Australian property prices have been rising again after a prolonged correction that started last year—an invitation for savvy home buyers and investors to purchase in Australia, particularly in the secondary cities, before values climb back to their heady heights of 2021 and early 2022.
May, for instance, had a monthly increase of 0.5% in overall dwelling values, according to CoreLogic.Although the gains are modest, experts believe the third consecutive month of rising prices is evidence of a real estate recovery. Tim Lawless, CoreLogic’s head of research, said the luxury sectors of several Australian cities look ripe for recovery with the top 10% of the marketplace already recording a larger drop in values through the most recent peak-to-trough cycle.
“But these are also the markets that seem to be leading the upswing at the moment,” he said.
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Still, though prices might be creeping up, after dropping 9.1% since the national cyclical peak in April 2022, the jury is still out on whether a fresh round of interest rate hikes will break the momentum.
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The Reserve Bank of Australia had a 10-month campaign of mood-dampening interest rate rises between May 2022 and February 2023, only taking a pause in April. It made two more increases of 0.25% in May and June to bring the official cash rate to 4.1%, the highest in 11 years.
“For people trying to get into that quite prestigious end of the marketplace, they’ve got a good opportunity now to get in while prices are well below what they used to be,” he added. “And based on the trends we’re seeing, that might not be the case for too much longer, particularly in the next six months. If current trends continue we could see these markets once again get back to new historic highs.”
Australia’s high-profile Sydney and Melbourne markets garner most of the attention when it comes to property prices, but there are a number of alternative cities with growth potential right now. According to Knight Frank’s latest Australian Prime Residential Review, the year ahead looks promising for luxury markets in the
Gold Coast,
Adelaide
and
Perth.
The Gold Coast Market Is Shining
Knight Frank data defines “prime” residential property as the top 5% of each market by value, which equates to A$2 million (US$1.36 million) for the Gold Coast.
During the last quarter of 2022, Gold Coast prime real estate sales volume decreased by 12%, with just 187 homes in the prime-price bracket compared with 857 in the previous year.
Despite the low turnover, Gold Coast prime residential values actually performed the strongest in Australia over this time period with 4.1% annual growth, ranking 14th from 45 global cities studied. Local prices are forecast to increase 3% a year over the next three years according to Knight Frank.
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Historically the holiday hot spot has been home to market extremes, however, LJ Hooker network general manager Stephen Mutton said the city is evolving.
“I’ve been based on the Gold Coast since 1997, and traditionally when the market boomed, everyone bought here, and when the market contracted everyone sold. We had such fluctuations between the highs and the lows. But during Covid we had a substantial amount of wealth transfer from the Victorian and New South Wales markets into Queensland, especially on the Gold Coast because of its lifestyle,” he said.
“Now we’re seeing an undercurrent that we won’t be as affected as we have been in the past. There’s some substantial wealth driving the local economy and construction is still happening,” he added.
Mutton said LJ Hooker’s offices throughout the Gold Coast are reporting that buyer and tenant demand is outstripping supply.
“They’re selling more than they can list each month and there’s a continuous amount of people lining up for rentals, we’ve got one of the lowest vacancy rates in the country,.” he said.
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Nerida Conisbee, chief economist with Ray White Australia, said in recent years the Gold Coast has confirmed its place on the international stage as a desirable destination.
“There’s a lot of global interest in that part of Australia because it’s quintessentially Australian. It’s got the Aussie lifestyle, the sun, the surf and so it just seems to attract a lot of overseas money,” she said.
“With very high levels of international and domestic migration, population growth continues to be the strongest in the country in Queensland. I think what’s really going to support pricing for housing is the fact the state simply isn’t building enough houses,” she added.
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Adelaide Is a City to Watch
Adelaide is also evolving, according to Conisbee.
“South Australia has been a state that’s lost people to other states over the past 20 years, but now that’s being reversed and we’re seeing very different conditions in that state as a result,” she said. Big demographic shifts are underway in places like Adelaide, the Gold Coast and Perth that represent a bigger change than just “short-term fluctuations in pricing,” she added.
“Adelaide is interesting, as with Perth and Darwin, because these markets are now back at their 2022 peak after what we see now was a very mild downturn,” she said.
The South Australian capital saw an incredible 44.7% rise in dwelling values between the onset of Covid to its July 2022 peak and prices only fell 2.4% when the local market reached a recent low point in March this year.
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“What’s driving Adelaide’s market is its affordability compared with other cities. Even at the top end you can get something really nice for A$1.5 million which for the same property would cost far more in Sydney or Melbourne,” Conisbee said.
With development and infrastructure on the cards for South Australia, Adelaide has a promising future.
“The state government is really pushing forward to opening up more land for subdivisions. They’ve got the infrastructure set, which a lot of the other major capital cities are struggling with,” Mutton said.
South Australia’s property market is expected to provide a stable option for investment over the course of 2023, according to Knight Frank managing director for South Australia, Bobbette Scott.
“Every market offers opportunities, but what is so compelling about Adelaide is that it continues to provide a stable and affordable investment environment for investors,” she said. “With significant investment in South Australia, with world-class health and biomedical, entertainment and sporting precincts, innovation hubs for technology and entrepreneurship, and major defense projects in the pipeline there are certainly exciting times ahead for the state.”
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Perth Is Digging Its Way out of a Mining Slump
Agents across the West Australian network of LJ Hooker have been reporting an uptick in buyer activity from Victoria, Queensland and New South Wales, indicating a flight to value for money, Mutton said.
“Demand is through the roof and I think that’s because Western Australia is just so affordable in comparison to other Australian cities. They had such a delayed market because of the downturn from mining. They’ve only now just caught up to values they were seeing 10 to 12 years ago.”
Perth’s home-price growth hit its lowest point in May, an ongoing decline since peaking at 24.5% annual growth in July 2022, according to CoreLogic figures.
“What we’re seeing on the fringes of Perth’s central business district, the market is really taking off. I recently spoke with an agent who told me they’re fielding requests from buyers agents who’ve got clients ready to buy 10 to 20 properties in one hit,” Mutton said “Whatever price point you’re looking at Perth offers more bang for your buck and in many ways the lifestyle is on par with the eastern cities.”
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