Australia’s housing markets rebounded strongly last year and this strength has continued into 2020.
In fact the property upturn which started in our big two capital cities in the middle of last year has become more widespread with housing values rising across every capital city in January according to the latest stats from CoreLogic.
While Sydney and Melbourne continue as the leaders for property value increases, the speed of growth has lost some momentum over recent months as can be seen in the chart below.
The following chart shows how a number of States are at the market peak in prices while Sydney and Melbourne property values have made up much of the ground they lost in 2017-9 and will reach new peaks sooner rather than later.
Looking deeper into the CoreLogic stats it is clear that the more expensive end of the Melbourne and Sydney markets are the primary driver of rebounding capital gains.
The Sydney property market is on the move having recorded its quickest turnaround in decades.
Since bottoming out after the election in May, Sydney dwelling values have recovered by 11.2%.
Sydney house prices increased 1.5% over the last month (6.7% over the last quarter) while apartment values increased by 0.3% over the last month (3.2% over the last quarter.)
The recovery is most concentrated across the premium end of the housing market where values were previously falling more rapidly.
The top quartile of the market is up 6.9% over the past three months and 10% higher over the year, while values across the lower quartile were 3.2% higher over the quarter and are only 3.4% higher over the past year.
The following metrics confirm the increased strength of the Sydney housing market:
- The average selling time of a home is 33 days (57days a year ago) and
- Vendors are discounting their properties an average of 3.5% to affect a sale (7.3% a year ago)
- 17% more properties sold in Sydney in the last 12 months compared to the previous year
Currently investors and home buyers are abandoning the off the plan apartment sector for many reasons including concerns about construction standards, and many of those who purchased off the plan a few years ago are now having trouble settling with valuations coming in on completion at well below contract price at a time when banks are more reluctant to lend on these properties.
In the background strong economic growth and jobs creation is leading to population growth and ongoing demand for property in Sydney.
At the same time international interest from migrants continues.
The beginning of this new cycle is a great time to look at buying an investment grade property in Sydney which is currently offering investors an opportunity to buy established apartments in the eastern suburbs, lower north shore and inner west at a slight discount to what they would have paid a number of years ago.
Melbourne property prices are surging with dwelling values up 8.2% higher over the last year taking them to only 1.2% below their October 2017 peak.
House values are rising faster than unit values across Melbourne, up 1.4% over the last month (5.6% over the last quarter) while apartments rose in value by 0.7% (3.5% over the last quarter.)
At the current rate of growth, we are likely to see Melbourne home values reach a new record high over the next month or so.
But the Melbourne property market is very fragmented, with values of more expensive properties rising considerably more than affordable houses.
The following metrics confirm the increased strength of the Melbourne housing market:
- The average selling time of a home is 31 days (45 days a year ago) and
- Vendors are discounting their properties an average of 3.5% to affect a sale (6.7% a year ago)
- 7.9% more properties sold in Melbourne in the last 12 months compared to the previous year
At Metropole we’re finding the Melbourne property market is moving from strength to strength, after exhibiting the strongest rebound in modern history.
Buyers are back, sellers are back and auction clearance rates are high despite rising volumes of properties for sale.
Overall property values will be underpinned by a robust economy, jobs growth Australia’s strongest population growth and the influx of 35% of all overseas migrants.
Remember…Melbourne rates as one of the 10 fastest growing large cities in the developed world, with its population likely to increase by around 10% in the next 4 years.
Brisbane’s property downturn was quite shallow compared to the big two capital cities and following its recent upturn property values have reached a new peak.
Brisbane house prices increased by 0.7% over the last month (2.3% over the last quarter) while apartments in Brisbane dropped in value by 0.6% over the last month (+0.4% over the last quarter.)
However, Brisbane property prices are still about 55% of Sydney’s while household incomes are only around 12% lower, making Brisbane a very affordable alternative for home buyers and investors.
A recent report by valuers m3property showed that there is still a significant oversupply of new Brisbane apartments, with around 1 in 4 new apartments in the Brisbane CBD remaining unsold.
The following metrics show how the Brisbane housing market is improving:
- The average selling time of a home is 50 days (49 days a year ago) and
- Vendors are discounting their properties an average of 4.0% to affect a sale (4.9% a year ago)
- 6.5% fewer properties sold in Brisbane in the last 12 months compared to the previous year
With migration rates lifting, supply under control and generally healthy levels of housing affordability, the Brisbane housing market fundamentals are looking healthier compared to most other capital cities.
At the same time the underlying strong demand from home buyers and investors from the southern States at a time when yields are attractive and housing affordability is relatively healthy and putting a floor under property prices.
Brisbane’s economy is being underpinned by major projects like Queen’s Wharf, HS Wharf, TradeCoast, Cross River Rail, the second airport runway and the Adani Coal Mine, but jobs growth from these won’t really kick off for a few more years.
Our Metropole Brisbane team has noticed a significant increase in local consumer confidence with many more homebuyers and investors showing interest in property.
At the same time, we are getting more enquiries from interstate investors there we have for many, many years.
Adelaide Property Market
Adelaide housing values were up 0.2% in January according to CoreLogic, continuing a trend of modest growth that’s been evident since October last year.
The latest month of growth has seen Adelaide home values reach a new record high, after recovering the 1.6% decline recorded between late 2018 and mid 2019.
House prices in Adelaide rose 0.2% over the last month (+1.3% over the last quarter) and unit prices rose 0.5% (+1.3% over the last quarter.)
Signs of the improving Adelaide property market include:
- The average selling time for a home is 40 days (down from 44 days a year ago)
- Vendors are discounting their properties an average of 4.3% to affect a sale (5.0% a year ago)
- 0.8% fewer properties sold in the last 12 months compared to the previous year
While things look good for Adelaide property in the short term, with sales activity starting to trend higher, based on improving buyer demand, over the next few decades the bulk of Australia’s long-term jobs growth, economic growth and population growth will occur in our 3 big capital cities meaning there are better locations for long term wealth creation that Adelaide.
Perth Property Market
Housing values are slowly emerging from a slump that lasted five-and-a-half years.
House prices in Perth rose 0.1% over the last month (+0.4% over the last quarter) while unit prices rose 0.3% (+0.7% over the last quarter.)
However, Perth property values are still 5.7% lower over the past twelve months taking values 21.3% lower than their peak in June 2014.
Perth values are now amongst the most affordable amongst the capital cities, but it’s much too early for a countercyclical investment in the west – I can’t see prices rising significantly for a number of years.
Signs of the slowly improving conditions in the Perth housing market include:
- The average selling time of a home is 42 days (57 days a year ago) and
- Vendors are discounting their properties an average of 5.4% to affect a sale (6.6% a year ago)
- 6% more properties sold in Perth the last 12 months compared to the previous year
Hobart Property Market
Hobart has been the best performing property market in the last few years, and while dwelling values are at a record high, its boom is now over.
The Hobart market lost momentum over the last year but house prices in Hobart rose 0.9% over the last month (+2.9% over the last quarter) while unit prices rose 0.8% (+5.4% over the last quarter.)
It’s likely the Hobart market will continue to lose its momentum over the year.
Signs of the slowing Hobart property market include:
- The average selling time for a home is now 25 days compared to 17 days a year ago)
- Vendors are discounting their properties an average of 2.7% to affect a sale (3.8% a year ago)
- 9.9% fewer properties sold in the last 12 months compared to the previous year
Over the last few years too many investors chased the Hobart “hot spot” at a time when there was a lack of employment drivers, insufficient population growth and not enough infrastructure spending.
Remember home buyers create a property market (they make up 70% of buyers) and investors create property booms – which is what’s happened in Hobart.
And Hobart is too small a market to be a long term “investment grade” proposition.
Only 5,510 property transactions occurred in Hobart last year, compared to Melbourne (76,840) Sydney 74,740 and Brisbane (48,830).
Darwin Property Market
The Darwin property market peaked in August 2010 is still suffering from the effects of the end of our mining boom with a very soft employment market and lack of migration and infrastructure spending.
Currently values are 31.8% below their historic peak and it is unlikely we’ll see these types of house prices again in the next decade.
House prices in Darwin rose 0.6% over the last month but fell -1.4% over the last quarter) while unit prices fell -1.1% over the last month (-2.1% over the last quarter)
The following metrics confirm how sluggish the Darwin property market is:
- The average selling time for a home is 68.5 days (69 days a year ago) and
- Vendors are discounting their properties an average of 7.6% to affect a sale ( the same as 12 months ago )
- 2% fewer properties sold in Darwin in the last year than 12 months ago
The small size of the Darwin market makes it more susceptible to local events and Darwin typically has a higher and more variable vacancy rate, a product of a large transient working population.
Darwin does not have significant growth drivers on the horizon and would be best avoided by investors.
Canberra Property Market
Canberra’s property market has been a “quiet achiever” with dwelling values having reached a new peak after growing 3.1% over the last year .
House prices in Canberra rose 0.3% over the last month (+1.6% over the last quarter) while unit prices rose 0.1% (+1.6% over the last quarter.)
Signs of the strength of the Canberra housing market include:
- The average selling time for a home is now 35 days (45 days a year ago) and
- Vendors are discounting their properties an average of 2.9% to affect a sale (2.7% a year ago)
- 5.7% more properties sold in Canberra in the last 12 months compared to the previous year.
Overall… the Australian housing markets are striding along
Vendor metrics have generally improved over recent months with the number of days to sell a property decreasing (a sign of the tight supply situation), vendor discounting decreasing (it’s easier for them to sell) and auction clearance rates starting the year on a very strong note.
While sellers went on strike for a year or two realising that it wasn’t a great time to sell, vendors now seem to be slowly re-entering the market and while new listings (properties for sale) are lower than recent years they are lifting more rapidly than over recent years pointing to renewed vendor confidence.
One sign of increased confidence, especially in the Melbourne and Sydney property markets are the strong auction clearance rates which have persisted despite more properties coming onto the market.
Our rental markets
Following a number of years of sluggish rental growth, rents are starting to rise and January was one of the best month in years at Metropole Property Management for rental enquires and leasing of properties.
Other market indicators:
The trend in population growth has eased as both the rate of net overseas migration and the rate of natural increase fell.
Net overseas migration is forecast to average a net inflow of 243,000 people per annum in the next 3 years and most of these people have jobs and are at household formation age.
But new dwelling approvals are trending lower and expected to fall further as presales become tougher which means that we’re likely to have an undersupply of properties in 2021.
While the RBA held “official interest rates steady this month, banks have been lowering their rates to new borrowers in order to “buy” business.
Latest ABS date reveals that total value of home lending seasonally adjusted increased by 4.9% over December compared to the previous month – the third consecutive monthly increase.
All sectors reported rises in lending over December with owner-occupiers (excluding first home buyers) up 5.3%, first home buyers up 6.2% and investors up by 2.8% over the month.
Compared to 2018 however, lending totals for 2019 remained lower, with overall owner-occupiers down 5.2% and investors still down 19.2% – for a total annual lending decline of 9.2%.
Lending for first home buyers however bucked the trend, increasing by 4.6% over 2019 compared to the previous year.
The Melbourne and Sydney property markets have surprised most commentators with the strength of their resurgence.
But what ahead for the rest of the year year?
Our forecasts for capital growth over 2020 for well-located properties in Melbourne and Sydney is around 10%.
These 2 cities are still playing catch up and when values reach their previous peaks property price growth is likely to slow down.
However, some commentators are suggesting even stronger price growth.
According to SQM Research’s annual Housing Boom and Bust Report, most of Australia’s capital cities will benefit from the interest rate cuts and loosening of credit restrictions and will record strong dwelling price rises over 2020 with Sydney and Melbourne leading the charge.
SQM’s base case forecast is for dwelling prices to rise between 7% to 11%, which is a strong bounce back from the price falls recorded over 2018 and the first half of 2019.
SQM forecast Sydney property values to rise between 10% to 14% and Melbourne property prices to rise 11% to 15% next year.
Source: Christopher’s Housing Boom and Bust Report 2020
Their base case forecasts assume no changes in interest rates and, importantly, no intervention by the Australian Prudential Regulation Authority (APRA).
What can you do to stay ahead?
If you’re looking at buying your next home or investment property here’s 4 ways we can help you:
Why not get the independent team of property strategists and buyers’ agents at Metropole to help level the playing field for you? We help our clients grow, protect and pass on their wealth through a range of services including:
- Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family. Planning is bringing the future into the present so you can do something about it now! Click here to learn more
- Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property. Click here to learn how we can help you.
- Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
- Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease 10 days faster than the market average.
Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.
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Source of graphs and data: CoreLogic.