Dear Reader,
Welcome back to our latest edition of Market Insights with Sanjeev Kaushik.
In this edition, we are diving straight into key financial and investment insights, with a particular focus on Australia. We will explore Aussie housing market trends for 2024, offering an update on the latest developments in the real estate sector. We also take a closer look at inflation, analyzing current trends and their impact on the economy.
Additionally, we will compare Stocks vs. Real Estate Investment to help you determine which asset class aligns better with your financial goals.
So let’s dive right into it..
Today at a glance:
- Aussie Housing Market Trends 2024
- Australia’s Inflation Landscape
- How Buybacks Manufacture Multi-Bagger Stocks
- Stocks Vs. Real Estate Investment – Which is better?
Australian Housing Market: A Closer Look
Australian house prices rose again in July, yet the market has become increasingly divided, highlighting clear winners and losers among the country’s capital cities. This growing disparity reflects varying economic conditions, demand, and supply dynamics across different urban areas.
Let’s learn more about the factors driving these differences and how they shape the current housing market landscape.
Market Holds its Ground
In July, Australia’s housing market demonstrated resilience as dwelling prices rose by 0.5% month-on-month, according to CoreLogic. This modest increase signals a steady pace of growth, contrasting with the rapid price surges observed earlier in 2023. The current trend points towards a market gradually normalizing after a period of heightened activity.
Changes in dwelling values, July 2024 (Source: CoreLogic)
Several factors contributed to this shift. Firstly, the Reserve Bank of Australia’s interest rate adjustments have played a significant role in tempering the market. Higher borrowing costs tend to cool buyer enthusiasm, leading to more measured price increases. Secondly, economic conditions, including wage growth and employment stability, have provided a stable backdrop, supporting moderate housing demand.
Additionally, the supply side of the market has seen gradual improvements. Increased construction activity and a rise in housing stock have alleviated some pressure, contributing to the deceleration in price growth. However, supply constraints in certain areas still persist, maintaining a degree of upward pressure on prices.
Overall, the current state of Australia’s housing market reflects a transition towards stability. While price growth continues, it is more sustainable and aligned with long-term economic fundamentals. This normalization bodes well for both buyers and sellers, fostering a healthier and more balanced real estate environment.
Markets within Markets
The story is far from uniform across the country. Cities like Perth, Adelaide, and Brisbane maintained their upward trajectory, with prices rising by 2.0%, 1.8%, and 1.1% respectively. These cities have benefited from robust local economies, ongoing infrastructure projects, and strong population growth.
On the other hand, Melbourne, Darwin, and Hobart experienced price declines, with drops of 0.4%, 0.2%, and 0.5% respectively.
Sydney, while showing a modest 0.3% increase, remains well below its 2023 peak. The stabilization in Sydney suggests a market adjusting to higher interest rates and affordability constraints. Despite this, Sydney continues to attract buyers due to its strong economic fundamentals and desirable lifestyle.
Price growth in Sydney and Melbourne continues to slow (Source: Goldman Sachs)
Overall, the divergent trends across Australian cities highlight the complex and multifaceted nature of the housing market. Local economic conditions, supply and demand dynamics, and external factors all play crucial roles in shaping the market’s performance in different regions. Understanding these nuances is essential for anyone navigating the Australian housing landscape.
Rental Relief
After being a pain area for both renters as well as the Reserve Bank, the rental market is finally showing signs of slowdown. National rents rose by just 0.1% in July, marking the smallest monthly increase since August 2020. This slowdown is particularly evident in Sydney and Brisbane, where rents actually declined.
CoreLogic attributes this to a decrease in overseas migration and a cooling unit rental market. The reduced demand from international students and workers, coupled with an increased supply of rental units, has eased some of the upward pressure on rents in these cities.
As the rental market adjusts, renters may find more opportunities and stability, contrasting with the recent trends of rapid rent increases.
What’s more?
Overview of Australian Inflation Trends
In the second quarter of 2024, Australia’s consumer prices increased by 1.0% from the previous quarter and 3.8% compared to a year ago. This was in line with what experts had expected. However, the core inflation measure that the Reserve Bank of Australia focuses on was a bit lower than anticipated, rising by 0.8% from the previous quarter and 3.9% year-on-year.
Inflation remains high for some items like food, rent, and insurance, but prices for many services, especially those sensitive to wages, are easing. In June, core inflation was slightly lower than expected.
Overall, the data suggests that inflation is slowing down and will likely continue to do so throughout 2024. This, combined with a weaker domestic economy and global trends, indicates that the Reserve Bank may start lowering interest rates gradually by February 2025. Key numbers include a 1.02% increase in overall prices from the previous quarter and a 3.81% rise year-on-year.
Which Asset Class is Better to Invest?
Discover the best investment strategy for you!
This video breaks down the complexities of stocks and real estate, comparing their performance across key investment stages: planning, acquisition, ownership, distribution, and legacy.
Whether you are a seasoned investor or just starting out, this in-depth analysis will help you make informed decisions for your financial future.
1 thought on “Australian Housing – Price is Hot, Rent is Not!”
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