Although prices are rising and investor interest is increasing at the same time, fewer Australians are putting their homes on the market. On paper, it may seem like an ideal time to take advantage of high values, but intense rental shortages are preventing many potential sellers from making a move. This limited supply is contributing to the upward pressure on property values, particularly in cities such as Perth and Brisbane.
Nationally, the number of homes available for sale remains well below the usual level. In October, listings were 18% lower than the long-term average, with roughly 127,800 properties on the market. This drop in supply is most evident in medium-sized capitals where demand is growing rapidly. In spite of the fact that prices in Perth and Brisbane have climbed 82% and 84% respectively over the past five years, these markets continue to report an unusually low number of new listings.
By contrast, cities where property prices have grown more slowly are seeing an increase in listings. Melbourne, which has been trailing other capitals in terms of home value growth, recorded the largest rise in new listings, up 24% in October compared to the month before.
A major factor behind this uneven performance is the rental market. Vacancy rates, which are usually between 3% and 4%, have fallen to around 1% across the nation. This severe shortage makes it hard for sellers to secure a place to live between transactions, making many hesitant to sell. With fewer owners choosing to list, buyer demand intensifies which further reduces supply.
Investors, however, are returning to the market with confidence, eager to benefit from high rental income and rising home values. Investment loan volumes rose 7% in the year to September, the fastest pace in a decade. Experts anticipate that property prices will increase by another 9% over the next 12 months, with freestanding houses likely to continue outperforming apartments.
The cycle of tight rental conditions leading to reluctant sellers, lowering supply and lifting prices, is expected to keep influencing the housing market in the near term. The effect is especially significant for homeowners who are unsure whether they will be able to find a suitable place to buy or rent after selling.
