Are interest rates and inflationary pressures finally about to curtail the Australian property market?

June 3, 2024

Are interest rates and inflationary pressures finally about to curtail the Australian property market?

Amid economic uncertainty, geopolitical crises, high inflation and higher interest rates, it may seem like downward pressure on property markets is overdue. However, when we take a closer look at the conditions, in many of the Australian property markets the reverse is actually true.

Historically there have always been periods of war, geopolitical turmoil and economic uncertainty, but Australian property markets have always prevailed. Ultimately global uncertainty has less impact on Australian property values than one might expect. So, why is this the case?

Property market fundamentals

The strength in Australian property markets comes down to the fact that the fundamentals that keep property markets strong have been maintained – or even strengthened. This includes:

Record overseas migration
Lack of new property supply
Fewer property listings
Increasing foreign investment into Australian property

This combination of factors has ensured that demand for property is outstripping property supply in many Australian markets. When that occurs, property values and rents will rise.

Here’s how these factors are having an impact:

Record overseas migration

Australia continues to be an extremely attractive proposition for overseas migrants thanks to our high standard of living, stable democratic government, strong job market and infrastructure pipeline.

Migration continues to be the major driving force behind growth in property values, and Australia has experienced record migration of late. Coming off the back of lower migration levels during Covid-19, in 2023 net overseas migration was recorded at 518,000 people – the highest on record.

80% of 2023 net overseas migration landed in NSW, VIC and QLD. That has created pressure in eastern seaboard property markets where demand is consistently outstripping supply.

Historically, we’ve seen strong migration after major events like WW1 and WW2 and that has led to exceptional property growth in the following years (See Figure 1).

Figure 1 – Property growth and world events^{^[1}^{^]}

If we review migration levels during the world wars and then compare that to Covid-19, the results are telling.

World War I – 1914 to 1918

In 1913 pre-WW1 our net overseas migration was 63,237
In 1919, post-WW1 we added 166,303 people in 1 year
This growth equates to 3.2% of our population (5 million)

World War II – 1939 to 1945

From 1930 to 1945 we had a net migration loss of 29 people
From 1948 to 1952 we added 461,785 people
This equals 6% of our population of 7 million in 4 years

Covid19 – 2020 to 2021

During the years of Covid-19 we lost about -8,600 people over a 2-year period
In the 2 years that followed we have added 721,000 people
In 2023 we added 518,000 which is 2% of our population of 27 million^[2^]

As we can see in figure 1, there were spikes in property values following the world wars. This was driven by strong post-war migration growth. Strong migration growth post Covid-19 is likely to have similar results.

While the government has recently introduced measures to reign in migration levels, such as tougher visa requirements for international students, this isn’t likely to translate to lower demand for housing for some time. There is a major shortage of housing and rental supply, and it will take many years for the balance to be readdressed.

Lack of new property supply

The construction of new properties is significantly down on annual averages. New housing starts in 2023 were at their lowest level in 11 years and will lead to Australia falling 90,000 homes short of the annual target of 240,000 set by the current government. The Urban Development Institute Australia (UDIA) reported that national residential housing lot releases decreased by 26% in 2023. There were 36,000 lots released in 2023 and this was the lowest volume released since 2011; a 56% decline on 2021 figures.

In addition to the slowdown in land releases, lower building approval numbers and challenges in the construction industry have placed further pressure on the supply issue. One example is Brisbane, where there are currently less than 3,000 apartments under construction in 2024 and this is expected to halve by 2025. The South East Queensland (SEQ) Regional Plan outlines a requirement of 7,500 new attached dwellings each year. If all projects under construction proceed to completion it will only bring 4,356 dwellings to market, just 58% of the SEQ’S annual target.

Fewer property listings

In many property markets, property listings have dropped significantly compared to annual averages. SQM Research data from March 2024 reported the following annual declines in listing numbers: Perth (down 27.2%), Adelaide (down 13.7%) and Brisbane (down 11.1%). Overall, national property listings rose by a modest 2.6% which hasn’t kept up with the increasing demand.^[^3]

Rental vacancies are at all-time lows nationally. In March 2024, the number of new rental listings was down 13.7% on the year prior, and the lowest they’ve been for March since 2010.^[4] Agents and renters report that sometimes hundreds of people are showing up to open home inspections due to such tight supply.

Increasing foreign investment

Foreign investment has increased significantly, led by Chinese investors. International real estate agents have seen an increase of 400% in foreign buyer inquiries. In the last quarter of 2023, foreign buyer approvals were up 40%.

Most foreign investors are coming from China. No doubt they’re attracted to the stability of Australian property markets, especially in light of potential volatility off the back of government control and regulation. Anecdotally, we’re seeing Chinese buyers pushing up prices in the prestige markets in Sydney and Melbourne with cash purchases in excess of $30m+.

Given the conditions, increased taxes on foreign investment have not deterred these buyers who are looking for a safe place to invest. This has added an additional dimension to an already high demand for Australian housing.

Takeaways

Understandably many Australians feel discouraged by the lack of property supply and increasing prices across most property markets. As a father with young kids who are likely to face challenges buying a home in the suburb they’ve grown up in, we’d acknowledge there are some obvious social challenges that arise when the balance of supply versus demand is too far skewed towards demand.

While these challenges keep property markets strong, they also make it extremely difficult for first home buyers to get on the property ladder.

There have been a number of recent reports of late that suggest household savings have been reducing due to inflationary pressures, which may start to impact discretionary spending in areas such dining out and expensive holidays. With property being a fundamental human need, the harsh reality is that this lack of supply is unlikely to change any time soon. The government is struggling to keep up with the demand for new housing and the delivery of new housing is extremely slow. For many of the Australian property markets (especially those on the East Coast benefiting from record overseas migration) it would appear there’s only one way that property prices and rents can go in the next five years – and that’s up!

For investors this also creates a significant opportunity, and we’re already starting to see a return of investors to our property markets – with lending to property investors reaching a six-year high.^[5]

Should an interest rate cut materialise towards the end of the year, we’re likely to see the markets heat up. Savvy investors are choosing to invest now, before the market becomes ultra-competitive and leads us into a frenzied growth stage.

With first home buyers struggling to gain access in the more blue-chip areas in cities like Sydney, we’re seeing a consistent rise in younger “rentvestors” – those people who are choosing to rent where they want to live and buy where they can afford. Securing an investment which is tipped for growth, while renting in an area you love can maximise your financial position and lifestyle.

Ultimately, tough conditions can either spook us, or prompt us into action. While the housing affordability crisis is deeply concerning, finding a long-term solution will take time. In the meantime, investors need to make the property markets work for them. Sitting on the sidelines is rarely the answer and investing in property now can open up more options in the future.

Looking to invest in property and want the experts on your team? Chat to us today to find the right property investment for you.

^{1https://matusik.com.au/}
^{2https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp1617/Quick_Guides/MigrationStatistics}
^{3https://propertyupdate.com.au/asking-property-price-index/}
^{4https://www.macrobusiness.com.au/2024/04/australian-rental-supply-collapses/}
^{5https://www.smh.com.au/property/news/thought-property-investors-were-sitting-on-the-sidelines-they-re-back-20240213-p5f4lq.html}

Google Rating

5.0

Binnari Property

Based on 95 reviews

review us on

Andrew West

2 years ago

Outstanding Property Investment Partners!

Working with the team at Binnari Property has been an absolute game-changer for us at DeMarque Finance. Their professionalism, market insights, and client-focused approach are unparalleled.

Their ability to analyze markets and identify high-growth opportunities has consistently impressed us and our clients. What stands out the most is their rigorous due diligence process—ensuring only the best investment options are presented. This aligns perfectly with our values of trust and quality service.

As a finance partner, we’ve seen firsthand how Binnari’s expertise and strategic connections deliver exceptional outcomes for property investors. If you’re seeking a team that combines research, industry relationships, and an unwavering commitment to client success, look no further than Binnari Property.

Highly recommend them to anyone serious about building long-term wealth through property!

– Andrew West, DeMarque Finance

Claressa Roderick

Working with Binnari Property has been a fantastic experience. From our initial introduction to the property review and the comprehensive market research provided, we felt confident and well-supported throughout the decision-making process. The entire journey, from investment selection to house purchase and settlement, has been smooth and seamless. The team has consistently communicated efficiently and at a high level, ensuring every detail was clearly understood. The time they dedicated to analyzing the property market and sourcing locations that fit our budget was truly impressive. I look forward to making future purchases with Binnari Property.

Ed Bassingthwaighte

The team at Binnari has been amazing, highly recommend them. Their attention to detail is incredible and I love the fact that they sort property solutions across all of Australia.

Sam Knowlton

Dave & Dom have been excellent to deal with. I could not be happier with their service & their professional approach. I would highly recommend them to anyone look for investment advice.

Cinta Hervàs Muria

Melinda Larriera

Purchasing an investment property with Binnari was a great experience. Quality products in research backed prime locations, with brilliant service along every step of the way. Can't recommend Binnari enough for those looking to invest!

daniel studdert

The team at Binnari are absolutely fantastic! They offer great advice, and I was impressed with their professionalism and communication throughout.

Hana V

i have been a referer to Binari for the last 4 years. I find the team very professional and the stock they organize for clients is always a high quality product. very happy with this organization.

Melinda Cartmer

Could not speak highly enough about the team at Binnari. Dom has been a pleasure to deal with during the process of purchasing our investment property. They made it a seamless process from begin to end, and we are extremely happy with how the property is performing.

Edward Alexander

Dave, Dom and Jess from Binnari property are great operators. As a partner of Binnari, I can say that they provide an exceptional level of service and professionalism in everything that they do.

we are regularly in contact with clients who have purchased properties through Dave, Dom, Jess and the team, who tell us that they all had a great experience.

Keep up the great work the Binnari Team!

Jordan Berger

I was connected to Dave and Dom through a friend when I asked about how they were managing their family wealth (both of us have your families) and my experience with Montara and Binnari has been truly excellent.

They were able to help us prepare multiple family finance scenarios to look at various ways of using our money and also helped us purchase our first property (which has gone extremely well!)

Highly recommend getting in touch with these guys who have loads more experience in this area than I did and they made the process of investing and financial planning far easier than I expected.

Laura Hastie

My husband and I had an exceptional experience with the team. From our first meeting with Dom, his extensive market knowledge immediately put us at ease, making us feel well-informed before making any decisions. Working with Binnari was an incredibly smooth process. Their communication was excellent, with regular updates at every stage. I always felt we were in good hands, which reinforced our confidence in choosing Binnari.

ricardo giraldo ferrer

My wife and I were first-time investors, and Binnari made the entire process incredibly smooth and stress-free. From the beginning, they guided us step by step, ensuring we made the best decisions from an investment perspective. Their team was always quick to respond to any questions or concerns, and they consistently went the extra mile to provide us with peace of mind. We couldn’t have asked for a better experience as first-time investors. Highly recommend Binnari for anyone looking for professional and reliable property investment advice!

Toby Price

5 years ago

I have found the staff at Binnari have a real focus on providing exceptional customer care. They are incredibly responsive and will follow through with questions or requests. The purchase of my investment property is still pending. Thus far they have made the process very easy and straightforward. We have had a lot of confidence in their property advice. I look forward to completing our purchase and renting out our property.

Niels Willemars

I cannot thank Binnari enough.

Being an expat from the Netherlands, as well as a first home buyer/investor, I had no idea what I was doing. I knew that my first home was not going to be the home I ended up in, so I explained to Binnari that my priority was a good investment return. I thought what I wanted was a 4 bedroom home, but then David laid the facts and figures in front of me, combined with an investment thesis that made complete sense to me, and we ended up buying a luxury apartment in the middle of town, and close to the beach.

The team have always been super approachable, very responsive, and seem to truly want to see their clients succeed.

To top it all off, based off of what similar properties are currently selling for, if we had gone with our original idea, a 10% capital gain to date would have been generous. Instead, one of the similar apartments in our building sold a few weeks ago for just over 29% more than what we paid for ours. I couldn't think of a better start to our first long-term investment.

See you for the next one Binnari!

Pat D

Positives: Professional, Trusted Advisor, Credible, Resourceful

Buying property with ease! Dom and team are well organised, amazingly proactive and fair to say Dom is passionate about property. Absolutely understood our requirements. We were blown away with the property options Dom provided to us, all backed up with credible, solid research on location, amenity, trends etc to support his recommendations. There were no high pressure tactics, support services were recommended but there was no compulsion to use them and there was no buyer’s agent fee for the research. Would highly recommend Binnari to family and friends who are looking to purchase investment property.

Chris Smith

These guys are efficient and know their markets well! They went out of their way to accommodate our busy schedules. They had done their research and had solid facts to support their reasoning on which areas hold the best potential grow. I would not hesitate to use them again to help find an investment property!

Anthony Hanna

Dave and Dom have been excellent during the process of purchasing our first investment property. They presented us with several options that fit our criteria and were not pushy to get us to sign anything.
Dom explained everything very clearly to us and has been very responsive whenever we had questions along the way.
Have recommended them to family members and I will personally be using Binnari again in the future.

P James

Going through the purchase of my first investment property has been made easy and hassle free by the team at Binnari Property. Dominc provided in depth research into multiple properties allowing me to select one in my price range and appealed to me. I look forward to working with them in the future.

Sean Geddes

My experience with the Binnari team has been pleasurable to say the least. I would highly recommend them when looking for property as they pretty much tailored the deal to suit our exact requirements. It would be amiss of me not to say thank you Dominic Cavagnino.

David Muscat

I was keen to get back into some property investing and after hearing about businesses like Binnari I really liked the idea of using a specialist to help in the process. At the first meeting with the Binnari team they explained their methodology, why they focus on certain properties in certain areas, but also took into consideration our financial goals. Coupled with their genuine interest in only offering options that would work I was sold and ultimately selected Binnari to get back into the investment game. Since then, the experience of going through the property selection and buying process has been second to none. Dominic and his team assist in every step ensuring that it proceeds as smoothly as possible and the attention you get remains constant throughout. I highly recommend the Binnari team to anyone looking at investing in property. You won't be disappointed.

Gilly Bear

We were referred to Dominic from Binnari Property by our financial planner to assist us in finding a suitable property to invest within our SMSF. He understood from the outset what we required for our circumstances & timeframe and presented a professional detailed analysis of the Australian property market including metropolitan & regional areas. He proposed a few properties for our consideration based on that analysis and, after some deliberations, we decided to proceed with one of these properties. Being our first ever acquisition through SMSF, we required additional guidance - Christina & Dominic assisted us through the process & liaising with all parties (Seller, Solicitors & Lender) as required. They were always available & very responsive - especially as most of the initial transactions and contract dealings were over the Xmas-New Year period and the timeframes didn't slip. We just settled on the property in Brisbane without once inspecting it due to Covid travel restrictions and couldn't be happier with the outcome so far. In fact, we decided to proceed with another property that Dominic had presented outside of SMSF and this is currently underway. Professional, responsive and genuinely friendly service.

C Rutland

6 years ago

A pleasure to work with. We purchased our first investment property with the help of Dom and the whole process was professional from beginning to end. The depth of market knowledge from Binnari was impressive and all of our questions were promptly answered. Highly recommended for first time investors. Thanks Dom!

Steve Badgery

I would like to thank David and Dom and the team at Binnari Property for the great service they have provided as my partner and I looked to diversify our investment portfolio. Their research and advice has been very useful in our decision making process and our difficult questions and demands were never too much for them. I would highly recommend Binnari Property to anyone looking to purchase an investment property especially in their super fund.

Ardy Powell

Excellent experience with Dave, Dom and the team. Whole process from start to finish made me comfortable in the buying decision, and has enabled me to continue building my investment portfolio with a property in an area I would never have considered, if it weren't for their knowledge and expertise.. Highly recommend.

Alexander Sierra

I recently settled on my first investment property in Melbourne. The process was so easy and simple with Binnari taking care of everything for me. The property has now settled, and I’m really happy with the finished product. I was able to find a tenant straight away which has meant that I have not been out of pocket at all throughout the process.
I’d highly recommend the Binnari team to anyone looking to buy an investment property.

Nicholas Falconer

Thanks Team, amazing to work with

David Spero

I knew I couldn't afford to purchase in Sydney, but I had no idea where to start when it came to researching properties interstate. I'd heard of so many horror stories of buying overpriced apartments, but I was referred to David and Dom from a friend who spoke highly of Binnari. From my perspective, the team were professional, polite, thorough and consultative. I now have a very nice positively cash flowed townhouse in Brisbane and I couldn't thank the team enough for their assistance.

Anna Wilson

I had a great experience working with Dominic and David. It is nice to work with a company who have the genuine interest of the client at the core. Would recommend Binnari Property to anyone looking to start investing in property or those expanding their portfolio.

Ella Rose

Binnari Property have been so great to work with and have had an amazing impact on growing my investment portfolio. Loved every moment working with them!

Luke Elchah

I recently referred my father to meet with Dom and David at Binnari Property. He met with various property research companies before Binnari but found comfort and confidence in their thorough and professional approach to finding him an investment property that would compliment his existing portfolio.
I cannot recommend the Binnari team highly enough. The property itself was rented before settlement at a rate higher and sooner than we expected!
Overall a great experience.

Zane Mateus

I went to Binnari Property last year when I was looking to buy my first investment property. They helped me to understand what I should be looking for and where I should be investing. They took the time to understand my goals and were able to find a property that would help me to achieve them.
So far, my property has been rented since purchase and has already shown some signs of capital growth. I couldn’t reccomend the Binnari team enough and I can’t wait to purchase my second with them.

N C

About a year ago I met with Binnari Property to educate myself on how to start building a property portfolio. They were extremely detailed and helped me to become really comfortable in making an investment decision. They really took the time to discuss what I was looking to achieve and identified a property that would help me to do that.

From day one my property has been rented and has already shown signs of some quick capital growth. I highly recommend chatting to these guys if you’re looking for some guidance.

Blake Horton

8 years ago

Highly Recommend!! Fantastic strategic advice and detailed research around investment properties that made sense to invest in! These guys are the real deal! Extremely happy with Dave and the Team!

Paul G

Highly recommend! I met with David to discuss my financial situation and looking to invest in my first investment property. David was kind and knowledgeable and made everything really simple. He seemed genuinely interested in helping me and growing my wealth. Looking forward to dealing with David and the team at Binnari moving forward!

Karen

Our experience with Binnari Property has been thoroughly positive. The team are wonderful to work with, super responsive to all and any queries during what could have been a daunting process. Thrilled with the outcome and would highly recommend.

Lorraine Ashley

As first-time investors, Binnari Property guided us through everything - helping us to choose a property, explaining every step of the process, making recommendations, and providing any assistance we needed. The team is very professional, friendly and helpful. We would have no hesitation recommending them to anyone.

Tom J

I purchased my first investment property through Binnari Property and would have no qualms recommending them to anyone looking to invest. The team is professional, supportive and friendly and they helped me through the entire process. Thanks guys

Natalie Rachael

I had such a positive experience with Binnari Property. Being a first time investor, I was nervous and slightly hesitant about the whole ordeal. But they really took the time to put my mind at ease, keeping me well informed and feeling confident about my decision moving forward. The team was so knowledgable, and made the entire situation stress-free.
I would happily recommend the Binnari team to anyone.

Gail Mcewen

Binnari Property made the whole process of becoming a first time investor easy. They spend time to explain everything, keep you informed and make the entire process stress free. The team is friendly, knowledgeable and professional. I would gladly recommend the Binnari team to anyone.

Katalina

I had a great experience with Binnari Property - being a first time investor, I was nervous about the process and had no real knowledge about what to look for in a good investment property. The team took the time to explain their research process and were involved at each stage ensuring that the process itself, was smooth and stress-free. Their expertise, in-depth knowledge and professionalism is second to none and I would gladly recommend the Binnari team to anyone looking to invest into property.

More reviews