$10 trillion question: What's the future for property?

The Australian property market has reached the incredible value milestone of $10 trillion – the largest capital class in the country.
 

With industry research showing almost 50% of suburbs at their highest-ever value level, it's time to ask, “what's next for Australian property?” 
 

As an experienced real estate agents in your area, we can testify to the fact that our property market has demonstrated remarkable resilience and growth. But why is this, and do the reasons provide us some insight into the future?
 

So, let's look at how Australian property has powered through the $10 trillion mark.
 

Historically low interest rates: While many complain about the current mortgage costs and rates of around 7%, the truth is that record-low interest rates over the last few years have made borrowing more affordable, fueling demand for property.
 

Population Growth: Australia is now home to almost 27 million, according to the Australian Bureau of Statistics. In the year to September 30 2023, our population was 26.8 million, indicating an annual growth rate of 2.5%, or an increase of 659,800 residents.
 

Demand accelerates: In 2023, net immigration was up 34%. So, combined with a natural increase of 111,000 people, housing demand has accelerated.
 

Limited supply: In many areas, the demand for housing has outstripped the supply of available properties, driving up prices. This is not just true for property values but also rental prices.
 

Government incentives: Initiatives, such as state government grants and stamp duty concessions for first home buyers, have encouraged participation and therefore increased pressure on prices.
 

Foreign Investment: Overseas investors have also contributed to the growth of the market, particularly in major cities.
 

Looking forward, what are the risks and opportunities? Is there a chance the market might retreat, or will standing on the sideline cost you dearly if you're waiting for the right moment? So, here are some risks: 
 

Interest Rates: Borrowing costs can increase, but we're probably at the top of the cycle right now. We can expect rate cuts to start late this year or in early 2025.
 

Economic Volatility: Global economic uncertainty and local factors, such as unemployment or inflation, could impact market sentiment. This is a constant factor no matter how the market is performing. 
 

Regulatory Changes: Changes to lending regulations or tax policies could influence the market's trajectory. That said, most governments see that toying with property values can have immediate and dire political consequences.
 

Despite these challenges, opportunities exist. Here are four:
 

Regional Growth: Many regional areas are experiencing strong growth, offering more affordable entry points into the market.

Renovation and Development: Adding value to existing properties through renovations or development can be a lucrative strategy.

Rental Yields: Despite rising prices, rental yields in many areas remain attractive for investors seeking income. Seek financial advice before deciding whether you want to become an investor.
Emerging trends: The rise of build-to-rent developments and alternative housing models presents new investment avenues.
 

With a growing population, ongoing demand for housing, and a stable economic environment, the market is expected to continue in its current growth path of high single-digit gains each year. Affordability concerns will remain a key issue, and innovative solutions to address this challenge will be crucial for our economic wellbeing.