Investment Property Market Snapshot
Latest industry statistics and analysis.
Asking rents up
The average capital city asking rent for houses in December 2018 was up 0.4 per cent to $555 p/w, according to SQM Research. In contrast, asking rents for units was down 0.5 per cent to $436 p/w. Across the capitals: Canberra $625 p/w for houses / $461 p/w for units; Sydney $708 / $506; Darwin $504 / $388; Brisbane $455 / $374; Adelaide $391 / $300; Hobart $426 / $350; Melbourne $534 / $406; and Perth $434 / $322.
According to SQM Research, the national residential vacancy rate for November 2018 rose to 2.3 per cent, up from 2.0 per cent in October. There were 74,590 vacant properties Australia-wide, with vacancies up across all capitals: Adelaide 1.2 per cent, up from 1.1 per cent; Perth 3.4 / 3.3; Melbourne 1.9 / 1.6; Brisbane 3.0 / 2.7; Canberra 0.9 / 0.6; Sydney 3.2 / 2.8; Darwin 4.0 / 3.8; and Hobart 0.4 / 0.3.
Investor finance down
Figures from the ABS revealed the total value of investment housing commitments decreased by $101 million, or 1.0 per cent (trend terms), in October 2018 compared with September. Falls were recorded in commitments for the purchase of dwellings by individuals for rent or resale (down $56m, 0.7 per cent), commitments for the construction of dwellings for rent or resale (down $29m, 3.1 per cent) and commitments for the purchase of dwellings by others for rent or resale (down $16m, 2.1 per cent). REIA noted that “the dollar amount approved for the purchase of dwellings by individuals for rent or resale is at the lowest level since June 2013”. ABS figures also showed investment housing loan outstandings financed by ADIs was flat at $566 billion at the end of October.
Investor refinancing rejections rise
Data from Digital Finance Analytics revealed more than 49 per cent of those seeking to refinance in November had difficulty. Around 27 per cent of investors had their refinancing loans rejected.
Investor loan share continues decline
APRA’s quarterly property exposures statistics for the September 18 quarter revealed the share of loans for property investment, relative to all loans, had fallen. The major banks held around 35 per cent of their portfolios in investor lending, the percentage held with foreign banks and mutuals also declined. Mutuals also held less than 10 per cent of interest only stocks, while the major banks held 20 per cent (down from 30 per cent in 2015). The proportion of new IO loans sat at around 10 per cent, with major banks writing the major proportion at around 16 per cent (down from more than 40 per cent in 2015).
Mixed rental conditions recorded
Australia-wide, rents rose 0.7 per cent in November 2018, according to CoreLogic’s Hedonic Home Value Index. Rents were up 0.4 per cent across the capitals and up 2 per cent in regional areas. Darwin had the weakest rental conditions, with rents down 5.1 per cent (compared with the same time the previous year), followed by Sydney’s 2.7 per cent fall. The largest gains were in Canberra where rents rose 6.9 per cent and in Hobart by 6.1 per cent. The data indicated dwelling rents were outperforming rental values.
Dwelling values decline
CoreLogic’s Hedonic Home Value Index revealed dwelling values declined 0.7 per cent in November 2018, and were down 4.2 per cent since peaking in October 2017 – the largest decline since the GFC. Declines were experienced in Sydney (-1.4 per cent) and Melbourne (-1.0 per cent), while dwelling values were higher in five of the eight capital cities.
Rental affordability rises
Rental affordability improved in every state and territory, except Victoria and Tasmania, in the September 18 quarter, according to the Adelaide Bank/REIA Affordability Report. The proportion of income required to meet rent payments dropped 0.2 per cent to 23.9 per cent of income required to meet median rents. The NT recorded the biggest decline, dropping 2.6 per cent to 18.4 per cent. NSW and Queensland both declined 03 per cent, to 28.5 per cent and 21.9 per cent respectively. WA (16.1 per cent), SA (21.8 per cent) and the ACT (18.4 per cent) all declined 0.2 per cent. Tasmania recorded the largest increase at 0.7 per cent, to sit at 28.3 per cent and Victoria recorded a 0.1 per cent rise to 23.4 per cent.
New home sales decline
The HIA New Home Sales report indicated the number of sales during the three months to October 2018 was down by 10 per cent compared with the same time the previous year. Private detached house sales in October increased by 4.9 per cent in Victoria and by 2.5 per cent in Queensland. New house sales declined in all other mainland states, with sales down by 4.9 per cent in NSW, 5.6 per cent in SA, and 10.7 per cent in WA.
New home approvals fall
Data from the ABS revealed there was a decline of 1.5 per cent in new home approvals across Australia in October 2018, equating to a seasonally adjusted 17,070 homes – representing a drop of 13.2 per cent compared to the same time the previous year. SA experienced the biggest dwelling approval drop with a seasonally adjusted decline of 17 per cent, followed by Tasmania down 3 per cent, Victoria (-2.6 per cent), Queensland (-1.1 per cent), NSW (-0.5 per cent), and WA (-0.1 per cent). Total dwelling approvals (trend terms) slumped in the NT by 12.5 per cent, but rose by 0.8 per cent in the ACT. Approvals for multi-unit homes dropped 5.4 per cent, while detached house approvals rose 1.7 per cent.
Housing affordability improves
The Adelaide Bank/REIA Affordability Report showed that housing affordability improved in every state and territory expect Queensland (where it remained stable at 28.1 per cent) in the September 18 quarter. NSW saw the best improvement in affordability, with the proportion of income required to meet loan repayments dropping 1.5 per cent to 36.6 per cent. WA came in second with a decrease of 1.2 per cent to 22.7 per cent, then the ACT dropping 0.9 per cent to 20 per cent. Drops of 0.5 per cent were recorded in Victoria and the NT, to 33.8 per cent and 21 per cent respectively. SA and Tasmania recorded decreases of 0.3 per cent, to 26.7 per cent and 25.1 per cent respectively.
Resi property prices decline
According to the ABS’s Residential Property Price Index, the price index for residential properties for the weighted average of the eight capital cities fell 1.5 per cent in the September 18 quarter and fell 1.9 per cent through the year. The capital city residential property price indexes fell in Melbourne (-2.6 per cent), Sydney (-1.9), Perth (-0.6) and Darwin (-0.9), and rose in Brisbane (+0.6), Adelaide (+0.6), Hobart (+1.3) and Canberra (+0.5). Annually, residential property prices fell in Sydney (-4.4 per cent), Darwin (-4.4), Melbourne (-1.5), Perth (-0.5) and rose in Hobart (+13.0), Canberra (+3.7), Adelaide (+2.0) and Brisbane (+1.7).
House prices see largest price drop in 7 years
REIA’s Real Estate Market Facts for the September 18 quarter revealed weighted average median prices declined by 1.6 per cent for houses and 0.8 per cent for other dwellings, which is their largest decline in the last year. REIA also noted house prices have seen their largest drop since December 2011. The weighted average median price for houses across all capital cities declined to $751,411 over the quarter, representing a decline in all capital cities except for Brisbane, Adelaide and Melbourne (which held steady). The weighted average median price for other dwellings declined to $587,959 over the quarter, representing a decline in all capital cities except for Melbourne and Canberra.
Negative equity on the rise
APRA’s Property Exposures figures showed banks wrote nearly 26,000 new mortgages with an LVR of more than 90 per cent and a further 51,000 with an LVR of between 80 and 90 per cent – this represents 20 per cent of all loans written in the June 18 quarter. A survey by Roy Morgan in November also found 8.9 per cent of borrowers (up from 8 per cent 12 months previous) were slipping into negative equity. Digital Finance Analytics’ modelling concluded 400,000 households (or around 10 per cent of properties) – both owner-occupiers and investors – are in negative equity.