Issue 13 | Thursday 29 June 2023 | Insights: Demand, Supply, and Housing Challenges
Hello, Andrew Bell here, checking in for our fortnightly update. I must say, there’s nowhere in the world better than the Gold Coast, but I’m genuinely curious to know if there’s any place that can rival it. Honestly, we’ve been blessed with the most incredible weather over the past month.
Now, as always, I aim to provide you with some contextual understanding of the real estate market. The news often circulates bits and pieces that are sensationalised, lacking context, and tend to generalise across Australia without acknowledging regional differences. While many national fundamentals such as interest rates play a role, it’s important to recognise that each region has its own unique dynamics.
Let’s get to the core of what’s currently driving our market, regardless of other factors like the state of the economy, interest rates, unemployment, and inflation. At its core, the real estate market is driven by demand and supply, plain and simple. First, let’s talk about the demand. Over the decade from 2011 to 2021, the population grew by approximately 390,000 people per annum. Modest estimates suggest that in the next 10 years, this number will increase to 487,000 per annum. The majority of this growth will occur in capital cities and their immediate surrounding areas.
Currently, we’re witnessing about 30,000 arrivals per month, and what we’re starting to understand now is that Australia is increasingly becoming the top destination for the world’s wealthy to migrate to. According to Henley and Partners, an advisory group to the world’s highest net-worth citizens, Australia is projected to attract more wealthy migrants than any other country this year. Australia, often considered a safe haven for global institutional money, is also attracting individuals seeking a secure and enjoyable place to raise their families or retire. In fact, in 2023, we expect 5,200 high-net-worth individuals to move to Australia, the highest number among all countries.
Furthermore, projections for our region indicate that the population in Queensland will reach 1 million by the time of the 2032 Olympic Games. While these individuals may not become permanent citizens or real estate buyers, it’s worth noting that in February alone, 140,000 foreign students returned to Australia for their education. Fortunately, they also helped alleviate the demand for hospitality staff in numerous businesses. These students are significantly impacting the demand for rental properties.
So, from a real estate perspective, there is certainly no shortage of buyers. That’s why we’re observing incredible results at our Ray White auctions. Last weekend, 72% of the 347 auctions across the country sold under the hammer, and most of the others have sold since. The average number of registered bidders has also increased to 4.5 per property, all because of this remarkable demand for real estate. People need a roof over their heads, regardless of high interest rates and inflation.
Now, let’s look at the other side of the coin—the significant problem we face with housing construction. Over the past decade, Queensland has built an average of 37,000 new dwellings per year. However, this number is declining as more builders go out of business, and others choose not to build to avoid bankruptcy. Given our current population growth levels, we need to increase dwelling construction by more than 20%. Unfortunately, we’re moving in the opposite direction. In April of this year, around 30,000 new arrivals came to Australia, yet nationally we only started around 2,500 dwellings. It’s a compounding problem.
When we look at the current governing bodies, they’re simply not addressing the fundamental problem, which is the lack of supply. In relation to our State budget a fortnight ago, an announcement was made about building 500 more low-cost homes. However, 500 is merely a drop in the ocean. The problems are well-known. As I mentioned recently, I serve on the board of the Real Estate Institute of Australia, and we’re actively collaborating with governments at all levels to identify the necessary steps to increase construction levels and supply properties for both the rental and housing markets. However, we must recognise that the wheels of Government turn slowly. For those who think this housing crisis will pass quickly, I fear that the worst is yet to come.
There’s no doubt that the Gold Coast remains at the top of people’s preferred locations to live. Therefore, the sooner people enter the market—potentially compromising on their preferred area, housing type, or price—the more secure they’ll feel with at least a roof over their heads and the ability to keep up with market growth. Don’t delay is the message.
Regardless of where you are in the world, I hope life is treating you well. I understand how challenging it can be for many, but there’s still so much to be grateful for. By focusing on the positive aspects of our lives rather than dwelling on the negative, we can experience happiness every day.
I will be back in a fortnight, until then, take care!
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group