The report highlights 10 regions across the country in need of more affordable rental stock in an era of perpetual rental crises.

Suburbtrends identified the selected suburbs based on a number of factors, including whether these suburbs had exceptionally low vacancy rates, where rents exceeded incomes below the state average, and possessed a very low pipeline of building approvals, suggesting that the problem is unlikely to subside anytime soon.

Australian rental markets were filtered out if they contained more than three rental properties, had vacancies below 1.5%, and had household income levels in the upper 50 percent of each state.

The ranking was based on median weekly rent expressed as a share of average weekly household income, a measure called ‘rental affordability.’

Queensland had the most suburbs listed (five), followed by NSW (three), while South Australia and Victoria had just one each.

One of the biggest issues facing Australian society as a whole is the rental crisis, according to Suburbtrends founder Kent Lardner. A significant number of suburban areas throughout Australia are experiencing a severe shortage of rental properties, with vacancy rates at historic lows and tenants struggling to find adequate housing.

According to him, well-off renters in upscale suburbs have greater access to housing choices, especially since many of them work remotely, since they belong to the knowledge worker demographic. However, renters living in lower-income households face dire conditions due to a lack of housing options and significant difficulties.

“The report sheds light on the suburbs hardest hit by the shortage of rental properties.”

We acknowledge that finding a solution to this crisis is complex, but urge the Australian federal government to work with state and territory governments to increase the supply of rental properties.

The following are the 10 Australian regions that are desperate for rental stock, according to Suburbtrends:

1.   Main Beach, Queensland (House):

In this region, the vacancy rate increased by 0.4% from January to January, resulting in 0.6 percent of houses available for rent. The average weekly rent has risen 33 percent in that time, resulting in renters being charged $1,200, or 71 percent of the average weekly household income.

2.   Tweed Heads South, NSW (House):

In this NSW-Queensland border town, vacancy rates dropped to 0.4% in January, while rents rose 10 percent to $680 in the 12 months to January. Approximately 70 percent of Tweed Heads South’s $976 median weekly household income comes from rent.

3.   Eastlakes, NSW (House):

Rents in this South Sydney suburb have increased by 18% to $825 over the last 12 months, while vacancy rates have dropped from 1.9 per cent last January to 0.3 per cent in the first week of 2023. As this airport’s neighbouring area has a median household income of $1,300, median rents equate to 63 percent of median income.

4.   Warrawong, NSW (House):

On the state’s South Coast, residents have seen vacancy rates drop to 0.8% in January this year, while rents have increased 13 percent from $450 to $510 in the past 12 months, meaning that the average homeowner, who earns $908 per week, spends 56 per cent of their income on rent.

5.   Pialba, Queensland (House):

Vacancy rates in this suburb in Central Queensland dropped from 0.6% to 0.2% during the year to January 2023, while rents rose from $420 to $500. Pialba households earn an average of $932 per week, with rent making up 54 percent of their income.

6.   Currumbin Waters, Queensland (House):

A vacancy rate of 0.8 per cent was recorded last month on the state’s Gold Coast, up from 0.3 per cent in January 2022. Rents have also grown 18 per cent during that time, with the average tenant in the region charged $850 for accommodation, which accounts for 52 per cent of the region’s median weekly income of $1,636.

7.   Victor Harbor, South Australia (House):

The first non-Queensland or NSW suburb to enter the list lays claim to a dire zero per cent vacancy rate, a figure which has remained since January 2022, while rents have risen slightly from $410 to $450. The average household within the region spends 51 per cent of their $882 median weekly income on rent.

8.   Capel Sound, Victoria (House):

Having begun 2022 with a zero per cent vacancy rate, this suburb at the tip of Melbourne’s Mornington Peninsula’s market rebounded slightly with 0.6 per cent of properties available for rent at the beginning of this year. Median rents of $450 mean the average household — with an income of $950 — will fork out just over half (51 per cent) of their income on rent.

9.   Bilinga, Queensland (House):

Vacancy rates have held steady (0.4 per cent) from January 2022 to last month, while median rents have slightly climbed from $620 to $720. On average, households in this Southern Queensland suburb earn $1,435 per week that sees rents take up 50 per cent of their income.

10.   Eli Waters, Queensland (House):

Located in the Sunshine State’s Hervey Bay region, Eli Waters’ vacancy rates have risen 0.7 per cent between January 2022 and January 2023 to 1 per cent. In that time, rents jumped 24 per cent to $1,038 meaning the average household spends exactly half their median weekly income on rent.

The Great Australian Dream has long been referred to, but research has revealed that owning property is no longer just a dream, but an obsession. According to 2019 research by HSBC bank, Australians spend an average of 2.5 hours a week focused on property, more than twice as much time as they spend at the gym (1.08 hours) or talking to their parents (0.88 hours).

It is clear that those hours of obsession have turned into a popular source of wealth building for Australians with the total value of residential dwellings increasing by $140.0 billion to $9,874.7 billion in the March quarter of 2023–even though the market declined from a record $10.14 trillion in the March quarter of 2022.

Recent ABS data shows that new investor mortgage commitments have grown to 35.3%, the highest level since 2017, despite the RBA’s interest rate hikes last year.

According to Adrian Kelly, immediate past president of the Real Estate Institute of Australia, many Australians still view property as a “more stable life raft” than the stock market.

In the early 2000s, when the stock market collapsed, many people were more inclined to put their hard-earned savings into bricks and mortar.

As Australians-and the RBA-recognised the role housing and housing finance institutions could play in helping to prevent future crises following the GFC, the idea of a stable property market gained strength.

Property’s generous tax breaks have caused a lot of concern among younger buyers and some policy makers, who claim that something as basic as shelter has become unaffordable and speculative. In order to compensate for a lack of retirement funds, many baby boomers claim to invest in property because they did not retire before they could take advantage of the 1992 superannuation scheme.

More and more Australians are taking advantage of property’s wealth-building potential. Here’s what you need to know before you jump in.

When it comes to investing in property, there are a number of factors worth considering. Some of these are positive factors, such as:

Entry Barriers are Low

Property is often viewed as less of a risk compared to other investments, often because it does not require any particular specialised knowledge, such as what is required in a niche market, such as NFT trading or buying and selling cryptocurrencies. In addition to capital gains, rental yield, and tax deductions, it offers plenty of other benefits.

The capital growth of a property

Your property’s capital growth is determined by comparing its current market value with its initial purchase price over time. In the case of a property that cost $500,000 ten years ago and is now worth $900,000, you have made $400,000 in capital.

92.3% of Australian homes made a nominal gain from resale, according to CoreLogic’s latest Pain & Gain report, which compiled data from approximately 76,000 resales in the third quarter.

Although this was a decline from previous quarters, CoreLogic Head of Research Eliza Owen pointed out that “gains from residential resales in Australia remain substantial and loss-making sales were relatively contained”.

Nationally, sellers gained $276,500 on average during the quarter.

Yield on rental properties

Capital growth will not hit your bank account for years and even decades, but rental yield will.

In the end, rental yield is determined by subtracting your investment costs from the income you receive from tenants.

It is imperative that you consider the potential rental yield of your investment property if you intend to rent it out to tenants.

Lilly Schneider, a property investment advisor with Abercromby’s, explains that a rental yield between 6-11% would be considered a good return.

State-by-state, rental yields will vary.

The rental yields in capital cities are generally higher than those in regional or metropolitan areas, although the pandemic has resulted in a noticeable shift in lifestyle in certain areas over the past 24 months,” says Schnieder.

Additionally, investors may find that properties with good rental yields tend to be less expensive to purchase than those in areas offering good long-term capital gains. In this way, the total purchase cost, including taxes and mortgage payments, will also be lower.

Physical Asset Investment

Property investment is appealing to some individuals because it is a tangible, physical asset. Unlike shares, individuals can drive past the property whenever they like and fix any problems.

Schnieder says this tangibility gives investors total control and confidence, which is not guaranteed when investing in the stock market.

Tax Deductions

You can deduct most of the expenses you incur in these periods if you rent out your property.

Your rental property is positively geared if your deductible expenses are less than the income you earn from it. That’s why you can take advantage of negative gearing tax breaks. A negatively geared property is one in which your deductible expenses are greater than its income, so you do not make a profit from renting it out.

Pina Brandi, director of PB Property, explained that negative gearing was made available in the 1980s to boost construction and help the government accommodate Australia’s growing population.

As Brandi explains, Australians benefit from negative gearing because the government does not have the resources to provide adequate housing to the burgeoning population.

The government has created a stimulus by adding tax incentives for investors to buy and build more houses, which creates more jobs, more service providers, and more opportunities for the country.

Investors can also take advantage of the capital gains tax discount, introduced by the Howard Government in 1999, allowing them to reduce their CGT by 50% if they own an asset for at least 12 months.

The CGT discount cannot be claimed if the asset is your home and you used it for rental or business purposes less than 12 months before disposing of it.

The cons of investing in property

Then, of course, there are the downsides to consider. Despite the many perks to investing in property, there are some more difficult aspects that potential investors need to consider before jumping into the market.

Investing in property isn’t as easy as it seems; there are a number of fees, entry costs, and decisions to make before you can buy.

The following are some of the cons of investing in property.

Entry and exit are difficult and costly

As we explain below, the property market is both financially difficult to enter and exit. The entry expenses include stamp duty, legal fees, and real estate agent fees.

Additionally, if you need cash quickly, you can’t sell your property in a hurry.

Property Market Fluctuations

Even though the property market isn’t as volatile as the stock market, it still fluctuates in value over time. As property is a long-term investment, an investor will likely see the value of their property fluctuate.

In fact, CoreLogic reports that in just a few months from April 2022, the average home value had dropped -2.0% from its peak to July 2022. As the RBA raised rates in the second half of 2022, the market slumped, and it is only now beginning to recover.

Potential investors may find it enticing to buy in a dip, but it also poses serious risks: such as more expensive mortgages, higher interest rates, and less competition, which encourages vendors not to sell.

A COVID-19 pandemic has also raised concerns about the Australian property market, with investors concerned that the current bubble may burst.

Inflation, CPI, and wage growth considerations have a significant impact on the property market, causing it to fluctuate.

Tenants and property managers are needed

Rental yields are appealing to potential investors, but they come with a set of challenges: finding tenants who are willing to pay rent consistently. The rental of a property comes with management costs and requirements in addition to tenancy. You will have to find new tenants at times when the property is empty, and this could mean covering the mortgage on your investment entirely.

Investors may choose to manage the rental aspect of their investment properties themselves, but it is more common to outsource to a property management company, which involves additional ongoing costs.

What are the best types of properties to invest in?

The benefits of owning a property are numerous, but it is also a decision that should not be taken lightly. Consider where you want to invest and what type of property is best.

Apartments vs. houses

Investing in a house or apartment completely depends on the investor’s intentions, according to Schnieder.

“You need to do your calculations before you purchase an investment property and look at the rental yield and return you’ll get, as well as the costs associated with owning a home,” she says.

An apartment with three bedrooms worth $2 million might rent for $1,500 per week, but a house with three bedrooms worth $2 million might rent for $850 per week.

“If you are planning to renovate or even knock it down and re-build the property in the future, then the rental yield might not be the biggest concern for investing, rather making a profit on the property, therefore capital gains would be the most important factor.

The investor will try to achieve the highest possible rental yield on a property purchased with the intention of generating immediate rental income.”

As a result, choosing between a house or an apartment depends on the purpose of your investment: capital gains or rental returns.

Rental or owner-occupied properties?

While investors looking to make money off rental yield may decide to live in the property they have invested in, those looking to invest for capital gains may rent it out to tenants.

CoreLogic’s latest research shows that while more than 90% of owner-occupied sales are profitable, there is a significant difference between owner-occupied and investor resales in terms of profitability.

Investors, for example, were 35.8% more likely to have a loss-making sale through the June quarter 2022. If any profits were made, the median nominal gains ($223,000) were also lower than those for owner-occupied resales ($348,000).

There is an important difference between investing in property for residential purposes before selling versus investing solely as a capital growth and rental yield investment. An investor can use it to determine what type of property to buy, and where to locate.

Which suburbs are the best?

In Australia, choosing the best suburbs for investment is speculative, since it depends on the investor’s circumstances and objectives. There will be various growing suburbs in every state, capital city, and regional location, so research is essential. Even then, you can only do so much. When a global pandemic hit, who knew regional cities would boom?

However, most experts have traditionally recommended staying within the first 10km of the CBD, as this can offer both a good rental yield and long-term capital gains, depending on your investment objectives. Despite the fact that working from home has become more popular since the pandemic, and there is less reason to commute into the CBD, it is still a well-established and often highly desirable suburb near the CBD.

Also, it is a good idea to take into account the proximity of schools when selling to families; train lines and highways, where noise pollution can affect your property’s value; and other factors of the suburb that may make your property more appealing when it comes to selling, such as a suburb that is close to supermarkets, transport, or a beach suburb.

The majority of property advisors do not recommend speculative investment in mining towns rumoured to be growing rapidly, nor do they recommend hot spotting, which involves buying property in suburbs before they become popular, as a strategy. There is no guarantee that you will be lucky enough to buy into a suburb on the cusp of gentrification, so stay away from hard sales talk and hot spotters.

Property Investing Mistakes to Avoid

Brandi urges investors to avoid cutting corners in addition to avoiding hurdles that may turn off prospective tenants or buyers.

Brandi says some investors don’t want to spend money on reports, professional services, or due diligence.

According to Schnieder, talking to financial planners, mortgage brokers, and real estate professionals can help you identify the best property to invest in based on your investment goals.

Before investing in a property, Schneider suggests asking yourself the following questions:

• Is it your intention to move in one day?
• Are you only planning to rent out the property to earn a passive income?
• Is this your first home purchase?
• Is your goal to renovate/upgrade the house and then sell it for a profit?

Can I borrow a certain amount?

Contact your bank or broker to find out how much you can borrow. In order to calculate your borrowing power, the bank considers how many people will be participating in the loan; how many dependents you have; whether you intend to live in the property or if you intend to invest in it; whether the property is already built; the state in which you are buying; and your salary at the time of purchase.

According to the Australian government-backed Moneysmart website, borrowing money from a bank for an investment is “risky business.” Investment loans are also more expensive than loans for owner-occupied homes.

Borrowing to invest can provide you with more money, but it also comes with more risks, such as bigger losses and higher interest rates.

The best way to determine which loan is right for you is to speak with a mortgage specialist.

Property Investing Costs

Investing in property involves many more costs than just the purchase price or mortgage repayments.

Stamp Duty

It is a compulsory, state-imposed tax that varies in cost from state to state when transferring a property from one owner to another. Stamp duty, also known as land transfer duty, is the cost of transferring a property from one owner to another. The time it takes to pay stamp duty is also determined by where you purchased the property.

As a result of the dutiable value of the property (generally the purchase price or market value), the date of purchase, whether you are an Australian or overseas investor, whether you are buying a new home, an established home, vacant land, if this will be your primary residence, and whether it is your first purchase, stamp duty is calculated accordingly.

A stamp duty calculator is available online from each state government so you can find out how much stamp duty you will have to pay.

Conveyancing and Search Fees

The conveyancing process involves the legal process of buying a house and transferring ownership from the seller to the buyer. By doing so, the buyer is protected from nasty surprises in the future and is informed about any potential problems before making a purchase decision.

Conveyancing costs money, and the fees are divided into two categories:

According to the Australian Institute of Conveyancers (AIC), conveyancing fees typically range from $700-2500, but can be higher for complex transactions such as leaseholds. Even if your purchase fails, you’ll usually have to pay conveyancing fees. Disbursements are charges by third parties for various searches and legal documents. For example, title searches, mortgage registrations, and inspections.

Each Australian state and territory is governed by its own individual division of the Australian Institute of Conveyancers, and therefore may have different pricing costs and agreements.

Inspections of properties

It is imperative that you hire a qualified building inspector before purchasing any type of property. In addition to looking for minor and major defects, the inspector will also check for structural integrity, moisture issues, and termite potential. Depending on the size of the property and the inspector’s call-out fees, investors should expect to pay $500 to $800 for an inspection.

Costs incurred in the future

Prior to investing in property, individuals must also be aware of a multitude of ongoing costs. You may have to pay council and water rates, building insurance, landlord insurance, body corporate fees if you’re buying an apartment or villa, land tax, property management fees, and maintenance fees.

New data has revealed a number of suburbs across NSW where conditions are favourable to buyers and investors have sizeable bargaining power.

The research commissioned by mortgagee lender Well Money took both house and unit markets and discounted suburbs that were experiencing stagnant demand over the past decade.

Suburbs were then ranked based on the number of years’ profit (from lowest to highest) that vendors would give up if they sold at a 10 per cent discount.

The Northern Rivers town of Alstonville topped the list of suburbs where conditions were most favourable to buyers and investors.

Alstonville has experienced a net price gain of 165 per cent over the past decade, with a median asking price of $901,600 in December 2022.

Even if a vendor sold the property at a 10 per cent discount in Alstonville, they would only lose out on a year’s profit.

The research highlighted investment-grade suburbs where owners enjoyed at least 45 per cent price growth over the past decade, meaning buyers would be confident vendors could afford to sell for a 10 per cent discount.

Well Money CEO Scott Spencer said the ranking was designed to help investors and buyers who wanted to buy in quality locations across NSW while also holding the negotiating power over vendors.

“Buyers hold a negotiating advantage in each of these suburbs right now, because vendors have enjoyed capital growth of at least 45 per cent over the past decade.

“Another reason why buyers have the edge in these suburbs is because market conditions have been turning in their favour, as demand relative to supply has been falling.”

Situated to the north of Nambucca Heads, the house market of Valla Beach ranked second on the list – experiencing a net price gain of 147 per cent over the past decade.

Valla Beach also enjoyed the lowest median asking price for houses on the list, with the average home costing $560,000 to buy and only a year of profit lost if sold at a discounted price.

Of the 20 suburbs identified as being buyer and investor friendly, only two unit markets made the list.

The unit market of Kellyville Ridge experienced an 89 per cent net price gain over the past decade and has a median asking price of $508,250.

A vendor would lose one and a half years of profit if they sold their unit at a discounted price in the suburb, with a 0.7 vacancy rate.

Kingswood was the only other unit market to make the list, experiencing a 118 per cent net price gain with a median asking price of $958,000.

While the suburbs in the report were indicative of being strong locations for investors, Mr Spencer urged them to be prudent with their finances.

“All of the suburbs have low inventory levels, which will put upward pressure on price growth, and low vacancy rates, which will put upward pressure on rental growth,” he said.

“Interest rates have been rising and will probably increase even further in the first half of 2023, so investors need to budget for higher repayments. It’s risky to enter the market if you don’t believe you’d have the capacity to cope with higher interest rates.”

TOP 20 SUBURBS WHERE BUYERS HAVE THE ADVANTAGE:

1: Alstonville (Houses)

2: Valla Beach (Houses)

3: Kellyville Ridge (Units)

4: Kariong (Houses)

5: Figtree (Houses)

6: Carrington (Houses)

7: Lawson (Houses)

8: Kingswood (Units)

9: Spring Farm (Houses)

10: Charlestown (Houses)

11: Elderslie (Houses)

12: Medowie (Houses)

13: Wadalba (Houses)

14: Fern Bay (Houses)

15: Braidwood (Houses)

16: Woongarrah (Houses)

17: Claremont Meadows (Houses)

18: Hamlyn Terrace (Houses)

19: Prestons (Houses)

20: Terranora (Houses)

Source: Well Money

Despite high inflation and interest rates, Brisbane property prices have risen by 9.1 percent since January, and the capital growth is expected to continue.

A new record high for dwelling values is on the horizon for Brisbane’s property market.

In Greater Brisbane, property prices continued to grow in the third quarter of 2023.

According to CoreLogic data, property values in Brisbane appear to be just 0.6% below their previous peak in October.

In spite of higher inflation and interest rates, prices have risen by an impressive 9.1 percent since January.

A pause in the interest rate cycle may have boosted buyer confidence, as nearly half of this year’s growth occurred in the last three months.

In October, the Reserve Bank of Australia (RBA) kept the cash rate at 4.1% for the fourth consecutive month, causing buyers to factor in borrowing costs.

Property options in Brisbane remain limited, despite growing buyer confidence.

Throughout 2023, despite significant median price drops in the latter months of 2022, Brisbane has recovered these price adjustments, driven by migration, tight rental markets, and a shortage of housing.

Despite fierce competition in 2024, buyers should be prepared to act quickly, since desirable properties are once again selling quickly.

It may be an opportune time to list your property, since a multitude of eager buyers and intense competition are driving prices upward.

In the medium term, these conditions are likely to sustain price growth.

Currently, Brisbane is the second most affordable capital city market in Australia behind Perth.

Affordability in Queensland is better today than it was during the 2007-08 mining boom, according to the PropTrack Housing Affordability Index.

While affordability has become more challenging in Queensland over the last two years, Brisbane’s relative affordability compared to other east coast capital cities continues to drive demand for housing.

Queensland makes mortgage servicing easier

According to PropTrack data, Queensland requires 31 percent of income to service a mortgage, compared to 39 percent in NSW and 35 percent in Victoria, South Australia, and Tasmania.

As a result, Brisbane is an attractive destination, particularly for cross-border investors seeking a low-risk investment.

According to ABS data, 37.8% of all housing finance commitments in Queensland were held by investors in August, up from 34.7 percent in July.

In many Brisbane suburbs, buyer demand continues to outpace supply, with new listings remaining frustratingly low.

CoreLogic data shows that new listings in Brisbane are 13.3% lower than this time last year, while total listings are 22.8 per cent lower than this time last year, according to SQM Research.

Listings in Brisbane remain 40 percent lower than the long-term average, according to CoreLogic.

According to the PropTrack Listings Report, suburb-level trends may differ from city-wide trends.

The suburbs with the greatest increases include Park Ridge (+142%), Ripley (+140%), and Ormiston (+79%); while the suburbs with the greatest decreases include Cornubia (-58%), Warner (-57%), and Woolloongabba (-52%).

Adapted from CoreLogic

According to CoreLogic, dwelling values in Brisbane rose 1.3% in September, pushing the median value to $761,739.

In Brisbane, dwelling values have risen by 3.9% over the past quarter. However, it’s worth noting that the previous month’s quarterly growth rate was at 4.2 percent, indicating we may have reached Brisbane’s peak growth rate.

A Brisbane house outperforms an apartment

Over the past month, Brisbane’s median house prices increased by 1.4%, according to CoreLogic’s latest data.

A median house value of $848,680 represents an increase of $16,433 over the previous month, which translates to an increase of $4,108 per week.

Brisbane’s housing market saw a respectable 4 percent growth rate over the quarter, but it’s worth noting that the growth rate for houses decreased a bit from the previous month when the rate was 4.3%. This suggests that we may be witnessing a leveling off in the peak growth rate of houses in Brisbane.

Source: CoreLogic

In September, Brisbane’s unit market continued its steady growth, mirroring the 1.1% increase seen in August.

As of now, units have grown by 3.7 percent, down from last month’s rate of 3.8 percent. A monthly price appreciation of $13,010, or $3,252 in weekly price appreciation, has resulted in a median unit value of $539,169 in Greater Brisbane.

It is a market dominated by low vacancy rates in terms of rentals

The rental market in virtually all areas of the city is tight at the moment.

SQM Research indicates a drop from 1.0% in July to 0.9% in August, indicating a continued low vacancy rate in the rental market.

In the Queensland capital, rents continue to rise, but rental price growth has slowed significantly over the past six months.

In the past 12 months, house rents have increased by 6.4%, which is less than the 11.2% annual growth observed six months ago.

The price of real estate continues to rise

The recovery trend continued in September with a 0.8% increase in national property prices.

Despite reduced vacancy rates, rent price growth has decelerated due to affordability constraints. Additionally, a shift in household formation may be underway, as group rentals resurface as a strategy to distribute rental costs among larger households.

In Brisbane, unit rents have grown by 14 percent over the past year, according to CoreLogic. In terms of rental price growth, units have outperformed houses, as they are more budget-friendly. This is a slight slowdown from the 16.1% rate recorded six months ago.

Rent Law Reforms in Queensland have introduced minimum housing standards for all new tenancies, which require landlords to ensure their rental properties comply.

23 percent of investors who sold a property in the past 12 months did so in Brisbane, according to the PIPA Annual Investor Sentiment Survey.

Changing tenancy legislation and increasing government regulations were cited by a greater majority as factors that made property investment less appealing.

A decrease in investment properties has resulted in increased competition among tenants for the dwindling number of rental properties in Brisbane.

Following the RBA’s todays rate call, experts have shared their latest forecasts.

Most Australian economists now expect the Reserve Bank of Australia (RBA) will keep interest rates on hold for the remainder of this year, ahead of its first rate cut next year.

AMP chief economist Shane Oliver said the cash rate has likely already peaked at 4.10 per cent. In fact, he has pencilled in four cuts for next year as the economy and inflation continue to slow.

“Absent much stronger than expected wages growth, a further drop in unemployment and/or a reversal of the downtrend in inflation, the RBA is expected to leave interest rates on hold for the rest of this year ahead of rate cuts next year,” he predicted.

Dr Oliver noted that the RBA’s decision to keep rates on hold in September was consistent with the softer jobs, wages, and inflation data released during the past month, as well as increasing signs that household spending is rapidly weakening.

“Our view remains that the RBA has already done more than enough to slow the economy in order to rebalance demand and supply and bring inflation back to target,” he said.

Dr Oliver also noted that, as a result of the RBA’s ongoing rate hikes, the risk of a recession in Australia in the next year is “very high”.

“Continuing to raise interest rates will only add to the already very high risk of unnecessarily knocking the economy into recession,” he warned.

“At the very least, the economy is likely to have slowed substantially by year end or early next year with unemployment starting to rise faster than the RBA is allowing for.

“Given the lags involved and the increasing signs that monetary tightening is working, it makes sense for the RBA to remain on hold so it can better assess the impact of the rate hikes.”

Commonwealth Bank senior economist Belinda Allen also predicted that interest rates have already peaked in Australia. The bank has forecast an initial rate cut by the RBA in March next year and a total of 100 basis points (bps) of easing throughout 2024.

“The narrow path the RBA has been hoping to achieve – one where inflation comes back down gradually to target and some of the gains in the labour market are retained, seems to be more probable than initially expected,” she said.

Experts share views on RBA’s next move

Following the RBA’s September rate call, experts have shared their latest forecasts.

Most Australian economists now expect the Reserve Bank of Australia (RBA) will keep interest rates on hold for the remainder of this year, ahead of its first rate cut next year.

AMP chief economist Shane Oliver said the cash rate has likely already peaked at 4.10 per cent. In fact, he has pencilled in four cuts for next year as the economy and inflation continue to slow.

“Absent much stronger than expected wages growth, a further drop in unemployment and/or a reversal of the downtrend in inflation, the RBA is expected to leave interest rates on hold for the rest of this year ahead of rate cuts next year,” he predicted.

Dr Oliver noted that the RBA’s decision to keep rates on hold in September was consistent with the softer jobs, wages, and inflation data released during the past month, as well as increasing signs that household spending is rapidly weakening.

“Our view remains that the RBA has already done more than enough to slow the economy in order to rebalance demand and supply and bring inflation back to target,” he said.

Dr Oliver also noted that, as a result of the RBA’s ongoing rate hikes, the risk of a recession in Australia in the next year is “very high”.

“Continuing to raise interest rates will only add to the already very high risk of unnecessarily knocking the economy into recession,” he warned.

“At the very least, the economy is likely to have slowed substantially by year end or early next year with unemployment starting to rise faster than the RBA is allowing for.

“Given the lags involved and the increasing signs that monetary tightening is working, it makes sense for the RBA to remain on hold so it can better assess the impact of the rate hikes.”

Commonwealth Bank senior economist Belinda Allen also predicted that interest rates have already peaked in Australia. The bank has forecast an initial rate cut by the RBA in March next year and a total of 100 basis points (bps) of easing throughout 2024.

“The narrow path the RBA has been hoping to achieve – one where inflation comes back down gradually to target and some of the gains in the labour market are retained, seems to be more probable than initially expected,” she said.

Ms Allen also drew attention monetary tightening delivered by the RBA since May last year, the full effects of which have yet to flow through to the economy.

“Evidence is accumulating that these rate hikes are working, and with the delays in transmission, this impact will continue for some time yet. Holding interest rates steady will allow the RBA more time to assess the impact,” she said.

ANZ head of Australian economics Adam Boyton reiterated the view held by the bank’s economists since July that the RBA is now on an “extended pause” but suggested that future monetary easing was still expected to be “a considerable way off”.

“Overall, we see nothing in today’s decision or statement to push us off our view that the RBA is on an extended pause as it examines how the 400 bp of monetary tightening to date washes through the economy,” he said.

Similarly, Westpac has held firm to forecasts made following the RBA’s August decision, in which it declared the end of the tightening cycle and said that the next move was likely to be a rate cut next August.

“We believe that the likely ongoing weakness in spending and the continuing reduction in inflation is likely to close any window for further ‘insurance’ to assist with the return to target. The governor’s statement today certainly supports that view,” he said.

Meanwhile, Harvey Bradley, portfolio manager at Insight Investment, said it was becoming increasingly apparent that RBA believes it has sufficiently tightened financial conditions.

“It is clear every meeting will remain live from here and the market will remain very sensitive to the incoming data given the uncertainty which remains around the macro outlook,” he noted.

“The risks for growth remain to the downside but the risks for inflation remain to the upside. We expect that the RBA will be on hold for an extended period, until they can be confident inflation has returned to their target on a sustainable basis.”

If you’ve been thinking about investing in property, it’s understandable that the current market may have you wondering whether now is a good time to jump.

The good news is regardless of whether you’re looking to make a quick profit or create a long-term rental income strategy, there are always opportunities – it’s just about making smart choices.

Amid the interest rate climate, many would-be investors are sitting on the fence rather than taking advantage of some otherwise favourable conditions. However smart investors are still managing to create their own opportunities for positive cash flow.

Here’s what to know about investing in the current market:

Know the market you’re investing in

Across Australia, the majority of real estate markets are undergoing a rebound phase, displaying diverse rates of price growth. Notably, South Australia has witnessed remarkable growth, with record-high prices with a 5.6% annual increase, as reported by PropTrack’s Home Price Index (May 2023). Perth, too, performed strongly with a 4.2% annual increase.

Angus Moore, PropTrack economist says it is really important to understand both the local area but also the broader rental market, wherever you’re looking to make a property investment. 

“The good news for investors at the moment is, rental markets are very tight in practically all parts of the country. In South Australia, in particular, rental markets are extremely tight. 

“That’s obviously good news if you’re an investor. It means that the risk of your residential property sitting vacant is very low at the moment.”

Furthermore, property investment is best taken as a long-term income strategy so it’s best to have a long-term view rather than being put off by the minor peaks and troughs. 

Nathan Blackburne, Managing Director of Cedar Woods says Australia’s population is growing and will underpin continued rent growth in the future. 

“Savvy property investors will take the opportunity to invest now. The fundamentals are really sound with current and forecast migration numbers being high, low vacancy rates and rising rents combined with the chance to invest at the bottom of the price cycle which could maximise your capital gain.”

Pick the right location

Location is everything when it comes to real estate investment, and it’s just as important for renters as it is for homeowners. Imagine yourself in the shoes of a prospective tenant and consider what they would want in a rental property. 

Convenient access to public transport, schools, and popular amenities like shops and restaurants can make a property much more desirable to renters.

This makes established suburbs attractive for investors but can also be very expensive – especially amid current conditions where housing supply is scarce. Moore explains that the relatively low supply of properties on the market can push prices up for those looking to buy. 

An alternative option is to invest in a high-growth area like a new master-planned community.  Blackburne says the kinds of properties created by Cedar Woods are typically located in areas of strong demand either in close proximity to central business districts (CBDs) or with excellent transportation links. They are seeing investors attracted to these projects due to the ease of attracting tenants and the long-term investment opportunities.  

“The developments are strategically located in well-established locations with access to existing local amenities including public transport.

Have a clear strategy 

Investors need to ask themselves before setting out whether they’re looking for high rental return or capital growth or both. Moore says that deciding on a strategy upfront and getting professional advice is the best way to proceed. 

“This will affect the property you choose because, as an investor, if your cash flow points towards favouring something with a higher yield then apartments and units have historically grossed higher, before taking into account fees and maintenance. 

“For those looking for capital gains, at least over the last few years, detached home prices have grown much quicker than apartments.”

Buying new is another great option for investors that want less maintenance. Newer modern homes also tend to attract tenants willing to pay higher rents.

Blackburne adds that purchasing a brand new home allows the owner to make all the decisions around what the final home will look like. There are also tax breaks that may apply from capital works depreciation to appliances depreciation.  

Choose the right type of property 

Investing can look very different when it comes to different property types. Furthermore, each type of property will attract a different kind of tenant, which may also impact the decision for investors. 

Nationally, rental vacancy rates for houses is sitting just above 1% at the moment, compared to around 2% for units according to PropTrack data.

Apartments and townhouses

Moore says, historically, apartments have higher gross rental yields, before accounting for strata and fees, and the entry point in terms of price tends to be a bit lower, so it can be a bit more attractive for those on a smaller budget. 

For example, apartments will attract a tenant who is looking for convenience, proximity and amenity. They’ll generally be looking for low-maintenance homes in areas close to the action. 

Blackburne adds that investing in this kind of property allows you to start investing sooner due to their relative affordability and overall desirability from renters.

“Apartments and townhouses are generally easier to maintain and often have a higher rental yield than standalone houses.”

“Cedar Woods projects is a good place to start your search as they offer a diverse range of quality, connected communities in South Australia, Western Australia, Victoria and Queensland. In particular WA is seeing solid rental returns thanks to affordability compared to other markets.”

Standalone houses

Standalone houses are more attractive for families looking to settle down and lay roots in the area so tenants will generally be more comfortable to be a little further away from things like public transport in favour of more privacy and open spaces. 

Blackburne explains that when you buy a house, you also own the land, which appreciates and has the potential for a significant capital gain when you sell the house. 

“Houses are ideal for more long-term accommodation for families so the rental yield, although can be lower, can be long-lasting.”

“Another bonus for investors considering a house and land option is that they only pay stamp duty on the land portion, which can add up to considerable savings.”

House prices across the country are set to soar over the next 18 months, according to big four accounting firm KPMG.

In a new report released Monday, KPMG also predicts housing affordability will get tougher for struggling home buyers, as prices push back past pre-rate hike and pre-pandemic levels

In the report, Residential Property Market Outlook, September 2023, Dr Brendan Rynne, KPMG Chief Economist said there were a number of factors expected to push up prices.

“Despite high interest rates, constrained supply will likely dominate the factors influencing property prices in the short term and result in continued price gains in most markets during FY24,” he said.

“House and unit prices will then accelerate further in the next financial year as dwelling supply continues to be limited, due to scarcity of available land, falling levels of approvals and slower or more costly construction activity.”

The post-pandemic recovery in immigration is also expected to add significant pressure to housing demand.

House prices will rise nationally by 4.9 per cent over the next 9 months and then surge by 9.4 per cent in the year to June 2025, according to KPMG’s new property report on Australia’s capital cities.

Apartment prices are also expected to rise at a slightly lower rate of 3.1 per cent by June, then another six per cent in the next 12 months

As the housing market recovers from consecutive rate increases, mortgage owners may be relieved to hear KPMG have predicted rate cuts by the next financial year.

“The supply issue will combine with several other factors to push asset prices up – higher demand due to heavier migration, anticipated rate cuts moving into financial year 2025 and potentially relaxed lending conditions,” Dr Rynne said.

High rental costs and low vacancy rates, may make owning a home more appealing to Australians, according to KPMG.

“If renting is more affordable, it can exert downward pressure on housing prices,” the report revealed.

“When the cost of renting is comparable to the cost of buying and owning a similar property, households may opt for homeownership, potentially driving up house prices.”

Units in Sydney, Melbourne and Hobart are likely to experience larger gains than the national average in the next two years.

The report revealed shrinking home building approvals and rising building material costs are also constraining housing supply.

There were some factors that were pushing the other way, Dr Rynne said.

“The main one being mortgage stress,” he said.

“First-time buyers now need to use around half their earnings on mortgage payments, a significant rise from a third just three years ago,”

Half of all fixed rate credit is estimated to expire this year, approximately 880,000 Australian households, according to Dr Rynne.

“Some homeowners who previously locked in low rates might be unable to pay, and won’t be able to refinance to a lower and competitive rate,” he said.

Despite this, Dr Rynne said “the factors pushing prices up will more than counter those restraining them.”

A select number of capital city and regional areas remain primed for significant rent increases and capital growth even as politicians bicker and grandstand.

There is still a strong focus on where property prices are headed after a recent holiday and time spent with friends.

Currently, the market sentiment is indecisive.

People’s expectations of long-term growth have been conflicted with rising interest rates over the last three months, resulting in inconsistent price trends around the country.

There has been steady growth in Sydney and Brisbane over the past year, while Perth and Adelaide have experienced gains. Meanwhile, Melbourne is emerging from the doldrums, while Hobart, Darwin, and Canberra are faltering.

In regional centres, only South Australia and Queensland have done well of late, but there are signs of life elsewhere, as we discuss in this article.

In 2024, where will property prices go?

Around March 2023, commentators gloomy about property were surprised by a spurt of price growth.

Until the RBA’s last two rate rises tempered the optimism, optimism spread from Sydney to other centres.

How can we predict what to expect in 2024?

We can start by reviewing the factors we know will play a role and making judgements about how they will play out.

One variable is the so-called mortgage cliff, in which borrowers move from low fixed rates of around 2 percent to variable rates between 5.6 and 6.2 percent.

I expect rental growth to hit double digits in 2024.

– Miriam Sandkuhler, CEO, Property Mavens

The process has been ongoing for some time, but no major impact has been seen on the property market so far.

While payments have increased an average of $900 per month for these households, banks are reporting much lower levels of arrears than in 2019.

Mortgage cliff areas tend to be on the outer fringes of our capital cities and in large regional centers, such as Ipswich in Queensland.

I do not expect a tidal wave of defaults. What’s more likely is a ratcheting up of pressure in areas with higher debt loads and among owners with lower equity.

Cash-rich buyers’ rise (and fall)

Buying homes for cash (i.e. without a mortgage) has been one of the more interesting trends this year.

The PEXA property transaction agency reports that a quarter of all buyers on the eastern seaboard settled with cash, particularly in country areas, but also in Sydney, Melbourne, Brisbane, the Gold Coast and Sunshine Coast.

It appears overseas investors are returning, as there has been a strong cash purchase rate in central Sydney and Melbourne, as well as a heavy cash buying of vacant land in the outer suburbs.

But it’s the cashed up Baby Boomers who have been driving most of the growth, especially in provincial areas like Maryborough (Qld) and Taree (NSW) and suburbs like Broadbeach(Qld), Frankston (Vic), and Kellyville (NSW).

While these buyers have been a strong influence this winter, I expect that to wane somewhat over the next year.

Nonetheless, it serves as a reminder that today’s market is less likely to be shaped by couples purchasing with a 10 per cent deposit. If you want to understand where the market goes next, start by tracking buyers with significant resources.

Home loans bouncing back?

Interest rates were a game changer in 2023, checking the market’s growth mid-year.

But have rates peaked? After a year of rises every month, the RBA has now lifted rates in only three of the last five months, meaning we are likely near a peak.

These rises have had a big impact on the number of home loans approved, typically a reliable sign of how prices are likely to travel over the next six to 12 months.

But it’s interesting to note the value of mortgages has only retreated to its level of 2019. And while the speed of that decline has been rapid, it has now stopped and could be starting to trend upwards.

Rent juggernaut continues unabated

While politicians bicker and grandstand, the residential market remains primed for significant rental growth.

Some investors asked me recently whether the Albanese government’s plan to build 30,000 social housing units would have any impact on market rents.

Rent freezes a hot topic but do they work?

API Magazine examines how rent caps and freezes have worked overseas and presents the arguments for and against proposed policy measures aimed at easing the rental and housing crises.

While undoubtedly great for the people who will be housed, this plan is unlikely to have any discernible impact on rents.

The Rudd Government pursued a similar housing initiative in 2009. It delivered 20,000 units yet did little to alter rents or housing affordability.

As I wrote recently, the factors driving the rental market are structural and to date, nothing has been done to change the dynamic.

Over the last year, rents surged from their 15 year average growth of 3.5 to 6.7 per cent, according to the Australian Bureau of Statistics.

I expect rental growth to hit double digits in 2024.

For landlords, the key period to watch is February and March. In most centres, something like 30 per cent of lease agreements roll over in these two months and that’s when we will see how big the rises will be.

Property market rollercoaster

We expect the rollercoaster ride with Australia’s property prices to continue.

While the overall number mightn’t look that great, below the surface the dynamics will be fascinating.

This year’s growth spurt kicked off with family homes in Sydney’s middle ring and was driven through winter by areas like Melbourne’s prestigious Bayside.

That growth ended with a thud in the outer ring mortgage belt and many of the small regional centres that were the unlikely stars of 2021 and 2022.

In 2024, I expect most of the high performing areas to be inner and middle ring suburbs of capital cities and in larger regional centres like Newcastle, Geelong and Ballarat.

Rent rises will play a much bigger role in 2024 than we’ve become used to, attracting investors and encouraging some renters to try and buy into the more affordable sectors of the market.

The overall market will produce lukewarm results but rewarding returns for shrewd investors.

There are four suburbs in south-east Queensland, demonstrating the region’s resilience.

According to Hello Haus, nine suburbs are well-positioned to withstand short- and medium-term economic uncertainty.

These suburbs have a homeownership rate higher than 55%, a median days-on-market below 60, and a growth rate of more than 6% annually.

According to Hello Haus founder Scott Aggett, these suburbs have the right fundamentals for values to remain stable or even rise despite a possible slump in the Australian economy.

The Australian property market includes a wide range of locations, price points, and types of properties – even though overall values are down, the right investment will continue to yield excellent returns, whether you are a homeowner or an investor.

“Four of the nine locations selected are in south-east Queensland, highlighting the region’s resilience on a national level – we have analyzed key metrics for each and selected areas that exceed our benchmarks.”

The following nine suburbs are recession-proof:

Banksia Park, South Australia

Median house price: $654,500
Days on market: 25
Gross yield: 3.57%
Rental vacancy rate: 0.81%
10-Year Compound rate: 7.1%

Banksia Park is located 16 kilometres north-east of Adelaide’s CBD. It is set to benefit from the $6bn worth of infrastructure projects, including the Adelaide Airport expansion.

Around 89% of the suburb’s population are homeowners. This suburb is dominated by 30- to 40-year-old brick homes on traditional size allotments.

East Toowoomba, Queensland

Median house price: $727,500
Days on market: 42
Gross yield: 3.54%
Rental vacancy rate: 1.2%
10-Year Compound rate: 6.45%

East Toowoomba is blessed with established infrastructure and planned rail and road network upgrades, which would bode well for its local housing market.

It is located 1.5 kilometres east of Toowoomba’s city-centre and only 90 minutes away from Brisbane.

Homeowners make up more than half (57%) of East Toowoomba’s population.

East Albury, New South Wales

Median house price: $699,000
Days on market: 31
Gross yield: 3.42%
Rental vacancy rate: 1.73%
10-Year Compound rate: 8.5%

East Albury appears to have a relatively easy access to other states — it is three hours’ drive from Melbourne, six hours from Sydney, nine from Adelaide, and more than three houses from Canberra.

The suburb is home to a lot of housing options, from contemporary and established dwellings to attached housing.

Around 66% of East Albury’s population are homeowners.

Burleigh Waters, Queensland

Median house price: $1.4 million
Days on market: 47
Gross yield: 3.53%
Rental vacancy rate: 1.09%
10-Year Compound rate: 11.50%

Burleigh Waters is one of Gold Coast’s prime hotspots — many southern buyers set their sales to this suburb, boosting its net internal migration.

Around 80% of Burleigh Waters’ population own their own home.

Thornlands, Queensland

Median house price: $850,000
Days on market: 25
Gross yield: 3.67%
Rental vacancy rate: 1.7%
10-Year Compound rate: 6.8%

Nestled in Brisbane’s bayside, Thornlands is roughly 32 kilometres south-east of the CBD.

Thornlands population, 74% of which are homeowners, are set to benefit from the $300m infrastructure spending.

Reedy Creek, Queensland

Median house price: $1.31 million
Days on market: 39
Gross yield: 3.86%
Rental vacancy rate: 0.95%
10-Year Compound rate: 11.25%

Property buyers flock to Reedy Creek to check out modern lifestyle homes. Roughly 82% of the population in this suburb are homeowners.

Reedy Creek provides easy access to several points of interest like the Pacific Motorway. It is positioned just 25 kilometres south-west of the Southport CBD and 85 kilometres south of the Brisbane CBD.

The $7b infrastructure budget for the M1 Varsity Lakes to Tugun upgrade would boost Reedy Creek’s market.

Leichhardt, New South Wales

Median house price: $1.73 million
Days on market: 24
Gross yield: 2.50%
Rental vacancy rate: 1.03%
10-Year Compound rate: 7.30%

Comprising 60% of Leichhardt’s population are homeowners, who are in good position to benefit from nearby infrastructure projects like the $3.9bn Rozelle interchange and the $750m Royal Prince Alfred Hospital redevelopment.

At its median price, Leichhardt offers a relatively low entry-level point to the inner west of the Sydney property market.

Bulli, New South Wales

Median house price: $1.58 million
Days on market: 25
Gross yield: 2.73%
Rental vacancy rate: 1.13%
10-Year Compound rate: 11%

Bulli is a beachfront suburb services by the Princess Highway. The suburb is 10 kilometres north of Wollongong’s CBD.

Bulli Beach is a go-to destination for beachgoers, making it also attractive for sea-change buyers.

Approximately 79% of Bulli’s population are homeowners.

Lilyfield, New South Wales

Median house price: $2.1 million
Days on market: 25
Gross yield: 2.21%
Rental vacancy rate: 1.03%
10-Year Compound rate: 8.5%

Situated in the inner west of Sydney, Lilyfield is six kilometres away form CBD and is fronting the Parramatta River.

Lilyfield relatively offers a cheaper median price compared to other suburbs within 10 kilometres of the CBD that also have over 2% gross yield and low supply of detached houses.

Homeowners make up 64% of Lilyfield’s population.

Despite signs of relief in vacancy rates in certain parts of Sydney, the state’s peak real estate body says the rental market isn’t yet out of the woods.

According to the REINSW Vacancy Rate Survey, the region’s available rental accommodation increased by 0.3 percent to 1.7% over June.

Although the rental market got some breathing room during the month, Tim McKibbin, CEO of REINSW, warned that its woes are far from over.

The availability of rental accommodation remains at historic lows and the rental crisis remains entrenched, despite the increase in vacancies.

Both the middle and outer rings of the harbour city experienced an increase in residential vacancy rates in June, reaching 1.5 percent compared to 0.7 percent and 1.2 percent in May.

Within the city’s inner ring, vacancy rates remained unchanged at 2.1%, contributing to the increase last month.

The number of available residential rentals declined in both the Hunter and Illawarra regions outside of Sydney.

There was a 0.3% drop in vacancy rates in the Hunter region and a 0.5% drop in the Illawarra region, according to McKibbin.

Some regional vacancy rates tightened further during the month, but others eased.

A rise in vacancy rates was recorded on the Central Coast (1.7 percent to 2.3 percent), on the Mid-North Coast (1.1 percent to 2.1 percent), in the Northern Rivers (1.4 percent to 3.3 percent), on the Orana (1.5 percent to 3.6 percent), on the South Coast (2.2 percent to 2.5 percent), Riverina (1.1% to 1.3%), and in the South Eastern region (1.5% to 2.6%).

At the same time, vacancy rates tightened in Albury (1.5% to 1.4%), Coffs Harbour (from 2.6% to 2.4%), Murrumbidgee (1.5% to 1.6%), and New England (2.2% to 2%).

According to Mr McKibbin, the rental market in the state is “extremely tough.”

There are many pre-qualified tenants in some areas, but there isn’t enough inventory available to meet demand, he said.

Although there are areas with available properties, rising rents and other costs of living pressures mean tenants can’t afford to move.

Despite the monthly vacancy rate easing, the demand for rental accommodation isn’t slowing down, he said.

There are three things that remain constant in the residential rental market: availability of stock is low, weekly rents are rising, and tenants are facing ever-increasing living expenses.

“None of these things are improving – in fact, many are getting worse,” he concluded.