69 Riding the Wave

RIDING THE WAVE

The population wave that may drive the next boom.

IS THERE ANY more peak left in this property market boom?

This is a vexing question for analysts and the Reserve Bank of Australia which has been mulling over its limited options for containing Australia’s rapidly surging housing market.

However, even with the latest move by the Australian Prudential Regulation Authority to tighten home lending now in play, there is one obvious change coming that could extend the current exuberance for property a little longer – with or without regulatory intervention.

Overseas migration is set for a rebound and forecast to hit pre-COVID levels by 2025.

Once international borders start opening, the mass migration to the regions that has driven the Australian property market over the past year could be bolstered further by incoming expats and international buyers making a return to the fray as early as next year. WORDS NICK NICHOLS

In the meantime, all we can do is assess the most recent data to see which markets are currently benefitting from this unprecedented market growth.

CoreLogic revealed in October that the value of residential property across Australia rose 20.3 per cent over the 12 months to September, the fastest since 1989.

However, a drop in government incentives and rising prices has seen the pace of growth wane from its peak in March this year, almost halving to about 1.5 per cent a month.

In another set of figures, CoreLogic reveals the wealth effect of the latest property boom and the heady profits being pocketed by Australians invested in the market.

CoreLogic’s Pain & Gain report for the June quarter shows that property owners achieved a median profit of $123,000 on their homes in just two years of ownership.

The latest analysis, which determines the percentage of properties sold at a profit or loss, showed the number of property owners locking in gains rose for a fourth straight quarter, driven by tight property listings and record low interest rates.

After analysing 106,000 dwelling sales nationally, the report found that 91.5 per cent of resales were made at a nominal profit on the purchase price.

That’s the highest this figure has been in more than a decade – and up 9 per cent from the March quarter.

“This number really does reflect the extraordinary recovery in housing values following a small downswing induced by the initial impact of COVID-19,” says CoreLogic’s head of research Eliza Owen.

A separate measure that shows which regions are most popular with buyers can be found in

the latest Property and Mortgage Insights report by digital property settlement platform PEXA.

The report revealed that Queensland, for the first time, had processed more property settlements in the September quarter than NSW and Victoria.

The PEXA report shows Queensland had 59,410 property sale settlements worth over $42 billion during the period, ahead of NSW at over 58,000 and Victoria at 56,000.

In terms of aggregate value of sales, NSW and Victoria continue to lead at $71.2 billion and $50.2 billion respectively.

Extended lockdowns played a role in settlement declines for NSW and Victoria, but Queensland was the only state to achieve positive quarter-on-quarter volume growth.

South Australia and Western Australia, on the other hand, were showing signs that settlements have peaked.

The PEXA report shows year-on-year volumes grew fastest in Brisbane, up 61.7 per cent, with the rest of Queensland up 52.3 per cent, also outpacing NSW and Victoria in percentage terms.

That doesn’t mean activity in Victoria and NSW has been subdued.

Surprisingly, Victoria dominated settlements by number on a suburb-by-suburb basis, largely those in the city’s growth corridors.

But Surfers Paradise was the only suburb outside of Victoria in the top 10.

All this has occurred during a period of negative net overseas migration, which has wiped out for now a key driver of housing demand in Australia for the past decade.

The forward-looking data is not so gloomy.

After a combined net loss of 174,000 overseas migrants estimated to have occurred between June 2020 and June 2022, the Australian Bureau of Statistics is forecasting net overseas migration to hit positive territory again in 2022-23.

The ABS is forecasting an influx of 95,900 people next financial year, surging to 201,100 the year after that, before reaching pre-COVID levels of 235,000 in 2025.

If there was any question where the current property boom is heading, these forecasts offer some insight into the potential groundswell of demand that lies ahead for the market.