LJ Hoooker Group White Paper - Top 10 Investment Markets for 2024

2024 Trends White Paper

Top 10 Investment Markets for 2024

Australia Has a Rental Housing Shortage

Housing supply levels remain at record lows right across the country at a time when population levels have risen sharply, creating a shortage of housing across all capital cities and regional markets. The crisis in housing supply has been hardest on tenants, with vacancy rates remaining at record low levels and rental prices continuing to rise. These two data points demonstrate the need for more rental accommodation.

LJ Hooker Group has analysed more than 500 regions and found the most undersupplied housing markets that could deliver strong investment returns for investors looking to provide this much-needed rental accommodation.

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Fortunately, there are several leading indicators such as supply, rental growth, population growth and buyer demand that enable you to look ahead to gauge future opportunities.

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Investing in residential property has been proven to deliver significant wealth to Australians for generations, and with Australia’s deep and diverse property market, there are numerous opportunities for investors. But picking the right time to buy, to maximise your capital growth and rental return can sometimes be tricky. Fortunately, there are several leading indicators such as supply, rental growth, population growth and buyer demand that enable you to look ahead to gauge future opportunities.

Typically, when trying to find opportunities, major cities often grab the headlines, however, this does not tell the whole story, as all markets behave differently, driven by unique local factors. LJ Hooker Group’s research team has analysed and identified the markets with the highest undersupply and shortlisted the top 10 locations for investment in 2024.

The Supply and Demand Imbalance Presents Opportunities for Investors

Australia is currently facing a significant shortage in housing supply. Despite a strong pipeline of housing supply anticipated until 2024, it's expected to barely meet the minimum requirements needed. The National Housing Finance and Investment Corporation (NHFIC) forecasts that about 184,000 new homes per year will be added to the supply in the next three years. However, household formation is projected to outpace this new housing supply, with a cumulative shortfall of approximately 163,400 homes expected by 2032.

A recovery in net overseas migration drives this imbalance to pre-pandemic levels and a growing number of single-person households. The shortfall in housing supply is particularly acute in the multi-unit segment, affected by bureaucratic delays in development approvals and a labour shortage in the construction industry. These factors, along with high inflationary pressure, are expected to continue driving house prices upwards well into 2024-25.

Therefore, while there is a notable effort to increase housing stock, it is still considered insufficient to meet the rising demand. This ongoing issue is a complex one that requires long-term planning and significant policy interventions to address both the supply constraints and the changing dynamics of the Australian housing market.

By targeting markets with high levels of demand, and low supply levels, investors can significantly increase their ability to achieve higher price growth and rental yields. In areas

with acute shortages, this will also enable investors to make stronger long-term returns. However, you need to be very targeted in your approach, as not all markets behave the same way, right down the suburb level.

Population Growth

In 2024, several Australian suburbs are experiencing significant population growth and attracting attention for their real estate prospects. Notably, suburbs in Western Australia are showing considerable growth. For example, Brookdale has seen a 22.5% growth in house prices over the past year, and neighbouring suburb Hilbert has had a 20.8% growth. Gosnells and Camillo have also experienced significant growth, with increases of 20.5% and 20.4%, respectively. Likewise, Seville Grove has seen a 19.9% increase in house prices.

Additionally, Elizabeth North in South Australia and Pagewood in New South Wales have shown notable growth, with increases of 19.9% and 19.6%, respectively. On a broader scale, Wyndham in Victoria was identified as the

fastest-growing area between 2019 and 2022, adding 34,500 residents. Other fast-growing areas in Australia include Blacktown - North in New South Wales and Casey - South in Victoria.

These figures reflect a combination of factors such as affordability, location, infrastructure development, and overall appeal for both residents and investors.

Where the Undersupply Is

Every state is suffering a housing shortage, which looks set to persist in the medium term as construction costs remain high, and access to developable sites gets scarcer. Based on the analysis of state population growth and housing construction supply, with consideration of other factors such as vacancy, every state in Australia is currently suffering a housing shortfall.

The most acutely affected state is Queensland, where our analysis indicates that there is a 69,000 dwelling shortage, followed by Western Australia and Victoria which have a shortfall of 27,000 and 23,000 dwellings respectively.

But the state-level statistics only tell part of the story. When drilling down to a local government area level, the shortfall statistics provide a more tangible insight into what markets you should be targeting to capitalise on the strong demand driven by population growth.

The most undersupplied local government area in Australia is Wyndham in Victoria,

which we estimate to have a current dwelling shortage of 12,600 homes. This area is a large growth corridor in outer Melbourne and is popular due to its proximity to transport and offers affordable home prices, which sit 20% below the Melbourne median house price. Other significantly undersupplied local government areas include the City of Brisbane, Moreton Bay QLD, Melton VIC and Logan in Queensland respectively.

Local Government Areas with Highest Housing Supply Deficit

WyndhamVICBrisbaneQLDMoretonBayQLDMeltonVICLoganQLDCaseyVICGoldCoastQLDIpswichQLDBlacktownNSWMelbourneVIC

Top Ten Investment Markets for 2024

Wyndham, Victoria

Wyndham local government area has the highest housing undersupply in the country, with a shortfall of 12,600 homes. There has been significant population growth in this region, as the state government focuses resources to make this area a major economic and employment activity centre, with train stations, new retail infrastructure and small business precincts. Located 19km west of Melbourne CBD, with good access to arterial roads such as the M1, Williams Landing offers significant affordability to first-home buyers with median house prices sitting at $810,000 and $468,000 for units respectively. Dwelling values have risen by an average of 6% over the past twelve months, however, this market points to significant longterm value growth due to its priority status for infrastructure and the persistent and significant undersupply of housing.

Brisbane City, Queensland

Brisbane City is the largest local council area in Australia, covering most of metropolitan Brisbane with a population of 1.28 million people. Over the last decade, this population level has grown sharply, resulting in a housing shortfall of 12,000 homes. Whilst all major cities across Australia are undersupplied, Brisbane is the most undersupplied major city and the second most undersupplied council in Australia. Dwelling prices in Brisbane have risen sharply in response to the strong demand for this market. The highest growth was seen in Richlands, with house prices rising by 46% and units by 14% over the past twelve months respectively. Units in Richlands also deliver strong rental yields of 6.4% according to Core Logic data. Bardon and Sunnybank have been other suburbs with strong growth in the Brisbane market, and offer strong investment returns.

Moreton Bay, Queensland

Located north of Caboolture, and one hour drive north of Brisbane, Wamuran saw housing values rise by 28% over the past twelve months, benefitting from a housing supply shortage of nearly 9,500 dwellings. The Moreton Bay local government area is between the Sunshine Coast, offering a fun outdoor lifestyle and access to strong employment prospects with only a 4% unemployment rate. Average house prices are $1.17 million in Wamuran, however more affordable options exist in Warner and Highvale. Median prices in these markets have both risen by over 20% in the previous twelve months.

Melton, Victoria

Melton is a major growth corridor in north-western Victoria, with a strong population growth boom driving demand for new housing, which according to the ABS has seen the local population rise sharply from 51,165 in 2001, to 178,960 in 2021. Median house prices rose by 5.4% over the past twelve months, as firsthome buyers driven by affordability and the desire to access space increased demand for housing. High priority has been placed on this region by the State Government, due to the pressures of a rapidly rising population significant investments in rail and transport infrastructure, and social infrastructure such as recreation and sports facilities have been fast-tracked to enhance the local area amenities.

Logan Council Area, Queensland

Located 35km southeast of Brisbane, Homeview in Logan saw a 50% jump in unit price values over the past twelve months, driven in large part by the housing undersupply of over 8,300 dwellings. The area is a new estate and development market, popular with house and land packages, and townhouses. Average dwelling prices range from $607,000 for a house and up to $720,000 for a unit, with a median average rental rate of $560 a week. Rental yields are higher in this market, averaging 4.8% according to Core Logic data. Other fast-growing suburbs in the Logan region also include Park Ridge and Eden’s Landing.

“ Top ten investment markets for 2024

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Casey, Victoria

Located 45km southeast of Melbourne, Junction Village in Casey has seen significant price growth over the past twelve months with units rising by 30% in value. The city of Casey is in a major southeast growth corridor and has the largest population of any local government area in Victoria. This strong population base has led to a housing supply deficit of over 8,100 dwellings. The Casey region covers a vast tract of outer suburban Melbourne, offering investors a significant variety of investment opportunities and suburbs. Notable Performers in these markets include Cranbourne West and the wider Cranbourne catchment where there has been significant development, population growth and infrastructure development.

Gold Coast, Queensland

Broadbeach is a popular destination internationally for tourists, visitors and residents seeking a beachside lifestyle. With a younger demographic averaging 40 years of age, young families are now making up a larger proportion of residents in this location. One of the main attractions of this area is its proximity to transport, such as the light rail, as well as entertainment and social infrastructure such as Pacific Fair shopping centre and Star Casino, and year-round good weather. Housing remains scarce in this market, with values for detached houses rising over 30% in the last twelve months giving them an average value of $925,000. Kingsholme and Hollywell have also performed strongly, and are in less dense, more affordable areas of the Gold Coast.

Ipswich, Queensland

Currently showing a housing supply shortage of 6,250 dwellings, Ipswich, which is located 28 minutes southwest of Brisbane by car, is a popular area for families seeking more space and affordability within the convenience of Brisbane. Bellbird Park saw the highest suburb growth over the past 12 months in this area, rising by an estimated 77.6% according to Core Logic transaction evidence. The average dwelling value for this area was $530,000 for a unit and $620,000 for a house, making it more popular with affordability-focused buyers. Moreso, it has lower rents than inner Brisbane, averaging $330 per week for a unit and $530 per week for a house, according to Core Logic. Other notable suburbs in Ipswich include Chuwar and Springfield which saw similarly high double-digit growth.

Blacktown, NSW

Located 35 kilometres northwest of Sydney, Parklea is a well-established, suburban area popular with young families and first-home buyers. Parklea also has a highly diversified local population and is a strong target suburb for overseas migrants. This area offers proximity to Sydney and Parramatta, the two largest cities in Metropolitan Sydney. Houses remain the most popular dwelling type in Parklea, with a median value of $1.4 million, which has seen significant growth over the past twelve months of 18%. Schofields and Seven Hills are strong alternatives, offering more affordable entry prices than Parklea, and have seen double-digit growth in prices consistently over the past three years.

City of Melbourne, Victoria

The City of Melbourne is one of the densest CBD residential centres in Australia, with over 145,000 people residing in the city. Population growth, linked to offshore migration and an increasing supply of high-density housing, is favouring the CBD due to its wellconnected infrastructure and access to many services. Values in this local area have risen by an average of 3% annually over the past decade, with strong growth in markets such as West Melbourne, Parkville and North Melbourne.

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Investing in residential property has been proven to deliver significant wealth to Australians for generations, and with Australia’s deep and diverse property market, there are numerous opportunities for investors.

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Conclusions

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The undersupply crisis is unlikely to end anytime soon, remaining a long-term, structural trend that will support significant pricing growth and returns over the coming decade.

Australia is seeing strengthening population growth numbers, with Government forecasts pointing to a national population of over 30 million people by 2033. This will continue to place significant demand-side pressure on already tightly stretched residential markets, providing long-term growth capital and rental growth opportunities for investors to capitalise on in undersupplied markets. When undertaking investment due diligence, there are other important factors worth considering, such as:

High-growth suburbs tend to have similar characteristics including:

• Solid reliable increases in property values over a relatively short time frame.

• Properties sell quickly and don’t spend many days on the market (DOM), a sign there is strong demand in a suburb.

• Rising rental yields, which is the value of how much income a property could fetch over a timeframe, as a proportion of its value. Higher yields indicate there is a strong demand for rental accommodation.

• High auction clearance rates are reported as a percentage of the number of properties sold over a week/month.

• Low vacancy rates indicate strong demand for rental property in an area.

The undersupply crisis is unlikely to end anytime soon, remaining a long-term, structural trend that will support significant pricing growth and returns over the coming decade. With a targeted, localised approach, investors can capitalise on this long-term trend to deliver superior returns to their housing portfolio.

Mathew Tiller

Head of Research

LJ Hooker Group

mtiller@ljhooker.com.au

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