Investment Property Market Snapshot
Latest industry statistics and analysis.
Asking rents up
In February, capital city asking rents rose 0.2 per cent to $560 p/w for houses and rose 0.7 per cent to $442 p/w for units, according to SQM Research. Across the capitals: Canberra $644 p/w houses / $460 p/w units; Sydney $710 / $510; Darwin $504 / $384; Brisbane $457 / $374; Adelaide $392 / $299; Hobart $418 / $357; Melbourne $543 / $417; and Perth $440 / $328.
SQM Research showed the national vacancy rate declined 0.3 per cent to 2.2 per cent in January. The total number of vacancies Australia-wide declined to 72,574, down 9,984 on December. Darwin had the highest vacancy rate at 3.8 per cent (down 0.5 per cent), followed by Sydney at 3.2 per cent (down 0.2 per cent), Perth at 3.0 per cent (down 0.4 per cent), Brisbane at 2.7 per cent (down 0.5 per cent), Melbourne at 1.9 per cent (down 0.3 per cent), Adelaide at 1.1 per cent (down 0.2 per cent) and Canberra at 0.9 per cent (down 0.4 per cent). Hobart was the only capital to record a rise in vacancies, up 0.1 per cent to 0.5 per cent.
Rental yields at 3-year high
According to the CoreLogic’s home value index for January 2019, the national gross rental yield is 4.01 per cent. While rents were up just 0.4 per cent over the 12 months to the end of January 2019, the 5.6 per cent decline in dwelling values pushed gross rental yields above 4 per cent for the first time since May 2016.
National dwelling values declined by 1 per cent in January, according to CoreLogic’s hedonic home value index. Every capital, apart from Canberra, recorded a month-on-month fall in dwelling values, while the weakest conditions were in Sydney (-4.5 per cent) and Melbourne (-4 per cent). The report noted regional markets were generally showing healthier conditions relative to the capitals. The combined regional index was down 0.6 per cent over the three months ending January while the combined capitals index was down 3.3 per cent over the same period.
Investor lending falls
Investment lending declined 1.6 per cent (down $125 million) from November to December 2018, according to ABS data. The share of investment loan flows for residential property was 28.5 per cent of housing flows. New investment loan flows fell 3.4 per cent and refinanced investor loans were down 21.3 per cent. Credit flows for investor purposes across the states over the last 12 months: NSW -25 per cent, Vic -21.5 per cent, SA -14 per cent, WA -12 per cent, Tas -24 per cent, NT -4.7 per cent, and ACT -37 per cent. The number of first time property investor buyers also dropped.
Rental sentiment up
According to NAB’s Residential Property Survey Q4-2018, rental sentiment saw a slight increase over the quarter, rising by 1 per cent as rental yield was predicted to increase. NSW was the only state to predict rental markets to decline by 0.1 per cent, while rents are expected to grow by 1 per cent in Victoria, 2 per cent in Queensland, 1.9 per cent in WA and in the combined markets of SA and the NT by only 0.1 per cent. In contrast, property sentiment was at a survey low, dropping 11 points to -20 for the last quarter of 2018.
House prices decline
Only Adelaide and Hobart recorded house price increases in 2018, according to the Domain House Price Report for the December 2018 quarter. It was also found units were performing better than houses. Across the capitals: Adelaide (+1.7 per cent over the year to $537,971 for houses and up 0.7 per cent to $321,430 for units), Hobart (+8.8 to $479,685 / -3.5 to $342,796), Sydney (-9.9 to $1,062,619 / -5.8 to $702,012), Melbourne (-8.4 to $833,321 / -4.3 to $479,306), Brisbane (-0.1 to $566,058 / -7.9 to $369,882), Canberra (flat to $738,933 / -6.1 to $412,718), Perth (-3.3 to $546,281 / -2.9 to $351,818), Darwin (-8.7 to $514,876 / -13 to $321,990).
SQM Research found national residential listings declined 0.03 per cent in January 2019 to 328,089 from 328,203 in December 2018. Sydney and Melbourne listings were down 2.3 per cent, while Canberra dropped 2 per cent. All other capitals were up marginally, with Hobart recording the largest increase at 1.4 per cent.
New builds decline
Figures from the ABS revealed building approvals declined by 8.6 per cent over December to 13,995 properties. The largest decline (seasonally adjusted) was recorded in Tasmania (-24.3 per cent), followed by NSW (-8.6 per cent), Victoria (-8.1 per cent) and Queensland (-5.8 per cent). Dwelling approvals rose in SA (+5.6 per cent) and WA (+1.1 per cent). In trend terms, the NT saw a rise in approvals of 1.7 per cent, while the ACT saw a decline of 21.3 per cent. The HIA noted that its research had found that the time taken to gain approval for a loan to build a new home had blown out from around two weeks to more than two months.
Less competition for investors
PRDnationwide’s Q1 2019 Key Market Indicators report showed the number of first homebuyer loans declined 3.7 per cent over the last 12 months up to the September 2018 quarter. However, the home affordability index rose by 2.6 per cent to 31.9 index points over the past 12 months, meaning properties were becoming more affordable. Coupled with this is the fact that rental transactions increased, which, the report noted, means in markets where there are softer prices and increased rental activity, there are good opportunities for property investors.
Mortgage stress at record high
Digital Finance Analytics’ January mortgage stress and default analysis update revealed the housing debt ratio had continued to climb to a new record of 139.6 (based on RBA figures), with 31 per cent of owner-occupier borrowing households now in mortgage stress.
Chinese residential investment wanes
The 2017-18 annual report of the FIRB revealed for the first time since FY13, the US surpassed China as the largest source country for foreign investment, with an increase in approved investment from $26.5 billion in FY17 to $36.5 billion in FY18. China was the second largest source country, with approved proposed investment decreasing to $23.7 billion in FY18 from $38.9 billion in FY17. By approval numbers, 91 per cent of all approvals were for proposed investment in residential real estate worth $12.5 billion (down from $17.5 billion in FY17).
Mortgage delinquencies rising
S&P Rating’s SPIN to December 2018 (an assessment of the risks in Australian Residential Backed Mortgage Securitisation Pools), showed there was an overall rise in mortgage delinquencies (to sit at 1.38 per cent), with the exception being Tasmania. Defaults: WA (+0.10 per cent to 2.73 per cent), NT (+0.36 to 2.77), SA (+0.06 to 1.5), Qld (+0.08 to 1.73), NSW (+0.07 to 1.13), ACT (+0.04 to 1.03), Vic (+0.03 to 1.23) and Tas (-0.04 to 1.12).