Australian Property Market Predictions – What My Property-Market Crystal Ball Reveals

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Everyone says they don't have a crystal ball when it comes to property market predictions and property price performance. However, the truth is that there's plenty of evidence indicating what's likely to happen next for those who buy the right types of assets.

You just need to understand history.

So, let's explore how past property can teach us lessons about what you should be looking to buy now to take full advantage of the next price cycle.

Reading the future

One of the many great things about real estate is that over the long term, it follows predictable cycles.

As a gross generalisation, in any given location and over many years, you'll see prices increase for a period, plateau or slightly retract, and then start to improve once more. It's this cyclical nature of property values that has helped build generational wealth for countless Australian families.

The tricky bit? Within these very long-term cycles, the nuances of the market can throw up short-term uncertainties and challenges that derail property buyers’ perspectives and expectations.

There's locational variation to contend with, for example. Not all property markets across Australia track in the same way at the same time. Just because there's a booming residential sector in Adelaide doesn't mean the same is happening in Darwin.

A quick look at the latest CoreLogic numbers tells the story. The following chart shows the annual change in home values across capital and regional cities:

Annual home value changes across capital and regional cities (source: Cotality)

While all locations remain positive, the actual range of annual growth rates across these centres runs from 1.9 per cent in Melbourne to 12.9 per cent in Darwin. That's a highly diverse set of results. I’d also suggest that the figures splinter even further at the suburb

level. Look at this same analysis five years ago and I'd venture that Perth and Hobart were probably leading the pack.

So, location adds unpredictability.

Then there's the stratification in growth rates across property types. Not too long ago, houses was seen as the sure-fire way to make the most significant gains. However, more recent analysis shows that units have not only caught up in the percentage gain stakes, but have, in some instances, surpassed detached housing.

Take a look at this analysis based on CoreLogic data:

House vs unit growth rates (source: Cotality)

You can see that unit values in Brisbane grew by 12.4 per cent in the past year, while houses gained an impressive, but markedly lower, 8.1 per cent.

So, the property type adds uncertainty.

Then there are price points. Within the very same location, depending on which price bracket you're in, market performance can be vastly different. You only have to look at the extreme uptick in growth for sub-$1 million properties compared to the $1.5 to $2.5 million markets in many areas. Affordable house price growth is being driven by high demand, fuelled in part by recent government first homebuyer incentive scheme expansions. Meanwhile, properties valued at $2 to $3.5 million in some areas struggle to secure the right buyer as finance constraints keep many borrowers out of the market. With interest rates now expected to remain unchanged for some time, this sector may slow down again.

So, what does all this teach us? Long-term markets are predictable, but short-term markets aren't when you consider all these different variables.

A predictable future

Here's the key insight: there are fundamental elements you can look for in a property that will substantially increase your chances of maximising value gains over the long term. It's these core features that add certainty and long-term security to your purchasing decisions.

What you want to do is buy a property that can take advantage of proven growth drivers. Things like gentrification, infrastructure upgrades, established and evolving facilities and

services, and employment opportunities. Locations near major city centres or employment hubs are always in demand.

Then there are the physical attributes of a property itself. Homes with desirable features like large allotments, views, and favourable aspects to catch the right sunlight through the seasons. Proximity to lifestyle options like bushland or water is highly desirable as well.

The property must be functional in layout. It should cater to the buyers who dominate the area you’re purchasing in. For example, family homes need separate living areas for parents and children. There should be a home office as well as usable outdoor living space. Many suburbs require two or more covered and lockable car spaces.

The key is this: if you understand your target suburbs intimately and know who the dominant buyers are in your market, as well as what they prefer in a home, you can quickly determine whether a property has the right fundamentals for long-term capital gains.

Your personal fortune teller

The hiccup in all of this is that very few everyday buyers are intimately knowledgeable about the areas they're looking to buy in. You need to follow all sorts of measures about a suburb. You need to be aware of every sale that has occurred, as well as the circumstances surrounding the buyers and sellers involved in each comparable transaction.

You must be well-connected with local agents who can share information that ensures you have the detailed knowledge required for informed decisions when selecting the right home. Not just to meet your needs now, but to deliver impressive value upside in the future.

This is why having an experienced, well-connected and highly skilled buyers' agent is essential to your success. We possess in-depth knowledge of our service areas to ensure you secure the right asset in the location you desire. It's the most efficient way to ensure you enjoy not just the benefits of a home right now, but also the upsides well into the future.

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