How sustainable is the stunning rally in residential property?
05 Jul 2021

It's all down hill from here

There already has been a downturn underway for inner-city units, especially for asking rents and rentals in Melbourne CBD, Docklands, and the city fringe.

Even with a cursory look at the latest demographic trends, it’s not hard to see why.

Victoria’s annual growth in its estimated resident population has collapsed from a peak of nearly 154,000 in 2017 to around just 750 in 2020.

In fact the population of the state has actually been in decline since June 2020. 

On-again/off-again lockdowns continuing into 2021 and the related restrictions have accelerated interstate relocations to south-east Queensland in particular.

Net interstate migration into Queensland exceeded 30,000 in 2020 for the first time in 15 years, and the numbers in the final quarter of 2020 were exploding (as is more than evident in lifestyle markets such as Noosa and the Gold Coast, as well as in some inland cities).


Many investors are choosing to invest interstate these days, and south-east Queensland has been a popular choice of late.

The outlook

We expect to see dwelling prices appreciating, but ultimately at a lower rate, since the current boom conditions are not sustainable.

The double digit pace of growth is likely to last for no more than 12 months, and will be quashed either through credit restrictions (by the regulators or voluntarily by lenders) or by market forces, including deposit and affordability barriers combined with a higher level of supply from owners who want to realise their capital gains.

With mortgage rates remaining ultra-low, we expect to see capital growth moderating to a rate of around 5-8 per cent, with no meaningful downturn any time soon, unless strong macroprudential measures are implemented.

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