The Australian property market is running at multiple speeds, with the economy trapped between a ‘rock and a hard place’ and buyers taking a cautious approach, according to new research.
PRD’s Australian Economic and Property Report found that there is a big difference between the different states, while buyers are keenly waiting on a rate cut from the Reserve Bank of Australia (RBA).
PRD Chief Economist, Dr Diaswati Mardiasmo, said there are buyers in the market, but many are not in a rush to purchase.
“In June 2024, the time to buy a dwelling index showed that most states recorded a declining trend,” Dr Mardiasmo said.
“This is the opposite of the June 2023 index reading, which showed a clear increasing pattern.”
She said that while last year’s mantra was “buyers are back,” the sentiment has shifted to “buyers are sticky” in 2024, with a more cautious consumer base, as seen in the Consumer Sentiment Index.
Dr Mardiasmo said Tasmania stands out as an exception, with a surge in buyer interest.
“Buyers in Tasmania have a different opinion than the rest of the country, with the time to buy a dwelling index increasing to 109.6 index points (or 40.1 per cent) in the past 12 months,” she said.
The residential construction sector shows signs of improvement, but challenges persist she said.
Dr Mardiasmo said that construction amounted to $19.1 billion in the March quarter of 2024, representing an annual growth of 3.3 per cent.
“This provides hope for more housing supply,” she said.
“However, anecdotal evidence from developers continues to name a tight labour market as the culprit to slower residential builds.”
On the economic front, Dr Mardiasmo said that Australians are facing a challenging environment.
“Economically, we are ‘between a rock and a hard place’,” she said.
“While our wages have increased, data suggests it peaked for both private and public sectors in December 2023 at 4.2 per cent,” she said.
“Household savings dipped to a historical low of 0.9 per cent in December 2023.”
Despite these challenges, some capital cities are showing signs of market recovery.
Dr Mardiasmo said that Greater Brisbane property prices grew 17 per cent in the past 12 months, outpacing Greater Melbourne at 14.6 per cent.
However, regional markets are moving at different paces she said.
“Regional markets are moving in different gears, but overall seeing a slight correction of -4.3 per cent in the past 12 months.”
Looking ahead, Dr Mardiasmo said that the future remains uncertain, with potential for further economic shifts.
“What can we expect for the rest of 2024 and early 2025? Well, the question we are being asked now has changed to: ‘How many more months do I have before something else (i.e. a cash rate hike) happens?’” she said.
Dr Mardiasmo said there is a need for strategic decision-making in the current climate.
“For now, it appears all we can do is hold tight and be strategic with our financial decisions based on our individual needs as we ride the different gears of each property market,” she said.
