Investment Property Market Snapshot
Latest industry statistics and analysis.
Asking rents up
Capital city asking rents rose 0.7 per cent in January to $559 p/w for houses and $439 p/w for units, according to SQM Research. Across the capitals: Canberra $635 p/w houses / $468 p/w units; Sydney $705 / $508; Darwin $506 / $391; Brisbane $457 / $376; Adelaide $395 / $302; Hobart $421 / $341; Melbourne $541 / $409; and Perth $439 / $326.
SQM Research also showed the national vacancy rate rose 0.2 per cent to 2.5 per cent in December 2018. The total number of vacancies Australia-wide sat at 82,558, up 7,968 on November. Darwin had the highest vacancy rate at 4.3 per cent (up 0.3 per cent), followed by Sydney at 3.6 per cent (up 0.4 per cent), Perth at 3.4 per cent (steady), Brisbane at 3.2 per cent (up 0.2 per cent), Melbourne at 2.2 per cent (up 0.3 per cent), and Adelaide (up 0.1 per cent) and Canberra (up 0.4 per cent) both at 1.3 per cent. Hobart continued to have the lowest vacancy rate at 0.4 per cent (steady) with just 121 properties available for rent.
Lowest rent movement since records began
CoreLogic’s December 2018 Quarterly Rental Review report revealed the national and combined capital city rent movement was the lowest since data began being collected in 2005. Over the quarter, weekly rents declined 0.1 per cent across Australia to a median of $433 per week (combined capitals were down 0.2 per cent to $462 p/w while combined regionals rose 0.2 per cent to $373 p/w). Across the capitals, Sydney recorded the largest decline at 0.7 per cent to a median of $583 p/w, followed by Darwin (-0.6 per cent to $463) and Canberra (-0.2 per cent to $539). Hobart recorded the largest weekly rent rise at 0.7 per cent to $433 p/w, followed by Perth (+0.3 per cent to $378), Brisbane (+0.2 per cent to $432) and Adelaide (+0.1 per cent to $381). Melbourne remained steady at $451 p/w.
Investor loans fall
ABS Housing Finance figures for November 2018 revealed the value of investor commitments dropped 4.5 per cent month-on-month and 23.4 per cent year-on-year (seasonally adjusted). Overall, the value of home lending fell 2.5 per cent in November (owner-occupier lending fell 1.4 per cent).
Investors look to non-majors for loans
AFG lodged $13 billion in home lending applications in the December 2018 quarter, down 8 per cent on the prior quarter. They noted credit tightening was having an impact on volumes in every state and that borrowers were increasingly using the services of a mortgage broker to secure loans, with three out of every five mortgages in Australia now generated through brokers. It was also revealed that the non-major lenders’ market share was at a record high of 42.1 per cent, with 43.4 per cent of investor loans written by non-majors.
House prices stabilise
Realestate.com.au’s January 2019 Property Outlook report revealed conditions remained highly variable across the country, with most capital cities either stabilising or recording moderate growth in 2018. Sydney had the largest median price fall year-on-year for December, with an annual change of -5.9 per cent (median price $840,000), followed by Darwin and Perth (both -3.6 per cent and $440,000 and $475,000 respectively) and Melbourne (-1.5 per cent, $665,000). Annual median house price growth was recorded in Hobart (+8.4 per cent, $420,000), Canberra (+1.4 per cent, $591,000), Adelaide (+1.1 per cent, $437,511) and Brisbane (+0.4 per cent, $490,000).
Based on the number of views per listing on the site, the top 10 most in-demand areas for the December 2018 quarter were: Middle Park, VIC; Battery Point, TAS; Aldgate, SA; Crafers West, SA; Collaroy Plateau, NSW; South Hobart, TAS; Belair, SA; East Geelong, VIC; Killarney Heights, NSW; and Red Hill, VIC.
Building activity slows
Figures released by the ABS for the September 18 quarter revealed a total of 54,803 dwellings commenced construction, which was down by 5.7 per cent in the quarter and down by 2.2 per cent against the same period a year ago. Detached house starts were down by 4.5 per cent in the quarter but were comparable with the level of starts during the September quarter a year earlier. Starts of ‘other dwellings’, primarily apartments, were down by 7.1 per cent in the quarter and down by 5.3 per cent on the year-ago level. The HIA noted that total housing starts increased in Queensland (+8.3 per cent), WA (+2.9 per cent) and in the ACT (+41.5 per cent), but declined in SA (-18.6 per cent), Victoria (-16.0 per cent), Tasmania (-6.0 per cent), NSW (-5.5 per cent) and the NT (-2.9 per cent).
Listings down, asking prices mixed in December
National listings declined 9.2 per cent in December 2018, according to SQM Research figures. Declines were pronounced in Sydney (-17.7 per cent), Melbourne (-17.2 per cent) and Canberra (15.5 per cent) – a complete reversal of fortunes on the year prior when listings were up 2.8 per cent with Sydney (16.5 per cent), Melbourne (25.4 per cent) and Canberra (19.3 per cent) leading the charge. Asking prices in December 2018 rose 0.4 per cent to $571,600 for units, but declined 0.9 per cent for houses to sit at an average of $924,500.
Credit access top barrier to price growth
CoreLogic has stated that access to credit will remain the most significant barrier to price house growth in 2019. Median house prices across all capitals fell 4.7 per cent in 2018, with access to credit providing the primary negative impact (IO lending had tracked well below the recently-discarded 30 per cent limit, credit growth for investment had flatlined and owner-occupier loan growth had slowed sharply in the final six months of 2018). Sydney was the worst performing capital, with median house prices falling 8.9 per cent, followed by Melbourne at 7 per cent. Hobart was the best performing capital in 2018, experiencing an 8.7 per cent lift in median values.
Building boom aiding affordability
According to the HIA’s Affordability Index for the last quarter of 2018, Australia’s capital cities experienced a rise in housing affordability with the index sitting at 75.4 (increasing 1.5 per cent over the quarter and 3.3 per cent higher than the same time the year prior). For the quarter, most capitals saw improvement in affordability, with Sydney’s index up by 11.3 per cent, followed by Melbourne (+5.9 per cent), Perth (+5.7 per cent), Darwin (+3.2 per cent) and Brisbane (+0.8 per cent). Affordability declined in Hobart (-9.3 per cent), Canberra (-3.6 per cent) and Adelaide (-3.3 per cent). Data also showed 2018 was the fifth year in a row with over 200,000 home starts and it was a record year for new home completions, with the HIA stating that the strong flow of new housing supply was one of the key factors behind moderation in price pressures, which has ultimately improved affordability.
Australia 2nd least affordable
According to the 15th Annual Demographia International Housing Affordability Survey, Australia is the second most unaffordable market for housing. Hong Kong ranked as the least affordable overall with a median multiple of 20.9 (determined by dividing the median house price by gross annual median household income). Australia’s figure was 5.9, closely followed by NZ at 5.8. The top 10 least affordable countries were rounded out by Singapore (4.8), the UK (4.5), Japan (4.2), Canada (3.9), the US (3.7) and Ireland (3.7). Sydney (12.9, 3rd worst city worldwide after HK and Vancouver), Melbourne (9.9, 5th), Adelaide (6.6), Brisbane (6.2) and Perth (5.9) were all ranked as severely unaffordable.
Major bank’s tips for suburbs growth
NAB’s Residential Property Survey Q4–2018 found sentiment among over 300 property experts had fallen to “a new survey low”. The bank also predicted prices will decline in some markets (namely Sydney and Melbourne) and hold steady in others, with further tightening of credit and weaker price expectations from investors likely to impact prices further. Despite this, the bank predicted above average growth over 2019 for a number of suburbs: Bondi, Newcastle, Penrith, Surry Hills, Sydney (NSW), Ballarat, Frankston, Melton, Seaford, Werribee (VIC), Brisbane, Coolangatta, Gold Coast, Sunshine Coast (QLD), Armadale, Scarborough (WA) and Hobart (TAS).