The market’s shifting – some suburbs are booming, others are busting. This edition of Property Edge cuts through the noise with:
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KPMG Market Outlook: Modest Growth
According to a recent KPMG report, Australian house prices are projected to grow by 3.3% in 2025, a slowdown from the 5.1% increase observed in 2024. This deceleration is attributed to affordability constraints and high interest rates, which have reduced borrowing capacities. Notably, unit prices are expected to outpace houses, with a forecasted growth of 4.6% in 2025 and 5.5% in 2026, as buyers gravitate towards more affordable property types.
Regionally, Perth is anticipated to lead with a 4% rise in house prices, while Sydney and Melbourne are projected to see increases of 3.3% and 3.5% respectively. Brisbane is expected to experience a 3.1% growth. For units, both Sydney and Perth are forecasted to see a 5% increase, with Melbourne close behind at 4.7%.
The report also highlights that price growth is expected to be more pronounced in the latter half of 2025, aligning with anticipated interest rate cuts. However, experts caution that even with rate reductions, affordability challenges will persist, emphasising the need for increased housing supply to meet demand.
In summary, while modest growth in property prices is expected across Australia in 2025, affordability remains a significant concern. The anticipated interest rate cuts may provide some relief, but the underlying issue of housing supply continues to be a critical factor influencing the market’s trajectory.
Australia’s Inflation Declines to 2.4%, Paving Way for Potential Rate Cut
Australia’s inflation rate has decreased to 2.4%, the lowest in over three years, strengthening the possibility of an interest rate cut by the Reserve Bank of Australia (RBA) in February. The Australian Bureau of Statistics reported that the trimmed mean inflation, which excludes volatile items, fell to 3.2% in the December quarter, down from 3.5% in the previous quarter.
The decline in inflation is attributed to lower electricity and fuel prices, as well as moderated increases in housing costs. Treasurer Jim Chalmers highlighted the progress made in controlling inflation, noting that it has significantly decreased from the 6.1% rate inherited by the current government.
Economists suggest that this downward trend in inflation could prompt the RBA to reduce the official cash rate by 25 basis points to 4.10% in its upcoming meeting.
While the reduction in inflation is a positive development, some analysts caution that underlying economic factors, such as a tight labour market and global uncertainties, may influence the RBA’s decision-making process. The central bank aims to balance fostering economic growth with maintaining price stability.
In summary, Australia’s recent inflation data suggests a favourable economic trajectory, with potential implications for monetary policy in the near future.
Suburbs With Minimal Growth Prospects To Avoid
A recent analysis by property management firm LongView has identified several Australian suburbs where property investors have experienced minimal capital growth, suggesting these areas may be less favourable for investment. The study examined investment property sales across Brisbane, Sydney, and Melbourne between January 1 and September 30, 2024, focusing on suburbs with at least 20 sales during this period.
Key Findings:
High Proportion of Units: Approximately 80% of the sales in the five worst-performing suburbs were apartments or units, not houses. This aligns with LongView’s observation that land appreciates, buildings depreciate, emphasising the importance of land value in property investments.
Underperformance Compared to Owner-Occupied Homes: The research found that nearly 67% of metropolitan investment properties sold in the three capitals delivered poorer historical capital growth than the average owner-occupied home. Additionally, about 72.6% of investment properties valued under 1 mil saw lesser growth.
Implications for Investors: Investors are advised to exercise caution when considering properties in these identified suburbs, especially those dominated by units or apartments. Focusing on properties with substantial land value and being mindful of the type of dwelling can be crucial for achieving better capital growth. LongView’s co-founder, Evan Thornley, suggests that investors should prioritise land value and consider older, well-located properties to optimise returns.
AUSTRALIA’S NO-GO SUBURBS FOR PROPERTY INVESTORS – METRO
AUSTRALIA’S NO-GO SUBURBS FOR PROPERTY INVESTORS – REGIONAL
By carefully selecting investment properties with a focus on land appreciation and strategic location, investors can better position themselves for profits in the Australian property market.
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