What are the current risks in the Australian Housing Market?
The latest quarterly outlook for Australia’s housing market from consulting firm RiskWise Property identifies the three main risks as being credit restrictions, housing affordability in larger markets and unit oversupply.
According to the report, South-East Queensland is an area well positioned for future growth while substantial parts of the WA market remain high risk.
Here’s a summary of the RiskWise outlook for each state and territory:
NSW: Volatility in the near-term due to uncertainty around investor activity. Housing affordability is a key weakness but NSW has strong economic fundamentals. Expect big differences across different areas, with high-end properties more at risk.
Victoria: Significant deceleration recently but strong population growth and jobs market will support prices. Areas including Geelong, Mornington Peninsula and the Western Suburbs expected to see strong growth.
Queensland: SE Qld enjoys strong internal migration, particularly from NSW and Victoria. From a 30-year perspective this area presents outstanding value compared to Sydney and Melbourne. Housing markets are varied across the state while units carry an added level of risk.
SA: The economy is below average and there is a high degree of dwelling oversupply (especially units), with nearly three times the stock required to meet population growth. However, affordability relative to the Eastern States will mitigate that to some extent.
In the Northern Territory houses have become extremely affordable with a price-to-income ratio of 4 (by far the lowest in Australia).
WA: The worst performer due to post-mining boom economy and low population growth. The report puts the risk at high for both houses and units. In inner-city Perth, the unit oversupply and low demand puts the risk at an extremely high level.
Tasmania: Investors should proceed with caution as the state’s growth rate over the last 12-24 months is unlikely to be sustainable. While the short-term risk is low, there has been decelerated growth, with less buyers in the market.
NT: Houses have become extremely affordable with a price-to-income ratio of 4 (by far the lowest in Australia). Poor population growth has been the main driver of weakness in NT property and the market is expected to remain soft, particularly for units.
ACT: The ACT has the second-fastest population growth rate in Australia. Growth rates have slowed in recent months but the ACT is projected to deliver modest capital growth over the next couple of years.
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