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Everything you need to know is included in our Australia Property Pack
Are you thinking of investing in real estate Down Under? Are you unsure if now is a good time to make a move?
Various opinions exist regarding market timing. The Australian real estate agent you consulted might advise you to buy property now, whereas your relative who actually resides in Sydney may suggest waiting for more favorable market conditions.
At BambooRoutes, when we create articles or update our pack of documents related to the real estate market in Australia, we base our work on reliable data and statistics, rather than relying on subjective opinions or hearsay.
We have gone through official reports and government website statistics in great detail. As a result, we have created a reliable database filled with valuable information. Here's what we found, which can help you decide whether it's the right time to buy real estate in Australia.
We hope you find this article insightful!
How is the property market in Australia now?
Australia is, today, one of the most stable countries in the world
Positive
Stability is the first factor to look at because it safeguards against market fluctuations and economic uncertainties, making it vital for real estate investment decisions. It is an information you need as a foreigner buying a property in Australia.
You probably already know that Australia is incredibly stable. The last Fragile State Index reported for this country is 22.7, which extremely high.
Australia has a strong economy and a stable government, both of which have contributed to its long-term stability and ability to weather economic and political challenges. Additionally, Australia has a strong social safety net and a robust infrastructure, ensuring that its citizens have access to basic services and resources.
Investors can definitely rely on the country's stability for investment. Let's review the economic outlook.
Australia will grow at a moderate pace
Positive
It's better to check the country's economic viability before deciding on a property purchase.
In accordance with IMF projections, Australia is set to conclude 2023 with a growth rate of 1.6%, which is positive. For 2024, we're talking 1.7%.
This steady growth might keep going since Australia's economy is expected to increase by 8.8% during the next 5 years, resulting in an average GDP growth rate of 1.8%.
The projected moderate growth rate in Australia is a good thing for investors because it indicates a stable and consistent increase in property values over time, rather than a rapid, unpredictable spike in prices. This provides a more reliable and sustainable return on investment, making it an attractive option for property investors.
However, GDP growth is not the only metric to look at.
Australian business owners still don't express confidence in current market conditions
Negative
While the GDP forecast is a valuable indicator, it may not fully capture the local sentiment as it relies on external projections. Fortunately, in Australia there is an official metric that is frequently communicated. It's not the case for every country, so we're lucky.
The Business Consumer Index (BCI) is a tool used to measure the confidence of business leaders in the economic conditions, both currently and in the future. It relies on surveys and assessments to gather this information.
The National Australia Bank's data indicates that the Business Confidence Index is currently -4 for Australia. It is definitely a small score.
Unfortunately, we're on a descending trend. The score, 12 months ago, was at 6.
The Business Confidence Index (BCI) currently reflects a relatively low level of confidence in Australia, as is the case in many other countries. However, this should not overshadow the potential opportunities in the Australian property market. A low confidence score often indicates a temporary period of uncertainty or caution, which is a normal part of economic cycles.
Let's now look at other data to see whether it's a good time to buy in Australia.
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Australia is issuing less building permits
Negative
If you're thinking of investing in property in a country, it's helpful to take into account the quantity of construction permits granted. More building permits being delivered implies a rising demand for properties and a thriving market.
Unfortunately, the number of building permits issued is decreasing in Australia.
Over the past year, according to Australian Bureau of Statistics, the number of building permits delivered by the Australian municipalities fell by 9.4%, from 212,905 to 192,956 units.
This is definitely a red flag. Let's consider more data to get a better understanding.
One last thing to note though. Less building permits means less real estate supply. If it's the case, then property prices will increase in Australia in 2024.
Australia's population is growing and getting (a bit) richer
Positive
When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Australia, the average GDP per capita has changed by 4.0% over the last 5 years. The growth, although minimal, is still present. Furthermore, the Australian population is growing (+2% in 5 years).
This means that, if you purchase a spacious house in Sydney and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, the rental demand might increase in Australian cities such as Sydney, Melbourne, or Brisbane in 2024.
Rental yields are not crazy in Australia
Neutral
Rental yield is a common measure in real estate investing.
It displays the percentage of income you can generate by renting out the property, giving you an idea of its investment value.
According to Numbeo, rental properties in Australia offer gross rental yields ranging from 2.8% and 5.5%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Australia.
It means that the income potential from a real estate investment is relatively moderate.
As we mentioned before, the amount of available real estate will stay the same (and housing prices may be stable), but more wealthy people will be looking to rent properties. Then we can conclude that rental yields might increase in Australia in 2024.
Everything you need to know is included in our Australia Property Pack
In Australia, inflation is projected to remain moderate
Neutral
Inflation is the general increase in prices of goods and services over time.
It's when your favorite flat white coffee in Sydney costs 5 Australian dollars instead of 4 Australian dollars a couple of years ago.
If you're about to invest in a property, high inflation can benefit you:
- property values tend to increase over time, leading to potential capital appreciation
- inflation can result in higher rental rates, increasing cash flow from the property
- inflation reduces the real value of debt, making mortgage payments more affordable
- real estate can act as a hedge against inflation, preserving the value of the investment
- diversifying into real estate provides stability during inflationary periods
- tax advantages, like depreciation deductions, can help offset the impact of inflation
As projected by the IMF, over the next 5 years, Australia will have an inflation rate of 14.0%, which gives us an average yearly increase of 2.8%.
This data infers that Australia might experience inflation soon, so it's worth thinking about buying property now.
Is it a good time to buy real estate in Australia then?
Time to conclude !
Despite some favorable and neutral indicators, 2024 may not offer the most advantageous conditions for property investment in Australia, considering a mix of signals that warrant a cautious approach. While Australia's stability and moderate growth potential are noteworthy, several concerns should be weighed before making investment decisions.
The neutral rental yields in Australia might impact the attractiveness of property investment as an immediate income source. Coupled with the projection of moderate inflation, the overall returns from property investment might not align with investors' expectations.
The lack of confidence among Australian business owners in current market conditions is a significant negative signal. This sentiment reflects potential economic uncertainties that could impact the investment environment and investor sentiment, raising potential challenges for property buyers.
Moreover, the negative trend of issuing fewer building permits suggests a potential slowdown in the real estate development sector, impacting future property supply and potentially affecting property values. Considering these signals, investors should carefully assess their investment objectives and risk tolerance before considering property investment in Australia in 2024.
We hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Australia.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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