One of the country’s leading property economists has delivered an argument for why prices for established homes are poised to enjoy significant growth.
Ray White Chief Economist Nerida Conisbee said problems in the construction and rental markets would push people to buy established homes (i.e. those that aren’t brand new), which would drive up prices.
Starting with the construction problems, Ms Conisbee pointed to Australian Bureau of Statistics data showing that the number of new homes being approved was “trending to its lowest level in over a decade”. Furthermore, many of these new homes would “not be built quickly” due to increased construction costs.
“Many people who would otherwise have bought a new home will be pushed to the established market. Either because the cost to build a new home is too high, it is difficult to find a builder or simply there is no availability in the suburb they want to live in,” she said.
Moving on to the rental problems, Ms Conisbee said the rapid rise in rents would encourage people to buy established homes, particularly those who had recently moved or only planned to rent temporarily.
“When moving to a new city, people tend to rent before they buy. Given a lot of this movement happened over 12 months ago, it appears that as 12-month leases expire, rental increases kick in making buying more attractive than it did,” she said.
Demand for established homes is building
Ms Conisbee said while there had been signs of a slowdown in construction cost increases, building costs were unlikely to go backwards, and the pipeline of new homes would take time to fill up again.
“In addition the lack of rental properties will take some time to resolve. Even though the cost of finance has risen rapidly, it looks like this pressure on prices is now being overturned by a shortage of homes,” she added.
As a result, the recent recovery in prices for established homes looked set to continue, according to Ms Conisbee.
“The problems we are having in the construction sector and with rental growth are going to mean that price growth will continue, driving prices back to where they were at the start of 2022 within the next six months,” she said.
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