Demand for property has hit yet another record high in February, suggesting that the price growth will continue, while the affordability crisis in Sydney and Melbourne will only become more prevalent, the latest REA Group Property Demand Index report said.
As a result of this, people will continue to be priced out of the market and pushed to regional areas, smaller dwellings or continue to rent, said REA group chief economist Nerida Conisbee.
Borrowers have shrugged off rising interest rates from banks, continuing their search for property.
In all states, buyer demand increased over the month, even in the relatively subdued market of Western Australia (WA), the report said quoting data derived from the group’s property website realestate.com.au.
“Continued un-affordability in our big cities in the buying market is forcing people to turn to renting and just like in the buying market; it’s abundantly clear that supply of rental housing has not kept pace with demand,” Conisbee said.
“Based on high levels of demand on the rent section of realestate.com.au, the current number of property investors in Australia are unable to provide enough rental properties adequately.
“The negative gearing debate continues to heat up, but the incredibly high levels of rental demand suggest that any changes to the way rental housing is provided in Australia need to be carefully considered. If negative gearing is taken away, there may be less investors in the market meaning a sudden drop in available rental housing. The upside is that it could also slowly moderate the rate of house price growth in our most unaffordable cities.
Conisbee said it was still too early to predict on whether the WA market has reached the bottom of its cycle with year-on-year declines still apparent.
“Tasmania continues to be the strongest market, attracting interest from local buyers, as well as buyers from interstate and overseas, while New South Wales and Victoria are still drawing very high levels of interest.
“While lifestyle factors such as access to excellent shops, cafes and restaurants are important for renters, it appears many are prepared to give these up if they decide to buy. There are some drivers of this. In some cases, it’s because they just can’t afford to buy in desirable lifestyle locations, for others it may be life cycle such as starting a family and needing more space,” she said.
Demand for rental properties is high across the country, but there is significant variance between states. Queensland, Tasmania, Australian Capital Territory, Victoria and New South Wales have the highest demand for rental housing, which is consistent with what we are seeing from buyers. It reflects conditions in those markets that impact both buyers and renters – a combination of economic growth and far too little supply.
Conisbee said at the moment most renters seek out shops, cafes, restaurants and lifestyle factors when considering where to live, so it’s no surprise the most in demand suburbs nationally have these features in spades.
“At present, the Gold Coast is undeniably the top region for renters, with eight of the top 10 most popular suburbs on realestate.com.au,” she said.
“Beyond the beachside lifestyle, the Gold Coast economy is still strong which is creating jobs, making the region particularly attractive to young people.
“The upcoming Commonwealth Games and the new light rail are also attracting more people to the area. For the first time, two Tasmanian locations feature in the national top 10,” she said.
Besides the Gold Coast, more people were flocking to buy homes in Tasmania.
“We have seen massive increases in demand for people looking to buy in Tasmania and this high demand from renters will support more housing development.
“North Hobart, with its restaurants and nightlife, is now attracting more people looking to rent than properties are available, while Moonah, located five kilometres from the centre of Hobart, is also an attractive location,” she said.