The latest CoreLogic Home Value Index offers a nuanced picture for rental property owners in Australia, detailing a landscape marked by regional divergence and shifting growth dynamics as of July 2024.
Despite a modest national increase of 0.5% in home values, the details reveal a complex market environment that savvy landlords should navigate strategically.
Across the board, Australian home values have marked their 18th consecutive month of growth, with a notable 13.5% rebound from a significant dip earlier in the year. However, this headline figure masks underlying variations that are critical for landlords to understand. Particularly, Melbourne, Hobart, and Darwin have seen a retreat in property values over the past three months, with declines of 0.9%, 0.8%, and 0.3%, respectively. This contrasts sharply with robust gains in cities like Perth and Adelaide, where quarterly growth rates of 6.2% and 5.0% respectively underscore stronger local demand and tighter supply conditions.
Tim Lawless, CoreLogic’s research director, points out that supply levels significantly influence these varied outcomes. Cities experiencing declines, such as Melbourne and Hobart, are grappling with an influx of listings above average levels, whereas markets on the upswing like Brisbane, Adelaide, and Perth are seeing listings more than 30% below average. This scarcity is a boon for landlords in these cities, potentially sustaining higher rental yields and lower vacancy rates.
Moreover, the shift towards more affordable housing options is reshaping rental markets. Lower quartile home values, representing the more accessible segment of the market, have risen by 3.3% over the past quarter, compared to a mere 0.8% increase at the upper quartile. This trend is driven by an erosion in borrowing capacity and tightening affordability, skewing demand towards less expensive properties. Rental property owners might consider this shift when planning their investment focus, particularly in capital cities where affordability pressures are intensifying.
Regional areas, traditionally slower paced in terms of value growth, are also showing signs of this trend. The combined regional index reported a 1.3% increase in home values over the quarter, slightly lagging behind the capitals’ 1.8%. However, certain regions like Western Australia and Queensland are outperforming, reflecting targeted opportunities for investors seeking growth outside metropolitan hotspots.
For those considering new investments or assessing their current portfolios, the diverging trends between houses and units warrant attention. Units have begun to outperform houses in growth, a reversal of traditional post-pandemic patterns, likely due to heightened affordability issues and changing demographics. In most capital cities, except Darwin and ACT, units have seen faster value increases, suggesting a shift in renter preferences towards more affordable, centrally located living options.
Investors are responding to these market signals, with a 24.8% increase in investor loans evident over the past year. The resurgence of investor activity, particularly in high-growth areas like Western Australia, underscores the continued appeal of real estate as a robust asset class, despite broader economic uncertainties.
While the overall growth in home values presents a positive outlook, the real story for rental property owners lies in the details. Understanding regional variations, supply dynamics, and shifting renter preferences is key to making informed, strategic decisions that balance growth potential with risk management in today’s volatile property market.
Gross rental yields nationally
