Old equation still the most important

WHEN discussion of property comes up and figures for growth are shared and compared, there has always been an unfortunately vague aggregate of “the Australian property market”.

This gauge of average prices and change has always been weighted towards Sydney and Melbourne (and to a lesser degree, Brisbane) and accordingly has always felt a bit off – particularly when those 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 almost across the board over the past 18 months.

I have never before 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.

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 Cairns by comparison, the 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, 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.

The two big price changers this year will be interest rates and supply. More properties are expected to come on market in Sydney and Melbourne now lockdowns are over, and prices might level out.

Having skipped the lockdown dilemma and with migration 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