Home Info Centre Investment property market snapshot - August 2019
Investment property market snapshot - August 2019
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Investment property market snapshot - August 2019

03 Sep 2019 13 mins read

Your monthly guide to latest industry statistics and news impacting landlords and property professionals.

Asking rents mixed

In August, capital city asking rents held steady for houses at $545 p/w, while unit rents declined 0.9 per cent to $437 p/w, according to SQM Research. Brisbane was the only capital to experience increases in weekly rents for both houses and units, while Sydney, Melbourne, Canberra and Hobart all recorded declines in both houses and unit rents over the month. Across the capitals: Canberra ($605 p/w houses / $457 p/w units); Sydney ($679 / $497); Darwin ($507 / $376); Brisbane ($465 / $375); Adelaide ($399 / $310); Hobart ($443 / $396); Melbourne ($525 / $419); and Perth ($437 / $338).

Vacancies steady

SQM Research showed the national vacancy rate remained steady at 2.3 per cent in July. The total number of vacancies Australia-wide was 76,346. Brisbane (2.4 per cent) and Adelaide (1.1 per cent) recorded minor decreases of 0.1 per cent in vacancy rates, while Perth (3.0 per cent), Canberra (1.1 per cent) and Darwin (2.9 per cent) recorded a 0.2 per cent decrease over the month. Sydney (3.5 per cent), Melbourne (2.0 per cent) and Hobart (0.5 per cent) vacancy rates remained steady over the month.

Yields down

According to CoreLogic’s Hedonic Home Value Index, capital city yields were lower in August, with the national median yield at 4.1 per cent – combined capitals 3.8 per cent; combined regionals 5.1 per cent. Sydney continued to have the lowest yield of the capitals (3.3 per cent), followed by Melbourne (3.6 per cent), Perth (4.3 per cent), Adelaide (4.4 per cent), Brisbane (4.6 per cent) and Canberra (4.7 per cent). Only Hobart (5.2 per cent) and Darwin (6.0 per cent) had yields in excess of 5 per cent.

Dwelling values rise

CoreLogic’s August Home Value Index results showed national dwelling values rose 0.8 per cent, with the median value at $521,157. The lift was attributed to improvements in credit availability, tax cuts, a stable federal government and lower mortgage rates. Values in the combined capitals were up 1.0 per cent to a median value of $597,072, while combined regionals were down 0.1 per cent to $376,076. Rises in housing values were recorded in Sydney (+1.6 per cent), Melbourne (+1.4 per cent), Brisbane (+0.2 per cent), Canberra (+0.8 per cent) and Hobart (+0.5 per cent). Falls were recorded in Adelaide (-0.2 per cent), Perth
(-0.5 per cent) and Darwin (-1.2 per cent).

Lending to investors up

ABS’ Lending to Households and Businesses data for June 2019 showed new lending commitments for investment dwellings rose 0.5 per cent to $4,374 million – the first rise in over a year. APRA’s figures for July also showed investor lending had increased in July, with the proportion of investment loans sitting at 37.6 per cent, up from 33 per cent in June. The value of investor loans rose by 16 per cent from $557.3 billion to $647.4 billion.

Building approvals down

The number of building approvals nationwide fell to 12,944 in July, down 9.7 per cent from the previous month and down 28.5 per cent from July 2018 (seasonally adjusted), according to the ABS. Approvals for private sector homes excluding houses declined 18.4 per cent to 4,420 from the previous month and 44.2 per cent when compared to the July 2018 figure. Approvals for private sector houses also declined to 8,274 – down 3.3 per cent month-on-month and 16.6 per cent year-on-year. ABS figures also revealed the value of residential buildings approved declined an estimated 5.4 per cent in July.

Property listings decline

National residential property listings declined 2.8 per cent in July to 316,391, according to SQM Research data. All states experienced a decline in property sales listings over the month: Sydney (-7.6 per cent), Melbourne (-3.3 per cent), Brisbane (-1.9 per cent), Perth (-4.0 per cent), Adelaide (-3.8 per cent), Canberra (-2.1 per cent), Darwin (-2.3 per cent) and Hobart (-3.5 per cent).

Listings lowest since 2010

According to CoreLogic, the number of properties listed for sale is tracking at their lowest levels since 2010. Newly advertised stock for sale is -22.0 per cent lower than a year ago, while total stock advertised for sale is -3.5 per cent lower than a year ago. Across the capitals, listings were -24.7 per cent lower than a year ago and total stock was down -5.1 per cent: Sydney (new listings -32.5 per cent / total listings -14.7 per cent); Melbourne (-29.3 per cent / -2.6 per cent); Brisbane (-19.8 per cent / unchanged); Adelaide (-6.7 per cent / +3.8 per cent); Perth (-17.5 per cent / -7.6 per cent); Hobart (-14.3 per cent / +15.5 per cent), Darwin (-23.4 per cent / -1.4 per cent) and Canberra (-16.7 per cent / +15.2 per cent).

Asking prices up

SQM Research data showed capital city asking prices increased marginally in July. House prices were up 1.7 per cent to an average of $919,900, and unit prices were up 0.6 per cent to $566,500. Sydney and Canberra were the only capitals to record increases in both house and unit asking prices.

Real dwelling values decline

Figures from CoreLogic revealed real dwelling values (when CPI is factored in) fell over the June quarter. Nationally, real values dipped 1.7 per cent over the quarter. The combined capitals recorded a fall of -1.7 per cent, with declines in all capitals: Sydney (-1.7 per cent); Melbourne (-1.3 per cent); Brisbane (-2.0 per cent); Adelaide (-1.0 per cent); Perth (-2.7 per cent); Hobart (-1.7 per cent); Darwin (-4.3 per cent); and Canberra (-1.3 per cent).

Days on market rises

CoreLogic’s Property Market Indicator Summary showed vendor discounts were commonplace across all capital cities, with the median length of time houses and units were on the market up in August. Across the capitals: Sydney (houses – 7.1 per cent discount / 38 days on the market; units – 7.3 per cent discount / 43 days); Melbourne (houses – 6.8 per cent / 37 days; units – 5.8 per cent / 35 days); Brisbane (houses – 6.7 per cent / 81 days; units – 6.7 per cent / 86 days); Adelaide (houses – 6.5 per cent / 62 days; units – 7.8 per cent / 77 days); Perth (houses – 8.8 per cent / 99 days; units – 9.9 per cent / 106 days); Hobart (houses – 5.3 per cent / 40 days; units – 3.5 per cent / 45 days); Darwin (houses – 8.9 per cent / 91 days; units – 13.9 per cent / 79 days); and Canberra (houses – 3.5 per cent / 33 days; units – 4.0 per cent / 64 days).

New home sales up

HIA’s New Home Sales report showed new home sales for the three months to July increased 6.1 per cent. New home sales were up in NSW (+12.7 per cent), Victoria (+5.4 per cent), Queensland (+4.1 per cent) and WA (+9.5 per cent), whereas a fall was recorded in SA (-4.5 per cent).

Mortgage stress steady

Figures from Digital Finance Analytics revealed 1,082,143 households – or 32.1 per cent of owner-occupier borrowing households – were estimated to be in mortgage stress in August and 70,036 were at risk of 30-day default in the next 12 months. RBA data to March 2019 also showed the ratio of household debt-to-income rose to 189.7.

Investor confidence wanes

Digital Finance Analytics’ household financial confidence index for July showed investor confidence had fallen. Concerns about falling rents, the emerging high-rise building defects issue and little prospect of capital gains were cited as reasons for the decline. The data also showed more than 20 per cent of property investors were in negative equity, especially those holding relatively new high-rise units in the high-growth corridors. 

Investor motivations revealed

According to Digital Financial Analytics’ latest survey on property transaction intentions, tax efficiency remains the strongest driver for 45 per cent of investors, while appreciating property values were cited by just 15 per cent of investors (down from 30 per cent in previous surveys). For 12 per cent, low finance rates were a factor and 25 per cent are driven by property investment affording a better return than bank deposits. Overall, investors believe the tax breaks make investing a reasonable proposition. However, 40 per cent said the main barrier to investing was the difficulty in obtaining finance, 15 per cent cited changes to regulation and 30 per cent had already made a purchase. Just 1 per cent said fears of interest rate rises were on their minds, down from 11 per cent who flagged this in the March survey.

Gold Coast joins luxury property price growth list

The Gold Coast has joined Sydney (18th), Brisbane (20th), Melbourne (21st) and Perth (32nd) in the top 46 cities for luxury residential price growth. It was the first time the GC joined the Knight Frank Prime Global Cities Index, ranking 27th.  The Index revealed Sydney (2.5 per cent), Melbourne (2.1 per cent) and Brisbane (2.2 per cent) all recorded growth in luxury resi prices higher than the overall average annual prime growth of 1.4 per cent.

Cities earmarked for investor activity

Research by Propertyology has identified the top seven cities with the most potential to deliver the best outcomes for investors based on unlocking economic development: Townsville, Western Sydney, Launceston, Darwin, Adelaide, Hobart and Geelong. Each city has signed a recent 'City Deal' with the intention of creating a “vision of prosperity, productivity and livability” for each “strategically chosen” city.

Top performing cities

Domain’s house price report has identified Australia’s best-performing suburbs over the past five years. Byron Bay in NSW topped the list for price growth (up 117 per cent since June 2014). Units in Adelaide’s Norwood, houses in Sydney’s Vaucluse, apartments in Noosa Heads (Qld) and homes in Burradoo (NSW’s Southern Highlands) rounded out the top five.

Mortgage debt in older Aussies to impact rental demand

According to the Australian Urban Housing and Research Institute’s Mortgage stress and precarious home ownership: implications for older Australians report, real mortgage debt of older mortgagors aged over 55 blew out by 600 per cent between 1987and 2015, while real house prices (tripled) and income growth (doubled) lagged behind. The research also revealed older mortgagors’ average mortgage debt-to-income ratio tripled from 71 per cent to 211 per cent between 1987 and 2015, reflecting a severe increase in repayment risk. The authors noted rising mortgage indebtedness was threatening home ownership and forecast demand for Commonwealth Rent Assistance would increase by 60 per cent by 2031. At the same time, the unmet demand for public housing from private renters aged 55+ is expected to rise by 78 per cent over the same period.

Aussies rank 12th in rental outlay

Imovirtual’s latest house renting guide has revealed that, on average, Australians spend around 29 per cent of their wage on rent, placing 12th out of 35 countries ranked in terms of the greatest outlay for rent. Renters in the US and Netherlands also pay out 29 per cent of their wages. Ireland took out the top spot, with residents paying 40 per cent of their wages in rent. Renters in Portugal, Luxembourg and Israel pay 38 per cent on average. The top five most expensive countries for rent were rounded out by Switzerland, where the average rent is 35 per cent of wages. NZ ranked 6th most expensive (33 per cent), followed by Norway, Czech Republic and Iceland (all recording 32 per cent), Japan (31 per cent) and Mexico (30 per cent). At the other end of the scale was Greece and Slovenia, where residents spend 19 per cent of their wages on rent.

NSW to introduce short-term rental framework

The NSW State Government is set to introduce a regulatory framework around short-term rental accommodation (STRA). The framework incudes a mandatory code of conduct, new planning instruments and a possible register of all STRA properties. “The mandatory Code of Conduct will facilitate oversight of STRA providers, including providing for the resolution of complaints and disputes regarding the conduct of hosts and guests”, said Kevin Anderson, minister for better regulation. Hosts or guests that commit two serious breaches of the code within two years will face a five-year ban, while platforms and letting agents will be prohibited from offering service to any person or dwelling listed in the exclusion register.

WA to introduce new strata regs

On 1 September, public consultation on the WA State Government’s proposed new strata regulations commenced. The proposed changes include better information for strata buyers, a more efficient process for resolving strata disputes and extensive improvements to how strata schemes are managed. The reforms, which are designed to make strata clearer and fairer for the growing number of West Aussies who own, live or work in a strata property, also include the introduction of the new Community Titles Act 2018. WA has more than 300,000 strata properties, with more than half of new land subdivisions strata titled over the last calendar year. An estimated 50 per cent of people will live in a strata titled complex by 2050 (up from the current 30 per cent).

Owners payout $10.5 billion in building defects

Mozo’s Property Pain – Building Defects Report 2019 has revealed new property owners have paid out $10.5 billion in repair costs over the past decade to rectify building defects. The average apartment defect bill was $6,434 (though 4 per cent of owners had to pay in excess of $50,000), with 60 per cent of owners having to contribute to a sinking fund and 24 per cent forced to pay special levies to fund the repairs. In the decade, with 670,197 apartments completed, the total paid out for defects was estimated at $4.3 billion. The most common defects were internal water leaks (48 per cent) and cracking to internal and external walls (39 per cent). For owners of houses, the average repair bill was $5,839, but 32 per cent had to pay more than $5,000. With 1,059,913 houses completed over the decade, buyers are estimated to have paid out $6.2 billion in repairs. Cracking to internal and external structures (42 per cent) and guttering faults (33 per cent) were the biggest issues.

Tech watch: latest apps and tools

The Australian Institute of Health and Welfare and the Commonwealth Treasury have created a new dashboard that brings together approximately 7 million data points from 20 key national housing data sets for the first time. Covering the entire housing spectrum, from housing market financial data through to regional population changes, a range of data sets are available including home ownership and household tenure, housing and rental affordability, Australian property values and sales across all states and territories.

Main photo by Handy Wicaksono 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 961 017 if you have any questions.

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