Australia / Analyst Insights
Relocate or renovate: Australia's shifting property trends

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by Kim Do
Sep 21 2017

The Australian residential property market has performed well over the past five years. Rising property prices and falling interest rates have fuelled strong revenue growth for operators in the Real Estate Services industry over the period. However, the market has recently begun to cool. Auction clearance rates have fallen over the past year, demonstrating that prospective buyers have become more hesitant. As a result, home owners are increasingly choosing to renovate, rather than purchase or sell, property.

APRA’s recent tightening of lending conditions has made it more difficult for prospective buyers to obtain credit. High house prices and restricted lending conditions are expected to support the estimated 8.3% rise in value of alterations and additions in 2017-18. Intensifying competition has made some home owners hesitant to sell their property, in fear they may lose their position in the market. These owners have instead opted to take advantage of increased equity to upgrade their homes. The popularity of renovation television shows such as The Block and House Rules has also stimulated demand for home improvement works. As a result, residential sales volumes are anticipated to fall in 2017-18, with the number of housing transfers falling by 2.4%. Overall, the Real Estate Services industry is expected to grow at an annualised 2.7% over the five years through 2017-18, to $14.2 billion. However, the industry’s revenue is projected to fall 1.8% in the current year, as the decline in housing transfer numbers slows down industry activity.

The Real Estate Agency Franchises industry has also grown over the five years through 2017-18, at an annualised 3.3%, to $7.2 billion. However, the industry’s revenue is expected to fall by 0.8% in 2017-18 due to similar market conditions. Despite the well-established brands, reputations and offerings of many industry operators, the growing prevalence of online resources is allowing property owners to bypass the industry and independently appraise and sell their property. This trend is anticipated to continue with the continued shift online.

Although residential housing prices are expected to fall by 0.4% in 2017-18, this decline is minimal compared with the 6.5% annualised increase in residential housing prices over the past five years. Housing prices in capital cities remain extremely high, particularly in the inner suburbs of Melbourne and Sydney. Prospective homebuyers are often finding it very difficult to participate in the market. As a result, many home owners have started looking to renovate, rather than buy, their dream home.

Related industries:

Real Estate Services

Real Estate Agency Franchises