A guide to keep landlords and agents updated about what is happening in the investment property market…
1. The rental market
In July, capital city asking rents increased 1.8% for houses to $575 p/w and 1.7% for units to $419 p/w, according to SQM Research. All capitals except Hobart (which recorded a rise in house princes but a fall in unit prices) recorded increases for both houses and units. Across the capitals: Canberra ($719 p/w houses / $500 p/w units), Sydney ($689 / $463), Darwin ($623 / $458), Brisbane ($516 / $390), Adelaide ($451 / $335), Hobart ($473 / $404), Melbourne ($518 / $364) and Perth ($523 / $401).
National vacancy rates fell 0.1% to 1.7% in June, according to SQM Research. A total of 60,457 residential properties were vacant Australia-wide over the month. Rates held steady in Brisbane (1.3%), Perth (0.9%) and Darwin (0.4%), while decreases were recorded in Sydney (-0.1% to 2.8%), Melbourne (-0.2% to 3.5%), Adelaide (-0.1% to 0.6%) and Hobart
(-0.1% to 0.4%). Canberra was the only capital to record an increase in vacancies, rising +0.1% to 0.7%.
According to CoreLogic’s Hedonic Home Value Index, the average gross rental yield for capital city dwellings in June was 3.1%, while the combined regional dwelling yield was 4.5% – bringing the national gross yield to 3.4%. Gross rental yields across the capitals: Sydney (2.6%), Melbourne (2.8%), Brisbane (4.1%), Adelaide (4.2%), Perth (4.3%), Hobart (4.2%), Darwin (6.1%) and Canberra (4.2%).
The index also detailed the change in rents over the year: Darwin (house rents +23.6% / units +19.2%), Perth (+17.0% / +14.7%), Hobart (+8.5% / +10.1%), Brisbane (+8.4% / +3.8%), Canberra (+7.9% / +5.4%), Adelaide (+7.8% / +4.5%), Sydney (+5.9% / -1.1%) and Melbourne (+2.3% / -6.4%).
Figures from Digital Finance Analytics revealed rental stress was 37.96% (or 1.935 million households) in June. NSW had the highest number of renters in stress (50.75%), followed by Victoria (40.70%), Queensland (35.37%), the ACT (34.24%), WA (30.05%), Tasmania (25.64%), SA (20.56%) and the NT (17.12%).
CoreLogic’s Rental Review for the June 2021 quarter showed national rental rates were 6.6% higher over the year – the highest annual growth in dwelling rents since January 2009. The national rent index recorded a 2.1% rise in the three months to June 2021. Regional rents rose 2.7% in Q2, while city rents rose 1.9%. Capital city house rents were up by 2.2% over Q2 compared to a 1.3% lift in unit rents. Regional house rents rose by 2.7% and units by 2.9% over the quarter. Regional Australia’s annual rental growth hit 11.3% in June 2021 – the highest annual growth result since CoreLogic’s rental index commenced in 2005. National gross rental yields were recorded at 3.41% in the June quarter.
Domain’s Rental Vacancy Report showed the national rental vacancy rate fell in June for the third consecutive month. The data revealed that Canberra remained Australia’s most expensive capital city to rent a house ($630 pw/) or a unit ($500), and Darwin was now the second most expensive city to rent a house ($593) following a 20.9% annual rise in house rents. For the first time in 13 years, Sydney fell to third most expensive capital city in Australia to rent a house ($550), while, for the first time on record, Melbourne was the most affordable city to rent a house ($430).
2. Housing trends
According to CoreLogic’s Hedonic Home Value Index, national housing values rose 1.9% in June to a median value of $645,454. All capital cities recorded increases over the month: Canberra (+2.3%), Darwin (+0.8%), Hobart (+3.0%), Brisbane (+1.9%), Adelaide (+1.6%), Perth (+0.2%), Sydney (+2.6%) and Melbourne (+1.5%).
National residential property listings decreased -4.0% in June to 236,218, according to SQM Research. Listings fell in all capitals except Darwin, which recorded a rise of 11.5%. The research also found capital city average asking prices rose 2.8% for houses (to $1,078,400) and 2.2% for units (to $573,200).
According to CoreLogic, annual growth in national home values was 13.5% for the financial year. House values rose 15.6% over the year, while unit values rose 6.8%.
CoreLogic’s Auction Market Review for the June quarter 2021 showed 31,605 homes were taken to auction across the combined capital cities in the three months to June 2021 – the busiest quarter for auctions since the December 2017 quarter when 32,408 capital city auctions were held.
The number of building approvals nationwide fell 7.1% in May to 20,163 (seasonally adjusted), according to the ABS. Approvals for private sector dwellings excluding houses rose 1.2%, while approvals for private sector houses fell 10.3%. The value of residential building approved fell 6.7%.
HIA noted the number of new houses that commenced construction in the March 2021 quarter was 40.6% higher than the same time last year. In contrast, starts for other dwellings (predominantly apartments) declined 22.8%.
New home sales were up 15.3% in June, according to HIA’s New Home Sales report.
4. Investment market
According to statistics from the ABS, the value of new loan commitments for investor housing rose 13.3% (seasonally adjusted) to $9.13bn in May. Investor loans accounted for 28% of the total value of housing loan commitments over the month.
Research data from NAB revealed 9% of Australians intend to buy an investment property in the next 12 months (up from 8% in Q4 2020).
Real Estate Australia’s Insights Housing Market Indicators Report July 2021 showed investor enquiry was 47.1% higher year-on-year.
In June, 25.91% of all investors were stressed (i.e. income from rent is not sufficient to recover the costs of owning and letting their properties), according to figures from Digital Finance Analytics. The ACT (35.95%) had the highest number of stressed investors, followed by NSW (34.96%), Victoria (25.30%), WA (23.81%), Queensland (23.42%), SA (16.16%), the NT (15.71%) and Tasmania (15.21%).
A survey from Finder revealed almost three million Australians are planning to purchase a property in the next six months, with 7% looking to buy as an investment.
5. Finance matters
The RBA kept the official interest rate at the historic low of 0.1% at its board meeting on 6 July. The Board noted: “Housing markets have continued to strengthen, with prices rising in all major markets. Housing credit growth has picked up, with strong demand from owner-occupiers, including first-home buyers. There has also been increased borrowing by investors. Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”
6. Latest research
Analysis by CoreLogic suggests servicing a mortgage is now cheaper than paying rent on 36.3% of Australian properties, which is higher than the pre-COVID proportion of 33.9%. For the combined capitals, 26.2% of properties are cheaper to buy than rent, whereas 60.1% of properties in the combined regions are cheaper to buy than rent.
Data from the Australian Institute of Health and Welfare showed 487,884 households around the nation were experiencing some form of rental stress – defined as when someone is paying over 30% of their income on rent – despite receiving Commonwealth Rent Assistance. Older Australians (over 75s) were shown to be particularly vulnerable, with the number of households experiencing rent stress increasing 11% between 2019 and 2020.
According to a national survey by Finder, 19% of Australians agree that houses sell for the price they are listed for. The research revealed 70% expect property to sell for more than what the seller asks, with 26% thinking that properties normally sell for between 11% and 20% over their asking price, while a further 5% think they sell for 21% to 30% more.
Suburb Trends research found four significantly undersupplied metro locations where residential vacancy rates hit just 0.1% in May, with the remainder of the top 10 recording a vacancy rate of only 0.2%. Greater Brisbane had four of the most undersupplied city rental house markets in the country, followed by Greater Perth and Greater Adelaide with two, and Greater Hobart, Greater Sydney, and Greater Melbourne with one each. The research also found that the 10 city suburbs with the lowest vacancy rates for rental houses all had median weekly rents of $340 to $450.
According to data released by realestate.com.au, 250 suburbs experienced median house price rises of over $200,000 over the last 12 months, with 24 suburbs experiencing significant price growth of $50,000 each month.
Tenants’ Union of New South Wales and Youth Action’s Young Renters: We Hear You! report found 84% of respondents consider the cost of rental properties as the biggest housing issue they face, followed by housing prices (72%).
The lifetime cost of owning a home has increased by over 130% in the last three decades, research from Per Capita revealed. According to the figures, for a Silent Generation family buying in 1970, the average repayment cost over the course of the mortgage was 11.2% of their gross income. For a Baby Boomer family buying a home in 1985, the average repayment cost over the life of the mortgage was 19.5%. For a Generation X family buying in 2000, 25.5% of their gross income would be spent on servicing their mortgage debt.
According to HomeLoanExperts.com.au’s June Borrower Sentiment Index, 70% of millennials believe the housing market should be more heavily regulated, with 40% believing the support should come in the form of FHB schemes and 30% thinking the regulations should target property investment. By comparison, 53% of Generation X felt more regulation was needed, with 37% supporting restrictions on property investment and 26% believing support for FBHs was warranted.
7. Technology insight
CoreLogic launched RP Proposals, an interactive digital proposals platform it said would create “a digital representation of the agent” and enhance proposal efficiencies.
The NSW State Government and KPMG are creating a new tool that will help determine the quality and trustworthiness of NSW residential buildings. The Building Assurance Solution will use multiple data points to help Fair Trading and the insurance industry to assess a residential apartment building’s quality and compliance with construction standards.
Knight Frank Australia and MRI Software created a fully Software as a Service (SaaS) compliant environment to deploy MRI’s Platform X technology, providing Knight Frank clients with access to the latest technology in the global commercial property market, which includes better access to data and new applications to manage their property portfolios.
8. COVID-19 impacts
On 13 July, the NSW State Government announced the re-introduction of a moratorium on evictions. A “short-term eviction moratorium for rental arrears where a residential tenant suffers loss of income of 25 per cent due to COVID-19 and meets a range of criteria” is in effect for 60 days. The Government also announced that residential landlords may be eligible for grants of up to $1,500 (or land tax reductions, depending on their circumstances) if they reduce rent for tenants.
CoreLogic released a comprehensive overview of housing market performance through lockdowns. Key findings included: auction results across Sydney and Melbourne remained resilient in lockdown; transaction activity slowed markedly through lockdown periods; and property values remained resilient through lockdowns.
According to CoreLogic, since the onset of COVID-19 the demand for detached houses has increased. In the past 16 months, capital city house values rose 14.2% – more than double the 5.6% rise in capital city unit values over the same period. As of June 2021, the median capital city house value was $797,287, compared to a median unit value of $611,117 – the 30.5% gap between median house and unit prices is the highest on record.
9. On the radar
Ratings agency Fitch raised its home price expectations for Australia based on the return of investors to the market, low interest rates, high savings and the extension of government support measures. House prices are expected to rise between 14% and 16% in 2021. Back in December 2020, the agency expected prices to rise by 3% to 5% over 2021.
NAB raised its expectations for short-term price growth in Australia’s residential housing market. The bank now expects dwelling prices to rise by as much as 19% in 2021 and 4% in 2022.
REIA welcomed recent exemptions provided to real estate for both deferred sales models for home and landlord insurance as well as exemptions for property managers and real estate agents in insurance claims handling reforms.
The Tenancy Skills Institute program that equips renters with the skills they need to maintain a successful tenancy has been extended into NSW and Victoria. The program is already available in Queensland.
The Professional Standards Scheme (PSS) for the strata sector in NSW came into effect on 1 July. The new standards are set to increase the professionalism of strata managers while better protecting consumers.
According to Knight Frank’s Australian Prime Residential Review, there were 1,429 prime properties sold across Australia’s prime regions in Q1 2021 – the highest sales volume on record and up 17% on Q4 2020. Capital growth for Australian prime property rose 1.1% in the first quarter of 2021. The report also revealed there were 3,124 Australians with a net wealth of US$30 million or more last year.
REIA called for stamp duty and land tax to be axed to help housing affordability.
Data from the ACCC showed Australians lost $851million to scams in 2020. Of that total, $176 million was never recovered. Investment scams were the top type of scam and accounted for $328 million in losses. The 2020 figure also represents a 34% increase from 2019, with the average victim losing $7,677. A total of 444,164 scam reports were lodged with various agencies in 2020.
According to on-demand housing platform Nestpick, Melbourne is the best city in the world to live in and work remotely from (based on legislation, costs and overall liveability). Sydney ranked third out of 75 cities. The top 10 was rounded out by Dubai, Tallinn, London, Tokyo, Singapore, Glasgow, Montreal and Berlin.
The results of the quarterly ANZ/Property Council survey showed confidence within the property industry was at 139 points, the third highest level since the survey began. A score of 100 is considered neutral.
According to the Knight Frank Global House Price Index, 43 cities are registering annual price growth above 10%. Three Australian capitals were among those cities – Darwin (10.8%) cent), Canberra (15.7%) and Hobart (13.8%). Over the 12 months, Adelaide (9.8%), Perth (8.9%), Sydney (8.6 %), Melbourne (6.4%) and Brisbane (5%) also saw notable increases.
In celebration of National Property Managers Day (23 July), REIA noted there are an estimated 2.7 million rentals in Australia, with around 80% managed by property managers. Some 27% of Australians live in private rentals and pay around $49bn per annum in rent. REIA also revealed women make up 67% of the property management workforce.
According to data from Ray White Group, Fridays are the most successful auction days. With a clearance rate of 91.2%, Fridays at 1pm is the most successful time to hold an auction, followed by 8am on Saturday (90.5% clearance rate).
10. Government incentives and actions
The NSW Registrar General announced the abolition date for paper certificates of title as 11 October 2021. The Real Property Amendment (Certificates of Title) Act 2021 makes several amendments to legislation, importantly allowing for the abolition of certificates of title and progressing NSW to 100% eConveyancing.
The ACT introduced the Private Buildings Cladding Scheme aimed at improving the safety standard of residential apartment buildings. Under the scheme, eligible building owners will be financially assisted, through a 50% rebate on the cost (to a max. of $20k), to test whether their building contains combustible cladding.
*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions.
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Read on for an update on where things stand with COVID-19 and landlord insurance…