» Australian property

Repurposing for demand: Office to residential conversions

BMT team — Fri, 23 Feb 2024 04:51:40 +0000

The evolving work landscape has led to businesses reassessing their office footprint, resulting in a decrease in office leasing. While the demand for A-grade or prime office space remains solid in some areas, older or subprime office buildings are struggling to fill their floors, with research showing a 6% decrease in demand from a year ago and a 24% decrease from pre-pandemic levels in cities globally. Some owners may consider adaptive reuse as a viable option to preserve the building, with popular options including hotel conversions, data centres and the office to residential conversion. Repurposing office buildings into residential units is gaining traction worldwide as a solution to housing shortages. In New York, the Office Adaptive Reuse Task Force is focused on converting outdated office spaces into housing, aiming to create 40,000 apartments from unused office buildings. New data indicates that 250 million square feet of vacant office space in Europe’s top 35 cities can potentially yield 500,000 homes and Australia is in a similar position. NSW office vacancy rates are currently above 13% and a recent study by the Property Council of Australia found that almost 90 Melbourne CBD office buildings are ‘ripe for adaptive reuse’, which could create up to 12,000 new homes in locations where amenity, transport connections and jobs already exist. In Melbourne the superannuation fund Australian Unity recently converted its headquarters into a seniors residential complex and the TNT Apartments towers at Redfern in Sydney were converted from a commercial space to 181 residential apartments. Though the high costs and regulatory challenges have been a deterrent for investors so far, governments worldwide are incentivising such conversions, and policymakers are working to simplify regulatory obstacles, which will hopefully reach Australian shores soon. In addition, the depreciation deductions available on these office to residential conversions will also increase the investor’s cash flow. Below is an estimate of the depreciation deductions that an investor might earn when converting a 1,200 square metre office space in North Sydney to 12 x 100 square metre residential units. Each includes two bedrooms, one bathroom, a kitchen with modern appliances and a connecting lounge area. To maximise the depreciation deductions on your office to residential conversion or to find out more about BMT and the additional services we offer, contact the team on 1300 728 726 or Request a Quote.

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2023 Property Market Year in Review

BMT team — Mon, 20 Nov 2023 22:47:43 +0000

Despite ongoing interest rate hikes, high inflation and a subsequent ease in consumer spending, the residential property market has shown resilience with a 7.0% growth rate in the year to November 2023. As at the end of November, residential real estate constituted $10.3 trillion of Australia’s wealth, with superannuation at $3.5 trillion, Australian listed stocks at $2.8 trillion, and commercial real estate at $1.3 trillion following closely behind. RESIDENTIAL AND COMMERCIAL PROPERTY VALUES There has been renewed growth in the capital cities property market this year. Brisbane properties have shown growth at an impressive 10.7% over the past year and dwelling values are currently at a record high. Perth has taken a definitive lead at a growth rate of 13.5%, followed by Adelaide which has shown a slowdown from a significant 13.4% in November 2022 in comparison with a growth rate of 7.6% in November 2023. In Sydney, dwelling values increased by 10.2% over the past year, but are still below the record highs of January 2022 and Melbourne showed a respectable 3.0% growth over the past year. Canberra, Darwin and Hobart have struggled to get above the line this year with values falling by -0.3% in Canberra, -1.5% in Darwin and -3.0% in Hobart respectively. The rise in the value of regional property has also slowed across the country showing a more moderate growth rate of 3.4% as of November 2023 compared to the 10.1% growth rate seen at the same time last year, suggesting a potential downtrend in the tree change and a return to city life for many. PROPERTY SALES Most residential homes across Australia take approximately 32 days to sell, with 10.2% more properties on the market across Australia, than the same time a year ago. Perth has once again broken the trend, selling within less than 12 days, highlighting the lack of availability and rise in demand in the already heavily burdened property market in Western Australia. RENTAL PROPERTY MARKET As always, rental rates in the capital cities have shown significant growth at 9.7%, followed by a much more muted growth rate of 4.1% in regional areas. Rental rates across Australia as a whole have averaged 8.1%. According to CoreLogic, there has been a slight compression in gross rent yields nationally to 3.69%, which is down from 3.70% the previous month. LOAN APPROVALS AND CREDIT Covid era fixed rates expired this year, forcing many Australians into mortgage stress, spending well above the recommended 30% of their income on mortgage payments. In 2020 the average three – year fixed rate investor loan was at 2.2%. For some, this has now increased to a comparable variable rate loan of up to 7.21% with the Big Four banks, averaging 6.0% for owner occupiers and 6.49% for investors. Lending standards tightened for all residential and commercial real estate loan categories, but secured, tenanted investors are still positively favored by banks with investor finance comprising 35.6% of new mortgage lending through October. This share of investment lending was highest across NSW at 40.4% and is trending higher than the historic average at the national level. Most owner-occupier loans granted this year were first time buyers, comprising 28.9% of new owner occupier finance, which is well above the decade average of 24.2%. indicating a positive uptake of government schemes for this market segment. In terms of the number of dwellings approved for construction, both detached home – and unit approvals trended well below the historic 10-year average, with units trending even lower than detached homes. INTEREST RATES The 25-basis point Melbourne Cup Day rate hike has taken no one by surprise, leaving 1 in 4 lenders now with loans greater than their incomes according to the Reserve Bank of Australia. The number of Australians defaulting on their home loans, now surpasses the mortgage stress peaks of the Global Financial Crisis, however, returns on interest bearing investments, such as term deposits, have been favorable. Many mortgage customers have also found a way forward by refinancing their loans at more competitive rates. BMT NEWS As quantity surveyors, we have been steadfast in our approach to depreciation, believing that a physical onsite inspection will ensure an accurate and reliable depreciation schedule that will earn the owner the highest possible tax deductions. In 2023 our stance was validated by the Australian Institute of Quantity Surveyors, whose principal mission it is to establish and uphold professional standards at all times, maintain uniformity in procedures, support industry education, and foster public faith in cost certainty and the quantity surveying profession overall. Since opening its doors in 1997, BMT Tax Depreciation has completed more than 900 000 tax depreciation schedules to date, averaging first full financial year deductions of almost $9 000,00 in all residential properties and more than $15 000,00 in new properties, once again cementing our position as market leaders in tax depreciation. To maximise property tax depreciation deductions on your property, Request a Quote from us. The information in this article is sourced from CoreLogic and the Reserve Bank of Australia. This article is general in nature and should not be taken as advice or a guaranteed outcome.

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Farm investment opportunities continue to attract investors

BMT team — Tue, 03 Mar 2020 22:51:03 +0000

Despite the relentless drought and tough conditions, Australian-grown products such as beef, nuts and wool are in high global demand. As a result, farm investment opportunities across the country continue to attract investor groups looking to expand within the industry. In this article we will look at: What farm investment opportunities are investors looking for? 3 key elements to look for in farm investment opportunities Depreciation available for farm investment properties Key points: Large scale farms in reliable rainfall regions are popular among commercial investors Water infrastructure, land quality and logistics are key elements to look for in farm investment opportunities Valuable depreciation deductions are available for farm investments, and specific rulings are in place for primary production assets What farm investment opportunities are investors looking for? Australian farmland is widely dispersed. Large-scale properties, with high production abilities in reliable rainfall regions, are popular among commercial investor groups. Farms close to regional towns with strong water infrastructure are also drawing a crowd. More conservative trends are seen in regions such as the north-west of New South Wales. Agents are finding that while inquiries are rolling in, owners and buyers alike are waiting for more favourable climate conditions before they consider selling or buying. Experienced investors and farmers that are looking to develop their farming portfolio are taking a geographical approach. Expanding their portfolio across the country, rather than being localised, helps them spread their risk and be more sustainable against natural disasters. 3 key elements to look for in farm investment opportunities 1. Water infrastructure The Australian climate can be unpredictable, so farm owners can’t rely solely on consistent rainfall to provide the large amount of water that they need. Water infrastructure provides storage and distribution of water across the property. Dams, bores, tanks and irrigation systems are some key examples of the type of water infrastructure that farm investors are looking at. 2. Land quality You can always change the farming infrastructure to suit your needs, but you can’t change the land. When looking for the right farm, investors must make sure that the land is suited to the livestock or crops that it will hold and grow. Size and soil type are the determining factors for how the land can be used. It’s also important to test the land for any degenerative signs of erosion and contamination. 3. Logistics Every farm must be easily accessible to buyers and suppliers. Before deciding whether to invest in a farm, investors need to do their research on where the farms sits on the map logistically. This is especially important for smaller farms, where getting trucks to the property can be costly if they are far away from the usual routes. Depreciation available for farm investment properties Both owners and tenants of farms used for income-producing purposes can boost their cashflow by claiming depreciation deductions. Capital works deductions can be claimed for the wear and tear of structural assets, such as the farmhouse, sheds, and driveways. Plant and equipment deductions can be claimed for the easily removable items from the property such as tractors and tools. Most assets found on a farm can be depreciated under normal depreciation principles. However, primary production depreciation assets such as water facilities, fencing, fodder storage and horticultural plants are depreciated using their own specific rulings. For more information on how to claim the maximum depreciation deductions for your farm investment property, Request a Quote or contact the specialist BMT team on 1300 728 726.

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Where to buy an investment property in 2020

BMT team — Thu, 13 Feb 2020 03:01:47 +0000

Your 2020 goal may be to take your first step into the property market or to grow your investment portfolio. Location is always a key factor to consider and we have provided a state-by-state overview to help you decide where to buy an investment property. New South Wales Australian Capital Territory Victoria Tasmania South Australia Western Australia Northern Territory Queensland New South Wales The most populated state in Australia provides many opportunities for investors. Sydney alone has recorded a 23.9 per cent change in dwelling values in the past five years and median values are over $850,000. Although dwelling and median values are on the rise in Sydney, gross rental yields are currently trending the lowest out of the major cities. Sydney is always high on the list of property discussions, however investors shouldn’t rule out entering the regional New South Wales market. With increasing dwelling values, and positive population projections the smaller cities such as Newcastle and Penrith are proving to be smart choices. Australian Capital Territory As one of the most consistent property markets in the country, Canberra is set to continue to be steady in 2020. Dwelling values are at record heights and stamp duty deductions for investors make the Capital an appealing choice. Victoria Despite the slight downturn that Melbourne experienced in 2019, things are starting to look on the up for 2020. Stabilised auction clearance rates, high rental yields and strong competition are helping to create a popular market. Regional Victoria dwelling values are at their peak and investors shouldn’t rule out searching for a property outside of the CBD in popular areas such as Wyndham and Greater Geelong. Tasmania Often overlooked, our smallest state is boasting a strong property market for investors. Dwelling values are at their peak and Hobart is experiencing the most competitive rental market across the country, with low vacancy rates, high demand and rents up 5.8 per cent over the past 12 months. To add further to Tasmania’s strong case as an investor’s choice, sub-regions such as Launceston and North East Tasmania are currently recording the highest annual change of dwelling values. South Australia High rental yields and lower property prices makes South Australia a popular choice among investors. Adelaide dwelling values are at their peak with median values sitting at over $430,000. Coming in at second place to Hobart, Adelaide is continuing its trend of producing a tight and competitive rental market. Western Australia Slowly but surely, Perth dwelling values are improving following their slump lasting over five years. While dwelling values are yet to reach their 2014 peak, Perth rental yields are trending positively by 1.9 per cent. On the outskirts of the capital, the City of Swan is also making its mark with one of the highest projections of population growth across the country. For investors looking to buy in regional Western Australia, it’s important to be aware that the southern region is one of the lowest performing housing markets in Australia due to persistent drought and overall underperforming economic conditions. Northern Territory Like Perth, Darwin dwelling values have been consistently falling over the past years. While they aren’t out of the woods yet, the good news for investors is that Darwin recorded its first subtle rise of 0.1 per cent in January 2020. Although Darwin’s housing market conditions are weak overall, the city features high rental yields as housing values are falling at a higher percentage than rental rates. Queensland Investors searching for a property in Queensland commonly look to the capital and major cities. Median values in Brisbane are almost at the $500,000 mark, while sub-regions such as the Gold Coast and Sunshine Coast are recording positive dwelling value increases and strong projections for population growth. The broader outback regions of Queensland continue to be one of the weakest housing markets due to persistent drought and weak economic conditions. Most properties across Australia, both new and old, have depreciation deductions available. BMT found residential property investors an average of almost $9,000 in first full financial year deductions last financial year, so it’s worth speaking with a specialist Quantity Surveyor to help inform your investment decisions. Contact our specialist team on 1300 728 726 or Request A Quote.

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Property market update August 2019

BMT team — Mon, 12 Aug 2019 04:12:15 +0000

Australian property market set to stabilise The property market continued to show signs of life throughout July and is tipped to stabilise by the end of the year following lower mortgage rates, improved housing affordability and increased confidence post federal election. Property values Tides appear to be turning for the Australian property market, with dwelling values holding firm throughout July, according to the latest CoreLogic Hedonic Home Value Index. Five out of the eight capital cities recorded a slight increase in values over the month. Sydney, Melbourne and Brisbane all recorded a 0.2 per cent rise, marking the first month-on-month rise for Brisbane since November 2018 and signalling a positive trend overall. Sydney house values were 0.2 per cent lower over the quarter, but unit values increased by 0.02 per cent. The latest forecast from BIS Oxford Economics is predicting inner Sydney’s new apartment market to return to balance in 2020, putting the central city back into undersupply as population growth picks up and a lack of new supply starts to push rents and prices higher. Melbourne is following a similar trend, with house values down 0.3 per cent over the three months to July and unit values up 1.1 per cent. Hobart (0.3 per cent) and Darwin (0.4 per cent) dwelling values increased over the month, while Adelaide (-0.3 per cent), Canberra (-0.3 per cent) and Perth (-0.5 per cent) declined. Regional markets remain varied. The best performing regions throughout July were in Tasmania’s south east and north-west, with New South Wales’ Riverina region also showing solid gains. On the other end of the property spectrum, the weakest regional sectors were in the outback regions of Queensland, Western Australia and South Australia, where drought conditions continue to bite. Residential property listings New residential listings are a significant 22 per cent lower than they were a year ago, while total stock advertised for sale is 3.5 per cent lower. While listing numbers are partly seasonal, recent falls are indicative of weak vendor confidence and tough market conditions. According to CoreLogic, the recent improvement in housing market conditions should support a rise in vendor sentiment as we approach spring. Vacancy and rental rates National rents were down 0.1 per cent in July, led by negative trends in Sydney, Perth and Canberra. According to CoreLogic, Sydney remains the lowest yielding market, tracking at 3.43 per cent, down from a recent peak of 3.51 per cent two months ago. The strongest conditions were in Hobart where rental prices have experienced an annual increase of 5.5 per cent. On average, Australia recorded a 0.3 per cent increase in rents over the second quarter of 2019, which is softer growth than the 1 per cent recorded in the previous quarter. Capital city rents were 0.1 per cent higher over the quarter however remain down year-on-year. Further, gross rental yields for the last quarter decreased in Sydney and Canberra, while increasing everywhere else. Auction clearance rates Combined capital cities recorded a preliminary auction clearance rate of 68.3 per cent in the first week of August. Sydney has the highest clearance rate of all capital cities, with 74.8 per cent of auctions returning a successful result. Melbourne was close behind, returning a result of 73.3 per cent. Outside of Sydney and Melbourne, auction volumes increased across all cities excluding Hobart. The latest data mirror the positive results felt throughout July. Auction clearance rates held above 70 per cent for most of the month across Sydney and Melbourne, indicating a better fit between buyer and seller pricing expectations. At the same time, advertised housing stock was reduced. The low number of houses going to auction is creating heightened competition among buyers, many of whom are eager to buy following the RBA’s consecutive interest rate cuts. Finance and interest rates The Reserve Bank of Australia (RBA) has announced its decision to leave interest rates on hold at 1 per cent following back-to-back cuts in June and July. The pause from lowering interest rates will give the RBA time to assess the economic effects of the consecutive cuts however, a further reduction is widely anticipated. Citing a weak inflation outlook and a deteriorating global growth outlook, RBA Governor Philip Lowe said, “the increased uncertainty generated by the trade and technology disputes is affecting investment and means that the risks to the global economy remain tilted to the downside.” Along with the RBA’s interest rate call, the Australian Prudential Regulation Authority removed the 7 per cent interest rate buffer for residential mortgage lending. The relaxed restrictions eliminate the need for a ‘stress test’ on home loan applications, which typically determines whether borrowers can afford to repay residential home loans with an interest rate of at least 7 per cent. Commercial property There is healthy buying appetite at commercial auctions across the country although buyers are cautious as conditions remain tight. Capital values surged 7.1 per cent nationally, led by Melbourne and Sydney, while commercial rental yields tightened across all capital city markets except Melbourne. Along the east coast, the overall vacancy rate for industrial property declined to 2.3 per cent during the second quarter of 2019, according to analysis by Urbis. In other commercial news, agricultural property is forecast to decline as drought conditions worsen. Increased property availability and decreasing farm operating profits are expected to further slow price growth in agricultural regions in the coming eighteen months.

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Property market update June 2019

BMT team — Sun, 23 Jun 2019 23:41:33 +0000

Property values Australian dwelling values fell by half a percent during May, as the pace of decline continues to improve. According to CoreLogic’s May 2019 Home Property Value Index, Adelaide was the only Australian capital city where dwelling prices increased, with values 0.2 per cent higher during the month. While Adelaide remained firm throughout May, values were 0.2 per cent lower for the quarter. Canberra performed well, slipping by only 0.2 per cent during the month and increasing by 0.2 per cent during the three months to May. Annually, Canberra’s dwelling values have increased by 2.4 per cent. In Sydney the dwelling values slipped by 0.5 per cent, marking a 10.7 per cent drop over the past 12 months. Melbourne followed a similar trend, with values declining by 0.3 per cent in May and trending 9.9 per cent lower annually. While property values fell, the rate of decline eased considerably, signalling improvement in the market. Hobart values have tracked lower for two consecutive months, taking the quarterly rate of change (-0.7 per cent) into negative territory for the first time since 2016. Dwelling values fell in Perth also fell by 1 per cent over the quarter and Brisbane by 0.5 per cent. Darwin was the worst performing capital city, with values declining by 1.6 per cent during the month and 3.3 per cent for the quarter. Nationally, dwelling values were down by 0.4 per cent during May, the smallest month-on-month decline since May 2018. Residential listings Listing numbers remained elevated across all capital city markets, providing buyers with a diverse selection of properties and strong bargaining power. According to SQM Research, national residential listings increased by 4 per cent in May. Hobart proved to be the best performing city, with listings experiencing an upward trend of 7.1 per cent. Adelaide closely followed with an increase of 6.4 per cent and Canberra not far behind with 5.6 per cent. The only capital city to record a negative change in listing numbers was Darwin, with a yearly decrease of 1.5 per cent. While total listing numbers remain high, there are fewer new listings being advertised for sale. Vacancy and rental rates Rental rates held firm in May however annual national growth continues to slow, largely due to declines in Sydney (-2.9 per cent) and Darwin (-5.2 per cent). While the market remains sluggish, gross rental yields are recovering from record lows. Hobart has seen the highest increase in rental yields, up 4.9% over the past twelve months. According to the ANZ-CoreLogic Housing Affordability Report, Hobart is now the most unaffordable capital city rental market. This is a result of relatively low household incomes and surging rental prices. According to SQM Research, Hobart’s vacancy rate for May was 0.5 per cent. Since peaking, Sydney dwelling values have reduced by almost 15 per cent, pushing rental yields higher. Sydney’s average weekly rent for houses stands at $550, a 3.2 per cent increase, and $520 for units, a 4.1 per cent increase. Sydney has a vacancy rate of 3.3 per cent during May. Vacancy rates were also recorded for Darwin (3.3 per cent), Perth (3.1 per cent), Brisbane (2.4 per cent), Melbourne (1.8 per cent), Canberra (1.2 per cent) and Adelaide (1.1 per cent). Nationally, the vacancy rate for May was 2.2 per cent, while Australia’s gross rental yield (4.1 per cent) was the highest it’s been since May 2015. Auction clearance rates Auction clearance rates have increased and are holding around the mid-50 per cent range across the major markets following the Federal election. As the rate of decline continues to improve, there’s indication the worst of the housing downturn could be over. Auction clearance rates suffered notably in Sydney during the long weekend, despite the Reserve Bank of Australia cutting interest rates. During that weekend, only 800 properties were taken to auction across the combined capital cities, with the clearance rate at 51 per cent. Though the last week of May saw improvement, with Sydney clearance rates breaking the 60 per cent mark for the first time in over a year and Melbourne’s auction volumes holding firm. During that same week, SQM Research reported a clearance rate of 62.6 per cent across the combined capital cities. Finance and interest rates The Federal election and the Reserve Bank of Australia’s (RBA) decision to cut interest rates were the two key events that impacted housing market activity throughout May. Proposed negative gearing and Capital Gains Tax were dismissed when Coalition was re-elected and removed vendors’ uncertainty surrounding potential taxation reform. The government also introduced the First Home Buyer Guarantee, set to come into effect in January next year. The introduction of the guarantee is expected to have a positive impact on housing activity and provide stimulus for those looking to enter the property market. The RBA cut interest rates to a record low, moving the official cash rate down 25 basis points to 1.25 per cent. This cut marked the first change since August 2016. Economists are predicting a further cut to 1 per cent in the coming months. Historically, lower interest rates have generally had a positive effect on housing demand. In addition to low interest rates, CoreLogic believes accessing a home loan could become easier, with a possible reduction in the interest rate serviceability test in late June. Lower interest rates coupled with lower borrower serviceability assessments is likely to improve housing market activity. While there are signs of recovery, housing credit is increasing at an historically slow pace, largely due to tighter lending conditions. Lenders continue to scrutinise incomes and expenses and are further reducing their exposure to high-risk borrowers.

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Property market update March 2019

BMT team — Wed, 13 Mar 2019 05:22:45 +0000

Property values According to CoreLogic’s Home Property Value Index for February 2019, seven of the eight capitals cities saw house prices decline during the month. The national median house price value also slipped a further 0.9 per cent. Hobart was the only capital city not to see a price decrease. Their median house price increased by 0.9 per cent in February to $489,000. Perth and Darwin housing markets were the hardest hit during the month. Both saw declines of 1.4 per cent and 1.3 per cent respectively. Sydney and Melbourne median house price values continued to drop a further 1.1 per cent and 1.2 per cent during the month of February. Sydney’s median house price value now sits below $900,000, down $14,000 from the month of January, while Melbourne’s median house price value dropped $11,000 over the month. Compared with March 2018, Sydney’s median house price value has fallen more than $160,000, while Melbourne’s has dropped by $105,000. February saw both capital city markets approaching 11 per cent annual declines (Melbourne 10.6 per cent, Sydney 10.9 per cent). The strongest capital city housing markets continue to be Hobart, Adelaide, Canberra and Brisbane. The top performing areas continue to be centered around regional Tasmania and the larger cities/towns surrounding Melbourne. These areas have a mix of lifestyle appeal, relatively affordable price points, access to amenities and transport options linking home buyers and tenants with major work precincts. Residential listings The number of properties advertised for sale has been consistently rising due to fewer buyers and longer selling times. Despite the surge in inventory, new homes being added to the market was down 19 per cent relative to last year, highlighting that vendor confidence is low. Buyers are firmly in the driver’s seat and in a good position to take advantage of the favourable circumstances. Vacancy and rental rates Rental conditions generally improved in February on the back of a seasonal rise in rental demand. Every capital city except Darwin saw weekly rents edge higher over the month. Regional areas also saw rents increase. Data from CoreLogic continues to show a trend of sluggish rental conditions across most regions of Australia. Nationally, rental rates were 0.3 per cent higher in February, but were up only 0.4 per cent over the past twelve months. Canberra and Hobart stand out as the tightest rental markets, with renters paying an extra 4.7 per cent and 4.6 per cent respectively compared with a year ago. The weakest rental conditions over the past year are in Darwin and Sydney, where rents have slipped 6.1 per cent and 2.9 per cent lower. Despite the relatively soft rental conditions, gross yields have continued to trend higher, especially across the capital cities where gross yields moved through record lows in August 2017, improving from 3.4 per cent since that time to reach 3.8 per cent at the end of February this year. Auction clearance rates CoreLogic reports there were 2,204 capital city homes taken to auction over the week ending 4 March 2019, returning a preliminary weighted average clearance rate of 55 per cent. The week’s volumes were slightly lower than the week’s previous 2,293 auctions held, which was the busiest week so far this year. The higher volumes last week saw the clearance rate dip below 50 per cent and it’s likely, as volumes increase, we will see clearance rates trend below this mark. Comparing results to one year ago, volumes are significantly lower than the 3,026 homes taken to auction over the same week in 2018. Given the combined capital cities posted another month on month decline in home values in February, it’s expected vendors will remain reluctant to auction their property while selling conditions remain challenging and year on year volumes will continue to trend lower throughout the year. Finance and interest rates Credit aggregates from the Reserve Bank of Australia and housing finance data from the Australian Bureau of Statistics have continued to show a consistent reduction in credit flows and mortgage activity, with a more pronounced downturn in owner-occupier credit growth visible through the second half of 2018 and now into the first quarter of 2019. It’s now been more than two and a half years since the RBA cut the official cash rate to 1.5 per cent in August 2016. The record-low interest rate is now the longest period rates have been left unchanged since the cash rate was introduced in 1990. What’s more, falling house prices are supporting the case to keep rates on hold even longer.

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Property market update – October 2018

BMT team — Tue, 30 Oct 2018 22:20:12 +0000

Property values The Australian property market has continued to weaken, with national housing prices falling half a per cent in September. This fall in market values has been consistent over the past twelve months according to the latest CoreLogic Home Value Index. Sydney house values have dropped 6.1 per cent over the past twelve months and Melbourne values are sitting 3.4 per cent lower. Not only are these amongst the largest annual falls across the Australian capital cities, but considering Sydney and Melbourne include approximately 60 per cent of the national value of housing, the shaky conditions in these cities continue to have a substantial impaction the overall national housing market. As national housing market conditions have slowed down, and credit seems to be less available, buyer numbers have thinned out. CoreLogic estimates of settled sales are down 10 per cent year on year nationally, whilst previously strong markets such as Sydney and Melbourne have seen the number of settled sales fall more substantially, down 19 per cent and 16 per cent respectively. There are more positive signs elsewhere across the country, with Brisbane, Adelaide, Hobart and Canberra showing signs that property prices are indeed increasing. With a change of Government possible in the near future, and Labor intending to change negative gearing policy, this could have a huge impact on pricing, particularly in Melbourne and Sydney. Residential listings New listings have commenced their anticipated seasonal rise thanks to the onset of spring and warmer weather leading into summer. However, the number of freshly advertised properties remains well below that of previous years. Despite the decrease in new listings, the total number of properties available for sale has climbed 9.5 per cent compared to one year ago across the combined capital cities. This wave in total listing numbers is highest in Sydney and Melbourne, where levels are now 22 per cent and 17 per cent higher than twelve months ago. A study conducted by analyst and buyer’s agency firm Propertyology revealed that Sydney and Melbourne markets continue to see housing oversupply, which is likely to cause slowdown in areas located in two of the major capitals. The oversupply has been driven by dropping property prices, increasing vacancy rates and easing rents. Vacancy and rental rates With capital city property values falling, rents continued to rise, despite gross rental yields gradually recovering from recent record lows. Whilst there has been a fall in properties available for rent, the most recent figures compiled by CoreLogic show the national gross rental yield at 3.73 per cent, lower than the decade average of 4.27 per cent. Nationally it is 4.2 per cent for apartments, and 3.6 per cent for houses. Recent figures from SQM Research indicate that the national vacancy rate remained steady at 2.1 per cent. Half of the capital cities saw their vacancy rates shrink by 0.1 of a percentage point, with the tightest being Hobart at 0.4 of a percentage point, followed by Canberra at 0.6 of a percentage point, Adelaide at 1.1 per cent and Perth at 3.6 per cent. Similarly, the capital city average asking rent for houses remained steady at $552 a week, but unit rents declined by 0.7 of a percentage point to $437 a week. The major growth standouts for rents were Adelaide and Perth, which saw both asking rents for houses and units rise. Adelaide’s asking rent rose by 0.5 of a percentage point for houses to $390 a week and by 0.3 of a percentage point for units to $300 a week. Meanwhile, Perth saw a more subdued rise of 0.3 of a percentage point for houses to $425 a week and by 0.1 of a percentage point for units at $320 a week. On the flipside, the capital cities that saw asking rents for both houses and units decline were Melbourne, which saw declines of 0.5 of a percentage point and 0.7 of a percentage point to $525 a week and $405 a week respectively, and Darwin, which saw declines of 2.0 per cent to $505 a week and $400 a week respectively. Auction clearance rates According to CoreLogic, the combined capital city auction clearance rates numbers have steadied over recent weeks, but they remain well below levels from a year ago. Across Melbourne, auction volumes rose. However, final figures saw the clearance rate drop to 45.7 per cent. This was not only lower week-on-week, but it was also the lowest figure since June 2012 (38.6 per cent). Over the week prior, fewer Melbourne homes were taken to market with a final clearance rate of 50.4 per cent. In Sydney, the final auction clearance rate fell slightly to 44.6 per cent last week, from 45.1 per cent the previous week. Across the smaller auction markets, clearance rates improved in Adelaide, Brisbane and Perth, while Canberra’s came in lower week-on-week. Building approvals Both house and unit building approvals are currently trending lower nationally. However, they do remain well above previous average levels. Finance and interest rates Mortgage demand is trending lower, largely due to an extensive decrease in investment lending. Previous housing cycles have generally been prompted by changes in interest rates, the current slowdown has been deeply influenced by changes in credit availability. Mortgage rates creeped higher in September, with the average discounted rate for owner occupiers rising from 4.50 per cent to 4.55 per cent. Some good news is that first home buyers are back, with finance approvals to this group well up compared to the same time last year. While a relatively small buyer group, the combination of renewed first home buyer Government incentives, fewer investors and calmer prices has been a positive. This is particularly the case in Sydney where there are the greatest number of first home buyer finance approvals in almost a decade.

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Five downsizing trends in Australian property

BMT team — Mon, 21 Nov 2016 01:12:09 +0000

It’s no secret that Australians have some of the largest houses in the world. While recent figures show a year on year increase in average floor size of our already large homes, our houses are actually not as big as they used to be. When you place these figures in a broader content and consider some current downsizing trends – as well as the rise in single person households – it makes you wonder if Australians are starting to embrace smaller homes. The stats Recent research from Commsec showed that in the past year the average floor space of a newly built home has increased 0.7 per cent to 231 square metres. Second only to the US whose houses are 10 per cent bigger than ours on average, Australian homes are 7 per cent larger than our New Zealand neighbours’ and 10 per cent larger than in Canada. While our houses are 10 per cent bigger than twenty years ago and 30 per cent larger than what they were in 1867, the current figure is actually down from our record of 247.7 square metres, which was recorded in 2008-2009. And interestingly, while there has been a slight increase in house size in the past year, our apartments are getting smaller. With an average floor space if 131 square metres, this is almost a 9 per reduction from 2004-2005 when the average size was 140 square metres. Alongside the common benefits of a reduced mortgage, reduced upkeep and cheaper utilities, people are starting to go smaller for a number of reasons, as we can see from several downsizing trends currently at play in Australia, which we have outlined below. 1. Sustainable property As our society becomes increasingly environmentally conscious, the demand for sustainable housing is growing. While still modern and comfortable, these houses have a green, thoughtful and efficient design, use recycled or sustainable building materials, aim to eliminate or reduce a carbon footprint during construction, foster a community feel and don’t take up more space than they need to. A good example of this is the award winning “The Commons” building in Brunswick (Breathe Architecture). The designer took everything not necessary out of the equation in order to reduce space and improve efficiency. This included, for example, a shared laundry instead of individual laundries and a communal bicycle storage room instead of a garage. With no air conditioning, these apartments rely on the building’s thermal efficiency and simple ceiling fans to keep cool. The Commons also promotes a community vibe with a shared veggie garden on the roof and other shared facilities. As sustainable building continues to grow in popularity, we should expect to see a reduction in houses that are big for the sake of being big, as there is no use for unwanted space in sustainable design. 2. Tiny houses Taking off in the US after proving to be a viable housing option following Hurricane Katrina, the tiny house movement has hit Australian shores and quickly gained a loyal following. Tiny houses are typically around 2.5 x 7 metres in size, can be completely off the grid and maximise every inch of cleverly designed space. They generally consist of a kitchen, bathroom, living area and sleeping loft and in Australia are often mounted on wheels to overcome current council building restrictions. People have embraced this trend in order to lead a minimalist lifestyle and be mortgage free, with tiny homes costing a fraction of the price of a regular house. In Australia, tiny houses seem to be popular with those entering the market for the first time as well as retirees. They’ve also been marketed as an ‘in between’ home, where people can live while saving for a deposit on a regular house. The tiny life is certainly not limited to these groups though. Many have simply embraced the trend after realising that perhaps we don’t actually need that much space after all. 3. Granny flats Changes to legislation in the past ten years has fuelled demand for and construction of granny flats in Australia, with accommodation ranging from modest studios to multi-bedroom mini-homes. Homeowners in granny flat friendly states – and in Sydney in particular – are taking advantage of the demand for comfortable and affordable rental accommodation in close proximity to the CBD, and benefiting from extra income from leasing one out. Those living in granny flats – commonly students, single people, young adults saving for a deposit and, of course, grannies – seem to be willing to compromise on a bit of space to take advantage of affordable accommodation close to the CBD. All Australian states except for South Australia, Queensland and Victoria now allow homeowners to generate income from a secondary dwelling on their land. 4. Baby boomers downsizing to apartments While empty nesters downsizing from their family homes into smaller apartments is nothing new, the trend continues. Alongside traditional retirement villages, many baby boomers are opting to move into comfortable apartments, allowing them to be closer to family and facilities in the city. The demand for apartment living has seen an apartment construction boom in our capital cities in recent times, with concerns that we could have an oversupply in a few short years. In the right areas, apartments continue to be a popular choice for investors because of this demand and other benefits such as the extra depreciation they can claim from common property. 5. Affordability The rising price of property in our capital cities – Sydney and Melbourne in particular – is something we hear about regularly in the media. Those who can afford to buy in the city as owner occupiers are often compromising by going smaller. This might mean for example purchasing a studio apartment instead of a one bedroom unit or a townhouse instead of a standalone house, due to the lower and more affordable price tag. As Sydney and Melbourne continue to become global cities it will be interesting to see if this trend grows and if we […]

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