National dwelling values increased for the first time since October 2017, as the Australian property market continued its trajectory to recovery throughout August. With the spring season forecast to lift the market, experts are predicting a slow and steady recovery.
Housing values increased across five out of the eight capitals and national dwelling values rose by 0.8 per cent throughout August. The increase in dwelling values lifted the national annual rate of decline to -5.2 per cent, an improvement from May 2019 when values reached their sharpest annual decline of -7.3 per cent.
August was also the third consecutive month of capital gain in Sydney, Melbourne and Hobart and the second consecutive month in Brisbane. The weakest market conditions remain in Perth and Darwin where values have been declining for several months. Darwin values are now 30.7 per cent below their 2014 peak, while Perth values are down by 20.6 per cent. Despite this, there are subtle signs of improvements in the rate of decline for both cities.
Residential property listings
An increase in buyers combined with a lack of stock has contributed to further market recovery in August, with listing numbers expected to increase throughout spring. The beginning of September has already signalled a resurgence in the property market, with the largest seasonal rise in new listings in five years. According to CoreLogic data, the first weekend of spring recorded a 21.7 per cent increase in the number of homes listed on the market in Sydney, Melbourne, Brisbane, Adelaide and Perth. Out of the eight capitals, Melbourne had the most substantial increase in listing numbers, up 36.2 per cent from its winter low.
Vacancy and rental rates
Dwelling values and listing numbers are improving but the same cannot be said for the national rental market. Rents fell 0.1 per cent over August, the third successive month of decline. Brisbane, Adelaide and Hobart rental markets were the only exceptions. Sydney and Melbourne are leading the softening of rental yields, however if the market recovery continues, we could see this stabilise in the coming months.
Auction clearance rates
Auction clearance rates across the country continued to climb in August and are now at their highest levels since early 2017. Sydney’s auction clearance rate was almost 50 per cent higher in the last week of August compared with the same time last year, as experts predict a bumper spring with the number of property listings already rising. During the same week, Melbourne auctions returned a preliminary clearance rate of 76.1 per cent. Across combined capital cities, 1,605 homes were taken to auction in the final week of August, returning an average preliminary clearance rate of 73.6 per cent.
Finance and interest rates
Lending to property investors tumbled in July, however, could be back on the agenda as we head into spring. As rates drop and property prices stabilise, the rental investment market is showing signs of improvement.
CoreLogic data shows the national average rental yield on residential property is currently 4.1 per cent, a return which experts suggest can comfortably surpass term deposit rates.
In construction news, reduced interest rate cuts and tighter credit conditions have contributed to a fall in building approvals. Overall, the number of building approvals fell 9.7 per cent in July. Houses declined by 3.3 per cent and other dwellings, which comprises apartments and townhouses fell by a startling 18.4 per cent.
The retail property market is continuing to transform as major stores like David Jones, Myer and Big W announced the decision to reduce their store footprint. The reduction in retail stores could see further opportunities for commercial property investors in the warehousing sector, as businesses start to increase their online services.
In the agriculture sector, the demand for rural properties didn’t waver throughout August, despite ongoing drought conditions. Reasonable commodity prices, particularly in the sheep market, seemed to lift the rural property market sentiment. Some purchasers were still showing hesitation, with limited cash flow from their existing holdings and little to no stock feed for additional properties.