Supply and Demand Remains the Important Equation

When the discussion of property in Australia comes up and figures for growth are shared and compared

When the discussion of property in Australia comes up and figures for growth are shared and compared, there has always been an unfortunately vague aggregate of “the Australian property market.” Encapsulating everything from Weipa to Wagga Wagga, this gauge of average property prices and price change has always been heavily weighted towards Sydney and Melbourne (and to a lesser degree, Brisbane) and accordingly has always felt a bit off – particularly when those southern cities have enjoyed (or lamented) boom after boom in property prices, while those in the north felt left out.

Fast forward though, and post-COVID we have seen what for the first time really could be called an “Australian property market” with similarly buoyant conditions experienced virtually across the board over the past year and a half. Somewhat bizarrely, this has been as true in the big cities, as in the coastal and destination addresses such as Gold Coast, Noosa, and Cairns. I have never before in my career been able to pick up the phone to an agent in Townsville, Brisbane and Toowoomba on the same day and find they’re having the same (positive) experience, yet here we are.

After this extended period of equality however, the question is raised – if things do change and there is a sudden fall in Sydney, what does that mean for me in Cairns?

Thankfully, it doesn’t automatically mean the end of the party. The Sydney market has been on a growth trajectory for a number of years, so there is a lot of padding that has gone into prices in that time – which is how you end up with multimillion dollar sales for a house that is subsequently knocked down.

In Cairns by comparison, the great growth we’ve seen since 2020 is really a case of playing catch up after a decade or more of sluggish market movement (and even a few backwards steps). Another metric often raised as a determinant of relative value is replacement cost – could you buy a block of land and build that house again for the same price? At this point you’d have to find the land first, and then get in line with a builder, but prices are still at or below replacement cost in the vast majority of cases – and when you can’t replace it for the price you’re buying it – well that’s still good value.

Importantly though, the two big price changers this year will be interest rates, and supply. Having skipped lockdowns and with migration still strong, supply locally will stay tight, making for a happy equation among home sellers for some time yet.

Tom Quaid is the REIQ Zone Chair for Cairns