Australia’s housing market has seemingly split in two: booming in some regions, while slumping in others. This is changing the mortgage game for both borrowers and brokers.
While home values in some of Australia's capital cities have experienced growth in recent years, others are trending downwards. In Perth and Adelaide, property prices saw double-digit growth in the 12 months leading up to March, while Brisbane real estate values shot up 8.6%, according to the CoreLogic Home Value Index.
Nationally, dwelling values rose 3.4% during the same timeframe. But that doesn't tell the complete story.
In Melbourne or Hobart, for example, property prices are heading south, down 2.6% and 0.2%, respectively, in the last year.
Australia’s two-speed housing market comes down to a mix of affordability, lifestyle choices, job opportunities and a limited housing supply. In some regions, strong job markets and lifestyle appeal are fuelling demand and pushing prices higher. Elsewhere, stretched affordability and tight borrowing capacity are keeping buyers on the sidelines.
But of all the factors driving the housing divide, Kevin Wheatley, founder and managing director of Bayside Residential and Commercial Mortgages, said the nation's housing shortage is the biggest culprit.
"Absolutely, it's supply and demand; that's it in a nutshell," the Sydney-based broker told Australian Broker. "We won't have fair market value until we have higher supply. And this is not going to happen anytime soon, because the bureaucracy you have to go through to get development applications approved through local governments is an absolute nightmare."
Widespread market expectations for the Reserve Bank of Australia (RBA) to cut rates later this month are a positive sign, and will no doubt fuel market optimism and increase borrowing capacities. So is Prime Minister Anthony Albanese's recent re-election. The Labor party ran on a campaign that included a number of housing reforms.
"The re-election will give us a pathway forward, hoping we can maintain political stability," Wheatley said.
"If Victoria could have a better government that would certainly be a vote of confidence to the constituents in the state of Victoria. But that's not going to happen anytime soon," he continued. "So at a Federal level, if we've got consistent government, consistent government planning in the housing sector and a contraction of interest rates, that should drive consumer confidence."
Wheatley added that Australia's housing market dynamics are very much "precinct by precinct."
"If you go back only five years ago, Melbourne was the preferred city to live in. And now people are moving out of Victoria in droves," he said. "[Homeowners] are going north, or into regional areas. Certainly, Adelaide was never a priority for people to go and live. Well, they're doing that now, because of the lifestyle.
"And the trend is becoming more and more exacerbated in Victoria, with the poor financial state they are in, and dreadful political leaders, state leaders; it's a basket case, Victoria," Wheatley said. "I've watched Victoria deteriorate dramatically in the last two years."
In fact, stark contrasts are appearing across the country.
Regional areas like Newcastle and Wollongong are gaining popularity as major cities are becoming less and less attainable. So are emerging Queensland hotspots, like Townsville and Sunshine Coast, both of which have been projected to grow, up to 30% and 16%, respectively, in 2025, according to a report by Propertyology. The same report found that growth in parts of Victoria, Canberra and Sydney will likely shrink through the year.
Nerida Conisbee, chief economist at Ray White, agreed that differences exist across various areas.
"Australia does have some of the least affordable property in the world," she said. "But it's not unaffordable everywhere. Sydney is the worst offender. Trying to find a house priced under $950,000 in Sydney is becoming increasingly rare. But go to Melbourne, and it has become more affordable. Go to somewhere like Hobart and prices have actually dropped over the past 12 months."
Some would-be homeowners and investors are adapting with a change of scenery, moving to places with more stock with a lower cost of living. But that strategy comes with its own set of challenges
"We're seeing a lot more activity in the regional areas because of the balance of lifestyle and affordability," Wheatley said. "But if you're relocating, you've got to have jobs that pay similar salaries to maintain your lifestyle."
But Andrew Rennie, a Melbourne-based broker at Helping Hands Finance said homes in popular suburbs will always be in demand.
"In my experience, properties that are well priced, that are in suburbs, that are in demand, are always going to attract pretty strong pricing."
