» Australian market update

Property market update February 2020

BMT team — Sun, 09 Feb 2020 22:11:34 +0000

House values jumped in January but there are signs of a slowdown House values lifted in every capital city in January with the CoreLogic national home value index up by 0.9 per cent. However, there are signs of a slowdown. Contents: Property values Rental rates Listing numbers Finance and interest rates Construction and commercial property Property values The property market rebound continued into 2020 as January saw prices rise in every capital city and rest-of-state region, apart from regional South Australia. Sydney and Melbourne continue to be market leaders as values increased 1.1 per cent and 1.2 per cent respectively. Hobart values increased by 0.9 per cent, while Brisbane jumped by 0.5 per cent. Canberra (0.3 per cent), Adelaide (0.2 per cent), Darwin (0.1 per cent) and Perth (0.1 per cent) also increased. Perth continued to bounce back after a five-and-a-half-year slump with January also marking the first positive change over the quarter (0.4 per cent) since May 2018. Regional markets also showed strong results during the first month of the year. The strongest conditions were in regional Tasmania (1.3 per cent) and Western Australia (0.9 per cent). Despite strong national results, the rate of growth is showing signs of slowing. The national dwelling index declined from 1.7 per cent in November to 0.9 per cent in January. Seasonal effects, ongoing affordability issues, an increase in advertised stock and tough economic conditions are all impacting the property market recovery. Rental rates Rental rates increased by 0.5 per cent in January however most markets remain relatively weak. Hobart remains the tightest market in Australia, where rental rates have experienced an annual increase of 5.8 per cent. According to CoreLogic, ‘with housing values rising more rapidly than rental rates, gross rental yields are swiftly compressing’. Listing numbers February figures released by SQM Research revealed national residential property listings increased by 2.2 per cent in January, however, were down 10 per cent compared to the same time last year. Overall, advertised listing numbers continue to trend below average, though experts are expecting to see numbers lift later in the year. While an increase in listings would offer a wider range of choice for buyers, it could also mitigate property growth as it dampens the urgency to purchase housing. Finance and interest rates The Reserve Bank of Australia (RBA) left the official cash rate unchanged at its February meeting. The cash rate remains at 0.75 per cent. The Reserve Bank of Australia #RBA has announced its decision to leave the official cash rate for February on hold. It remains at a record low of 0.75% pic.twitter.com/Ngq4vzKqG6 — BMT Tax Depreciation (@BMT_Tax_Dep) February 4, 2020 RBA Governor Philip Lowe said in a statement that: ‘There are continuing signs of a pick-up in established housing markets. This is especially so in Sydney and Melbourne, but prices in some other markets have also increased. Mortgage loan commitments have also picked up, although demand for credit by investors remains subdued. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality. Credit conditions for small and medium-sized businesses remain tight.’ In other finance news, the Commonwealth Bank and National Australia Bank have been inundated with thousands of applications for the First Home Loan Deposit Scheme since it opened in January. The influx of applications is fuelling a FOMO attitude among buyers and lifting property prices as a result. Construction and commercial property Investment in alternative real estate assets like student accommodation and petrol stations rose to $8 billion in 2019, a 42 per cent jump year on year. With subdued business conditions, property groups are on the hunt for relative value in the property market. The same growth cannot be said for the development sector. According to CoreLogic’s Cordell Construction latest report, the number of new developments which have been announced but not yet commenced decreased by 33 per cent. Nationally, the number of new projects fell by around 5 per cent when compared to the previous twelve-month period. In terms of construction, there were 863 projects moving into the construction phase over December, a decline of 14 per cent. As mentioned in our Property Market Outlook 2020 article, figures from the Performance of Construction Index also showed that overall activity in apartment construction and new developments contracted for a 20th month in December, even as the pace of decline eased.

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What to expect as a property investor in 2020

BMT team — Wed, 15 Jan 2020 03:00:05 +0000

We reflect on how the Australian property market fared in 2019 and delve into what investors can expect to see in 2020. Property investment 2019: the year of highs and lows Property investment 2020: a steady year ahead Property investment trends: what are investors buying? Property investment 2019: the year of highs and lows It’s safe to say 2019 was a year of highs and lows for Australian property investors with the national housing market getting off to a slow start. Investor sentiment was low as policy uncertainty, the banking royal commission and a subdued economy overshadowed the market. Tighter lending conditions effected loan approvals, and property values plummeted. However, the National Dwelling Index reached its turning point in June when Sydney recorded a slight rise of 0.1 per cent, the first monthly increase in the city’s housing values since its peak in July 2017. The Australian housing market moved through one of the largest and longest corrections on record followed by a fast-paced and surprising rebound in values in the second half of the year. House prices in most Australian cities finished on a high with national average dwelling prices lifting 1.1 per cent during December and by 2.3 per cent over the year, according to CoreLogic. A variety of factors are contributing to the recovery including three cuts to the official cash rate with the potential for further reductions, the removal of uncertainty around tax reform following the federal election result, and low advertised stock creating a sense of urgency among buyers. Property investment 2020: a steady year ahead This year is likely to be steady for investors with markets potentially plateauing mid-2020. Smaller cities are starting to show a stronger growth trajectory, including Perth, where housing values have been trending lower since mid-2014. With the cash rate at 0.75 investors will be able to secure credit at a reduced rate, however the ongoing repercussions of the banking royal commission could negatively affect the banks’ ability to lend finance. Unit and apartment sales continue to trend lower, and developers may be retaining stock as a result. Slowed development will have a flow-on effect on the construction industry and is likely to put pressure on property prices as housing stock is reduced despite demand remaining high. Across the states and territories, dwelling approvals fell in the Northern Territory (11.1 per cent), New South Wales (4.6 per cent), Queensland (1.4 per cent), and Western Australia (1.0 per cent), according to the Australian Bureau of Statistics December data. Tasmania (4.5 per cent), South Australia (3.1 per cent), Australian Capital Territory (3.1 per cent), and Victoria (1.3 per cent) recorded increases, in trend terms. To compound the issue, figures from the Performance of Construction Index, a monthly barometer of industry sentiment, showed that overall activity in apartment construction and new developments contracted for a 20th month, even as the pace of decline eased. Along with slowing construction, the first home buyers’ scheme may also contribute to a jump in property prices in the first half of the year. Property investment trends: what are investors buying? Over the past few years, BMT has seen a consistent increase in the schedules completed for new property and this is expected to continue. Already in the 2019-20 financial year, 57 per cent of schedules completed have been for new property. It’s important for investors to understand that every property type, whether it be new or old, will attract depreciation deductions. In the 2018-19 financial year, BMT found residential investors an average first year deduction of almost $9,000 so it’s always worth consulting a specialist Quantity Surveyor to see how much you can claim. Interest in commercial property has also increased, with BMT experiencing a 9 per cent rise in the number of commercial schedules ordered. These schedules are mostly for industrial warehouses, as well as retail and office spaces. Whether you’re investing in residential or commercial property, the team at BMT wish you every success in 2020. You might also enjoy reading: Bushfires offer a timely reminder for landlords What’s happening in the commercial property market

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Property market update November 2019

BMT team — Mon, 04 Nov 2019 03:55:32 +0000

Property values deliver largest month-on-month gain since 2015 A surge in property values in October has delivered the largest month-on-month gain since 2015, CoreLogic’s national index data shows. Property values National dwelling values jumped by 1.2 per cent throughout October, delivering the fourth consecutive month of increased values and the largest month-on-month gain since May 2015. Melbourne overtook Sydney to claim the title of the best performing capital city, recording a 2.3 per cent increase in dwelling values over the month. Melbourne’s October growth is the largest consecutive gain for the city since November 2009. A tighter market combined with strong population growth relative to other cities has assisted the solid rebound. Dwelling values are trending higher across most of the capital cities as lower mortgage rates and improved credit conditions continue to encourage buyers. Dwelling values increased in Sydney (1.7 per cent), Hobart (0.9 per cent), Brisbane (0.8 per cent), Canberra (0.6 per cent), Adelaide (0.4 per cent) and Darwin (0.3 per cent). The worst performing city was Perth, declining by 0.4 per cent over the month. While the downwards trend in Perth has continued, the market is showing an improvement in the rate of decline. Both Perth and Darwin have been weakening since mid-2014, with Darwin down a cumulative 31 per cent and Perth values 22 per cent lower. The median value now stands at $435,119 for Perth and $394,132 for Darwin. Outside the capital cities, Launceston was the top performer for change in dwelling values. Property values in the Tasmanian city increased by 4.7 per cent. The Mackay and Whitsunday region in Queensland wasn’t far behind, recording a 4.4 per cent rise over the month. Rental rates CoreLogic data revealed slowing rental markets throughout October. Over the three months to October, rental rates fell across five out of the eight capital cities. The sharpest declines were found in Darwin, where rental rates were 1 per cent lower for the quarter. Sydney’s rental market also suffered, recording a 0.7 per cent decline in rent prices and the lowest rental yields (3.2 per cent) of any capital city. Adelaide and Brisbane emerged as the top performers. Rental rates increased by 0.3 per cent and 0.2 per cent respectively over the quarter. The current rental conditions are a combination of multiple factors including a rise in rental stock, increased construction skewed toward rental accommodation and higher first home buyer activity. Auction clearance rates Auction clearance rates remained relatively unchanged, pushing 70 per cent and consistently showing strong demand. There were just under 2,000 capital city homes taken to auction in the week ending October 20, 75.6 per cent of which returned a successful result according to preliminary results. Finance and interest rates Lower mortgage rates and improved access to credit are having a positive affect on the national property market as the rebound continues to gather momentum. The Reserve Bank of Australia #RBA has decided to leave the cash rate unchanged at a record low of 0.75 percent. #interest #rates #recordlow pic.twitter.com/fxcjYompFv — BMT Tax Depreciation (@BMT_Tax_Dep) November 5, 2019 Despite a subdued rental market, property investors are seeing improved cash flow as a result of falling mortgage rates. Over the quarter, average rents fell by 0.5 per cent across the capital cities while the gross yields dropped to 3.99 per cent. The average fixed rate mortgage also declined to 3.6 per cent, roughly matching the rental returns. Commercial property Commercial property is likely to become a stronger investment over the next 18 months, according to a report by AMP Capital, with most asset classes set to offer solid returns. Similarly, Australian Bureau of Statistics data from August showed commercial building approvals soared by 54 per cent to their highest point in three years. Australian office sales also soared to $17.9 billion in the first three quarters of 2019, showing strong growth in the sector. On the contrary, commercial primary producers and agricultural businesses could be facing tax changes liken to ‘the removal of negative gearing’. The tax legislation denies owners of vacant land the ability to claim holdings costs such as interest, council rates, land taxes and insurance as tax deductions. Property developers, foreign owners, farmers and trusts are said to be among those hit the hardest by the NSW government crackdown.

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Property market update October 2019

BMT team — Tue, 08 Oct 2019 21:54:05 +0000

Australian property market recovery gathers momentum The Australian property market has continued its recovery throughout September, led by strong rebounds in Sydney and Melbourne. Property values 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. Commercial property 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.

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Where should I invest next? Australian city comparison

BMT team — Thu, 28 Mar 2019 21:51:22 +0000

Although property prices have been steadily falling across most Australian cities, the latest figures from CoreLogic show home values in several of our nation’s smaller capitals are holding their own. The shift in investor demand has occurred as a result of tighter credit lending. However this change is mostly being felt in the larger property markets of Sydney and Melbourne. We have looked at the results in some of the nation’s smaller capital cities and the areas continuing to show growth, which could provide the next opportunity for buyers to invest. Hobart was the only state capital where prices rose last month and values are up 7.2 per cent in the past year. The Tasmanian capital city is benefiting from mainlanders cashing out and moving to the island state for a more relaxed lifestyle and investors chasing capital growth in a tight market. Plus, the median house price is an affordable $457,186. Brisbane’s eastern suburbs have witnessed a price rise of 16 per cent over the last three years. According to CoreLogic growth areas include Pallara, Nudgee and Highland Hill. These areas recorded a price growth of 35.8 per cent 7.7 per cent and 7.6 per cent over the past year. For Nudgee and Highland Hill this same growth percentage has also been reflected annually over the decade. Highland Hill has a relatively affordable median house price of $650,000. Moreton Bay is another value proposition Brisbane suburb, with new infrastructure set to be built, as well as being declared a priority development area by the state government. As a result, the area has become one of the highest-growing shires across Australia. Adelaide is currently one of the most affordable, relaxing and liveable cities in Australia. The rental market strongly favours landlords with a tight vacancy rate of 1.2 per cent. As a result, rents in the region are rising rapidly, increasing by 2.6 per cent to $387 per week for Adelaide houses and 3.4 per cent to$299 per week for Adelaide units over the past year. According to recent SQM Research, Adelaide rents are predicted to continue to rise a further 3-5 per cent in 2019. Canberra was the only capital city where asking prices increased for both houses (at 3.4 per cent) and apartments (at 7.9 per cent) during 2018. According to CoreLogic, Canberra’s employment growth remains robust and unemployment is the lowest of any capital city. This is also being reflected where household incomes, the ratio of dwelling price to income in Canberra is unchanged at a healthy 5.0 per cent. The Perth property market has shown significant signs of recovery over the last twelve months, with vacancy rates falling below 3 per cent. Rental values also increased and prices are expected to rise significantly in 2019 across the whole of Perth by at least 10 per cent, making Perth property more attractive to investors. Population growth in the east and south-east of Perth will attract infrastructure to support those communities, which is why those areas are ideal investment hotspots. The sweet spot for entry-level investors is the $350,000-$480,000 price point where properties in this range are providing close to 5 per cent yield. Darwin has recorded the largest decline in dwelling prices, according to February CoreLogic data. As a result, it is the only capital city where the median rent for a three-bedroom house has declined. The rental market is performing no better, with data highlighting that along with Sydney, both cities had the weakest rental conditions among all other capital cities. Landlords collected 5.1 per cent less rent in November 2018 than they did in November 2017. As such, CoreLogic are predicting more of the same conditions throughout 2019.

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