Australian property market recovery gathers momentum
The Australian property market has continued its recovery throughout September, led by strong rebounds in Sydney and Melbourne.
Australia’s two largest cities led the September recovery, with Sydney and Melbourne dwelling values both increasing by 1.7 percent. The positive trend pushed the median property value to $805,424 and $634,913 respectively, however values still remain well below their peaks.
CoreLogic cited low mortgage rates, improved credit access and economic factors to the current bounce-back of Sydney and Melbourne. CoreLogic head of research Tim Lawless said: “Population growth is higher, unemployment is lower and jobs growth is stronger, providing a solid platform for housing demand.”
Along with this, the Sydney and Melbourne markets have seen stronger investor participation in recent months as market confidence continues to grow.
Brisbane and Canberra were the only other capital cities to record a rise in dwelling values, lifting 0.1 per cent and 1 per cent. Values fell in Hobart (-0.4 per cent), Perth (-0.8 per cent) and Darwin (-0.2 per cent), while Adelaide prices remained unchanged.While Perth continued its market decline experts say the city is just at the right stage of the property cycle for growth, having achieved a balance between supply and affordability.
Residential property listings
Property listings remain low across the country, with existing listing numbers 10 per cent lower than a year ago across the combined capital cities and fresh listings 15 per cent lower. The reduced real estate stock is creating a sense of urgency among buyers, with the fear of missing out boosting buyer activity.
Auction clearance rates
The seasonal impact of spring showed in the national auction market, with CoreLogic results recording a lift in national residential property listings by almost 3 per cent in the first week of September. National auction clearance rates held around the mid-to-high 70 per cent range over the month, with the results remaining high on larger volumes.
Prices also experienced a lift throughout the month. Buyers are paying above the expected sale price as sentiment continues to pick up, and purchasers compete for the few properties on the market.
Vacancy and rental rates
National rental rates were down 0.1 per cent over September, continuing their downward trend for the fourth consecutive month. Sydney (-1.0 per cent), Melbourne (-0.3 per cent), Perth (-0.4 per cent), Darwin (-0.2 per cent) and Canberra (-1.1 per cent) all recorded a decline in the three months to September. While gross rental yields are still trending slightly higher than 12 months ago, they’re trending lower across most areas.
Finance and interest rates
The Reserve Bank of Australia (RBA) has dropped the official cash rate below 1 per cent for the first time in history. The official rate is now at a record low of 0.75 per cent. In a statement issued after the call, the RBA said they made the decision in a bid to support employment growth and to provide greater confidence that inflation would be consistent with the medium-term target.
A combination of drought, stagnant wage growth and trade conflict between China and the United States also contributed to the controversial interest rates decision.
New hotel development in Australia is predicted to slow as the country’s struggling apartment market contributes to a decrease in residential-led mixed use projects. Along with the slowdown in development, hotels in Australia have started offering free co-working spaces as a new phenomenon of space activation takes hold. Two hotels in Sydney’s Rushcutters Bay and the CBD have offered free desks to businesses to draw in more patrons through the lure of a busier ground floor lobby.
While hotels continue to look for new ways to adapt to the market, Sydney and Melbourne’s office and industrial property sectors have offered strong returns for investors throughout September. Melbourne’s office market boom is expected to continue until 2024, with prime rents expected to rise another 30 per cent to 40 per cent.