Despite robust headwinds, some market-specific conditions have retained a solid foundation for residential property prices. The limited availability of established housing stock has bolstered buyer competition, keeping prices stable despite the cash rate increases. This stability was further reinforced by the gradual easing of the cash rate hikes in 2023, following its rapid rise in 2022.
The cash rate’s aggressive uplift means that residential property prices have not had an opportunity to meaningfully soften. Instead, they have continued to strengthen after the initial fall in 2022.
The broader conditions indicate that established house price growth is expected to continue into 2024 and 2025. However, there remains some uncertainty in the market, for instance, regarding the potential increase in selling from investors in the established house market. This uncertainty is further amplified by questions about the future cash rate trajectory and the impact of global conditions on cash rates.
Given this current landscape, the market must offer a diverse range of dwellings; ranging in types, sizes, and price points to cater to the needs of local, regional, and national buyers. Affordable options, like townhomes and small lot housing products, are gaining prominence as they offer a more attainable price point and demand less sacrifices on house-like amenities, while satisfying the key preferences of owner occupiers and investors alike.
A townhome’s more attainable price point can come complete with separately titled lots, generous internal space, secure off-street parking, and reduced or no strata fees. This not only benefits price-conscious owner occupier first home buyers and local key workers, but also supports investor activity – which is vital to increasing supply in the tight rental market.
Meeting the diverse lifestyle needs of a wide range of buyers not only supports the genuine delivery of townhomes but also contributes to the much-needed supply across the housing market, helping to address current housing challenges.
The aggressive cash rate increases have significantly reduced borrowing capacity from its Covid-highs. At the same time, the broader availability of established market stock and construction costs have underpinned robust prices in both established and new dwelling options.
This article references findings from our Q3 2023 Greenfield Market Report.