More Aussies are planning moves in the property market

The dream of home ownership is alive and well in Australia even as cost-of-living pressures challenge affordability, according to the findings of a Westpac survey.

The latest Westpac Home Ownership Report found that 44 per cent of Aussies plan to participate in the property market in the next five years, rising from 35 per cent six months ago. 

The survey showed an increase in people looking to buy for investment or to upsize their property, as well as continued robust demand for renovations. 

“There’s still an underlying determination among Australians to become property owners, but they are having to adapt and compromise in their plans in order to achieve that,” says Westpac Senior Economist Matthew Hassan.  

The report’s findings indicate that people are feeling a little more confident about the prospects for the economy on a five-year horizon, he adds.  

“Over the last couple of years many prospective home buyers have had to delay their property decisions, so maybe what we’re seeing here is some pent-up planning effect showing through.”

Rising inflation and interest rates have been a headwind for the property market since the pandemic. Still, Australian property prices rose 8.1 per cent in 2023, according to CoreLogic, and Westpac economists expect further gains of around 6 per cent in 2024. 

There’s a growing consensus among economists that inflation and interest rates have now peaked, with many now expecting the Reserve Bank to start cutting the cash rate later in the year. That should further support prices. 

“While some buyers have paused their housing plans, the intention to buy remains strong and prospective buyers are becoming more ruthless with their goals,” says Damien MacRae, Westpac’s Managing Director, Mortgages. 

“Buyers are casting their expectations wider, willing to compromise on location and are forgoing everyday luxuries like food deliveries. They are also more inclined to relocate and move to apartment living.”

First home buyers are “at the pointy end” of affordability challenges, Hassan says, and the report shows a small decline among those planning to get on the property ladder in the next five years. 

Those who do aspire to become homeowners are exploring creative ways to achieve their goal, including buying with a partner, considering more affordable locations, or buying a property to rent out, a trend known as “rent-vesting”. 

The research also showed that while a house is still the preferred property this has decreased by 5 percentage points since 2021, while apartments and units have jumped by 7 percentage points. Additionally, preferences for a townhouse have doubled.

The price premium for detached houses has blown out in the major cities over the last couple of years, taking them out of reach for many people, Hassan says. Meanwhile, price growth in apartments and units has lagged, in part due to concerns over build quality and hidden costs such as strata fees.

“We’re starting to see a shift back towards that market, because if you’re really facing difficulties with affordability then the more affordable dwellings now are units by a long way.”