Australia outperforming foreign real estate - so why is it ranked the second most risky in the world? (2024)

FAQs

Why is Australia's housing market so high? ›

High house prices in Australia are primarily driven by supply and demand imbalances, tax policies, low-interest rates, and rising household debt.

Australia's population growth, favourable taxation regime, historic low interest rates, growth in property values and use of investment properties as a retirement asset are all contributing to this popularity.

According to Domain figures, the value of Australia's housing market fell by -5% across capital cities in 2022. Sydney dropped by -10.9% and Melbourne was down -5.9%. While Canberra and Brisbane house values fell by -6% and -1.1% respectively last year. Most of the damage was done by the end of spring selling season.

There is good news and bad news. The bad news is that the good news is more likely than not bad news. In any event, the good news is that the great Aussie housing crash, which has seen national prices fall about 10 per cent from their peak – the second-largest slump in 43 years – has suddenly stalled.

Migration/population growth

Australia's population has jumped more than 30% over the last two decades to the current 26 million. A big reason for this has been the much higher net immigration rate since the mid-2000s, which has fuelled demand for new homes.

Australia's current housing crisis is driven by the nation's unique demographics and a shortage of available residential land near jobs and services, with the impact of interest rates and government homebuyer subsidies often overstated.

The answer to whether the property in Australia is a good investment can depend on various factors, such as location, market trends, and economic conditions. However, historically, property in Australia has been considered a stable and lucrative investment.

Provided that foreign investors are contributing to economic growth and have the necessary approval from the Foreign Investment Review Board's approval, they are permitted to purchase new dwellings and vacant land.

Investing in property can be a good way to build wealth – but there are several factors you need to consider. The potential tax benefits and wealth generation make real estate an attractive investment option for many Australians, but it is not without any drawbacks.

Average House Prices in Australia averaged 654.79 AUD Thousand from 2011 until 2022, reaching an all time high of 961.10 AUD Thousand in the second quarter of 2022 and a record low of 486.30 AUD Thousand in the third quarter of 2012. This page includes a chart with historical data for Australia Mean Dwelling Price.

Why is housing so unaffordable in Australia? ›

House prices in Australia are extremely high compared to income, relative to other countries. The market is propped up by rules that provide tax deductions for property investment, and by repeated state government bonuses for first home buyers. Furthermore, the supply of new homes is hard to generate.

Australian property values experienced a downturn in 2022 and prices continue to fall—but predictions of the overall peak-to-trough price decline tend to vary between 15-25%. Read more about whether the Australian property market is going to crash.

A growing economy that outperforms in global rankings. While many major economies are at risk of recession in 2023, the IMF has forecast that the Australian economy will continue to grow. Our positive outlook is built on strong recent performance. During 2021, Australia outperformed peer economies, growing by 5.2%.

Australia has recorded its largest decline in property values on record, with values dropping by 7.9 per cent in a year and the median value of dwellings in more than 200 suburbs dipping below $1 million.

Are we close to one in 2023? The housing market has softened compared to 2022, but it's not a risky environment; many precincts are still showing growth, so we think it's very unlikely Australia's real estate market will crash anytime soon.

Living in Australia, you'll feel a deep sense of safety and freedom thanks to our enduring political stability and open, diverse society. Sydney and Melbourne ranked among the top 10 safest cities in the world in the Economist Intelligence Unit's Safe Cities Index 2021.

People experiencing homelessness, and those at risk of homelessness (see glossary), are among Australia's most socially and economically disadvantaged. Governments across Australia fund services to support people who are homeless, or at risk of homelessness.

Australia needs to build an additional three million homes over the next two decades to provide the needed infrastructure to house Australia's growing population. By 2041 we will have 13 million homes, up from 10 million in 2021.

While the standard of living in Australia is high, so is the cost of living. In fact, Australia is often ranked as one of the most expensive countries in the world to live in. This is due to a number of factors, including the high cost of housing, food, and transportation.

Why do they move whole houses in Australia? ›

“People used to do it because it was cheaper but these days you get more people doing it because of the value of the land especially around Byron Bay. An old house restored has got better resale than a new similar priced project home. It has more character and style and the market for them is much stronger.”

The June 2022 quarter saw the median house price across the combined capitals fall -0.9% from last quarter, where median prices sat at $1,074,676 to $1,065,447. Despite this slight decrease, the national median price for a house is still 10.9% higher than this time last year.

CoreLogic's latest Pain & Gain Report, which analysed approximately 102,000 property resales that occurred in the June 2022 quarter, showed Australia's profit-making sales plateaued at 93.8% when compared to the previous three months.

2% Rule. The 2% rule is the same as the 1% rule – it just uses a different number. The 2% rule states that the monthly rent for an investment property should be equal to or no less than 2% of the purchase price. Here's an example of the 2% rule for a home with the purchase price of $150,000: $150,000 x 0.02 = $3,000.

Can foreigners buy property in Australia? Yes. Non-Australians can buy property in Australia as investments. In Australia, foreign property purchases are regulated by FIRB (meaning foreign buyers must apply for approval through the FIRB before buying residential real estate) and there are limitations in place.

Typically you need to be a permanent resident or citizen to buy property in Australia and many of the available home loans also require you to be Aussie. But don't fret, foreigners can still buy: the property needs to be categorised as an investment and you need to get government approval.

Normally, only individuals who are not permanent residents or temporary residents seeking to buy property in Australia need to apply for FIRB approval. Therefore, the following groups of people do not need to apply for FIRB approval: Australian citizens, regardless of their residence status.

Average real estate return on investment

The average rental yield in Australia is around 8%, with 1% accounting for ongoing costs like dues, strata and insurance fees.

There's a wide choice of assets to invest in—from physical assets such as property, classic cars, fine wine and jewellery to financial assets such as shares, funds and bonds. If you're looking to invest in financial assets, it's important to spread your investment across different asset types.

Average rental yield of houses Australia Q4 2021-2022, by capital city. In the fourth quarter of 2022, the average rental yield of houses in Sydney, New South Wales, was 2.87 percent.

Are houses cheaper in America or Australia? ›

So when the average house price in Australia is compared with the United States, the numbers demonstrate a huge divide. It turns out that the cost of the average house price in the US is less than 1500 euros ($AU 2541) per square metre, but down under it's more than 5000 euros ($AU 8470) per square metre.

But how expensive is it? Australia currently has the 12th highest cost of living in the world, with the USA and UK well behind at 21 and 23rd place respectively. The overall cost of living in Australia is 9% higher than the USA, but 10% cheaper than London.

Buyers from China dominate foreign investment in Australian residential real estate, with $1.6 billion in proposed purchases approved in the six months to the end of December last year, official figures show.

Strained affordability has seen many homebuilders turn to smaller units. The Pandemic Housing Boom, which pushed national home prices up over 40%, coupled with last year's mortgage rate shock, has resulted in a deterioration of housing affordability.

The most expensive place for housing in Australia is Sydney.

Prices could fall further

If you buy in a recession, there is always the risk that prices could fall even further. That said, Australian property prices usually tend to rise in the long run, especially in capital cities. So if you're prepared to spend some time owning your property, you're likely to come out ahead.

"Our forecasts imply that the share of income required to pay the mortgage on a median-priced [home] will fall to around 35 per cent by 2025, which would still be well above its long-term average of 30.5 per cent. Accordingly, the risks are tilted towards even larger falls in house prices."

Australians are the richest people in the world, with a median wealth three times that of the average American, a new report has shown.

Individuals income tax. Individuals' income tax is the single most important source of government revenue. Since the mid 1970s it has consistently raised around half of the Australian Government's tax receipts and continues to be a stable and predictable source of revenue.

Why is inflation so high in Australia? ›

The single biggest cause of inflation is when the demand for goods and services outstrips supply. This results in businesses increasing their costs, because they know that only a small number of customers will go elsewhere.

Reasons behind the steady decline and trend towards smaller lot sizes over the past decade include the increasing cost of land, a high proportion of new housing being built in urban infill areas and more double storey houses being built to maximise floor space on the smaller blocks.

Median dwelling prices in Sydney

This is not surprising, as forecasting in October 2022 from big four bank, NAB, predicted that the value of the median-priced house in Sydney would fall by $175,087 to $1,108,415 by the end of 2023.

New capital city listings per capita in April fell by 26 per cent compared with the decade average prior to the pandemic. On this metric all the major capitals recorded sizeable falls, with Darwin experiencing the smallest fall at 27.5 per cent and Brisbane the largest fall down 47.5 per cent.

It's also worth noting that while foreclosure rates are up year-over-year, experts do not expect to see a wave of foreclosures in 2023, even where home values are depreciating, as many homeowners have substantial equity due to progressive home price appreciation in recent years.

High house prices in Australia are primarily driven by supply and demand imbalances, tax policies, low-interest rates, and rising household debt.

“There is also unlikely to be further decline in property prices this year, as the market is stabilizing as interest rate increases start to level off. There are still plenty of buyers in the market and a lack of supply, which is keeping prices up.”

House prices set to plummet by 20-25 per cent in 2023 | news.com.au — Australia's leading news site.

According to Expatistan, this means Australia is one of the most expensive places to live (ranked 13 out of 74). Generally, a higher cost of living means that basic expenses have become – well, expensive.

Australia's housing sector experienced a material correction in 2022, with rapid rate rises driving significant declines in both prices (–9.7% between April 2022 and January 2023) and turnover (down about 30% over the same period).

Are houses more expensive in Australia? ›

House prices in Australia are extremely high compared to income, relative to other countries. The market is propped up by rules that provide tax deductions for property investment, and by repeated state government bonuses for first home buyers. Furthermore, the supply of new homes is hard to generate.

House prices in Sydney are down by 13.8% year-on-year and nationally by 7.2%. In late 2022, PropTrack's biannual Property Market Value Report said Sydney, Brisbane and Canberra home values could fall by between 8% to 11% in 2023, thanks to a combination of inflation, interest rate hikes and cost-of-living pressures.

The mining magnate Gina Rinehart is Australia's biggest landholder, controlling more than 9.2m hectares, or 1.2% of the entire landmass of the country, according to data compiled by Guardian Australia.

“They are looking to upgrade.” He said Chinese first home buyers are “still not fully back into the market.” Australia has long appealed to Chinese buyers as it's in the same timezone and region as the mainland and has a reputation as a safe and environmentally clean destination.

The mean age of people buying their first home in Australia has edged up from 33 for either a new or established dwelling in 1995–96 to 35 for a new dwelling and 36 for an established dwelling in 2017–18. Figure 1: Age bracket of first home buyers (by percentage) in 1995-96 and 2017-18.

Cost of living in United States is 8% more expensive than in Australia.

The Australian public accesses care within the public health system for free or at a lower cost through Medicare (funded by tax). The private system includes health service providers that are owned and managed privately, such as private hospitals, specialist medical and allied health, and pharmacies.

But how expensive is it? Australia currently has the 12th highest cost of living in the world, with the USA and UK well behind at 21 and 23rd place respectively. The overall cost of living in Australia is 9% higher than the USA, but 10% cheaper than London.

The June 2022 quarter saw the median house price across the combined capitals fall -0.9% from last quarter, where median prices sat at $1,074,676 to $1,065,447.

Floor area of new houses

In 2012, the average floor area was 245 square metres and in 2021 the average was 242 square metres, a decrease of three square metres (-1%) over 10 years.

How much is an apartment in Australia? ›

Canberra and Sydney are the most expensive cities for renters with the median unit price coming in at $550 per week, followed by Darwin ($520 per week), Brisbane ($465 per week), and Hobart ($462.50 per week).