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Australian property market set for recovery

Published: Monday 28 October 2019

House prices in some of Australia’s largest cities have plummeted in recent years. An outcome that could be good news for British immigrants looking to take a first step on the country’s property ladder. However, the window of opportunity may be short-lived…

Recent figures show that average house prices in six of Australia’s eight state or territory capital cities fell in the year to the end of September 2019.
It’s a trend that has been ongoing since mid-2017. Property prices in most capitals have been falling faster than a ten-tonne weight; decreasing by as much as 10 per cent in Sydney and Melbourne in the past 18 months alone.

While prices in some regional areas have continued to grow – or at least remain steady – the relatively small number of investors purchasing a home in these areas has seen the average national house price slump.

The latest CoreLogic Home Value Index shows that in the past year, property prices fell in Darwin, Perth, Sydney, Melbourne, Brisbane and Adelaide.
Tasmania’s capital Hobart and national capital Canberra were the only capitals to record house price increases in this period.
Combined, property values in Australia’s eight state and territory capitals fell by 4.3 per cent in the 12 months to 30th September. Outside of the capitals, however, the decrease was just 2.5 per cent.

Australian property market upturn incoming

A closer look at these figures reveals that the situation is improving.
The government’s decision to ease previously stringent lending criteria, and the Reserve Bank of Australia (RBA) slashing interest rates to just 0.75 per cent a year, has seen confidence return to the market.

In the past quarter alone, the average house value in the eight capitals combined rose 2.2 per cent. Unsurprisingly, Sydney and Melbourne lead the charge. Prices were up 3.5 per cent in Sydney on the previous quarter and by 3.4 per cent in Melbourne.

While values were still falling in Perth, Darwin and Adelaide, the scale of the declines were much lower than they had been previously.
Indeed, a recent survey carried out by the Property Investment Professionals of Australia found that 82 per cent of investors view now as a good time to buy a residential property in the country, while, 48 per cent plan to purchase in the next six to 12 months.
Property in  Melbourne, Victoria, Australia

Time to buy?

There’s little doubt that Australia’s decision to tighten lending criteria in the wake of the late noughties global financial crash, combined with the market’s recent instability, has had an adverse effect on home ownership rates for new immigrants.

For British immigrants, there is another spanner in the works. Brexit. Prevailing uncertainty in the UK has caused many new immigrants to hold on to their properties back ‘home’ for the time being. Waiting to see what will happen to the property market – and the currency exchange rates – when the UK leaves the European Union.

With Brexit developments changing by the day and negotiations continuing – deal or no deal – we should soon start to have a clearer idea of how the property and currency markets will be impacted. This could lead to some British immigrants already living in Australia being more prepared to sell up their UK house, then use their equity to buy a home Down Under.
UK house price

"Currency timing ideal"

In some respects, the timing couldn’t be better. In terms of currency, the Pound-Australian Dollar exchange rate has already strengthened in recent months and is currently close to pre-Brexit levels. It’s the best time to buy Australian Dollars in three years, and this rate could improve further in the months following Brexit as the impact of what leaving the EU will actually have on the UK becomes clearer. Currency markets don’t tend to thrive on uncertainty.

What’s more, lending conditions in Australia are currently very good, interest rates are low and the market looks stable.
However, some industry experts are concerned that all this could cause house prices to suddenly skyrocket.

“A fall in interest rates generally translates into rising property values,” IBIS World Senior Industry Analyst Michael Youren told 9news.com.au. “While first home buyers would have access to greater loan sizes than previously, rising home values will necessitate the saving of larger deposits to enter the market.”
Therefore, with prices likely to rise once again, the window of opportunity may be small for immigrants – and other investors – to get the most from their money.

The regional issue

As the CoreLogic data demonstrates, it is in the larger cities where the house price recovery is prevalent. While average prices across the capitals may have increased in the past quarter, outside of these eight cities, price growth was down 0.1 per cent.
This could be good news for immigrants who are currently looking to make the move Down Under. The Australian Government has made no secret of its desire to attract migrants into regional areas.

A slew of new regional visas have been announced to try and tempt newcomers away from the bright lights of Sydney and Melbourne.
And this drive for more regionalised migration is working. Recent figures show that in the first quarter of this program year, the Government has granted more than 6,350 regional visas. An increase of 124 per cent, compared to the same time last year.
Sydney buildings and skyline.

With property prices in regional Australia already lower than those in the capitals (according to CoreLogic the combined regional house price average is AUS$376,903 compared to AUS$602,319 in the capitals combined) immigrants who find themselves settling in a regional area could find themselves quid’s in when buying a home. The flip side, though, is that as more immigrants settle in rural areas, house prices in those areas will start to rise.

However, for those who are currently in a position to take advantage of the favourable property market conditions Down Under, there should be value to be found throughout the country. Quite how long these favourable conditions will last, though, is another question entirely. Watch this space