SnapshotInvestment Property Market Snapshot

Latest industry statistics and analysis.

Asking rents steady
Capital city house asking rents in October were steady at $552 p./w, while unit asking rents fell 0.7 per cent to $437 p/w, according to SQM Research. Across the capitals: Canberra $624 p/w for houses / $442 p/w for units; Sydney $714 / $512; Darwin $505 / $396; Brisbane $451 / $369; Adelaide $387 / $298; Hobart $425 / $361; Melbourne $524 / $406; and Perth $424 / $321. The national average for houses was $441 p/w and $355 p/w for units.

Vacancies steady
Data from SQM Research revealed the national vacancy rate in September was steady at 2.1 per cent, with 70,172 vacant properties nation-wide. Vacancies were down in Adelaide (from 1.2 per cent to 1.1 per cent), Perth (3.7 to 3.6), Canberra (0.7 to 0.6) and Hobart (0.5 to 0.4).  While vacancies were up in Melbourne (from 1.6 per cent to 1.7 per cent), Brisbane (2.8 to 2.9) and Darwin (3.5 to 3.6). Sydney held steady at 2.8 per cent.

Values decline
National dwelling values declined 0.5 per cent in September to a median value of $550,610, according to CoreLogic. Over the 12 months to September, values declined 2.7 per cent to provide a 0.7 per cent total return. Capital city median values: Sydney $847,948; Melbourne $697,457; Brisbane $495,474; Adelaide $438,570; Perth $452,138; Hobart $443,711; Darwin $436,936; and Canberra $598,326.

Investor loan growth falls
According to the RBA Credit Aggregates to August 2018, investment home loans have fallen 1.5 per cent on an annual basis. The data showed investor loans were slowing, accounting for 33.2 per cent of housing loans or $593 billion of the $1.78 trillion in total home lending.

Perth remains most affordable capital
Perth has retained the title as the most affordable Australian capital, according to a report by the HIA. Scoring 113.5 on the affordability index for the September quarter, Perth beat out Darwin (98.9), Hobart (95.4), Brisbane (93.1) and Canberra (86.2) to be the most affordable. A score of 100 indicates an affordable market (where mortgage repayments account for exactly 30 per cent of earnings). The average across the eight capitals was 72.9, with Sydney (55.1) and Melbourne (65.8) the most unaffordable cities.

Mining towns offer good yields
Despite property values in Western Australian and Queensland mining towns taking a significant hit in recent times, the rental yields remain high, according to CoreLogic’s Property Pulse. The best performing town in WA was South Hedland with a rental yield of 9.2 per cent, while in Queensland, Dysart offered 8.6 per cent.

WA introduces foreign buyers levy
From 1 January 2019, foreign buyers will pay a 7 per cent surcharge on residential property in Western Australia. Exemptions to the Foreign Owner Duty Surcharge apply where foreign buyers are funding developments with 10 or more dwellings or purchasing non-resi property.

Investors struggle with P&I loans
According to a survey by PIPA, 13 per cent of interest-only borrowers were expecting to “struggle” when they begin repaying principal and interest, with a further 10 per cent “unsure” how they would cope, while 61 per cent were confident in their ability to meet repayments. Of those who said they would struggle, 5.5 per cent said they have sold, or would have to sell, an investment property to meet loan commitments.

Property ‘bubble’ risk in Oz low
The UBS Global Real Estate Bubble Index 2018 (indicating ‘bubble risk’ or a significant overvaluation of housing markets) has found the greatest risk is in Hong Kong, followed by Munich, Toronto, Vancouver, London and Amsterdam. The study also found imbalances in Paris, San Francisco and Frankfurt. And while there were imbalances in Stockholm and Sydney, these cities experienced the steepest drop and moved out of bubble risk territory.  The report noted: “Sydney’s housing market reached bubble-risk territory in 2015 thanks to buoyant foreign demand, low interest rates and exuberant expectations. It peaked last year and has since corrected by 5 per cent in real terms in light of tighter mortgage lending. Despite its index score plunging, the city remains highly overvalued.”

Investors exiting market
The latest survey from Digital Finance Analytics has revealed a fall in the number of property investors – with 20 per cent expecting to transact in the next few months with the bulk intending to sell a property, compared to a year ago when 50 per cent were expecting to transact but to add to their portfolio. It was also found investors were less likely to borrow, with 36 per cent saying they had had issues with finance. The number of loan rejections for investors rose from 12,448 in August to 13,201 in September. Investors were also more concerned about potential changes to regulation as more were increasingly reliant on tax breaks (40 per cent are banking on the tax benefits) as capital growth eases (15 per cent expect future capital appreciation). 

Rentvestors feel mortgage stress
A survey by Gateway Bank has found 58 per cent of property investors consider their mortgage to be a burden, compared to 54 per cent of owner-occupiers. Mortgage stress was even higher amongst rentvestors (who made up 9 per cent of survey respondents – 50 per cent were Millennials, 38 per cent Gen X and 10 per cent Baby Boomers), with 65 per cent considering their loan a burden. The bank noted that the debt-to-income ratio was 189 per cent, a record high, while household savings was only 1 per cent.

Fixed rate loans spike
Data from Mortgage Choice has revealed demand for fixed rate loans is increasing, with the loan type seeing a rise of 6 per cent in September for all loans written to nearly 24 per cent. Fixed rate investor loans rose 1 per cent to 33 per cent. 

AMP quits funding property investment
Following in the footsteps of the Westpac group and CBA, AMP announced it would no longer offer its SMSF loan product SuperEdge after 20 October. AMP also announced that from 10 November, existing SuperEdge Loans would not be permitted to switch to interest-only repayments, internally refinance or extend their loan terms. In addition, AMP is axing new mortgages to property investors with five or more properties, tightening scrutiny of all loan applications and banning new loans to investors whose property-related income, which is typically rent, is more than half of their total declared income.