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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 May 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, bushfire relief and COVID-19 updates.

Asking rents down

In April, capital city asking rents decreased 3.2 per cent for houses to $544 p/w, while unit rents decreased 2.9 per cent to $428 p/w, according to SQM Research. Sydney, Melbourne, Brisbane and Hobart all recorded decreases in weekly rents for both houses and units. Perth and Adelaide were the only capitals to record rent increased for both houses and units. Canberra and Darwin recorded increases in house asking rents, but decreases for units.  Across the capitals: Canberra ($647 p/w houses / $464 p/w units), Sydney ($667 / $484), Darwin ($467 / $361), Brisbane ($461 / $376), Adelaide ($407 / $313), Hobart ($442 / $392), Melbourne ($543 / $415) and Perth ($457 / $347).

Rent values up in March

According to CoreLogic’s Quarterly Rental Review, rent values increased 0.3 per cent nationally over the month of March and 1.2 per cent on a quarterly basis to be 1.4 per cent higher over the year. Capital city rents were 1.3 per cent higher over the quarter and 1.0 per cent higher year-on-year. Regional rents were 1.0 per cent higher over the quarter, and 2.6 per cent higher over the year. Over the quarter, all capital city regions saw rental increases, led by a 1.7 per cent increase across Perth. Regional rental yields slipped 6 basis points to 4.97 per cent in the quarter, while the combined capital cities regions fell 5 basis points to 3.46 per cent. 

Vacancies stable

SQM Research showed the national vacancy rate remained at 2.0 per cent in March. The total number of vacancies Australia-wide was 67,371. With the exception of Sydney (2.9 per cent), Melbourne (1.9 per cent) and Darwin (2.7 per cent) which remained stable, all other capitals recorded 0.1 per cent declines in vacancy rates: Brisbane (2.1 per cent), Perth (1.9 per cent), Adelaide (0.9 per cent), Canberra (0.9 per cent) and Hobart (0.8 per cent).

Yields compress

According to CoreLogic’s Hedonic Home Value Index, the gross rental yield for capital cities in March were 3.5 per cent, while the combined regionals were 5.0 per cent – bringing the national gross yield to 3.8 per cent. Sydney continued to have the lowest yield of the capitals (2.96 per cent), followed by Melbourne (3.2 per cent), while Darwin had the highest yield at 5.9 per cent. Hobart (5.0 per cent) was the only other capital to record a gross yield at or above 5 per cent. Perth (4.3 per cent), Adelaide (4.5 per cent), Brisbane (4.4 per cent) and Canberra (4.8 per cent) all recorded yields below 5 per cent.

Investor lending falls

ABS’ Lending Indicators for February 2020 showed new lending commitments for investment dwellings declined 1.9 per cent (seasonally adjusted) to $5.31 billion. The ABS noted that falls in new loan commitments for investors in NSW, SA and the ACT outweighed increases in the remaining five states and territories and 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.

According to APRA’s banking statistics to the end of February, loans for investment purposes fell 0.03 per cent ($170m). The share of investment mortgages dropped to 36.8 per cent with total exposures for investment loans at $0.64 trillion.

Building approvals up

The number of building approvals nationwide rose 1.0 per cent in February to 14,823 (in trend terms), according to the ABS. Approvals for private sector dwellings excluding houses rose  1.6 per cent, while approvals for private sector houses rose 0.6 per cent. Across the states and territories, dwelling approvals rose in Victoria (+3.9 per cent) and Queensland (+0.4 per cent). Falls were recorded in the ACT (-7.7 per cent), the NT (-5.3 per cent), SA (-2.6 per cent), WA (-2.0 per cent) and NSW (-0.1 per cent), while Tasmania was flat. The value of residential building rose 0.9 per cent.

Property listings increase

National residential property listings increased 3.7 per cent in March to 307,847, according to SQM Research data. All capital cities experienced increases in property listings over the month, with Darwin (+15.6 per cent) recording the largest increase, followed by Canberra (+11.0 per cent), Sydney (+10.5 per cent), Perth (+8.5 per cent), Melbourne (+5.7 per cent), Brisbane and Adelaide (both +3.9 per cent), and Hobart (+2.4 per cent).

Asking prices up

SQM Research data showed capital city asking prices for houses increased 0.7 per cent to an average of $990,500 in March. Unit asking prices also rose 0.6 per cent to an average of $577,000. Brisbane was the only capital to record decreases in both house and unit prices, while Sydney, Melbourne, Perth and Darwin recorded increases for both. Adelaide saw house prices decrease, while unit prices increased, while the opposite was true for Canberra and Hobart.

Dwelling values rise

CoreLogic’s March Home Value Index showed national housing values increased 0.7 per cent over the month – 0.7 per cent combined capitals and 0.6 per cent combined regionals. The median value of a home was $554,229 – $643,540 for combined capitals and $392,802 for combined regionals. All capitals, except Hobart which recorded a fall (-0.2 per cent), saw positive growth over the month: Sydney (+1.1 per cent), Melbourne (+0.4 per cent), Brisbane (+0.6 per cent), Adelaide (+0.3 per cent), Perth (+0.5 per cent), Darwin (+2.0 per cent) and Canberra (+0.6 per cent).

New home sales dip

Figures from the HIA revealed new home sales fell 23.2 per cent in March. WA experienced the biggest decline at 31.6 per cent, while Victoria had the smallest at 16.9 per cent.

Auction clearance rate declines

According to CoreLogic, the auction clearance rate across the combined capitals for the March quarter was 62.5 per cent across 18,902 auctions. The clearance rate was down from 70.3 per cent for 26,923 auctions in the December 2019 quarter, but higher than the March 2019 quarter which recorded a rate of 49.9 per cent for 14,647 auctions.

Capital city population growth

Figures from the ABS showed the number of people living in the capitals increased 1.8 per cent (303,100 people) in FY19. Capital city growth accounted for 79 per cent of total population growth, with Melbourne (113,500) and Sydney (87,100) recording the largest growth. All capitals, except Darwin (-0.8 per cent), recorded population increases over 2018-19: Melbourne (+2.3 per cent), Brisbane (+2.1 per cent), Sydney (+1.7 per cent), Adelaide (+1.0 per cent), Perth (+1.3 per cent), Hobart (+1.5 per cent) and Canberra (+1.5 per cent). The areas with the highest growth rates were Mickleham–Yuroke (+53 per cent) in Melbourne’s outer north, Moncrieff (+38 per cent) in Canberra’s outer north, and Rockbank–Mount Cottrell (+37 per cent) in Melbourne’s outer west. Outside of the capital cities, Pimpama on Queensland’s Gold Coast had the highest growth rate (+20 per cent).

Top performing suburbs revealed

Research from Propertyology has revealed the country’s ‘best performing property markets’ with Hobart’s municipality of Brighton taking the top spot with a 75 per cent increase in the median house price in the five years to December 2019. Hobart City was runner-up with a 62 per cent increase, while the Apple Isle’s Glenrochy had a 58 per cent increase. Victoria’s Hepburn and Alpine saw 60 per cent increases, while Melbourne’s Brimbank and Sydney’s Mosman recorded 57 per cent increases in median prices. Strong price performance  was also found in regional municipalities including Mitchell (Vic), Snowy Monaro (NSW), Wingecarribee (NSW), Lithgow (NSW), Noosa (Qld), Kempsey (NSW), Byron (NSW), George Town (Tas) and Shoalhaven (NSW), where median house price growth between 45 and 51 per cent was recorded.   

Household wealth up

Total household wealth increased to a record high in the December 2019 quarter, rising by 3.1 per cent to $11.3 billion, the latest Australian National Accounts data from the ABS revealed. According to ABS chief economist Bruce Hockman, the improvement in household wealth was spurred by a 3.9 per cent increase in residential property prices over the same period. This compared to a “modest” 1.5 per cent increase in other household financial assets, including shares and superannuation funds.

‘Accidental landlord’ numbers rise

According to a study by MCG Quantity Surveyors, in 2019 a quarter (25.7 per cent) of investors had once lived in their investment property as a principal place of residence. After living in their homes for an average of four years and two-and-a-half months, they moved out and let the property. In 2018, the figure was 23 per cent, and over the past four years the number of investors who lived n their property prior to renting increased by 14.7 per cent.

Vic/Tas tie for top economy

According to CommBank’s State of the states, for the first time in 11 years Tasmania has topped the best-performing states, tying with Victoria. The ACT overtook NSW to come in third, with SA in 5th and Queensland in 6th position. WA ranked 7th and the NT took out the last place. However, the biggest improvements over the quarter came from SA, WA and the NT as these economies started to close the gap.

Foreign investment changes

On 29 March 2020, new regulations came into effect that will see all foreign investments in Australia screened for approval, regardless of the value or nature of the foreign investor. The change will be in place for the duration of the COVID-19 crisis and sees the temporary reduction in the foreign investment thresholds so the Australian Government has oversight over all proposed foreign investment in order to “protect Australia’s national interest”. 

NSW clarifies short-term rental changes

NSW Fair Trading has confirmed changes to strata laws that help manage short-term rental accommodation which went into effect on 10 April 2020. “Owners corporations are now able to adopt by-laws that limit short-term rental accommodation in their strata scheme, by not allowing it in lots that are not the host’s principal place of residence,” NSW Fair Trading said. “This means if someone lives in a strata property as their principal place of residence, they will still be able to rent out their home or rooms while they live there, or temporarily go on holidays.” Any such by-law needs to be adopted by “special resolution, with at least 75 per cent of votes supporting the proposal at a general meeting”.

Victoria holds off RTA reforms

The Victorian State Government has announced some of the 130 amendments to the RTA which were due to come into effect by 1 July 2020 will be delayed for six months amid the coronavirus crisis.

NT defers residential tenancy law update

The NT Government announced it is deferring planned changes to its Residential Tenancies Act 2019, which outlines the rights and responsibilities of tenants and landlords. The legislation was passed in February but will not commence while the NT focusses on its response to COVID-19. The legislation will require further amendments, with the government indicating plans to accommodate COVID-19 provisions such as enabling the creation of longer negotiation periods between tenants and landlords, and creating fairer terms for new leases where hardship due to COVID-19 is demonstrated.

Catastrophes update

Insurance claims for the series of devastating bushfires across NSW, Queensland, SA and Victoria from 8 November 2019, had topped 34,500 by 23 April 2020. The estimated value of the insured losses was $2.26 billion.

The fall-out from the hailstorm which hit South East Queensland on 17 November 2019 is still being felt. As of 23 April 2020, almost 28,000 insurance claims, valued at $435 million, had been lodged.

The series of destructive hailstorms that struck parts of Victoria, the ACT and NSW on 19 and 20 January was declared a catastrophe by the ICA on 19 January. As at 23 April, more than 119,000 claims had been received with a value of $1.43 billion.

On 10 February, the ICA declared its sixth weather-related catastrophe in five months after severe storms and flooding lashed parts of Queensland and NSW. As at 23 April, almost 92,500 insurance claims worth more than $800 million had been made.

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

COVID-19 update – property industry

Having announced a six-month moratorium on evictions for non-payment of rent (29 March), the Australian Government clarified (3 April) that this did not mean tenants did not have to pay their rent. The Housing Minister stated: “A moratorium on evictions doesn’t mean rent is not payable, it is. If circumstances mean that payment in full is not possible, it is a holding off from payments, not a cancellation. It is for people who cannot pay at this time, not for those that can. If you can pay your rent now, you pay it. If you can’t pay your rent now, you have been given grace for six months, but will have to catch up when you are able to pay it again.”

On 13 April, the NSW State Government announced a $220 million relief package for residential renters and landlords affected by Government-enforced COVID-19 restrictions. The money has been allocated to residential tenants who have lost 25 per cent or more of their income, and at the same time residential landlords will be eligible for a land tax waiver or rebate of up to 25 per cent if that saving is passed onto financially distressed tenants.

On 14 April, the Queensland State Government pledged over $400 million to support commercial and residential landlords and tenants affected by COVID-19.  The initiative includes up to $400m in land tax relief for eligible landlords, which must be passed on to tenants. Eligible landowners can apply for up to three months waiver and three months deferral of land tax if they fulfil the eligibility criteria. Eligible landlords must also commit to comply with a set of principles, which include not evicting their tenants and not charging break-lease fees.

On 15 April, the Victorian State Government announced a $500 million property relief package. The government will provide $420 million in land tax relief for landlords who provide rental relief for their tenants (25 per cent discount on their land tax). An $80 million rental assistance fund for eligible renters facing hardship due to COVID-19 will also be created. 

Also in April, the ACT Government advised that landlords who reduce their tenant’s rent by at least 25 per cent for up to six months will receive a discount on their land tax. The government will match 50 per cent of the rent reduction to a maximum of $2,600 over six months (or $100 per week). The territory’s share of the rent reduction will be provided to landlords via a rebate on their 2019-20 quarter 4 and 2020-21 quarter 1 land tax bills.

On 23 April, the WA Government announced a $30 million package to support residential tenants and landlords. Grants of up to $2,000 will be available for eligible tenants who have lost their job and are facing financial hardship, with the monies to be paid directly to the tenant’s landlord to contribute to the tenant’s rental payments. 

Our state-by-state rundown of legislative changes and relief packages is updated regularly.

The ATO has confirmed that SMSFs can provide tenants with a temporary rent reduction, including to tenants who are a related party or related trust, and where a member, relative or a member or related party/trust has an underlying economic interest in the tenant. While this would normally trigger a range of SIS Act compliance breaches, the ATO indicated that it won’t be taking compliance action for either the 2020 or 2021 financial years.

Latest platforms and apps

realestate.com.au has launched a new digital inspection feature to enable agents to use videos to showcase listings to potential renters and buyers.

The President of REIA is urging property owners and tenants to download and use the Federal Government’s new COVID-19 tracing app. Mr Kelly said anyone connected to the industry including salespeople, business owners, property managers, receptionists, tradespeople and even tenants, those attending inspections and property owners to use the app to provide added confidence for those inspecting/attending properties. “While protocols for inspections have been established by the state and territory governments, the tracking would bolster any trace-backs of other contacts, should it be needed and add to the speed of containment of Coronavirus”, Mr Kelly stated.  

Main photo by Jamie Davies 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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