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If you feel like buying property in Australia is getting harder every day, you’re not imagining things. Prices have absolutely skyrocketed with median dwelling values across Aussie capital cities reaching $1.01 million in the December 2024 quarter, and so many Australians are feeling defeated and lacking confidence.
So, what exactly is behind this affordability crisis, and why are savvy investors doubling down on property right now amidst all of this uncertainty? Let’s break it down:
So, where is this affordability crisis coming from?
- Dwelling prices vs wages: According to Domain, the gap between dwelling prices and wage growth only continues to get bigger. Over the past two decades, Australian home values have surged by 193.1%, while wages have increased by only 81.7%, and this gap does not make things easy. In fact, it makes buying a home for many Australians feel very out of reach. Not only does it take longer to save for a deposit, but borrowing capacity is much lower too.
- Supply and demand: A growing population, slowed construction rates and limited land availability means that demand continues to completely outweigh the supply we’ve got. And with more migration and a rental crisis that’s only getting worse, this doesn’t look like it’s going to change anytime soon. What we know about a market with supply and demand imbalances is that it drives prices up, making this a huge contributing factor to the current crisis.
While this all sounds a bit doom and gloom, there are some steps that could help relieve this pressure
Potential solutions & what needs to change
- Government action: Putting actions in place to increase housing supply, introducing policies such as rent-to-own schemes and reforming stamp duty are all things that would help create more avenues for Australians to buy and own property. While many of these things are in the hands of the Government, it’s good to be aware of how things could change over time.
- Regional growth: Now that remote work is such a large part of our lives, people are more willing, and actually more inclined to move regionally. As this continues, more people buying and living regionally could help ease affordability issues in bigger cities like Melbourne and Sydney.
While these potential solutions exist, it doesn’t mean change will happen quickly or anytime soon. This is where it becomes super important to understand how you can make the most of the current market as an investor, and seek out opportunities wherever you can.
What does this all mean for investors?
While the affordability outlook isn’t great right now, the fundamentals of the market as a whole are still there. What does this mean? There’s still a lot of opportunity for investors who understand market cycles and know how to make the most of them.
Here’s why now is still a great time to jump in to the market:
- Increased rental demand: The affordability crisis means that homeownership feels completely unattainable for many Australians – leading to them renting for longer. This means demand in well-located areas is driven up, and with the supply shortage we’re currently facing, renters are willing to pay more just to have somewhere to live. This makes the potential for high, steady rental yields a very enticing opportunity.
- Capital growth potential: Despite the challenges we’re facing with affordability, one thing we have seen historically is that property prices do trend up over the long term. Well-located properties are likely to appreciate in value, and you have a clear opportunity to get in now while other investors are hesitating amongst the unfavourable conditions.
- Interest Rates: With interest rate cuts already here, borrowing has become more accessible – and this is likely to continue. Getting in now before the competition picks up again could see you setting yourself up for some really strong long-term returns.
As our Managing Director Michael likes to say, property investment often rewards those who are willing to go against the grain. Investors who are able to see OPPORTUNITY even when the market seems grim, are often the ones who reap the greatest rewards in the long run.
History has shown that after a storm there is usually sun, and being patient, strong in your individual strategy and taking calculated risks is what’s going to allow you to make the most of that sunshine when it comes.
If you want to chat with our expert team about the best way forward for you and your goals, we’d love to help! Contact us here or call us on 1300 776 735 and we can work together to put you in the best possible position to build sustainable, long-term wealth through property investment.
