Home Info Centre Investment Property Market Snapshot – January
Investment Property Market Snapshot – January
Insurance insights

Investment Property Market Snapshot – January

06 Feb 2020 13 mins read

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

Asking rents up 

In January, capital city asking rents increased 0.9 per cent for houses to $555 p/w, while unit rents increased 0.7 per cent to $437 p/w, according to SQM Research. Sydney, Melbourne, Perth and Adelaide all recorded increases in weekly rents for both houses and units. Brisbane and Hobart recorded increases in house rents but declines in unit rents, while in Canberra house rents fell while unit asking rents rose. Darwin saw unit prices hold steady while house rents dipped. Across the capitals: Canberra ($633 p/w houses / $465 p/w units), Sydney ($686 / $496), Darwin ($468 / $380), Brisbane ($473 / $377), Adelaide ($402 / $314), Hobart ($462 / $420), Melbourne ($539 / $413) and Perth ($441 / $336).

Vacancies increase 

SQM Research showed the national vacancy rate increased marginally to 2.5 per cent in December (up from 2.2 per cent in November). The total number of vacancies Australia-wide was 84,591. All capitals, except Perth which held steady at 2.5 per cent, recorded marginal increases in vacancy rates: Sydney (up 0.2 per cent to 3.6 per cent), Melbourne (up 0.3 per cent to 2.5 per cent), Brisbane (up 0.4 per cent to 2.9 per cent), Adelaide (up 0.1 per cent to 1.1 per cent), Canberra (up 0.6 per cent to 1.7 per cent), Darwin (up 0.4 per cent to 3.5 per cent) and Hobart (up 0.1 per cent to 0.6 per cent).

Yields up

According to CoreLogic’s Hedonic Home Value Index, capital city yields increased 0.1 per cent in December, with the national median yield at 3.8 per cent – combined capitals 3.5 per cent, combined regionals 5.0 per cent. Sydney continued to have the lowest yield of the capitals (3.0 per cent), followed by Melbourne (3.3 per cent), Perth (4.3 per cent), Adelaide (4.4 per cent), Brisbane (4.5 per cent) and Canberra (4.6 per cent). Only Hobart (5.1 per cent) and Darwin (5.9 per cent) had yields in excess of 5 per cent.

Investor lending up

ABS’ Lending Indicators data for November 2019 showed new lending commitments for investment dwellings rose 2.2 per cent (seasonally adjusted) to $5.24 billion. Loan commitments for investors grew at a faster rate than for owner-occupiers (1.6 per cent), with the value of loan commitments up in NSW, Victoria, Queensland, WA and SA. The national residential loan market share for investors remained at 24.1 per cent over November, which was well below the long-term average of 35.0 per cent.

Building approvals up

The number of building approvals nation-wide rose to 14,675 in November, up 11.8 per cent from the previous month (seasonally adjusted), according to the ABS. Approvals for private sector homes excluding houses rose 22.6 per cent, while approvals for private sector houses also rose 6.1 per cent. The estimate of the value of residential building rose 5.2 per cent. 

Property listings fall

National residential property listings decreased 14.8 per cent in December to 288,966, according to SQM Research data. All capital cities experienced a decrease in property sales listings over the month: Sydney (-28.7 per cent), Melbourne (-24.4 per cent), Brisbane (-14.6 per cent), Perth (-15.7 per cent), Adelaide (-14.5 per cent), Canberra (-28.1 per cent), Darwin (-20.8 per cent) and Hobart (-14.8 per cent).

Asking prices up

SQM Research data showed capital city asking prices for houses increased 2.4 per cent in December to an average of $977,900. Unit asking prices were also up, recording a 0.8 per cent rise to an average of $577,600. Sydney and Hobart were the only capitals to record increases in both houses and units, while Darwin recorded declines in both house and unit asking prices. All other capitals saw increases in house prices, but marginal declines in unit prices over the month. 

Dwelling values rise

CoreLogic’s December Home Value Index showed national housing values increased 1.1 per cent over the month and by 4.0 per cent over the quarter. The median value of a home was $537,506 – $622,346 for combined capitals and $380,657 for combined regionals. All capitals expect Darwin (-0.5 per cent) and Perth (no change) saw positive growth over the month: Sydney (+1.7 per cent), Melbourne (+1.4 per cent), Brisbane (+0.7 per cent), Adelaide (+0.5 per cent), Hobart (+0.2 per cent) and Canberra (+0.1 per cent). 

Median house prices rise

According to Domain’s December 2109 House Price Report, property prices in Australia are almost back to peak levels, with the median house price sitting at $809,349 (up 4.2 per cent over the quarter) and the median unit price at $565,024 (up 3.4 per cent). Domain noted it was the strongest quarterly growth for houses in three years and the strongest unit growth since 2015. The national house and unit median jumped 5.5 per cent and 4.5 per cent over the year – with the uptick attributed to the rebound in the Sydney (+6.8 per cent YoY for houses / +3.0 per cent for units) and Melbourne (+8.7 per cent / +12.2 per cent) markets, plus increased price growth in Canberra (+5.4 per cent / +0.1 per cent) and Hobart (+15.6 per cent / +19.0 per cent). 

Profitable sales up

Almost nine in ten (87.4 per cent) property resales over the September 2019 quarter sold for more than their previous price, delivering a gross profit of $18.7 billion for resellers across Australia. CoreLogic’s Pain and Gain Report also found across the combined capital and regional markets, a higher proportion of houses (90.0 per cent) resold at a profit than units (80.2 per cent). 

… but investors re-sell at a loss

CoreLogic’s report also noted that, nationally, 16.6 per cent of investors sold at a loss compared to 11.1 per cent of owner-occupiers. Throughout the combined capitals, 11.1 per cent of owner-occupiers failed to re-sell their property for a profit compared to 17.2 per cent of investor-owned properties. 

Auction clearance rates higher

Data from CoreLogic revealed a significant increase in auction clearance rates in the December 2019 quarter. The increased clearance rate was coupled with higher auction volumes across the capitals, with the combined capital cities clearance rate at 70.3 per cent from 26,923 auctions – a significant jump on the previous quarter where auction volumes were 16,730 and returned a clearance rate of 69.9 per cent. 

Top suburbs for rental growth

According to SQM Research, the top suburbs for rental growth in houses are Bayview 2104 (up 174.9 per cent over the year to $1,754 p/w with a vacancy rate of 1.6 per cent), Yarrabandi 2875 (144.9 per cent / $240 / 1.5 per cent), Paraburdoo 6754 (125 per cent / $495 / 0.4 per cent), Coolangatta 4225 (91.8 per cent / $585 / 1.3 per cent) and Murray Island 4875 (90 per cent / $950 / 0.0 per cent). For units the top performers are Stradbroke Island 4183 (170.8 per cent / $975 / 1.1 per cent), Wantiool 2663 (140.5 per cent / $190 / 4.2 per cent), Stoney Creek 4514 (103.2 per cent / $319 / 0.6 per cent), Boolaroo 2284 (87.5 per cent / $497 / 1.5 per cent), and Mulwala 2647 (84.7 per cent / $242 / 1.3 per cent).

Highest yielding localities

SQM Research also revealed the five highest yielding localities for houses: Menindee 2879 (yield of 18.4 per cent), Angledool 2834 (14.7 per cent), Mallacoota 3892 (14.7 per cent), Coolabah 2831 (13.4 per cent) and Madura 6443 (13.1 per cent). For units the top yielding suburbs are Karratha 6714 (13.1 per cent), Queenstown 7467 (12.2 per cent), South Hedland 6722 (12.0 per cent), Newman 6753 (11.9 per cent) and Woombye 4559 (11.5 per cent).

Tightest vacancy rates

Within the capital cities, the following suburbs have the tightest vacancy rates: Sutherlands 5374 (rate of 0.0 per cent and an average rent $251 p/w), Point Sturt 5256 (0.0 per cent / $301), Wynn Vale 5127 (0.1 per cent / $374), Clarendon Vale 7019 (0.2 per cent / $397), Kingston 7050 (0.2 per cent / $509), Woodcroft 5162 (0.2 per cent / $339), Moonah 7009 (0.3 per cent / $457), Mount Nelson 7007 (0.3 per cent / $571), Cygnet 7112 (0.3 per cent / $315) and Golden Grove 5125 (0.3 per cent / $366), according to data from SQM Research.

Banks cut investor loan rates

Westpac has announced cuts of up to 50 basis points to its fixed-rate investment loans. The changes apply across all terms with package and non-package rates for both P&I and IO options reduced. A maximum LVR of 80 per cent applies. Bankwest and People’s Choice Credit Union also made cuts to their investor loan interest rates ahead of the first RBA rate announcement for 2020.

Non-majors take lion’s share of investor loans

According to the Australian Finance Group’s December 2019 quarter mortgage and competition index, 51.7 per cent of investment home loan volumes were lodged with non-majors (up from 49.9 per cent in the September quarter). Non-major lenders’ share of IO loans also climbed to 54.9 per cent (up from 52.4 per cent), while the share of P&I loans also rose to 45.1 per cent (up from 44.5 per cent).

Investor confidence dips

Digital Finance Analytics’ household financial confidence index for December showed investor confidence dipped slightly off the back of continued weak rental returns, higher vacancies, and little, if any, capital growth.

Home buying intentions lift

According to CBA’s Household Spending Intentions (HSI) Series, home buying intentions moved higher again in December and now sit at a record high. The HSI readings mean that the pick-up in dwelling prices in H2 2019 will continue into H1 2020. The bank also noted that the turn in the HSI was an encouraging sign that the economic drag from falling residential construction was nearing an end.

Property sentiment rises

The ANZ-Property Council Survey for the March 2020 quarter showed a rise in sentiment in Australia’s property sector. Sentiment toward residential property continued the strong upward trend with sentiment rising strongly in NSW and SA, and more moderately in Queensland and WA. In Victoria, it was steady, but in the ACT it fell sharply (although it remains high). Expectations of easier debt finance availability continued to rise, as did house price expectations with the rebound in price expectations sharpest in NSW and Victoria and also high in Queensland, SA and the ACT. In WA, price expectations were in positive territory, but only just.

Low-income renters struggle

According to the latest Productivity Commission report, more than four in 10 low-income renters in Australia are struggling to pay their rent despite receiving government assistance. The report found 40.5 per cent of people receiving Commonwealth Rent Assistance were in rental stress – spending more than 30 per cent of their income on rent – while one in eight spent more than half their income on rental payments.

Mortgage stress up

Figures from Digital Finance Analytics revealed 1.1 million households – or 32.7 per cent of owner-occupier borrowing households – were estimated to be in mortgage stress in December and 83,220 were at risk of 30-day default in the next 12 months. 

CPI good news for buyers and renters

According to REIA, the December 2019 quarter CPI figures showed a positive sign that official interest rates will not increase. CPI increased by 0.7 per cent in the December quarter giving an annual increase of 1.8 per cent. The Housing Group CPI increased by 0.1 per cent for the quarter and 0.2 per cent for the year to December 2019, and rents did not increase at all for the quarter and increased by just 0.2 per cent for the year, which was “the lowest annual change since ABS started the series in September 1973”, according to REIA.

Capitals remain unaffordable

According to the Demographia International Housing Affordability Survey: 2020, Sydney is Australia’s least affordable market, ranking as the 3rd most unaffordable city globally after Hong Kong and Vancouver. Melbourne is the 4th least affordable major housing market internationally, Adelaide is the 14th, Brisbane 17th least affordable and Perth 19th.

WA looks at rental reforms 

The WA State Government is undertaking a review of the Residential Tenancies Act. Under consideration are key issues such as improving security of tenure for tenants; should termination of a tenancy require reasons and do away with “no grounds” terminations; disclosure of important information before a tenancy begins; what are the minimum standards for rental properties; tenant liability for damage – what is fair wear and tear; bonds, changes in rent and other charges; making a rental property a home, including the right to keep pets and make minor modifications; and regulation of boarding, lodging and room-by-room rentals. Public consultation ends 1 May 2020.

NSW to introduce risk-rating tool for apartments

In a bid to address the state’s building-standards crisis, the NSW State Government has announced a plan to get credit ratings agencies to develop a new risk-rating tool they will be able to sell to prospective apartment buyers. Under new powers, the Building Commissioner will be able to use the rating tool, which will draw from up to 100 different data points to determine whether a development displays indicators of compliance riskiness, to select sites to audit and halt dodgy apartment projects.

Hailstorm declared a catastrophe

The ICA has declared the series of destructive hailstorms that struck parts of Victoria, the ACT and NSW on 19 and 20 January a catastrophe. As at 23 January, more than 55,650 claims had been received with a value of $514 million. The ACT accounted for 53 per cent of claims, NSW 17 per cent and Victoria 30 per cent. EBM RentCover policyholders caught up in the hailstorm disaster should contact our Expert Care Team for claims assistance.

Bushfire catastrophe update

A series of fires across NSW, Queensland, SA and Victoria that impacted homes and businesses from 8 November was declared a catastrophe by the insurance industry on the same day. Some 183 postcodes across four states have been caught up in the event with more than 20,000 claims worth in excess of $1.65 billion lodged as of 23 January.

The NSW and Victorian governments have announced a new arrangement to support homeowners who were impacted by the recent catastrophic bushfires. Both governments committed to engage contractors and fully fund the removal of debris and site clearance for all bushfire-affected homeowners in their respective states. The ICA noted that the government-funded clean-up will enable insurers to maximise the funds available in their customers’ policies for rebuilding.


Main photo by Joshua Hibbert 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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