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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 April 2019

BMT team — Tue, 02 Apr 2019 04:16:05 +0000

Property values According to CoreLogic’s March 2019 Home Property Value Index, six of eight Australian capital cities saw dwelling prices decline during the month, with Canberra values holding firm while Hobart values were 0.6 per cent higher. The national median dwelling price value, which has been trending lower for seventeen months and has fallen by a cumulative 7.4 per cent since peaking in October 2017, remains 15.9 per cent higher than five years ago. Darwin and Perth, where weak housing market conditions were driven by the post mining boom and weaker economic and demographic conditions, saw dwelling values fall by a cumulative 27.5 per cent and 18.1 per cent respectively since peaking in 2014. Housing is now very affordable in both these capital cities and first home buyers seem much more active compared to other cities across the nation. Dwelling values remained at record highs in Hobart and across regional Tasmania. In other cities values were only marginally lower including Canberra (-0.2 per cent), Adelaide (-0.5 per cent) and Brisbane (-1.6 per cent) and regional Victoria (-0.8 per cent). Although housing market conditions remain relatively healthy in these regions, conditions have noticeably softened over the past twelve months, with values either slipping or the pace of growth slowing. Residential listings International investment banking company, Morgan Stanley, reported March is typically the strongest seasonal month for Australian house prices and residential listings. The recent slowdown of falling house prices and listing availability is likely due to seasonality, rather than the prospect that house values may soon hit bottom. Vacancy and rental rates Rents across our nation’s capital cities slipped 0.1 per cent lower over the twelve months ending March 2019, the first negative reading since at least May 2005. CoreLogic reports the negative change in annual rental activity was heavily influenced by the Sydney market, where weekly rents were down 3.1 per cent over the year. Every other capital city apart from Darwin recorded a slight rise in weekly rents over the year. During March, CoreLogic also noted that gross rental yields have moved away from their record lows in both Sydney and Melbourne. However, these cities are still recording the lowest gross rental yields amongst the capital cities at 3.5 per cent and 3.6 per cent respectively. Other capital cities recorded average gross rental yields of 4.5 per cent, with Darwin and Hobart showing a higher yield profile. Nationally, regional markets are reflecting a higher gross rental yield relative to the capital cities. Finance and interest rates The upcoming federal election and potential changes to negative gearing and Capital Gains Tax (CGT) will continue to cause uncertainty for property investors in a market that has already been influenced by tighter lending policies and economic conditions locally and internationally. Some prospective buyers and sellers may be delaying their housing decisions until after the election. However, there is no guarantee investor certainty will improve post-election should there be a change of government and the opposition’s plans to wind back negative gearing and halve the CGT concession go ahead. The March 2019 CoreLogic report cites other factors are likely to help offset the housing market weakness, such as an expected cut to interest rates later this year. This could result in lower mortgage rates.

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The housing market performance: 2016-2017 financial year

Chan Naylor Team — Mon, 28 Aug 2017 23:58:45 +0000

In the past two decades, there were only two years when combined capital city dwelling values fell. Last year, these values rose by 9.6 per cent which was higher than the 8.3 per cent increase recorded in the previous financial year. Combined capital city dwelling values have risen in the last five financial years but in 2010-2012, there were successive financial years when values dropped. Individual capital city growth in recent years is a different story. In Sydney, dwelling values rose by 12.2 per cent during the past financial year, its fifth successive financial year in which values increased. This value growth was greater than the 11.3 per cent growth in the previous financial year. In Melbourne, values have risen for five successive financial years, each of which saw a faster value growth rate. Last year, Melbourne values rose by 13.7 per cent which was the cities highest growth since 2009-2010. Brisbane, on the other hand, saw a 2.0 per cent growth in values last financial year, which was down from the 5.3 per cent growth recorded in the financial year prior. Brisbane’s values have risen over the last five years but the previous year was its slowest growth since 2012-2013. Adelaide also experienced a 2.4 per cent increase in values last financial year, which is slightly higher than the previous year’s 2.1 per cent growth. It also marks Adelaide’s fifth consecutive financial year in which values rose. Meanwhile, Hobart and Canberra dwelling values have both increased over the past three financial years, whereas Perth and Darwin dwelling values have dropped for the same three consecutive financial years. Factors which have influenced the rebound in capital gains last financial year included changes in investment activity following macroprudential measures from the Australian Prudential Regulation Authority (APRA) and rate cuts during May and August 2016. Investment activity across the housing market may slow further following new macroprudential policies announced in March 2017. The 2017-2018 financial year may come with lower capital gains than 2016-2017 because of higher mortgage rates and affordability constraints. For more information about property investment in Australia, contact a specialist to discuss your particular circumstances. If you like what you are reading, subscribe to our newsletters now at www.chan-naylor.com.au Disclaimer

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