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Key takeaways<\/p>\n
The Australian housing market remains far more complicated than many portray it to be.<\/p>\n
The Australian housing cycle is turning up again; falling interest rates are the key driver, along with a chronic undersupply of homes of 200,000-300,000 dwellings. <\/p>\n
This partly reflects a surge in building times; poor affordability is a key constraint though, but it varies significantly between cities; and finally, mortgage arrears remain low.<\/p>\n
Average prices are expected to rise 5-6% this year boosted by falling rates but constrained by poor affordability.<\/p>\n
By now, you\u2019ve probably noticed the resurgence in our property markets.<\/p>\n
Headlines are shifting from fear to FOMO again, and once more we\u2019re hearing bold predictions from both extremes, the eternal optimists touting the tired \u201cproperty doubles every seven years\u201d mantra and the perennial bears warning of a crash.<\/p>\n
The reality, as always, lies somewhere in between.<\/p>\n
Australia\u2019s housing market isn\u2019t broken.\u00a0But it is complex.<\/p>\n
And if you want to build lasting wealth through property, you need to cut through the noise and understand what\u2019s really driving the trends – not just today, but into the future.<\/p>\n
Dr Shane Oliver<\/a>, AMP\u2019s well-respected Chief Economist, has recently shared seven insightful charts<\/a> that help make sense of what\u2019s happening beneath the headlines.<\/p>\n Let\u2019s unpack them together.<\/p>\n 1. The property cycle is turning up\u2014again<\/p>\n After a minor pause earlier this year, Australia\u2019s property market is back on an upswing.<\/p>\n According to CoreLogic data, national home values are rising again, with a likely 0.5% gain this month alone.<\/p>\n Source: AMP<\/a><\/p>\n What\u2019s notable\u00a0 is that this isn\u2019t just the previously strong performing cities of Brisbane, Adelaide in Perth anymore.<\/p>\n Cities that were previously lagging: Melbourne, Hobart, Canberra, Darwin, are joining the party.<\/p>\n This kind of broad-based upswing is a clear sign of a market cycle in motion – not a one-off blip according to Shane Oliver.<\/p>\n And savvy investors know that this phase of the property cycle create opportunity.<\/p>\n 2. Interest rates are (still) a key driver<\/p>\n To put it simply: when interest rates fall, borrowing capacity rises, and property becomes more attractive.<\/p>\n So it\u2019s no coincidence that property prices started to rebound as rates started easing earlier this year.<\/p>\n Dr Oliver makes a strong point: in five of the past seven RBA rate-cutting cycles since 1982, home prices rose significantly over the following 12 to 18 months, provided we didn\u2019t fall into recession.<\/p>\n The AMP base case now includes a series of 0.25% rate cuts starting in August, then again in November, February and May.<\/p>\n Source: AMP<\/a><\/p>\n Dr. Oliver suggests that if the labour market continues to soften, we could even see back-to-back cuts sooner than expected.<\/p>\n However, the previous two rate cuts and the expectation of easier monetary policy are already fueling renewed buyer confidence.<\/p>\n But remember, these tailwinds won\u2019t benefit everyone equally. Location, property type, and strategy still matter.<\/p>\n 3. Chronic undersupply is the real elephant in the room<\/p>\n Forget the populist blame game about negative gearing or investors, Australia\u2019s biggest housing issue currently is lack of supply and not property speculation.<\/p>\n Since the mid-2000s, our population has grown rapidly thanks to strong immigration, but housing completions just sorry okay thank you very much. I enjoyed my lunch.haven\u2019t kept pace.<\/p>\n Dr Oliver estimates the national housing shortfall is at least 200,000 dwellings, and possibly closer to 300,000 depending on household formation assumptions.<\/p>\n Source: AMP<\/a><\/p>\n This persistent imbalance between demand and supply is the structural force behind long-term price growth.<\/p>\n Fact is, property prices don\u2019t just rise because of investor sentiment – they rise when more people want homes than there are homes to go around.<\/p>\n 4. Home building times are blowing out<\/p>\n To fix this undersupply, we don\u2019t just need more homes, we need to build them faster and more efficiently.<\/p>\n Yet the time it takes to complete a dwelling has ballooned.<\/p>\n Over the past decade, house construction timelines have grown by 57%, and unit builds have taken 65% longer.<\/p>\n Source: AMP<\/a><\/p>\n Why? A toxic mix of planning red tape, higher construction costs, and labour shortages.<\/p>\n Yes, immigration has been moderating lately.\u00a0But that alone won\u2019t fix the problem.<\/p>\n We need meaningful reforms to boost construction capacity, things like streamlining approvals, encouraging smaller dwellings, and smarter material use like pattern plans or timber over brick and concrete.<\/p>\n And critically, governments need to stick to their promise under the National Housing Accord: building 1.2 million new homes over five years.<\/p>\n 5. Yes, Australian property is expensive, but that\u2019s only part of the story<\/p>\n Affordability is clearly deteriorating, and it has been for decades.<\/p>\n In his article<\/a> Dr. Oliver points out that:<\/p>\n It now takes the average Aussie nearly 10 years to save a 20% deposit, compared to just 4 years in the 1980s.<\/p>\n House prices relative to wages and household incomes have surged.<\/p>\n The house price-to-rent ratio (our version of a \u201cP\/E\u201d for property) is about 30% above its long-term average.<\/p>\n Source: AMP<\/a><\/p>\n This price pressure doesn\u2019t mean a crash is imminent.\u00a0But it does mean the upside in the current cycle could be capped.<\/p>\n High prices combined with high debt levels create financial vulnerability if unemployment rises or if mortgage stress increases.<\/p>\n But for property investors, especially those with solid equity and buffers in place, this isn\u2019t a red light, it\u2019s a yellow one.<\/p>\n Be selective, stick to investment-grade assets, and focus on long-term performance rather than short-term noise.<\/p>\n 6. It\u2019s not one property market, it\u2019s many<\/p>\n We love to talk about \u201cthe Australian property market\u201d like it\u2019s one big beast.<\/p>\n But it\u2019s really hundreds of micro-markets moving at different speeds.<\/p>\n Source: AMP<\/a><\/p>\n Dr Shane Oliver\u2019s valuation table shows this clearly. He believes:<\/p>\n Houses are around 30% overvalued on a price-to-rent basis.<\/p>\n Units, on the other hand, are only 1% overvalued\u2014which suggests better value and less downside risk.<\/p>\n Perth and Melbourne now appear to be the least overvalued capital city markets for houses.<\/p>\n Both cities show undervaluation in the unit sector.<\/p>\n This sort of dispersion is gold for investors.<\/p>\n It means you don\u2019t need to wait for a national upswing – you just need to find the right city and the right asset type.<\/p>\n 7. Mortgage arrears remain low<\/p>\n Despite all the talk of mortgage stress, actual arrears remain extremely low, sitting below 1% on average, and still low even for high LVR or high debt-to-income borrowers.<\/p>\n This reflects several things:<\/p>\n Prudent lending standards<\/p>\n Strong employment levels (so far)<\/p>\n Large household savings buffers from the COVID period<\/p>\n Unless we see a sharp spike in unemployment, we\u2019re unlikely to get a wave of forced sales that would push prices down meaningfully.<\/p>\n So where are we headed?<\/p>\n Dr Oliver\u2019s base case? A 5\u20136% gain in national property prices this year, underpinned by lower interest rates and structural undersupply, but limited by poor affordability.<\/p>\n There are risks both ways:<\/p>\n For investors, this environment rewards strategy, not speculation.<\/p>\n Buy well-located properties with strong fundamentals and decent rental yields.<\/p>\n Avoid the froth, ignore the spruikers, and don\u2019t fall for the doom-and-gloomers either.<\/p>\n This market isn\u2019t cheap, but for the strategic, it\u2019s still full of opportunity.<\/p>\n Are you wondering how you should invest in this interesting phase of the property cycle? If you’re like many property investors, you’re probably wondering what’s the right thing to do at present.<\/p>\n
<\/p>\n Should you buy, should you sell, or should you just wait?<\/p>\n
<\/p>\n You can trust the team at Metropole to provide you with\u00a0direction,\u00a0guidance,\u00a0and\u00a0results.<\/p>\n
<\/p>\n Whether you\u2019re a beginner or an experienced investor, at times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that\u2019s exactly what you get from the multi-award-winning\u00a0team at Metropole<\/a>.<\/p>\n
<\/p>\n We help our clients grow, protect and pass on their wealth through a range of services including:<\/p>\n
![\"Average](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/Average-capital-city-home-prices-800x482.jpg\")
<\/p>\n![\"Australian](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/Australian-average-home-prices-after-first-RBA-rate-cut-800x466.jpg\")
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<\/p>\n![\"Ratio](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/Ratio-of-home-prices-to-wages-and-incomes-800x479.jpg\")
<\/p>\n![\"Percent](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/Percent-overvaluation-800x462.jpg\")
<\/p>\n![\"Mortgage](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/Mortgage-arrears-rates-800x509.jpg\")
<\/p>\n![\"Metropole](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2025\/07\/01.jpg\")
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