3 capital cities primed to see strong price growth: CBRE

Commercial Real Estate Services (CBRE) has released its inaugural Quarterly Residential Valuations Property Market survey, unpacking the performance of the residential property market and forecasts for its performance in the future.

The real estate services and analytics provider surveyed 190 residential valuers across Australia in February 2024 to understand which markets and segments are currently experiencing the most demand and to gauge future value expectations.

The report revealed that 78 per cent of valuers expect house prices to continue to increase over the coming 12-month period. The respondents predicted the highest growth in values to be in Perth, Sydney, and Adelaide.

The survey found that more than 40 per cent of valuers expect an increase in house prices of up to 5 per cent, while more than 30 per cent expect an increase of 5–10 per cent. Under 20 per cent of respondents expect house prices to remain the same.

A valuer from inner Perth said: “Properties are selling above the asking price due to a shortage of stock and strong purchaser demand.”

According to 44 per cent of respondents, apartment prices are expected to grow in the next year, particularly in Brisbane, the Gold Coast/Sunshine Coast, and Sydney.

CBRE’s research also found that 49 per cent of respondents had seen strong purchaser demand in the last three months in their local markets, which was six times as many valuers who said there was limited demand.

According to CBRE, demand was particularly evident in Perth, Adelaide, and Brisbane due to continued affordability and lifestyle factors.

Conversely, there was softer demand in the ACT, Melbourne, and regional areas of Victoria.

What are purchasers buying?

According to the report, 60 per cent of valuers saw an increase in demand for houses and 45 per cent particularly saw an increase in demand for recently constructed houses.

In contrast, there was a 22 per cent decrease in demand for vacant land and a 21 per cent decrease in demand for unrenovated properties. CBRE attributed this decrease in demand to “the influence of higher construction costs”.

The report also stated that first home buyers (FHBs) were the most active buyer type in Melbourne, Adelaide, and the ACT in the last three months, according to 60 per cent of valuers.

Kat Hale, CBRE’s residential valuations national director, said that recent residential value growth may be attributed to current strains on the rental market.

Hale commented: “Low rental vacancy rates are driving up rental prices, prompting some tenants to consider apartment purchases due to overall housing affordability.

“Early signs of value growth in the property market are emerging driven by purchasers willing to buy ahead of potential interest rate cuts. Overall, there is a preference for high-quality or renovated homes.”

CBRE’s Pacific head of research Sameer Chopra said that the research showed a higher level of demand from upgraders and downsizers as these buyers are “less sensitive to interest rate movements”.

Chopra continued: “So, while there is an issue around affordability, high-interest rates being the culprit, a reasonable part of the market is less sensitive to this when acquiring property.

“The results also point to high construction costs and funding costs continuing to put a lid on demand for unrenovated properties and vacant land, which ultimately creates tighter market conditions.

“We also see material differences in the demand and price expectations across different geographic markets. For instance, metro markets, despite being more expensive, are outperforming.”

[Related: Tim Lawless flags early indicators of housing confidence]