The Australian property market is showing signs of a slowdown, with auction clearance rates dipping and listings increasing in key areas. Is this the end of the boom, or just a temporary pause? Discover the latest market insights, explore key data, and learn strategies to diversify your portfolio and prepare for 2025. Stay ahead of the curve with actionable advice from the experts at Search Property.
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The last couple of weeks in the Australian property market have been really interesting.
We've seen auction clearance rates dip, supply of listings go up in areas like Sydney, and people are starting to think that maybe the gravy train has ended.
Maybe property prices are finally going to correct, and we’re probably going to see a collapse of some sort.
In this article, I'm going to share my thoughts on what's happening, share some data that's just come out, and from there, we can make some decisions on what to do in 2025.
If you're interested in my thoughts, then definitely keep reading!
The truth is you could get into property and hope for the best, and you’ll probably work it out in the next 20 years. But a lot of us are so concerned with the short term that it usually wrecks us.
I know certain people I spoke to six months ago were expecting the following:
None of those things happened.
We didn’t see a rate hike, we didn’t see rate cuts, and the market didn’t collapse. Instead, the market went up. Six months later, they’re struggling with the fact that property prices are moving faster than they can save.
In 2025, we will see inflation calm down, and we’ll also see rate cuts.
What does that mean for property prices? Well, who knows? But let’s dive into some of the latest data.
This is the PropTrack Home Price Index for November 2024.
According to the report:
My assumption is that many people have been sitting on the sidelines, waiting, because they expected rate cuts by the end of 2024. It’s clear that’s probably not going to happen.
Now, banks are predicting that interest rates won’t really drop until maybe Q2 or Q3 of 2025.
The national growth rate monthly is 0.2%, capital cities at 0.1%, and regional markets at 0.3%. This brings the annual growth to about 5.5% across the board.
If we look at which markets are growing and, more importantly, which are stagnating, we can see that Melbourne and the rest of Victoria are still lagging. Compared to numbers in Brisbane, Adelaide, or Perth, it shows the cyclical nature of these markets and highlights the importance of being in the right market at the right time.
I personally like to diversify my portfolio. So, if I said I had five properties, and they were across Sydney, Melbourne, Brisbane, Perth, and Adelaide, I would, at any point in time, have some properties going up and some properties going down.
The good thing about that is it means that every single year, there's at least one market going up, and that would mean that I could go and extract some equity out to go and purchase in a different market and purchase counter-cyclically.
Therefore, if you're someone who goes: I don't want to use a buyer’s agent. I don't know what happens outside of Victoria. I'm only purchasing here, you may have had a really good couple of years, but then over the last couple of years, you've been falling behind. Because the market's been going backwards, you really have no option.
If you had two, three, or four properties, and they all lost value, you couldn't do anything. Say if you diversified that, and you had one property in Melbourne, one property in Perth, one property in Queensland, even though your Victorian property went down, you would have had your value go up in Queensland and in Perth, which meant that you could use the equity from there. If you truly believed in Melbourne, you would be able to come back, or you would go: Hey, I really want a property in Sydney. I want to diversify into Adelaide.
You still have the choice, and that's how you dollar-cost average (DCA) into building a large portfolio.
A lot of people don't know this. They go and buy in the neighbouring suburb because they understand the metrics.
Just imagine outsourcing that and then having the ability to keep your portfolio growing even when times are slow.
The same report also added that:
Now, here are the key findings:
Keep in mind, a lot of economists have been calling for a collapse because affordability was a concern, rates were going to go much higher, and they've been proven wrong. This is an average, so if you were in the right markets, like your Perths, your Adelaides, your Queenslands, you would have experienced almost 3x the national house price growth.
Now, I know you might be looking at this data and saying: Oh my God, that's the best place to buy. Let me go buy stuff in Perth, and that's where I'm going to go, and that's how I'm going to get the gains for next year.
Chances are, Perth is going to grow next year, but don't forget, everything works in cycles. There are periods when the market goes down, periods where the market stagnates and goes sideways, and then periods where markets go up.
This is where data and research come into it because you could get into an area that might just be really undervalued because it was unknown or there was a lack of knowledge. So, in that case, you probably have greater upside for a longer period of time.
However, you've also got to factor in that there are so many more sellers at that point.
If they bought at $500,000, and let's say it dipped to $450,000, if it went back up to $500,000, you might see those people now start selling. It puts downward pressure because there's more supply available. That's exactly what happened in Perth.
Now, at Search Property, because we have a full-blown research team, we were early into Perth, and when we got in there, it was significantly undervalued.
We realised that some people had bought their property for $500,000, and now it was worth only $300,000 or $350,000. Once we purchased the property at $350,000, we saw the values go up fairly quickly.
However, what was interesting was so many people that had bought for, say, 500 were selling for about 500 as well, about 8 or 9 years later.
The reason they were selling was because they felt like this market wasn't going to last forever, and they just wanted to cash out. They had been ruined for the last 8 or n years and now just wanted to cash out. But the difference here is that the dynamics are totally different.
You also can't factor in that because it went down 8 years ago, it would go down 8 years later.
Now, that would make sense if nothing's changed, but so much has changed in an area like Perth.
This is where it comes down to your strategy and risk profile because if you need something to grow as fast as possible, you get into the momentum markets.
If you're looking at areas where you're going: Hey, I want long-term growth, and maybe I'm okay because I don't need the equity from the first property. I've got enough of a deposit to purchase three upfront, then I'd be going and having flexibility around which locations I get into. But I definitely would be diversifying.
The same report further stated that despite the surge in stock for sale, the Australia’s median home value hits $800,000 for first time.
This is a simple case of supply and demand. If you think a market can never go down, just watch. If supply comes into that market, you're going to get absolutely ruined.
This brings me to some good and bad news.
We have two states where new apartment approvals have absolutely exploded.
That's good news for people that want to buy a place just to live in and have more choice because now prices won't go up.
However, it's bad news for anyone that thinks this is a good investment. If you have supply increasing at the level that it could be—I've always said this—if approvals move up, you're going to see supply increase in the next 12 to 18 months, and that is going to be followed by a sharp decrease in prices.
According to the report:
This is why I have urged you to be very, very careful when you see these really nice people selling you really nice properties off the plan, saying: This is the new growth area. Look, it's in the CBD, and look, there are apartments, and they look so nice.
This is where you need to be worried.
When you start seeing approvals like this come in, largely driven by apartments in building blocks in the CBDs, you're going to screw yourself over.
I know people who have bought in what would be deemed the second CBD of Sydney and have absolutely been ruined over the last 5 to 6 years. They've had their money go backwards, missing the opportunity cost during one of the greatest booms in Australian property prices.
This is why I try to educate you guys, so you can be protected from not just buying some "dogsh*t” apartment because it looked really nice online.
This graph here showcases what's been happening in the market over the last 10 years. What we've seen is that although this rate of growth is reducing, we're still recording 5.5%.
When you think about all the doomsayers who came out and said:
This is where you need to zoom out.
When you zoom out, all you have to deal with is blocking out the noise. You didn't just wait for the media to tell you when to buy and when to sell.
You focused on data and teamed up with the right people. You would have purchased and made a lot of money over the last couple of years.
If you really zoom out over the last 10-year period, there have only been two blips where we've seen prices fall. Again, I know this is the average and a summary of Australia. This is why it's important that if you diversify your portfolio across Australia, you can start limiting the volatility that you experience in your portfolio.
Now, price growth has leveled out in the capitals, with regional areas leading in November.
This is where it comes down to supply and demand.
If we're going to see approvals come in, this is you preparing for what comes in the next phase of this market.
You want to look at the approvals and see where the projects are coming in. If there are more approvals in a particular area, it gives you insight or a sneak peek into where property prices are most likely going to fall in the next 18 to 24 months.
This is how you stay ahead of the curve and position your portfolio starting right now.
If you need help with any of that, need the strategy, or need to start structuring your loans properly, we have a mortgage broking team we work with. They are absolute weapons when it comes to scaling up portfolios, and they only specialise in investment portfolios.
If you need your equity out from your principal place of residence to fuel this investment portfolio, then definitely reach out to my Search Property team by booking a FREE discovery call. We also have Refyne Loans, who are definitely going to be able to assist you, especially in 2025.
I hope you guys have learned so much from me in this article.
I'll catch you guys in the next one. Thanks, guys.
Disclaimer: Search Property Pty Ltd (SP) does not provide financial or investment advice and does not hold a financial services license as defined in the Corporations Act 2001 (Cth). Any advice given by SP is general in nature and does not take into account your personal circumstances or objectives, financial situation or needs.
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