Looking at recent times in property
The last number of years have seen a range of property markets performing well above expected levels.
Rental asking prices across most locations have increased significantly, which, let’s face it, they have needed to, considering the increase in capital values across most property markets around Australia.
Surely by now we have all heard of the tiny vacancy rates in Adelaide (generally below 0.7% since qtr 4, 2021*), the increase in property asking prices in the Perth market (15.5% growth per annum over the last 3 years*), and the fact that we continually seem to be running into under supplied markets across Australia.
What is the outlook for 2025?
Let’s find that magical crystal ball we all wish we had to ensure our investment decisions are sound while gaining maximum returns!! Unfortunately, this doesn’t exist; however, we can apply previous trends and property market responses to current trends and forecast data to ensure we are making safe, investment decisions.
For example, let’s look at Adelaide.
The low vacancy rates in Adelaide have been positive for investors who own property in the metropolitan region. Rental returns across Adelaide have increased from an average of approximately $400 per week in January 2020*, to $671 per week in January 2025*. That’s an increase of 13.55% per annum.
Are these low vacancy rates set to continue? I would say the vacancy rate trend is on the increase in Adelaide with the current rate sitting at 0.8%*. To give you something to compare that to, the national vacancy rate is currently 1.6%.
Is there an increase in stock on the market which is leading to this?? If you ask property buyers in Adelaide, you may find that the answer is ‘no’ as property listings are still trending down.
Is there an increase in supply for the vacancy rates to increase, or is there a decrease in demand??
Supply & Demand
Let’s look at two more aspects; population growth and building approvals.
Population growth
South Australia grew by 1.7% for the 12 months leading up to June 2023; however, this dropped to 1.4% for the 12 months leading up to June 2024. What does this mean in real figures?
Although South Australia grew by 5,400 (according to the ABS) less in the 2023/2024 financial year compared to the 22/23 financial year, this is only 2 years’ worth of data and the question must be asked: Is this downward trend continuing moving forward??
According to the Centre for Population, the percentage of population growth in South Australia is projected to drop over the coming years to below 1% growth per annum, back to pre-covid levels.
Building Approvals
In May 2023, Australia hit it’s lowest levels of building approvals Nationally (8,211) for Private Sector Houses since April 2013 (8,116). Since then, we have seen an increase in building approvals with the country consistently approving over 9,000 new dwellings per month since May 2024. (ABS)
In the first 4 months of the current financial year, we can see an increase in building approvals in Adelaide compared to the previous year. According to the data available by the Australian Bureau of Statistics, metropolitan Adelaide has approved approximately 400 new dwellings for construction more in July ’24 to October ’24 compared to July ’23 to October ’23.
This leads to more supply in the market.
Property Forecast
Since the beginning of 2022, there has been an upward vacancy rate trend in metropolitan Adelaide. Is this set to continue? Will this effect property values?
We see a projected decrease in population growth numbers leading to a potential decrease in demand.
An increase in building approvals leading to a potential increase in supply.
With that said, property listing levels are at an all-time low over the last 15 years.
Summary
It is worth noting that this is all broad data for metropolitan Adelaide. As there are different supply and demand levels across each LGA, it’s important to understand the various property market indicators which can affect the results of investing into specific property markets.
Yes, these trends in population, approvals and listing levels can affect property values, but understanding a broad range of factors – such as employment growth sectors – that can affect future supply and demand levels is more important now than ever before.
Source *SQM Research
