Property market trends in Australia – Spot the next hotspot

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Top 10 Residential Property Market Trends in Australia

Australia's residential property market is now settling into a period of steady growth. According to Australian property market trends, it continues to provide compelling opportunities for property developers and investors who know where to look. 

The value of Australia's residential real estate market climbed by a trillion dollars last year to reach $9.1 trillion, representing an astonishing annualized growth rate of about 30%.

This article explores ten critical residential property market trends in Australia and the numbers behind them.


1. Coming back to the suburbs

According to a National Australia Bank survey, a significant trend is underway in the residential property market, with the desire to move regionally weakening as buyers again look to the suburbs after emerging from lockdowns.

The bank surveyed 370 property professionals, including real estate investors, agents and developers.

Highlights of the survey:


Exodus to the regions reversing

In the upcoming months, it is anticipated that a trend in the residential real estate market will cause a movement of home purchasers from regional areas back to the major cities.

Last year, COVID-related work flexibility initially led to a significant change in perceptions around buying in regional areas.

But now, buying in a metropolitan area is considered more critical than buying in a regional area, at 26% versus 21% respectively.

Throughout the pandemic, there was a considerable shift in the trade-off between cost and lifestyle, with choices about closeness to the CBD, extra room, and price all altering over the past two years.

As cities like Melbourne and Sydney have opened up, it is now possible to see tiny green shoots of people returning to inner-city suburbs in search of a balance of lifestyle and value.

The more moderate price growth in certain places has contributed to this.

As youthful first-time house buyers seeking nightlife propelled them, the inner suburbs of these cities slowly came back to life.

But outer suburbs were still holding a reasonable appeal in NSW. Having endured the most prolonged periods of stay-at-home restrictions, having a study or work area was most important in Victoria and NSW.

Victorians still valued good public transport more than other states, due to moving to the outer suburbs or regions during the past year.

The size of the space and the amount

The amount homebuyers are prepared to borrow the key consideration in all states – with buyers in South Australia most concerned about this by far.

The size of a house/apartment is also most important in South Australia, where those preferring an apartment over a house is higher than in any other state.

In recent times, South Australia has seen some significant house price growth.

Apartment price growth

Prices of apartments have grown at a much, much slower rate than houses.

In South Australia, the hunt for value drives them to consider apartments.

In Western Australia, a house's relative importance to an apartment was a major factor, whilst for Queenslanders, the size of the land was crucial.

Banks act swiftly

Banks had to process loan applications more quickly because of the fierce competition for listings and how quickly homes were changing hands. NAB used to take five days on average to process loan applications around a year ago. Still, now 80% get a decision that same day.

Forty per cent of home loan appointments now take place via video link.


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2. Five events that happened

Knight Frank's Australian Residential Market Update for May 2022 looked at five events across Australia in the residential property market and the likely impacts.

The bank cash rate change

Up until 3 May this year, it was 0.1%. It then changed to 0.35%. By the end of the year, it is expected to rise to 0.75%.

In October 2021, the Australian Prudential Regulation Authority (APRA) increased the servicing rate for lenders, lowering borrowers' ability to take on more debt by about 5%. 

This is unlikely to have a significant impact on housing demand. However, NAB warns regulators may soon introduce additional cooling measures such as higher debt-to-income or loan-to-value ratio limits.

Knight Frank noted that many of Australia's banks had already lifted mortgage lending rates over the past year.

More first-home dreamers

The great Australian dream of owning their own home was achievable for a sliver of time in mid-2020. The Knight Frank report said,

  • Values "subsided across Australia" during the period and offered significant subsidies at state and federal levels.
  • Soon after, the market became more competitive and first-time purchasers were priced out.
  • After increasing to 36 percent in 2020, the share of first-time homebuyers in all new loan commitments for Australian owner-occupiers fell to 29 percent by the end of 2021.

Auction slowed down

The survey discovered that in the majority of the main cities, auction activity had decreased.

  • From a total of 32,306 auctions, the average clearance rate was 69.1%.
  • But with 25,336 auctions in the first four months of 2021, the percentage was 10% higher at 79.1%.
  • From 49,092 auctions in the final few months of 2021, the clearance rate was 73.2 percent.

Home price rise has also been moderate. According to CoreLogic, there was a reduction in price growth from 0.7% in March 2022 to 0.6% price growth in April. The market is still 16.7% higher than one year ago.

A Wider exposure

The Australian residential real estate market has seen an increase in foreign purchasers, according to a survey by Knight Frank. 7.9% of all new residential property purchases in March 2022 were made abroad.

A year ago, that percentage was 3.7 percent.

The report also noted that the Australian government continues encouraging foreign investment into the residential property market and has not proposed changes to the Foreign Investment Review Board application process framework.

The new government, however, plans to double the application fees and financial penalties to pay for the proposed housing affordability policies.

Housing short supply

The lack of housing supply continues to have a significant impact on the residential real estate market. According to the NHFIC, Australia will have 163,400 fewer dwellings than it needs between 2025 and 2032.

While the amount of new residential sites that property developers have bought has decreased over time, a greater number of low-density sites have been sold outside of the more significant municipal limits.

3. Rental demand could skyrocket

Following the restart of international travel, there is the potential for an increased demand for home rents, with the return of international students and new migrants after a two-year absence.

The sudden spike in demand could increase demand for rental rates for both houses and apartments. House price growth is expected at a slower rate.

Property values will continue to rise, but at a slower rate than during the post-COVID price boom, which saw price hikes of more than 20% in key cities.

Instead, housing market consensus predicts an increase in average national house prices of 5 to 7% after the current slowdown. 

Once the lockdowns and border restrictions are lifted, current Australian residents will be permitted to restart internal migration. It will create fresh supply in areas where residents are leaving and new demand in areas where internal migration is most appealing. 

As international borders open, CoreLogic forecasts Melbourne will enjoy Australia's biggest rise in rental demand.

Due to its affordability advantage over the state capital, QBE identifies Geelong as a site of medium-term growth.

4. Different real estate markets will exhibit the finest results

The concentration of major price increases is predicted to shift away from Sydney and Melbourne, Australia's two largest cities, following a boom that has reduced affordability. 

Hobart is probably going to have the quickest growth among capital cities due to its appeal as a destination for interstate migration.

It is anticipated that more APRA measures would be put into place.

APRA is likely to intervene once more if worries about housing affordability intensify if a rising property market is perceived as a threat to financial stability.

5. Impact of the new government

Negative gearing for newly built homes will be restricted, and the capital gains tax deduction for investment properties held for more than a year will be decreased from 50% to 25% under Labor.

6. Residential property markets to flourish

Thoughts on the national home market have recently been seen to be relaxing, according to recent studies like NAB's most current Residential Property Survey, and a slowdown in building approvals is anticipated. The NAB forecasts a 5% increase in housing costs.

Westpac's recent forecast is that house prices will increase by 8% after the market enters a mild correction phase, with property prices to retrace by 5% on the back of high construction costs and stretched affordability.

7. Demand for units to bounce back

Record highs have been reached in the difference between home and unit prices, and over the previous two years, rentals in some inner-city high-rise buildings have decreased by up to 30%.

However, the yearly trend for national unit rents has changed to the better, and vacancy rates in the capitals have stopped rising and are anticipated to continue trending lower.

As has previously happened in London, New York, and other cities, easing border restrictions, the inevitable return of international students, immigrants, and hospitality workers, as well as businesses and nightlife, are likely to significantly increase demand for city housing. 

The capital city CBD markets that have suffered the most from the pandemic, according to Domain's chief of research and economics, Nicola Powell, will recover the quickest.

"We know that most people arriving from overseas choose Sydney or Melbourne as their destination. 

"I think we will see additional pressure on rental markets in Melbourne and Sydney once overseas migration goes back to normal," says Dr Powell. 

At the same time, buyers see more excellent value in units due to housing price affordability constraints, and growing investor activity supports unit prices.

Investor mortgage demand has increased from a record low of around 23% to more than 30%, and CoreLogic head of research Tim Lawless says this is helping to drive recovery in these markets.

8. South East Queensland is due to be popular

According to QBE, persistent interstate migration should continue in Brisbane, the Sunshine Coast, and Gold Coast until 2024 since South East Queensland will continue to be more inexpensive than Sydney and Melbourne.

The Gold Coast has become Australia's most sought-after vacation spot since September of last year, when 11% of all inhabitants of capital cities who relocated to regional areas did so, according to the Regional Australia Institute.

9. "Work-from-home" evolving the residential needs

Metro areas and local suburbs will benefit from the continued popularity of working from home in urban locations. Bernard Salt, managing director of The Demographics Group, predicts that during the next five years, the residential property market will be dominated by "upgraders" in the 37-45 age range.

"I think we will see heightened demand for upgrader McMansion products on the city's edge (the Zoom call has killed commuting) and in idyllic lifestyle locales within striking distance of capital-city workplaces. Family-friendly housing: three-four bedrooms, two bathrooms, front garden, backyard," says Salt

10. Property developers turning to non-bank lenders

Property developers are fast-tracking projects and acquiring new opportunities in all market sectors to take advantage of the growing residential property market.  

The property market trends in Australia indicate that lending firms have been receiving enquiries across Queensland, New South Wales and Victoria from brokers and their developer clients for various projects. 

The silver lining is that the economy is still in good health.

According to the OECD, Australia's GDP is anticipated to grow by 4.1% in 2022.

Employment levels are among the highest, and business and consumer confidence are high. According to government data released in mid-March, the unemployment rate had plummeted to a 50-year low of 4%. 

These are positive trends for the residential property market in Australia.

Australia's residential property market is now settling into a period of steady growth. According to trends, it continues to provide compelling opportunities for developers and investors who know where to look.


Is the Australian housing market about to collapse?

There's no one answer to this question since the Australian housing market is made up of many different markets, each with their own trends and drivers. That said, there are a few things to keep in mind if you're thinking of buying or selling property in Australia:

- Interest rates are at historic lows, so now might be a good time to buy before they start to go up again.
- Property prices have been increasing steadily over the last few years, but they're starting to level off and even drop in some areas. So if you're thinking of selling, it might be a good time to do so.

How much will house prices fall in Australia?

It's tough to say exactly how much house prices will fall in Australia, but many experts believe it could be significant. The country has been hit hard by the coronavirus pandemic, and this is likely to lead to a decrease in demand for housing. Additionally, the Australian economy is facing some challenges, which could also put downward pressure on prices. So, if you're thinking of buying a home in Australia, it's important to do your research and be prepared for the possibility of prices falling.

Is now a good time to sell a house Australia?

It depends on where you are in Australia and what your goals are for selling your house. In seller's markets, such as Sydney and Melbourne, you may be able to get a good price for your house. If you're looking to downsize or move to a cheaper area, then it may not be the best time to sell. Ultimately, it depends on your specific situation.

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