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27 Feb 2024 - Australian Secure Capital Fund - Market Update

By: Australian Secure Capital Fund

Australian Secure Capital Fund - Market Update

Australian Secure Capital Fund

February 2024


The first RBA meeting of the year has taken place, with the cash rate remaining on hold at 4.35%. Recent inflation data has given economists confidence that we have reached the end of the rate hike cycle.

The first weekend of February brought the start of the 2024 auction season, with a mammoth 1,671 auctions being held across the combined capitals. This is the second largest opening weekend since 2008, with only the corresponding weekend in 2022 holding more auctions, with 1,779 taking place.

This result was up 26.4% on 2023 data, and was more than double than double the number of auctions held over the year so far (803). Melbourne recorded the most auctions for the weekend, with 603 taking place, followed closely by Sydney with 562. Brisbane, Adelaide and Canberra also recorded triple digit auction numbers with 203, 159 and 132 auctions taking place respectively, whilst Perth and Tasmania held just 9 and 3 auctions respectively.

Preliminary clearance rates have also begun the season strongly, with a clearance rate of 73.9% across the combined capital cities, well above the 61.9% of 2023. Canberra led the way with 80.0%, followed by Adelaide, Sydney and Melbourne with 77.6%, 76.3% and 71.9% respectively. Brisbane being the only capital below 70% with a 68.5% result.

The property market continues to show growth, albeit signs of cooling do exist, with a 0.4% increase across both the combined capitals and regionals.

Perth continues to experience the highest rate of growth, increasing by 1.6% for January, followed by Adelaide and Brisbane with 1.1% and 1% respectively. Darwin and Sydney also experienced growth of 0.3% and 0.2% respectively, whilst prices in Melbourne, Canberra and Hobart have fallen by 0.1%, 0.2% and 0.7% respectively. The annual change remains significant with a 10% increase across the combined capitals, and 4.9% increase for regional centers, contributing to a national increase of 8.70%.

This has been driven by four of the capitals experiencing double figure growth with 16.70% for Perth, 14.80% for Brisbane, 11.40% for Sydney and 10.30% for Adelaide. Melbourne and Canberra also recorded growth for the year with 3.90% and 1.20% whilst only Darwin and Hobart saw prices fall for the year with 0.1% and 0.4% respectively. This has led to Brisbane now holding the second highest median value in the country, overtaking Melbourne with a median value of $796,818 compared to Melbourne's $777,250.

Whilst the property market has begun to show signs of easing, given that economists predict we are at the end of the rate hike cycle, we anticipate that property prices will still experience growth throughout 2024, as interest rates begin to subside, and the lack of housing supply continues.

Clearance Rates & Auctions week of 4th of February 2024

Property Values as at 1st of February 2024

Median Dwelling Values as at 1st of February 2024

Quick Insights

Will Values Fall? Unlikely.

With home values in capitals such as Sydney still 2.4% lower than their peaks, many investors such as Sydney-based investor Nicholas Marangos-Gilks are more motivated than ever to increase demand in the market. Buyers are not waiting for the rate cut to occur. 

Tim Lawless, CoreLogic research director, has commented, "We are still seeing housing values below their record highs in Sydney, Melbourne, Hobart, Darwin and the ACT. In these cities we could see motivation from buyers looking to get into the market while values are still below their peaks."

Source: Australian Financial Review

Looser Planning, not Restrictive Taxes

Eliminating negative gearing and ditching capital gains tax discounts will not solve the worsening housing affordability crisis, but boosting supply by easing planning rules will, a new report says. 

Centre for Independent Studies chief economist and former Reserve Bank official Peter Tulip said restrictive planning rules have added more than 40% to house prices in Sydney and Melbourne, while property taxes boosted values by 4% at most. 

"There are arguments from the tax policy perspective that negative gearing and the capital gains discount should be considered, but it's not relevant to the question of housing affordibility," he said.

Source: Australian Financial Review

Author: Filippo Sciacca, Director - Investor Relations, Asset Management and Compliance


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