» Residential property market

Could this regional city be the next property hotspot?

Simon Pressley — Mon, 19 Aug 2019 06:54:28 +0000

A high proportion of property investors often overlook regional locations which offer great potential. Right now, one of the strongest property markets in Australia is the inland regional Victorian city of Mildura. Mildura’s 7.8 per cent increase in median house price over the last twelve months is superior to all Australian capital cities. Only Hobart, Canberra and Melbourne have produced a higher rate of capital growth over the last three years. You’ll get change from $300,000 for a good quality house in Mildura and the 6.1 per cent median rental yield, regardless of the size of your deposit, puts a standard investment property in cash flow positive territory. While several capital cities are currently feeling the pinch from housing over-supply, Mildura’s vacancy rate of 0.6 per cent is reflective of one of the tightest rental markets in the country. As for employment opportunities, the 6.9 per cent increase in job advertisements over the year ending May 2019 is higher than six out of eight capital cities. There’s no such thing as a ‘perfect’ property market however, as you’ll see throughout this Mildura Property Market Research Report, this location certainly ticks the right boxes. Mildura property market history Over the last twenty eight years, Mildura’s median house price has more than tripled from $78,000 in 1990 to $270,000 as at December 2018. The trend line in the below chart confirms how incredibly consistent the market has been for just shy of three decades, with the average annual growth over the period being 4.5 per cent. The largest property market downturn ever experienced in Mildura was in 2008 (the year of the GFC) when the median house price declined by just $10,000. Contrast this against the $225,000 decline in middle-ring Sydney over the last two years and one can only hope that property investors are now starting to re-evaluate Mildura’s potential. Over the most recent five years (ending March 2019), Mildura’s 25.6 per cent price growth is on par with Canberra and superior to Brisbane, Perth, Adelaide and Darwin. As for rents, according to CoreLogic, Mildura’s current median house rent is $320 per week. Rents have increased by 18.5 per cent over the last five years and 6.7 per cent over the twelve months ending March 2019. Mildura population Located on the Victorian side of the Murray River, Mildura is the largest settlement in the Sunraysia region. Mildura is an important service centre for dozens of smaller country towns within a 100-kilometre radius. During 2017-18 the inland city had a population growth rate of 0.8 per cent, equal to Adelaide and driven largely by overseas migration. The demand from overseas migration is led by skilled labour, particularly to support the region’s agriculture productivity. Mildura housing supply Based on Mildura’s average annual population growth over the last five years (477) and its average household size of 2.4 people, the base-level demand for extra housing in Mildura is 199 dwellings per year. According to Australian Bureau of Statistics data, an average of 293 new dwellings have been approved in Mildura over the last five years. On face value, the data suggests recent supply should have been sufficient for recent demand, but the reality says otherwise. Mildura’s dwelling stock increased by 428 between the Census periods – enough for an increased population of 1,027 people. However, ABS data shows the actual population growth across this period was 2,742 (1,715 more than supply accommodated for). For much of the last decade, roughly seventy residential dwellings were recorded as ‘vacant’, or a vacancy rate of just shy of 2 per cent. All considered, Mildura’s rental stock would benefit from an additional forty to fifty dwellings. Mildura property market outlook Mildura is a shining example of a regional location that continues to produce solid results. Advantages: Mildura is one of the most accessible property markets in Australia for owner-occupiers and investors Current housing under-supply places pressure on real estate prices Continuation of tight supply is likely to maintain pressure on prices Strong housing demand is driven by healthy local economic conditions and overseas migration to meet skills labour shortages Exciting outlook for the Australian agriculture sector presents a great opportunity for regional cities like Mildura Strong investor cash flow supported by high rental yields and prospect for further rent rises Disadvantages: Declining internal migration Property growth cycle is already underway, although this is no suggestion of the cycle being too advanced for new buyers to benefit from

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Property market update July 2019

BMT team — Thu, 04 Jul 2019 04:09:45 +0000

Property values Sydney and Melbourne housing market conditions continued to improve in June, despite dwelling values still trending lower nationally, according to CoreLogic’s June 2019 Home Property Value Index. Interest rate cuts and renewed confidence in the property market are having a flow-on effect for conditions across the country. CoreLogic recorded a 0.2 per cent fall in national dwelling values, the smallest month-on-month decline since March 2018. Sydney saw an uptrend in dwelling values of 0.1 per cent, marking the first monthly increase in the city since July 2017. In addition, Melbourne recorded a rise of 0.2 per cent, the first move since November 2017. Hobart was the only other capital city to record an increase (0.2 per cent) in dwelling values. Despite strong growth over the past few years, Hobart experienced a 1.1 per cent fall over the three months leading up to June. Outside of Hobart, regional Tasmania proved strong, increasing by 1.3 per cent for the quarter. This is contrary to the general trend among other regional areas where dwelling values are losing momentum. Darwin experienced the biggest decline in housing values, falling by 0.9 per cent over June and 3.6 per cent over the quarter. Perth also continued its weaker trend, with a monthly decline of 0.7 per cent in June and 2.1 per cent over the quarter. Adelaide fell by 0.5 in June and 0.4 per cent over the quarter, marking the smallest decline amongst the capital cities. Brisbane slipped by 0.6 per cent and Canberra by 0.9 per cent. Residential listings National residential property listings fell by 5.8 per cent in June while year-on-year listings declined by 1.8 per cent, according SQM Research. Listing numbers in Sydney experienced the highest decline, falling by 10.8 per cent over the month and 9.8 per cent from the same time last year. Melbourne wasn’t far behind, recording a 10.7 per cent decline over June. Other declines included Hobart (9.4 per cent), Canberra (9 per cent), Adelaide (5.2 per cent), Perth (5.1 per cent) and Brisbane (4.4 per cent). Darwin recorded the lowest fall in listings at 1.3 per cent. Seasonally, it’s not unusual for listing numbers to fall throughout winter. With colder weather and falling housing prices, many vendors are waiting longer to sell. The Reserve Bank of Australia’s additional rate cuts could see an upward trend in listings throughout July. Vacancy and rental rates National rental rates remained relatively unchanged in June, tracking 0.3 per cent higher for the quarter and 0.4 per cent higher for the financial year. Despite sluggish conditions capital cities are starting to see rental rates rise faster, while those experiencing weakening are seeing the pace of decline ease. Hobart continued to lead the charge for rental rate growth after recording a 4.7 per cent monthly increase. With Hobart’s rental rates outperforming dwelling values, gross rental yields are continuing to push higher. Darwin was on the other end of the property spectrum, tracking the largest yearly fall of 4.7 per cent. Gross rental yields across both combined capital cities and combined regional areas rose from record lows, signalling that the property downturn may be over. Auction clearance rates National auction clearance rates got off to a slow start in June with the Queen’s birthday long weekend returning an average preliminary auction clearance rate of 51.3 per cent. However, the housing market surged back to life mid-month with CoreLogic recording a preliminary national clearance rate of 66.4 per cent from almost 1,500 auctions. The winter auction market continued to warm as more than 60 per cent of listed properties were sold under the hammer nationally for three consecutive weeks. According to CoreLogic, both the Sydney and Melbourne markets consistently recorded preliminary rates of above 60 per cent. This is a substantial improvement relative to late 2018 where rates were holding in the low 40 per cent range. While Sydney and Melbourne auction clearance rates have kept up their post-election energy, low auction volumes are likely to weaken the market pulse if house prices remain flat. Finance and interest rates The Reserve Bank of Australia (RBA) has cut interest rates for the second time in two months, reducing the official cash rate to a record low of just 1 per cent. The unprecedented move to further reduce rates follows on from the RBA’s decision to drop rates to1.25 per cent at the beginning of June. In an attempt to kick-start the economy and drive unemployment lower, the 25-basis points reduction marks the first time the RBA has delivered back-to-back cuts since 2012. In the statement accompanying the decision, RBA governor Philip Lowe indicated rates could be pushed even lower if the jobless rate didn’t fall fast enough. This mirrors several predictions that the official rate will fall as low as 0.75 per cent by the end of 2019. Treasurer Josh Frydenberg said the government expects the banks to pass on the full rate cut to borrowers. Along with interest rate cuts, CoreLogic said housing finance data and credit aggregates have caused a slowdown in investment lending. Investor credit has increased at an historically slow rate of 0.6 per cent.

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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 – February 2019

BMT team — Wed, 06 Feb 2019 05:49:20 +0000

Property values The start to 2019 has seen a continuation of the conditions witnessed at the end of 2018, with almost every capital city recording a month-on-month fall in dwelling values during January. The weakest housing market conditions continue to be centred in Melbourne and Sydney, where 55 per cent of Australia’s housing market is concentrated, dwelling values fell by 0.3 of a per cent and 0.4 per cent, respectively, according to CoreLogic’s Home Property Value Index. Both markets have seen an acceleration in the rate of decline over the past three months, with the rolling quarterly fall tracking at the fastest pace since the downturn commenced. Sydney dwelling values were down 4.5% over the three months ending January 2019 and Melbourne values were 4.0% lower. Nestpick’s 2019 Neighbourhood Price Index identified Sydney as the 25th most expensive city to live in based on its overall percentage of disposable income required to pay rent, which currently sits at 51.77 per cent. Canberra was the only capital city to defy to downward trend, with values increasing slightly by 0.2 per cent in January and 0.8 per cent over the quarter. In general, regional markets are showing healthier conditions relative to the nation’s capital cities. Regional NSW values were 1.3% lower, while regional Queensland values were 0.3% lower and regional Western Australia values were down 0.8%. It is regional Victoria that is doing particularly well, with Ballarat seeing the strongest regional price growth in Australia. CoreLogic’s home value index reflects national property prices overall are now 6.1 per cent lower than they were when the market peaked in October 2017. With a change of Government possible in the near future, and Labor intending to change negative gearing policy, this could have a further impact on pricing, particularly in Melbourne and Sydney. Residential listings The recent trend in housing market conditions, tighter credit conditions and low levels of housing supply are the primary drivers for January’s falling listings. Houses remained more popular than units across capital city markets, but average time on market for houses continued to rise. Hobart fared best at 44 days for houses and 34 days for units, while Perth claimed last place with 83 days for houses and 92 days for units. Average vendor discounting sat between 5.8 per cent and 8.6 per cent for houses and between 6.2 per cent and 8.8 per cent for units. Sydney emerged as the high-end exception for houses at 8.9 per cent, while Perth was the high-end exception for units at 9.6 per cent. Buyers currently are finding themselves in an encouraging position, where they can negotiate harder, take their time in making a purchase decision and be selective in finding a home that is right for their budget and lifestyle. On the other hand, vendors are facing more challenging selling conditions. Vendor discounting across the combined capitals has increased to a median level of 6.1% over the three months ending January, up from 4.7% at the same time last year and the median selling time has risen to 44 days, up from 37 days a year ago. The slowdown in buyer activity is evident in the reduced number of settled sales. CoreLogic’s property market update estimates there were 12.3% fewer sales over the twelve months ending January 2019 relative to the same period a year ago, and transactional activity is down 15.8% from the 2015 peak level of activity. Vacancy and rental rates Like property values, rental rates also continued to decline. CoreLogic’s Quarterly Rental Review and property market update indicated a 0.1 per cent decline in weekly rents across Australia, dropping the median to $433 per week. Meanwhile, combined capital cities saw a decline of 0.2 per cent to $462 per week. Across the capital cities, Sydney recorded the largest decline at 0.7 per cent to a median of $583 per week, followed by Darwin at 0.6 per cent to $463 per week and Canberra at 0.2 per cent to $539 per week. Hobart, Perth, Brisbane and Adelaide, on the other hand, saw rises in rental rates, while Melbourne remained steady. Meanwhile, rental yields in Sydney increased by 0.9 per cent to 3.24 per cent for houses and 0.1 per cent to 3.87 per cent for units. As rental rates decline, the supply of rental properties continue to be abundant, ultimately leading to a significant rise in vacancy rates across most capital cities, particularly in Sydney. According to the REINSW Vacancy Rate Survey, metropolitan Sydney’s vacancy rates rose by 0.2 per cent to 3.2 per cent, with the rise largely driven by middle Sydney and inner Sydney, where rental rates hiked up by 1.6 per cent to 5.1 per cent and 0.5 of a per cent to 3.0 per cent, respectively. Auction clearance rates Auction clearance rates also continued to soften over the quarter, with the combined capital city clearance rate declining to 43.6 per cent. However, select suburbs defied the trend, including Sydney’s Bellevue Hill, which recorded a clearance rate of 80 per cent, Melbourne’s Windsor Hill with 71.4 per cent, Canberra’s Griffith with 58.3 per cent, Adelaide’s Prospect with 57.6 per cent and Brisbane’s Ashgrove with 33.3 per cent. Finance and interest rates Between the upcoming federal election and the results of the banking royal commission, the lending landscape is expected to see more changes in 2019. The Reserve Bank has also decided to keep the official cash rate on hold at 1.5 per cent where it has remained since August 2016. Apart from being mortgage-ready, investors are encouraged to engage property professionals, where appropriate, in order to understand market movements and ultimately make the most out of the property market despite its softening conditions.

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