Property valuers see growth in key markets, new property

Australia's housing market is entering a more balanced phase, with higher interest rates and proposed property tax changes cooling sentiment.

However, new research from international real estate giant CBRE suggests any downturn is likely to be modest, with Adelaide and Perth continuing to attract strong buyer demand and many property professionals seeing long-term opportunities in new housing development.

The details

CBRE says sentiment has softened significantly since the start of the year, particularly in Sydney, Melbourne and Canberra.

However, buyer demand remains resilient in key markets such as Adelaide and Perth.

First-home buyers also remain the most active group in the market, while many property valuers believe the Federal Government’s proposed tax changes could eventually encourage more housing development.

CBRE’s latest Residential Valuer Insights survey, based on responses from 165 residential valuers across Australia, found expectations for house price growth have cooled markedly in recent months.

Just 29% of valuers expect house prices to rise over the next 12 months, down from 70% the previous quarter.

41% say they expect prices to fall.

Importantly, most of those forecasting declines believe any correction is likely to be relatively modest, with expected falls generally less than 5%.

Meanwhile, just under a third (28%) of valuers expect apartment values to rise over the next year, while another third (31%) expect prices to remain stable.

CBRE says the highest apartment price growth is anticipated in Adelaide, the Gold and Sunshine Coasts and suburban Brisbane.

The survey suggests rising interest rates remain the dominant concern for the market.

44% of valuers identified interest rates as the most important factor likely to influence housing performance over the next year, while 28% pointed to the Federal Government’s proposed changes to capital gains tax and negative gearing.

Demand has also eased from the strong levels seen earlier this year.

Only 30% of respondents described recent market demand as “strong” or “very strong”, down from 54% in the March quarter.

Even so, several markets continue to perform well.

Adelaide and Perth recorded the strongest buyer demand and the most optimistic outlooks among valuers surveyed.

One valuer operating in Adelaide’s western suburbs told CBRE the local market remained resilient, “underpinned by low housing supply, population growth, migration, and affordability relative to eastern-state capitals.”

A Perth-based valuer reported that “Demand levels remain strong with a lack of supply still evident.”

Tax changes reshape investor outlook

The Residential Valuer Insights survey also highlights the growing influence of the Federal Government’s proposed property tax reforms.

Half of all valuers expect changes to capital gains tax to place some downward pressure on housing prices over the next year, while 48% believe changes to negative gearing could have a similar effect.

However, many respondents also see a potential upside, with demand for new houses strengthening.

CBRE found 44% of valuers reported increased demand for new homes during the quarter, even as demand for established housing moderated.

“Development sites and vacant land will be the beneficiaries of the changes to CGT and Negative Gearing, therefore increasing the demand for these types of properties,” said a valuer from Melbourne’s rapidly growing north-east.

“New dwellings will be sold at a premium.”

More than four in ten valuers expect the capital gains tax changes to support new housing development over the longer term, while almost half believe changes to negative gearing could encourage additional construction activity.

The report also points to a potential shift in the composition of demand rather than a collapse in activity.

First-home buyers remain the most active group in the market, identified by 70% of valuers as the dominant buyer segment, followed by upgraders and local investors.

Investor activity has eased compared with earlier surveys but remains an important component of many markets.

Stronger rental growth

According to valuers surveyed by CBRE, one consequence of the Albanese Government's proposed tax changes could be stronger rental growth.

63% of respondents expect changes to capital gains tax to push rents higher over the next year, while 67% believe changes to negative gearing will have a similar effect.

Looking further ahead, around 72% of valuers expect both reforms to place upward pressure on rents over time.

While sentiment has clearly softened, the survey suggests the housing market is transitioning into a more selective environment rather than experiencing a broad-based downturn.

Supply shortages, affordability constraints and population growth continue to underpin demand in many regions, particularly in markets such as Adelaide and Perth, where housing availability remains tight.

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The take-out

CBRE’s valuers believe Australia’s housing market is entering a slower and more balanced phase, but not necessarily a severe downturn.

While higher interest rates and proposed tax changes are weighing on sentiment, most expected price declines are modest, first-home buyers remain active, and several markets continue to record strong demand.

Perhaps most significantly, many valuers see the Government’s tax reforms reshaping where investment flows, potentially boosting demand for development sites, new housing and other supply-focused projects at a time when Australia continues to grapple with a chronic housing shortage.