Australia Residential Insights by Erin Van Tuil

Australia's residential market

Although residential prices are currently in correction mode, more construction of new housing is still needed, particularly in the prime luxury market. For the coming year, we expect the prices of prime properties to stabilise. The housing market has cooled down from the high levels seen throughout the pandemic, but prices are still significantly higher than before COVID-19.

As a result of the current market conditions, developers have become more cautious in Australia. Addressing supply chain and cost of building challenges have been a focus over the past few years, but this is likely to ease gently in 2023. Although we anticipate stable growth in the housing market, there is no indication of significant market distress yet.

Impact of the pandemic on rightsizing

Rightsizing refers to adjusting the living space to one's current needs and preferences without compromise. This involves downsizing from a significant standalone house to large luxury apartments in the city with house-like proportioned living areas. Previously, options for luxury apartments in cities like Sydney were limited, but developers are now starting to respond to the demand by building more homes catering to this top-end of the market. It will take 2-3 years before this new stock arrives on the market.

The trend of "co-primary living" has also emerged in the wake of COVID-19, as more people choose to divide their time between multiple homes. This often involves maintaining an apartment in the city for work and another home in a coastal or rural area for leisure. With the rise of remote work and international travel, people have more flexibility to spend time in multiple locations. Developers are responding to this trend by increasing the supply of homes catering to the rightsizing market, which is in high demand due to many years of a newly built stock shortage.

For more information on rightsizing, please refer to Knight Frank's report on Rightsizing in Australia via this link.

Advice for 2023

Australia is a resilient market with strong fundamentals, similar to Singapore, thus making it a great place to live and invest. Despite recent challenges with the limited availability of desired properties, it is worth considering the purchase if you have a long-term view in a maturing city.

Three bright sparks for 2023

1. The lack of newly built homes on the market is creating pent-up demand, pushing prices up in the prime market.
2. International borders reopening will result in an uptick in tourism in Australia and viewing activity for off-the-plan homes.
3. The resilience of the Australian property market, combined with its solid fundamentals, makes Australia a great place to live and invest.

For more insights on the residential landscape, watch the on-demand recording of Asia-Pacific Residential Outlook 2023 webinar here and download the full report here.