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Industry snapshot: What landlords need to know about the investment property market
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Industry snapshot: What landlords need to know about the investment property market

06 Jul 2020 15 mins read

Your monthly guide to latest industry statistics and news impacting landlords and property professionals... Scroll down for general news, legislation changes, a catastrophe update and COVID-19 insights.

Asking rents mixed

In June, capital city asking rents increased 0.2 per cent for houses to $538 p/w, while unit rents declined 0.7 per cent to $425 p/w, according to SQM Research. Sydney and Melbourne recorded decreases in weekly rents for both houses and units, while Brisbane, Perth and Darwin recorded increases for both. In Adelaide and Hobart house rents rose, while unit rents declined, and the opposite was true for Canberra. Across the capitals: Canberra ($622 p/w houses / $467 p/w units), Sydney ($641 / $476), Darwin ($486 / $355), Brisbane ($462 / $378), Adelaide ($411 / $317), Hobart ($433 / $378), Melbourne ($533 / $405) and Perth ($450 / $349).

Vacancies decline

SQM Research showed the national vacancy rate fell 0.1 per cent to 2.5 per cent in May. The total number of vacancies Australia-wide was 86,398. Vacancies fell in Brisbane (-0.3 per cent to 2.5 per cent), Perth (-0.3 per cent to 2.0 per cent), Darwin (-0.3 per cent to 2.3 per cent) and Hobart (-0.2 per cent to 1.2 per cent), and held steady in Adelaide (1.2 per cent). Increases in vacancy rates were recorded in Sydney (+0.1 per cent to 4.0 per cent), Melbourne (+0.3 per cent to 3.1 per cent) and Canberra (+0.1 per cent to 1.3 per cent).

Listings fall

SQM Research also revealed total rental listings fell over May. Total listings dropped from 105,277 on 9 May to 98,061 on 9 June.

According to CoreLogic’s estimates, the percentage of rental housing advertised rose over the month of May in Sydney (up 0.2 per cent to 4.5 per cent) and Melbourne (up 0.4 per cent to 3.6 per cent), while declining across the rest of the capital city regions. Falls of 0.1 per cent in the portion of rental stock on market were recorded in Brisbane (to 3.5 per cent), Adelaide (to 2.3 per cent), Perth (to 5.1 per cent) and Darwin (to 3.0 per cent), while Hobart recorded a 0.4 per cent fall to 3.0 per cent and the ACT held steady at 1.9 per cent.

Yields compress

According to CoreLogic’s Hedonic Home Value Index, the average gross rental yield for capital city houses in May was 3.3 per cent and 3.9 per cent for units, while the combined regional house yield was 4.9 per cent and 5.2 per cent for units – bringing the national gross yield to 3.6 per cent for houses and 4.1 per cent for units. Gross rental yields across the capitals: Sydney (2.7 per cent houses / 3.5 per cent units), Melbourne (2.8 per cent / 4.0 per cent), Brisbane (4.1 per cent / 5.2 per cent), Adelaide (4.2 per cent / 5.4 per cent), Perth (4.2 per cent / 5.2 per cent), Hobart (4.8 per cent / 5.1 per cent), Darwin (5.3 per cent / 6.8 per cent) and Canberra (4.3 per cent / 5.8 per cent).

Investor lending falls

ABSLending Indicators for April showed new lending commitments for investment dwellings declined 4.2 per cent (seasonally adjusted) to $4.86bn. The ABS noted falls in new loan commitments for investors was largely driven by Queensland but offset by Victoria’s rise. All other states saw falls in investor lending, except the NT which recorded a small rise. Investor loan commitments remain lower than owner-occupiers for the purchase of resi land, construction of dwellings, purchase of newly-erected dwellings and purchase of existing dwellings.

However, APRA’s quarterly property exposures statistics showed lending to investors increased $5.2bn to $22.7bn in the three months to March.

Building approvals up

The number of building approvals nationwide rose 1.0 per cent in April to 15,400 (in trend terms), according to the ABS. Approvals for private sector dwellings excluding houses rose 1.0 per cent, while approvals for private sector houses also rose 0.8 per cent. Dwelling approvals rose in the ACT (+13.2 per cent), the NT (+10.0 per cent), Tasmania (+4.2 per cent), WA (+2.3 per cent) and NSW (+2.0 per cent). Falls were recorded in Victoria (-0.7 per cent), and SA (-0.6 per cent), while Queensland was flat. The value of residential building rose 1.3 per cent.

Property listings increase

National residential property listings increased 3.9 per cent in May to 304,137, according to SQM Research data. All capital cities, except Canberra (-0.8 per cent), experienced increases in property listings over the month, with Melbourne (+11.6 per cent) recording the biggest increase, followed by Sydney (+10.9 per cent), Hobart (+7.8 per cent), Darwin (+2.5 per cent), Brisbane (+1.8 per cent), Adelaide (+1.6 per cent) and Perth (+0.6 per cent).

Asking prices mixed

SQM Research data showed capital city asking prices for houses increased 0.5 per cent to an average of $997,400 in June. Unit asking prices decreased 0.1 per cent to an average of $573,300. Melbourne, Perth and Adelaide all recorded increases in both house and unit prices. Sydney recorded a rise in house prices but a fall in unit prices, while the opposite was the case for Brisbane, Canberra, Darwin and Hobart.

Dwelling values dip

CoreLogic’s May Home Value Index showed national housing values decreased 0.4 per cent over the month: -0.5 per cent combined capitals and 0.0 per cent combined regionals. The median value of a home was $557,818 – $645,511 for combined capitals and $397,388 for combined regionals. Hobart (+0.8 per cent), Adelaide (+0.4 per cent) and Canberra (+0.5 per cent) recorded increases. All other capitals recorded falls over the month: Sydney (-0.4 per cent), Melbourne (-0.9 per cent), Brisbane (-0.1 per cent), Perth (-0.6 per cent) and Darwin (-1.6 per cent).

House prices rise

According to REIA’s Real Estate Market Facts, house prices increased in the March quarter, with the weighted average median price for houses for the eight capital cities increasing to $786,923. Increases were recorded in Sydney, Melbourne, Hobart and Darwin. The weighted average median price for other dwellings also increased, coming in at $602,293. Prices increased in Sydney, Melbourne and Adelaide, but decreased in Brisbane, Perth, Canberra, Hobart and Darwin. REIA’s figures also showed the median rent for three-bedroom houses increased in all capital cities except for Brisbane and Perth, which remained steady and Darwin, which decreased. The median rent for two-bedroom other dwellings increased in all capital cities except Darwin. The weighted average vacancy rate for the eight capital cities decreased to 2.5 per cent during the quarter.

Data from the ABS also confirmed property prices rose in the March quarter. Prices increased 1.6 per cent over the quarter and 7.4 per cent over the year to the March quarter. All capital cities recorded a rise in residential property prices. The total value of Australia’s 10.5 million resi dwellings rose by $141.6bn to $7,237.1bn in the quarter, with the mean price of resi dwellings recorded at $690,200.

New home sales down

Figures from the HIA showed new home sales fell 4.3 per cent in May. Over the three months to May, sales declined 20.3 per cent compared to the previous three months. The HIA noted that project cancellations, which are normally 7-9 per cent, were at 26 per cent.

Affordability improves

REIA’s Housing Affordability Report showed rental affordability improved marginally in the March quarter. The proportion of income required to meet median rental payments decreased 0.1 per cent to 23.5 per cent. Rental affordability improved in Queensland (-0.1 per cent to 22.0 per cent), WA (-0.1 per cent to 16.6 per cent) and the NT (-0.6 per cent to 20.6 per cent), but declined in NSW (+0.1 per cent to 27.5 per cent), Victoria (+0.4 per cent to 23.0 per cent), SA (+0.2 per cent to 22.5 per cent), Tasmania (+0.5 per cent to 30.5 per cent) and the ACT (+0.2 per cent to 19.0 per cent).

Cheapest rents revealed

Data from rent.com.au has identified the cheapest cities in which to rent. Adelaide topped the list for apartments (at $310 p/w),and  Perth for houses (at $375 p/w) and rooms (at $130 p/w). Median rents across the capitals: Perth ($130 p/w rooms/ $340 p/w apartments / $375 p/w houses), Darwin ($150 / $335 / $450), Adelaide ($138 / $310 / $390), Melbourne ($182 / $400 / $420), Hobart ($165 / $350 / $450), Canberra ($220 / $450 / $550), Sydney ($275 / $500 / $600) and Brisbane ($156 / $380 / $430).

Renter activity up 70 per cent

REA Insights Weekly Rental Demand Report revealed year-on-year renter activity increased 70.5 per cent nationwide. Heightened renter activity was experienced in all states and territories, with the largest annual increase in the ACT (+102.0 per cent) and NSW (+84.3 per cent), while SA (+20.8 per cent) and WA (+41.5 per cent) recorded the smallest increases.

50 per cent to rent

According to the AHURI’s Australian home ownership: past reflections, future directions report, up to 50 per cent of Aussies will be renters in the future. The research estimates that around half of all Australian households aged under 60 years will rent their homes off private landlords in the next 20 years. The rate of home ownership is projected to decline to around 63 per cent for all households by 2040, with the biggest proportion of renters in the 25-55 age bracket – where around 49 per cent of households are expected to own or be paying off their home by 2040 and 51 per cent are expected to be renting.

Mortgage stress eases

Digital Finance Analytics’ survey found mortgage stress had fallen in May. The number of households in distress fell from 38 per cent to 37.5 per cent, indicating 1.4 million households were experiencing cash flow issues.

Mortgage holders don’t check their rates

Figures released by Canstar revealed 16 per cent or nearly 1 million mortgage holders have not asked to change their interest rate since signing on for the mortgage. Canstar noted that in the record-low rate environment, mortgagees could be paying thousands more by not switching to a better rate.

Grants for building and renovations

In an effort to boost demand for residential construction, the Federal Government will give eligible homeowners $25k to build or renovate homes. The HomeBuilder program is restricted to substantial renovations and the construction of new homes, with recipients required to spend at least $150k before being eligible. Recipients must also have an income of less than $200k per year for a couple or $125k for a single. To be eligible for the $25k, the cost of a new build is capped at $750k while renovations can cost between $150k and $750k (but will only be subsidised if the house being altered is valued at less than $1.5M and the renovations are not for structures separate to the main property such as swimming pools, tennis courts or sheds). Note: The grant is not available for investment properties or for owners who intend to build or renovate without using builders. To be eligible, the builder must have been licensed or registered for at least six months prior to the announcement of the scheme.

Apartment legislation passed in NSW

The Residential Apartments Building Bill 2020 has passed the NSW Parliament. The new legislation boosts the Building Commissioner’s powers to stop defective buildings being sold to consumers. The new powers, which come into effect from 1 September 2020, apply to buildings yet to be constructed and to buildings constructed in the last 10 years.

Investment scam warning

According to figures released by the ACCC, Australians lost $634 million in 2019 to scams. Of this, investment scams accounted for $126 million. Scams originating on social media increased 20 per cent and contacts via mobile phone apps increased 29 per cent. ASIC has also warned that COVID-19 has created “a perfect storm” for scammers. The regulator noted scam reports had risen 20 per cent across March, April and May in 2020, compared with data from the same months in 2019, with “a spike in reports of scams related to fake crypto assets (or crypto currencies), term deposits, investments and scams that start via romance sites”. 

Catastrophes update

As at 24 June 2020:

  • 8/11/19 – NSW, Qld, SA & Vic bushfires – 37,804 claims lodged, total losses $2.34bn
  • 17/11/19 – S-E Queensland hailstorm – 29,130 claims lodged, total losses $460M
  • 19/1/20 – Vic, ACT & NSW hailstorms – 127,160 claims lodged, total losses $1.56bn
  • 10/2/20 – Qld & NSW storms and flooding – 98,613 claims lodged, total losses $938M

EBM RentCover policyholders caught up in the natural disasters should contact our Expert Care Team for claims assistance.

COVID-19 update – property industry

South Australia re-opened its borders to travellers from WA, the NT and Tasmania on 16 June. Visitors from those jurisdictions will no longer be required to self-isolate for 14 days when they arrive in the state. All of SA’s borders will re-open to travellers from all states by 20 July.

After becoming the first Australian jurisdiction to have clinically eradicated COVID-19, the NT will re-open its borders from 17 July. Visitors will no longer be required to self-isolate for 14 days after entering the NT.

Following an increased number of infections, on 20 June, the Victorian Government re-introduced tighter restrictions for gatherings. Crowds at auctions and open house inspections are once again limited to 20 people.

COVID-19 has sparked a boom in interest from expats to return home, according to research from Knight Frank. The survey, carried out amongst Knight Frank’s global network of prime agents, found 64 per cent said the lockdown had influenced expat decisions to buy a property in their home country. However, only 29 per cent are considering a permanent move and 14 per cent are buying a property purely as a second home, while 57 per cent are seeking a 50/50 home that will provide them with a home base while giving them the option to return permanently in the long-term.

Commercial property update: Codes of Conduct

WA has introduced a new commercial lease code of conduct to help commercial tenants and landlords reach rental agreements during COVID-19. The code provides guidelines that implement the key principles from the national cabinet’s national code and applies to SMEs with an annual turnover of less than $50M and which qualify for the JobKeeper scheme or have experienced a decline in turnover of 30 per cent or more during the 6-motnh emergency period.

Law firm MinterEllison has published a Code of Conduct compendium to assist commercial landlords and their SME tenants understand the Federal Government’s Mandatory Code of Conduct and how the code is applied by each state and territory government.

Latest platforms and apps

RentReady, touted as the first ‘pay later’ solution in Australia for landlords, allows landlords to access up to $15k of property expenses in minutes via REAs. The funds can be used to help landlords and agents make property improvements as well as cover maintenance and general costs, marketing expenses and rent shortfalls.

REIQ is launching, via its Realworks platform, a new automated utilities connection service. Using One Touch Execution, the new feature enables REAs to nominate their default utilities connection provider so that all tenants are offered utility connections in the process of signing a tenancy agreement.

Legal corner: housing provider fined $700k, agency fined $5k

Quantum Housing, which ceased trading in December 2019 and is in liquidation, has been ordered by the Federal Court to pay $700k in fines for false and misleading representations relating to the National Rental Affordability Scheme. The court found Quantum had pressured investors to terminate their arrangements with their existing PMs and instead use PMs approved or recommended by Quantum. The group also failed to tell investors it had commercial links with the PMs it recommended and told some investors that their existing PM “had not properly managed their property’s compliance with the NRAS, when this was not true”, according to a statement by the ACCC.

A Perth REA has been fined $5k for failing to lodge a number of security bonds. The agency had accepted $4,180 in security bonds from three tenants but failed to lodge them as soon as practicable or within the required 14 days prescribed by the RTA. The agency said it was an “administrative oversight” which the SAT accepted but fined the agency $3k and its director $2k for misconduct.

Main photo by Kon Karampelas on Unsplash

*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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