be some things that happen that are going to, I guess, influence property prices and where they go. If we're looking at those dwelling values annually, sydney has increased 2.3%. Melbourne's gone backwards 3%, brisbane has increased 11.2%, adelaide increased 13.1% and Perth 19.1%. So those three top performers for 2024. Throughout the year their growth rates were annually a little bit higher so they have softened a little bit. But if we're getting 11%, 13%, 19%, that's extremely strong growth still. And then once you break it down into local government areas, individual suburbs, in those marketplaces there's been a lot of suburbs that have done 20% that we're investing in, if not more. So yeah, they're the top performers. Hobart went back with 0.6%, darwin it increased 0.8% and Canberra went back with 0.4% annually. All right, so I say it all the time, but it's really important of knowing your marketplaces, knowing where each capital city is at within its cycle, so that you can really take advantage of that growth and know what's not going to perform.

Speaker 1: 4:08

We'll just quickly touch on some of the data as well, just for since the COVID onset and those growth rates, right? So Sydney 27.7% growth since COVID. We've got Melbourne only increased 8.4%. Brisbanebane 67.7 percent increase. Adelaide 72.1 increase perth increased 77 percent. Hobart increased 26.7 percent, darwin 24.8 percent and we've got canberra increasing 30.3 percent. So some have obviously performed well under, some have performed extremely well. We've still got Sydney sitting as the most unaffordable capital city, so it's sitting at the median values 1.191 mil. Melbourne 774k, brisbane 890k, adelaide 814k and we got perth uh 813. So adelaide and perth sitting relatively, relatively similar there. So just something to keep in mind as part of those growth rates, we still and we'll get into these predictions think there's some room in the tank for for some of those top performers, cool, cool, all righty.

Speaker 1: 5:34

So our predictions for 2024 we're still predicting that the top performers are going to be perth, going to be bris, going to be Adelaide. Are they going to be the same growth rates that we've seen over the last 12 months? That's not what we're, I guess, adding into our expectation and our prediction. So if we have no rate cut, we're expecting Perth to still tick along and do roughly 10%, all right. Brisbane expecting to do 8%, adelaide expecting to it's going to be a decline 0% to 5%, and Sydney the same that 0% to 5% decline. That's what we believe. With no rate cut, all right.

Speaker 1: 6:18

Now we believe that there's going to be a rate cut this year. It's not a matter of if we're going to get a rate cut. In my opinion, it's a matter of when we get that rate cut. Are we going to get it in the RBA's first meeting in February or is it going to be midway through the year. We don't know. It's hard to predict. I'm hoping that it's in February. As someone holding millions of dollars worth of debt, that's what I hope for, as well as for our clients and everyone else. It's going to help with holding costs right, but we're kind of just being conservative and expecting it's going to be midway through the year. It just makes it easier for us and we're always being conservative with those sorts of things.

Speaker 1: 7:01

Same with these growth rates Now, with a rate cut and we're really going to need to see half a percent rate cut, I believe, for the performance with that rate cut. All right, with that rate cut, per's probably going to do about 15 percent, brisbane 10, adelaide 15 and then melbourne's probably going to do zero to five percent once that rate reduction happens. Give or take. Same with sydney zero to five percent growth. Don't believe a word. I say as well. These, these are just my opinions, what I believe is going to happen, but don't take it for gospel. No one's got a crystal ball, but we predicted end of 2023 who the top performers were going to be and that was Perth, brisbane and Adelaide. So we have got it right in the past, but it doesn't mean we're going to get it right, so don't hold me to it.

Speaker 1: 7:59

Now. That's kind of what's happened over the last 12 months and what we're expecting to happen over the next 12 months. There's marketplaces we'll keep an eye on and, as things change, there might be some changes within that. But some really important stuff to go over is building approvals, is the net overseas migration and those vacancy rates, because that gives us a really really good understanding of the supply and demand issue that we have going on in this country. Fundamentally. Fundamentally, we just simply do not have that supply keeping up with demand.

Speaker 1: 8:38

The government has come out with a very it's a stretch target, right. I still think it's great that they're recognizing that they need to add supply. But we can talk about doing something, but until we see that come into fruition, it's simply all talk right. So we need to make sure what we're talking about, what we're saying is possible, is going to be achieved, because at the end of the day, it's what is achieved and what they implement. That is the most important thing. So, abs, as of October 2024, building approvals rose 4.2%. So that's positive. They're increasing. That's fantastic.

Speaker 1: 9:26

What we've just got to consider and keep in mind that building approvals versus what is actually built there is a little bit of a difference and there's roughly around 20% drop off from building approvals versus what is actually built. So it's just something to keep in mind, okay, not to mention there's lag time with that as well. Just because something gets approved now doesn't mean it might not happen for 12, 24 months. There's a lot of complexities that go on with that as well. We've got construction cost issues. We've got lack of tradies, a lack of that which is just directly impacting those approvals and, ultimately, what is built.

Speaker 1: 10:12

Now the government set a leverage target $1.2 million worth of homes in the next five years and they are behind target. So it's always been a stretch target. They've never hit those numbers in the past to be able to make that many homes over five years. So behind target, it's not looking good to kind of get to where we need to, and that is the issue with this supply issue also is that what we do now is going to take years to take effect. So when we're talking about vacancy rates and when we're talking about net overseas migration, there's just a massive amount of pressure that's going to still be there for years to come before some of these things take effect. These take, some of these things take effect. All right, so we've kind of broken down that supply side of things. But on the flip side of that we have net overseas migration. For the 2024 financial year it increased 445 700 people. So we're 55k off half a million people still coming into the country Now. This is the second highest recording only to the 2023 financial year and it was above the budget target of 395,000. So still a massive amount of people coming into the country.

Speaker 1: 11:40

But on the flip side, we have supply not keeping up with the targets that we're trying to achieve because of the demand. So you just got to think right there. If you're purchasing in quality areas in established areas with limited building approvals, that is a pressure cooker for growth. It's why we love metro locations, it's why Brisbane, melbourne, sydney get the majority of that migration and, yes, some of those marketplaces aren't performing now. But as those people keep pushing into those areas, that established land is going to become more and more scarce. Scarcity pushes growth and that pressure cooker for growth. So it's so important to remember that. That's why we only target established properties in established areas and we're analyzing building approvals and the supply that's coming into a marketplace. We've got 30 people coming through open homes and we've got median days on value under 15 days. We know that those areas are still super in demand. We've still got 30 people that are missing out on that property that need to go and find something else. So it's going to continue.

Speaker 1: 12:55

And just remember once we see rates start to reduce, everyone's borrowing capacities here. But as rates reduce, our borrowing capacity increases. People are able to borrow more, which means it's gonna. People's budgets are higher and we can continue to push that growth. Something super important to remember everyone says they can't go any higher. All this bullshit. Well, there's a lot of still affordable areas out there in these metro locations and once we see those rates come back, it'll push it and rates might go up for a little bit. They might go down all over the place, but it's something to keep in mind.

Speaker 1: 13:43

All right, so as per sqm research vacancy rates nationally for november 2024, the most recent data available nationally, sitting at 1.4 percent, still chronically undersupplied. So if we got half a million people that have just come into the country, they need just somewhere to live. They're going to rent or they're going to purchase. It's going to continue to put pressure on those vacancy rates and property prices. Sydney vacancy rate 1.8%. Melbourne 2%. So Melbourne's sitting a little bit higher than everything else, but don't get me wrong, 2% is Melbourne's sitting a little bit higher than everything else, but don't get me wrong. 2% is still chronically undersupplied. Brisbane 1.1%, adelaide 0.7% and Perth 0.6%. So they're still sitting extremely low in those marketplaces. And Brisbane, adelaide and Perth listing levels are still lower than the five-year averages, have improved, have increased to what they were last year, but still undersupplied for that five-year average. So that is, I guess, just some of that supply and demand that's going to be going on and what we need to consider for that pressure cooker for growth.

Speaker 1: 15:02

When we see these rates reduce and they will reduce there's going to be so many people flood back to the marketplace that are sat on their hands because they didn't want to hold for, let's call it, $200 to $300 per week. They thought, no, we'll wait until that reduces. They're going to go and borrow 200k more for the exact same asset that they could have purchased two years ago. But they will flood back now that it's lower cost to hold. You're going to be competing with far more people in the marketplace than you are today. The areas we target are still very much in demand, so that's something to remember. There is a window of of opportunity. I've been saying it's short for a period of time because once we see those rates reduce, it has taken longer than we expected, but a lot of people are going to flood back to the marketplace. So if you can get in and take action before that takes place, it's going to be very advantageous for you. We've been aggressive personally ourselves to get as much as we can before we see those rates reduce, because we just know what's going to happen. The next couple of years, in the right locations, are going to perform extremely well. If you wait one or two years, you're going to be borrowing more money for the exact same asset or you're going to get priced out and you can't purchase. Get in and take action. Now is the perfect time at the start of 2025. Get your borrowing capacity, get your pre-approval in place and go out there and make that purchase.

Speaker 1: 16:33

That is it for this episode. We've discussed the supply and demand, discussed the property performance for 2024 and what our predictions for next year are going to be. If you have anything that you want to hear on the episode. If you have a topic or something you want us to touch on, please shoot us through an email, complete a contact form, whatever it is. We'd love to know what you want to hear out of us in 2025. We're going to be pushing the podcast hard. We're growing it. We want to educate as many people as possible. So if you're enjoying it, subscribe like it, do whatever you need to do and we'll see you on the next one. Thanks, guys. Bye.