Home Info Centre Investment property market snapshot - September 2019
Investment property market snapshot - September 2019
Insurance insights

Investment property market snapshot - September 2019

02 Oct 2019 15 mins read

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

Asking rents mixed

In September, capital city asking rents declined 0.4 per cent for houses to $544 p/w, while unit rents held steady at $438 p/w, according to SQM Research. Brisbane continued to be the only capital to experience increases in weekly rents for both houses and units, while Sydney and Melbourne recorded declines in both houses and unit rents over the month. Across the capitals: Canberra ($603 p/w houses / $459 p/w units); Sydney ($676 / $497); Darwin ($513 / $380); Brisbane ($466 / $378); Adelaide ($399 / $312); Hobart ($442 / $412); Melbourne ($524 / $418); and Perth ($440 / $337).

Vacancies decline

SQM Research showed the national vacancy rate declined marginally to 2.2 per cent in August. The total number of vacancies Australia-wide was 75,757. Vacancy rates decreased 0.1 per cent in Sydney (3.4 per cent), Perth (2.9 per cent) and Adelaide (1.0 per cent). In comparison, rates increased 0.1 per cent in Brisbane (2.5 per cent), Canberra (1.2 per cent) and Hobart (0.6 per cent). Melbourne’s vacancy rate held steady at 2.0 per cent and Darwin’s at 2.9 per cent.

Yields down

According to CoreLogic’s Hedonic Home Value Index, capital city yields were lower in September, with the national median yield at 4.0 per cent – combined capitals 3.7 per cent; combined regionals 5.1 per cent. Sydney continued to have the lowest yield of the capitals (3.2 per cent), followed by Melbourne (3.5 per cent), Perth (4.3 per cent), Adelaide (4.5 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 September Home Value Index results showed national dwelling values rose 0.9 per cent, with the median value at $524,744. The lift was attributed to a strong rebound in Sydney and Melbourne where values rose 1.7 per cent over the month. Values in the combined capitals were up 1.1 per cent to a median value of $602,319, while combined regionals were up 0.1 per cent to $376,903. Rises in housing values were recorded in Sydney (+1.7 per cent), Melbourne (+1.7 per cent), Brisbane (+0.1 per cent) and Canberra (+1.0 per cent). Adelaide values held steady while falls were recorded in Perth
(-0.8 per cent), Darwin (-0.2 per cent) and Hobart (-0.4 per cent).

Investor lending up

ABS's Lending to Households and Businesses data for July 2019 showed new lending commitments for investment dwellings rose 4.7 per cent (seasonally adjusted) to $4,643 million. Improvements in investor lending was recorded in all states and territories. Refinancing of investment dwellings was also up 3.5 per cent.

Investor mortgage market on the up

APRA’s quarterly property exposures data for the June 2019 quarter showed of the $1.67 trillion total ADI mortgages, $547 billion (32.6 per cent) were investor loans and $359 billion (21.4 per cent) were IO loans. Lending to investors was up 13.8 per cent on the March quarter and IO loans were up 17.0 per cent. The big four banks accounted for 34 per cent all investor loans ($452 billion) and 22.8 per cent of all IO loans ($303 billion). The flow of new investment loans ran at 32 per cent to June and is rising.

High-LVR loans on the rise

APRA’s property exposure data for the 12 months to June revealed the share of new loans approved with a high-LVR rose from 20.3 per cent to 21.5 per cent. Of the high-LVR loans approved, 68.1 per cent (14.6 per cent of total new loans) had an LVR between 80 and 90 per cent, while 31.8 per cent (6.5 per cent of total new news) had a LVR above 90 per cent.   Overall, APRA reported there was a 12.6 per cent ($47.5 billion) decline in the number of new loans approved over the 12 months, down from $377.9 billion to $330.4 billion. The decline was driven by an 11.1 per cent ($28.9 billion) fall in owner-occupier loans ($231.5 billion) and a 15.8 per cent ($18.6 billion) fall in new investment loans ($98.9 billion). As at 30 June 2019, the cumulative mortgage portfolio of the ADI sector totalled $1.62 trillion.  

Official interest rates cut

On 1 October, the RBA lowered the official cash rate 25 basis points to an historic low of 0.75 per cent. The decision to cut was influenced by global economic conditions (US-China trade and tech disputes, low interest rates around the world and expected further easing, record low government bond yields) and the Australian economy growing by a lower-than-expected 1.4 per cent in the June quarter.

Building approvals down

The number of building approvals nation-wide fell to 12,864 in August, down 3.9 per cent from the previous month and down 25.6 per cent from August 2019 (trend terms), according to the ABS. Approvals for private sector homes excluding houses declined 9.2 per cent to 4,427 from the previous month and 39.7 per cent when compared to the August 2018 figure. Approvals for private sector houses also declined to 8,187 – down 1.0 per cent month-on-month and 15.8 per cent year-on-year. ABS figures also revealed the value of residential buildings approved rose 1.1 per cent in August.

Property listings fall

National residential property listings fell 4.0 per cent in September to 312,754, according to SQM Research data. All states experienced a decrease in property sales listings over the month: Sydney (-5.7 per cent), Melbourne (-5.8 per cent), Brisbane (-4.8 per cent), Perth (-5.8 per cent), Adelaide (-3.3 per cent), Canberra (-1.1 per cent), Darwin (-3.1 per cent) and Hobart (-6.4 per cent).

Asking prices up

SQM Research data showed capital city asking prices for houses increased 1.5 per cent in September to an average of $942,400. Unit asking prices were also up 1.4 per cent to $568,300. Sydney, Melbourne, Brisbane and Hobart all recorded increases in both house and unit asking prices.

New home sales up

HIA’s New Home Sales report showed new home sales were up 7.3 per cent in August. Sales of new detached houses were up in NSW (+12.8 per cent), Victoria (+11.0 per cent) and Queensland (+10.6 per cent).

Resellers see healthy profits

According to CoreLogic’s Pain and Gain Report, 87.1 per cent of properties re-sold in the June quarter achieved a higher sale price compared to their original purchase price. Total gains across the country came in at $16.3 billion. For the first time since 2009, regional markets outperformed the capital city markets, with 87.9 per cent of regional sales profitable compared to 86.6 per cent in the cities. Over the June quarter, 12.9 per cent of resales nationally were at a loss.

Top rental yields suburbs

According to CoreLogic’s Top Rental Performers report, which identifies the top 100 suburbs where houses or units have an estimated gross rental yield of 5 per cent or more per annum, a Queensland country town is the nation’s best performer. With a rental return of 11.7 per cent, Blackwater also has a 0.0 per cent vacancy rate, a median house price of $122,165 and median rent of $260 per week. The top ten was rounded out by NSW’s Broken Hill (11.7 per cent), Queensland’s Woree (10.8 per cent) and Manunda (9.5 per cent), WA’s Katanning (9.1 per cent), NSW’s Cobar (8.8 per cent), SA’s Bordertown (8.8 per cent), Queensland’s Bungalow and Moranbah (both 8.7 per cent) and SA’s Port Augusta (8.4 per cent). Suburbs in Queensland accounted for 42 of the top 100, NSW had 17, Victoria had15, SA also had 15 make the list and Tassie had 8. WA, the ACT and the NT all only had one town or suburb make the cut.

Resi property prices fall

ABS statistics showed residential property prices fell 0.7 per cent in the June quarter. The total value of Australia’s 10.3 million resi dwellings fell $17.6 billion to $6,610.6 billion. The mean price of dwellings in Australia was $638,900. The fall in values was led by the Melbourne (-0.8 per cent) and Sydney (-0.5 per cent) markets. All capital cities except Hobart (+0.5 per cent) and Canberra (+0.2 per cent) recorded falls in property prices during the quarter.

Decline in house prices slowing

Despite REIA’s Real Estate Market Facts for the June 2019 quarter showing the weighted average median prices decreased by 1.0 per cent for houses to a median price of $720,041 and by 0.6 per cent for other dwellings to a median price of $565,753, the association notes that the rate of decline is slowing and there had been a higher level of enquiries since the federal election.

House prices set to rise

QBE’s Australian Housing Outlook 2019-2022 report has forecast house price growth across all major capital cities. Brisbane is expected to see the sharpest rise in house prices at 20.3 per cent over the three years to 2022, followed by Adelaide (12.7 per cent), Darwin (7.0 per cent), Canberra (6.4 per cent), Perth (6.0 per cent), Sydney (5.8 per cent), Melbourne (5.1 per cent) and Hobart (4.1 per cent). Unit price growth is also projected in all capitals except Sydney, where prices are expected to fall 0.3 per cent. Darwin units are expected to see the greatest price rise (9.2 per cent), followed by Canberra (6.7 per cent), Perth (5.3 per cent), Adelaide (4.7 per cent), Melbourne (3.8 per cent), Brisbane (3.2 per cent) and Hobart (2.8 per cent).

10% increase in housing price growth tipped

Off the back of a sharp uptick in lending in July, economists at UBS have lifted their price expectations for Australia’s housing market. From a previously predicted 3-5 per cent recovery, UBS now anticipate up to 10 per cent growth by next year. "We expect home loans to lift to 15 per cent to 20 per cent year-on-year over the next year, underpinning stronger house price growth of 5 per cent to 10 per cent," UBS economist George Tharenou said. 

Mortgage arrears stable

According to S&P’s Performance Index (SPIN), investor mortgage arrears were mostly unchanged in July, falling 1 basis point to 1.46 per cent. Overall, national prime mortgage arrears dropped to 1.49 per cent, from 1.51 per cent in June. Arrears improved in WA (-0.14 per cent to 2.91 per cent); the NT (-0.06 per cent to 2.84 per cent); Queensland (-0.01 per cent to 1.90 per cent); the ACT (-0.11 per cent to 1.03 per cent); Victoria (-0.04 per cent to 1.36 per cent) and Tasmania (-0.08 per cent to 1.19 per cent), while NSW (+0.03 per cent to 1.29 per cent) and SA (+0.02 per cent to 1.54 per cent) showed increases.   

More borrowers ‘fudge’ loan applications

Research from investment bank UBS, found 37 per cent of Aussie home-buyers submitted false information to financial institutions to obtain mortgages last financial year, up from 32 per cent the previous year. ‘Fudges’ included overstating income (20 per cent), understating debts (23 per cent), understating living costs (34 per cent) and telling ‘porkies’ in multiple categories (23 per cent). It has been estimated that up to $500 billion in home loans may be underpinned by false customer information.

3 Oz capitals ranks among most liveable

The Economist Intelligence Unit’s latest Global Liveability Index has listed Melbourne (2nd), Sydney (3rd) and Adelaide (10th) in the top 10 global cities for liveability. The cities are ranked on five key categories – stability, healthcare, culture and environment, education, and infrastructure. Vienna took out the top stop, while Japan’s Osaka (4th) and Tokyo (7th), Canada’s Calgary (5th), Vancouver (6th) and Toronto (8th), and Denmark’s Copenhagen (9th) rounded out the top 10.  Perth (14th) and Brisbane (18th) made the top 20 most liveable cut.

Investor confidence wanes

Digital Finance Analytics’ household financial confidence index for August showed that while owner-occupier confidence firmed a little, investor confidence had fallen. Rental streams easing back, values of high-rise apartments being questioned and renters having greater choice and lower rental options in most centres were cited as the reasons for low confidence.

Low income renters struggle

The Productivity Commission’s Vulnerable Private Renters: Evidence and Options report found that two-thirds of low-income renters were in rental stress – spending more than 30 per cent of their income on rent. The number of low-income households struggling to pay their rent has doubled in the past two decades, with 170,000 households now left with less than $35 a day after covering their rent.

Affordability remains an issue

CoreLogic’s Perceptions of Housing Affordability report revealed 83 per cent of non-property owners were worried about being able to afford their first home. Securing a deposit (47 per cent) was the greatest obstacle to homeownership, followed by receiving approval for a home loan (45 per cent) and stamp duty costs (44 per cent).

Scam watch: investors warned on “fake” tenant scam

The WA Commissioner for Consumer Protection has issued a warning for investors and real estate agents after an agent who was showing a prospective tenant a rental property discovered that someone had changed the locks and had already moved in without the authority of the owner. The tenant moved in after responding to a rental accommodation advertisement on Gumtree which ended up being fake. He paid $2,000 to the scammers via a money transfer service as a deposit for the tenancy which was advertised at $340 per week, $30 cheaper than the real asking price. The scammer pretending to be the owner said he was overseas so couldn’t hand over the keys for the property so suggested the tenant contact a locksmith to change the locks, which he did. The scammer also spoke to the locksmith, assuring him that he was the owner and giving him authorisation. The tenant hadn’t realised he had been scammed until the agent knocked on the door for a viewing by a prospective tenant. The agent and owner have allowed the tenant to stay in the home, but at the higher rent of $370 per week. The Commissioner noted rental accommodation scams were becoming increasingly common, with eight victims in the state reporting a total loss of $16,000 in the past two years.

REIQ launches blockchain-based digital tenancy agreements

By the end of the year, residential tenancy agreements will be able to be executed as digital smart contracts in Queensland. REIQ partnered with tech firm Igloo to create the blockchain-based technology. REIQ notes that in addition to providing transparency, there is opportunity for the functionality of the smart contracts to be built out to handle payments of bond and rent, and facilitate other activities such as routine inspections and maintenance.

REINSW calls for greater short-term rental reform

Following the NSW State Government’s passing of legislation to begin the reform of the short-term rental accommodation market, REINSW is calling for significant changes to the proposed reforms and recommending the creation and implementation of government-run Guest and Host registers in addition to the proposed Exclusion and Property registers.  REINSW is also calling for the introduction of mandatory landlord insurance for owners.

WA looks to short-term regulation

Following the WA State Government’s ‘Inquiry into the Regulation of Short-Term Accommodation in Western Australia’, industry groups are divided over the plan to increase regulation of short-stay accommodation providers. The inquiry has recommended all short-term rentals be registered and be issued a registration number. The proposal to create a register was welcomed by the Tourism Council, the AHA, West Australian Apartment Advocacy and Stayz. The CCI did not support the proposal, instead suggesting a consistent state-wide framework across all local government areas would reduce the risk of inconsistent regulation.

SA to introduce land tax changes

The South Australian Government has announced it will push through with the proposed changes to land tax aggregation, which would prevent owners from spitting properties under different names and trusts to lower their duties. The government also intends to cut the top land tax rate from 3.7 per cent to 2.4 per cent starting in July 2020. The new tax rate would apply to property portfolios worth $1.3 million to $5 million, with lower discounts for those with properties worth more than $5 million. 

Oz leads in sustainability

Australian property companies set a new record for sustainability in the 2019 Global ESG Benchmark for real estate assets. Australia achieved the highest score of any country to date with its sustainability performance.

Timing market costs investors

A study by Property Investment Professionals of Australia has found investors timing the market to achieve the best capital growth could potentially lose as much as $140,000 in a 15-year period. PIPA noted transactional costs of buying and selling multiple times, including stamp duty and capital gains tax, erode a significant amount of potential profit. 

‘Great Aussie Dream’ still alive

Findings from travel insurer InsureandGo’s survey showed 64 per cent of Aussies would rather own property than travel. Overall, 59 per cent of people said they would regret not owning property.

Tech watch: latest apps and tools

realestate.com.au has launched an app that enables agents to track how their listing are performing anywhere, at any time, direct from their mobile device. Ignite allows agents to view active listings, track their campaign performance and respond to buyer enquiries on the go.

*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 954 374 if you have any questions. 

Main photo by Sam Wermut on Unsplash

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