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This year marks the fifth edition of our Australia's Housing Fundamentals white paper. Time flies. In this episode, instead of looking at just this year's housing fundamentals, we're going to look back in time, the past five years' housing fundamentals, and see what have changed, what have become weaker, what have become stronger, and most importantly, what have been remaining strong throughout the five years. And that might be the most important to help us understand what's driving property growth in Australia. I'm Joan, now let's let the data speak.
A few weeks ago, we have launched our fifth edition of the Australia's Housing Fundamentals Analysis white paper. We've been producing it consistently ever since 2022. And over the five years, a lot of things have changed. In this episode, we are going to look at this year's housing fundamentals, but more importantly, we're going to review what have happened over the past five years since 2022, what have changed, and what's remained the same. Now, the first thing is to give you a brief introduction of the 25 housing fundamentals, what we're looking at.
We have three overarching categories here, demand, supply, and confidence. In demand, we're looking at people movement, economic activity, finances, and affordability. People movement includes population growth, net overseas migration, regional migration, or internal migration, international visitors, and household size. So everything demographics. In economic activity, we have GDP growth or economic growth.
We have job market conditions. We have infrastructure investment and commodity prices and exports, which are really important for Australia's economy. In finances, we have a cash rate. We have a household income. We have household saving ratio or household liquidity and the new home loan commitment, residential loan to value ratio, bank delinquency rate, and borrowing capacity.
In terms of affordability, we have rental affordability, mortgage affordability, and that's all demand side fundamentals. On the supply side, we have current supply, which is measured by for sale listings, and we have a current rental supply, which is measured by rental vacancy rate. And then incoming supply, we have building approvals, new dwelling building approvals. And when it comes to confidence, three fundamentals left, consumer sentiment index, media cycle, which is how the media is looking at Australia's property market, whether it's positive, whether it's negative, whether it's neutral. And then in the end, we have government intervention, how supportive government policies are to the property markets.
Those are the 25 fundamentals we've been tracking over five years. Now we're going to put these 25 fundamentals into a metric showing the rating of each of them across the past five years from 2022 to 2026. And we color code the cell based on the rating that year from weak, which is red, to strong, which is dark green. Looking at the matrix, the first thing that strikes me is that over the past five years, there's no one single perfect year with the most fundamentals being strong. In 2022, demographics were weak because the international border was closed and overseas migration dropped to almost zero.
Therefore, overseas migration and international visitor were both rated weak. Cash rate was already hiking. It was still low, but weakening. And because of the cash rate hikes, borrowing capacity was dropping significantly. So it was rated somewhat weak as well.
After two years of a strong price growth, housing affordability was deteriorating. As we can see, mortgage affordability was still strong, but price to income ratio was already somewhat weak. And because of the cash rate hikes, confidence was struck heavily with the consumer sentiment index low and media cycle quite negative. So both of these were weak. Moving into 2023, rate hikes were continuing.
Economic growth slowed down. Demographic fundamentals became strong because of the international border reopening. But at the same time, cash rate became higher, so it became weak. Household saving ratio became weak. Borrowing capacity, rental affordability, mortgage affordability, and price to income ratio all became weak.
And on the confidence side, consumer sentiment remained weak. Media cycle improved slightly, but still somewhat weak. In 2024, situations were very similar. Cash rate remained high. Affordability was still deteriorating, so remaining weak.
Consumer sentiment as well remained weak. 2025, we experienced three rate drops. Confidence improved slightly, but affordability was still very poor. And now when it comes to 2026, cash rate came back high again. Affordability remains poor, and confidence becomes weak again, not just because of the high interest rate, but also because of the tax policy changes.
Every year, we've had some fundamentals weak or some fundamentals strong. So every year from 2022 to now, there have been multiple fundamentals being weak. But if we look back at price trends over the past five years, we remember there were states and many cities experienced actually booms during those years. For example, Western Australia, Queensland, and South Australia, many of the regions, including the capital cities, Perth, Brisbane, Adelaide, and regional cities like Bunbury, Barossa, Mount Gambier, Townsville to Wumba, Gold Coast, Sunshine Coast, over the past few years, they have all achieved 20%, in some suburbs, even more than 30% annual growth. At the first glance, that doesn't make sense.
That doesn't match with what we see at this national fundamentals matrix. And that is why we want to differentiate cyclical fundamentals and structural fundamentals and identify which fundamentals are changing, which fundamentals are remaining the same. If we look at the matrix again, what have changed are demographics because of the international border closure, cash rate, GDP growth, household saving ratio, borrowing capacity, affordability, and especially consumer sentiment and media cycle. Many of these are cyclical, following economic and monetary policy cycles. But at the same time, there are structural fundamentals that are remaining the same the whole time, including population growth, household size, job market conditions, infrastructure investment, residential loan to value ratio, for sale listings, rental vacancy rate, and building approvals.
These structural fundamentals are much harder to change, or at least much slower to change. And it is these structural fundamentals that are determining the long-term house price trends. So looking at these fundamentals, these consistently strong fundamentals, it is clear what a picture they are painting for Australia's housing market. Although cash rate continued to hike and stayed high over the past five years, Australia's population growth has remained strong in terms of population among all OECD countries. At the same time, job market has remained strong and resilient with a fast wage growth, boosting household income growth and household savings.
At the same time, household balance sheets have remained healthy, as indicated by the low residential loan to value ratio and the low bank delinquency rate. Housing demand has been strong in the smaller capital cities and the regional cities compared with the larger cities because of affordability, better lifestyle appeal, and the ongoing infrastructure investment gradually lifting the livability and accessibility of many regions. And at the same time, supply remains tight. Established supply is still much lower than the pre-COVID level. Rental vacancy rate nationwide is now around 1.
3%. That is much lower than the pre-COVID average level of around 2% to 3%. Established supply measured by for sale listings is much lower than pre-COVID level as well. For example, the current number of for sale listings in Brisbane and Adelaide are now 35% or more less than their pre-COVID average levels. And incoming supply is not catching up because we still face high construction costs, including labor costs and material costs.
So this imbalance between the high demand and constrained supply is the real force that is driving Australia's property prices up consistently, either nationwide or locally in different parts of the country. We shouldn't ignore today's weaknesses. This year, we see the largest number of weak fundamentals in the past five years because of the unfavorable interest rates as well as tax policies. However, all the structural fundamentals are remaining strong. We still see high demand fundamentals and constrained supply.
The weak ones are mostly related to cash rates and are mostly cyclical. That is why we are confident that even though at a national level, fundamentals may seem weak, at a local level, we can still see many strong performing markets continuing to deliver strong growth in the coming year. So to summarize, if the past five years fundamentals, the evolution has told us one thing, that would be the difference between cyclical fundamentals and structural fundamentals. Cyclical fundamentals such as cash rate, such as confidence or sentiment can affect housing prices and create fluctuation ups and downs. However, it is the structural fundamentals that really determine the underlying demand and supply that sets the long-term trajectory, growth trajectory of housing prices.
As investors, we would want more of our focus on these structural fundamentals that would take us to the long-term success instead of paying too much attention to cyclical ones that may make too much noise in the short term. I'm going to put the link to this year's Housing Fundamentals Analysis white paper below. If you're interested in detailed analysis of how the fundamentals are looking this year and market pressure analysis of eight capital cities and 25 regional cities across Australia, download a free copy. I'm Junge, the Senior Research Analyst here at InvestorKit. I'll see you next time.
