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 February 2020

What to expect as a property investor in 2020