This Week in Real Estate – 1st December 2022
Builders Warn Of Qld Price Rises
The Queensland construction sector is warning of rising prices as a result of proposed changes to the National Construction Code. The changes will apply to all new homes and renovations built from October next year. Master Builders Queensland head Paul Bidwell says the industry is operating in a challenging post-Covid environment already. He says it has been hit with “unprecedented” price increases and shortages of trades and materials as well as tough weather conditions in the past two years. While many builders have continued to deliver projects despite these hurdles, Bidwell says changes in the code to include new accessibility and sevenstar requirements will make it tougher and will drive prices up further. He says while the industry supports having more efficient and inclusive homes, the State Government needs to realise it will take additional time and effort from builders to implement the changes. Other state governments have put the changes on hold to enable the industry enough time to adapt.
Quote of the Week
“The drop in investment activity is bad news for rental markets, with less investment activity implying a slowdown in rental supply at a time when more rental supply is desperately needed.” CoreLogic head of research Tim Lawless
Price Growth Predicted For 2023
The predicted housing market downfall has been short lived, with analysts now predicting the market will head back into price growth mode in 2023. SQM Research’s Housing Boom and Bust Report for 2023 predicts Sydney house prices will increase by 9% next year, followed by Perth which it predicts will increase by 8%. The report has Brisbane, Melbourne and Adelaide house prices all growing by up to 5% in 2023. SQM Research director Louis Christopher says the price increases will be driven by the continuing shortage of rental properties, workers returning to offices, land tax changes and a surge in overseas arrivals. He believes interest rate rises will have ended by June and the official interest rate will be no higher than 4% by then. As property prices rise next year Christopher predicts renters will do it tougher due to a shortage in supply and rising rents. “Asking rents are forecast to rise between 8% to 13%,” his report says.
RBA Apologises For Bad Forecast
Reserve Bank governor Philip Lowe has apologised to those who took out home loans based on his repeated statements that interest rates would not rise until 2024. Lowe told a Senate estimates hearing it is “regrettable” that the RBA did not make it clear enough that this scenario would only occur if inflation did not rise as dramatically as it did. “I’m sorry that people listened to what we said and then acted on that and now find themselves in a position they don’t want to be in,” he told the hearing. “Looking back, we would have chosen different language. People did not hear the caveats. I thought it was clear but the community didn’t think it was clear. Well, they thought it was clear we weren’t raising rates until 2024. That’s a failure on our part.” The official interest rate has increased from 0.1% in May to 2.85% in November. Lowe says he made those comments when inflation was considered unlikely to pick up quickly.
Land Shortage Pushes Up Prices
Land supply needs to improve if the Federal Government target of building one million new homes over five years from 2024 is to be achieved. CoreLogic economist Kaytlin Ezzy says it is an ambitious goal given current land supply issues. As demand increases for land so have prices for housing allotments, which rose 15.4% in the 2022 financial year. The latest HIA Residential Land Report says prices appear to have risen close to consumers’ capacity to pay. The report also predicts increases in interest rates will reduce borrowing power and make it harder for some buyers to purchase land, but land prices have continued to increase because of the supply shortage. “Until there is a material change in supply, median land prices will likely remain elevated,” Ezzy says. She says 975,000 homes were built in the five years to June 2022, but similar figures will be harder to reach in the next five years.