Australian Property Update – March 2024
Tax Cuts Encourage Investment
Stage 3 tax cuts coupled with a drop in interest rates could be enough to entice investors back to the property market. Industry experts said the two financial measures combined would lead to better borrowing capacity.
Rate City analysis says borrowing capacity might improve by between 4% and 5% as a result of the Stage 3 tax cuts. LJ Hooker’s head of research Mathew Tiller, says there has already seen an increase in investor activity over the last six or so months with much lower vacancies and higher yields.
“With more money tipped into everyone’s pockets, that could increase buyer demand from both investors and owner-occupiers. It would also help borrowing capacity for investors and the serviceability of their mortgages,” he says.
Under the Stage 3 tax cuts, people on $100,000 a year receive a tax cut of $2179 a year, those on $190,000 and above will receive a cut of $4529, and those on $70,000 will receive a tax cut of $1429.
Cheaper to Buy Than Rent
Rents have risen so substantially in some locations that it is cheaper to make weekly mortgage repayments than rent. Analysis by PropTrack found 340 house markets and 261 unit markets which offer cheaper weekly mortgage repayments than typical rents.
Australia’s median rent is $550 over the past year according to PropTrack senior economist, Paul Ryan. Assuming a 20% deposit and a 6.24% interest rate, a property would need to be priced at less than $447,000 for repayments to be less than $550 per week.
In Sydney unit markets in Lakemba, Wiley Park and Punchbowl met the criteria, while in Melbourne unit markets including Carlton, Flemington, and West Footscray were suitable.
In Brisbane house markets in North Booval and East Ipswich were cheaper to buy than rent.
In Adelaide house markets in, Davoren Park and Smithfield Plains were cheaper to buy then and in Perth, it was Camillo and Armadale.
Tasmania’s Bridgewater and Risdon Vale house market were cheaper to buy than rent and in Darwin there were plenty of options including Darwin City and Nightcliff.
Prices Tipped to Keep Rising
Australian property prices are tipped to rise by 5% a year for the next two years according to a survey of property analysts.
The poll by Reuters, conducted in February, of 14 property analysts, shows the majority think price increases will continue to rise despite substantial increases in the past three years.
ANZ senior economist Adelaide Timbrell says housing prices will still grow because people will have more borrowing capacity through the year due to tax cuts and rate cuts.
“And there’s still strong population growth and a backlog of building homes that needs to be filled.” According to CoreLogic Australian Housing values nationwide increased by 0.6% in February, with Western Australia, Queensland and South Australia the most solid performers. Almost every capital city (Hobart was the exception) recorded a lift in values over the month according to CoreLogic Research director Tim Lawless.
“Housing values have been more than resilient in the face of high-interest rates and cost of living pressures,” he says.
QUOTE OF THE WEEK
CoreLogic Research director Tim Lawless
“Housing values have been more than resilient in the face of high interest rates and cost of living pressures.”
