General Market Overview

Consumer Price Index
The Australian Bureau of Statistics reported a 0.2% increase in the Consumer Price Index (CPI) for the September 2024 quarter, with a 2.8% rise over the past year. Significant price increases were noted in Recreation and culture (+1.3%), Food and non-alcoholic beverages (+0.6%), and Alcohol and tobacco (+1.3%). In contrast, Housing prices experienced a slight decrease of 0.1%. While CPI inflation remains below the RBA’s target range of 2-3%, it indicates that inflation pressures persist, particularly in certain sectors, such as food and services. The RBA continues to forecast that CPI will return to its target range in 2025. Trimmed mean inflation showed a slight decline to 3.5%, down from 4.0% in the previous quarter, reflecting a gradual easing of underlying price pressures in the economy, despite ongoing high costs driven by demand in housing and essential goods.

Population
As of March 31, 2024, Australia’s population reached approximately 27.12 million, reflecting an annual growth of 615,300 people, equivalent to a rate of 2.3%. This increase underscores the significant impact of net overseas migration, which accounted for 509,800 of the total population change, indicating a robust recovery in migration levels following the easing of border restrictions. While natural increase—births surpassing deaths—contributed 105,500 individuals to the population, it was net overseas migration that emerged as the primary driver of growth across most states and territories. Every state experienced positive population growth, with WA recording a rate of 3.1%, while Tasmania exhibited the slowest growth at just 0.4%. New South Wales and Victoria reported solid growth rates of 2.0% and 2.7%, respectively.

Employment
As of September 2024, the Australian unemployment rate remained steady at 4.1% seasonally adjusted, reflecting a slight increase from 3.9% in February 2023. Employment growth continues with a 0.4% increase in total employment, reaching 14.52 million people, while the participation rate rose to 67.2%, indicating a stable labour market. New South Wales reported an unemployment rate of 3.9%, aligning below the national average, while full-time employment saw an increase of 51,600 positions. These labour market conditions suggest ongoing stability in income generation for borrowers, particularly in key employment sectors. However, the sustained underemployment rate at 6.3% may continue to signal wage pressures in certain segments. The RBA’s forecast of unemployment stabilizing below 4.3% provides a more favourable environment for credit risk assessment moving forward, with less strain on household cash flows.

Dwelling Approvals
For the year to August 2024, a total of 166,233 houses and apartments were approved, marking a 3.28% year-over-year (YoY) decline and a 6.06% drop month-over-month (MoM). This represents the lowest number of approved dwellings in a financial year since 2011/12. Approvals for private sector houses increased slightly by 0.5% to 9,338, while approvals for private sector dwellings excluding houses fell sharply by 16.5% to 4,418. The overall value of residential building decreased by 6.7% to $7.96 billion. The decline was largely driven by an 18.8% MoM drop in unit approvals in NSW, where only 1,597 private homes were approved in June. This steep reduction reflects the impact of high interest rates, land prices, and construction costs, which have dampened development application activity Nationally, with approvals for total dwellings falling across all states: New South Wales (-11.5%), South Australia (-11.5%), Tasmania (-4.4%), Queensland (-3.9%), Western Australia (-3.3%), and Victoria (-3.0%). The marked reduction in multi-unit developments and the corresponding drop in residential building values could indicate decreased demand for construction finance and increased caution among developers. Additionally, the rise in private sector house approvals in some states signals that the appetite for single-family home developments may remain resilient, providing opportunities for financing smaller-scale, lower-risk projects. The overall contraction in approvals may also heighten competition for financing within the private credit sector, particularly as developers seek alternative funding sources amidst stricter bank lending conditions.

Median Dwelling Price
The national median dwelling price in Australia increased by 0.7% month-on-month (MoM) in June 2024, marking the 17th consecutive month of price growth, with the median dwelling value now reaching $793,883. Sydney remains the most expensive property market, with a median house price of $1.17 million, up 0.5% MoM and 1.10% over the quarter. Since the market plateaued in January 2022, Sydney prices are expected to remain steady for the remainder of 2024. However, the Australian property market has been fragmented – particularly across capital cities. Perth, Adelaide, and Brisbane have led the pace of growth over the past two years. Perth saw a 1.6% rise in dwelling values in September 2024, while Adelaide increased by 1.3%, and Brisbane by 0.9%. Nationally, dwelling values rose by 0.4% in September, in line with previous months as momentum slowed across the market. The national median dwelling price now stands at $807,110. Although price growth has decelerated, Perth and Brisbane continue to see substantial demand due to affordability and demographic factors, while Melbourne’s market struggles with a 1.1% decline over the past quarter. In contrast, the Sydney auction market has remained strong, showing resilience despite seasonal slowdowns. Overall, Australia’s housing market continues to reflect a supply-demand imbalance, with regional areas seeing more modest but steady growth as well.

Vacancy Rates
Sydney’s vacancy rate of 1.7% in July 2023 marked a notable increase from the 1.4% recorded in June. This trend aligns with similar increases in major cities like Melbourne, Canberra, and Brisbane, where the CBD vacancy rates also experienced upward shifts. The July data suggests that demand for student accommodation likely peaked during the winter, aligning with the academic calendar. Additionally, the potential for a slowdown in migration could further ease this pressure in the coming months, potentially signalling a cyclical peak. The national vacancy rate in September 2024 dropped to 1.2%, down from 1.3% in August, indicating a general tightening of the rental market. This decrease was largely driven by regional Australia and cities like Perth (down to 0.6%), Canberra (down to 2.0% from 2.1%), and Hobart (down to 0.8%), however, Sydney’s rental vacancy remained steady at 1.6%, with 11,360 vacant rental properties. In Melbourne, however, vacancy rates slightly increased to 1.7%, reflecting 8,796 vacant dwellings, a marginal rise from August’s 1.6%. Despite these fluctuations, the national rental market is expected to remain under strain due to continued population growth, with Australia projected to expand by over 500,000 people in 2024. This sustained migration-driven pressure is expected to keep vacancy rates low in the foreseeable future, especially in high-demand urban centres, further exacerbating the national rental shortage.

House Rental Rates
Australia’s rental market experienced a notable slowdown in growth during the second quarter of 2024, with national house rental rates increasing by 8.2% annually by June. The month of June marked a significant deceleration, recording only a 0.4% increase, the lowest monthly growth since September 2023. This trend reflects an overall easing in rental increases, although significant regional disparities remain. In major capital cities, house rental rates have varied considerably. In Sydney, rents increased by 7.9% over the 12 months leading to June 2024, driven by high demand fuelled by strong migration and persistent supply shortages. Melbourne saw a 7.0% rise in house rents, bolstered by ongoing urban densification and competitive rental markets. Brisbane experienced an 8.4% increase, largely due to internal migration and a relatively limited supply of new homes, keeping demand high. In regional areas, house rental trends followed a similar upward trajectory, albeit at varied rates. Regional NSW saw a 6.5% increase in house rents, reflecting a growing trend of Australians seeking affordable housing options outside major cities. Regional Victoria reported a 5.2% rise, while Regional Queensland experienced a notable 7.8% increase, driven by internal migration towards more affordable living conditions. In terms of rental yields, gross yields remained steady at 3.7% nationally in August 2024. Regional areas generally showed higher yields than the national average, reflecting a combination of stronger rental growth and slower price appreciation in many locations. The ongoing supply-demand imbalance, coupled with migration pressures and constrained housing stock, continues to influence these rental dynamics across Australia.