Here’s a big picture (macro) look at the State of Play of our housing markets in 7 short parts and 17 graphs
Clearly we can’t go into endless detail in one blog post, but follow the links for more details on each section from previously published analysis.
And don’t forget to share online…thanks!
OK let’s take a look in 7 short parts, beginning with…
1 – Demand: Population Growth
Population growth is slowing in Australia on a national basis, dribbling along in South Australia and is slowing sharply in the mining states.
Population growth is all going to be about Greater Sydney and Greater Melbourne in 2015, with huge absolute population growth expected and net interstate migration away from New South Wales falling to the lowest level ever recorded.
2 – Demand: Jobs, Jobs Jobs!
Employment growth has continued through 2014, but at a somewhat slower pace than would be desirable and has only taken place materially in the four largest states.
Headline unemployment rates are generally ticking higher way from Greater Sydney, which has by far and away the strongest economy.
Our recent analysis has highlighted a quite alarming disparity between capital city jobs growth and what is happening (or rather, what is not happening) in regional Australia where jobs growth has stalled.
This is just beginning to flow through to a notable variation in unemployment rates between metropolitan and regional Australia.
New South Wales is a fine case in point with Greater Sydney unemployment set to head below 5 percent on a rolling annual basis in 2015 but regional unemployment in the state rising sharply to head above 7 percent.
There are also significant variations between inner suburban, outer suburban and regional unemployment rates to be considered (especially in NSW).
There is no need to reproduce the entire contents of our entire chart packs here in one blog entry, merely to note that property buyers need to remember these three words: research, research and research!
Note that while unemployment rates may be very low in the inner suburbs of Sydney and Brisbane, regional areas often enjoying few such luxuries.
See here where I explain that unemployment is up to a 12 year record high and here for further detailed analysis of regions with elevated and rising levels of unemployment, which include certain parts of outer Adelaide..
3 – Demand: Housing Finance
Total housing finance has continued to rise, but investor finance has been the real driver of increased activity.
As a result it is the properties favoured by investors – those located in the inner suburbs of capital cities, particularly Sydney, Melbourne, and next to go, Brisbane – which are outperforming, while plenty of regional centres and outer suburban areas are lagging badly.
Owner-occupier commitments may be rising in dollar value terms in most locations…
But in terms of the number of loans being written, Victoria has already rolled and South Australia is already well past its peak.
Sydney looks solid, and the other out-performer in 2015 will be Brisbane.
Investor loans on the other hand are trending higher in the four largest states.
Sydney is due to break all manner of records hitting new record high loans written by the month.Investor activity in Queensland is rising and is up to its highest level since 2007.
The outlook looks good for Brisbane here too.
Part 4 – Rental Yields and Interest Rates
The rent versus buy decision and investment decisions are impacted by rental yields and interest rates.
Interest rates are considered to be only a 20 percent chance to be cut in the month of February 2015, but futures markets believe that the cash rate is all but certain to fall at some point in the next year, which will continue to make owning property an attractive proposition for many Australians as term deposit rates fall yet further.
The rate of real rental growth is generally declining as supply comes online and has already turned negative in Canberra and Darwin, with Perth threatening to follow suit.
Rents in Sydney have remained very robust and are still growing at around 4-5 percent per annum, reflective of there being no oversupply of dwellings in the harbour city.
More detail on the inflation figures can be found here, including why soft inflation data will leave the door open for an interest rate cut in 2015.
5 – Supply: The approvals pipeline
Stacks of detached house building is set to take place in the outer suburbs of Greater Melbourne, with Greater Perth having increased the number of its approvals in 2014.
For such a populous city the levels of detached housing construction in Greater Sydney are absolutely nowhere by comparison.
Sydney unit approvals initially responded to rising prices but have long since peaked with approvals tailing back towards a comfortably manageable 20,000 per annum.
However, an oversupply of apartments is going to land squarely in Melbourne with some areas already well oversupplied.
It has been heartening for Greater Brisbane to see that unit approvals have now eased back considerably after a big pick-up in 2014 – it is possible to have too much of a good thing.
More up-to-date and detailed analysis on the approvals and dwelling supply by city and state can be found here.
6 – Supply: Vacancies and stock on market
Vacancy rates have fallen to very tight levels in Hobart, and remain tight in Adelaide, thanks to a lack of construction in those cities.
Inner and middle ring Sydney is also very tight, with vacancy rates hovering around just 1.5 percent.
Melbourne is not a tight market, and there is a net oversupply of units in the Victorian capital.
The Melbourne property market also has a glut of stock on the market and price growth in that city will likely ease in 2015.
Record numbers of auctions in 2014 suggest that plenty of vendors are ready to capitalise on the upswing in prices, which in turn may cap price growth.
7 – Dwelling prices
Sydney continuing to be the hottest capital in 2015, with Brisbane also now set to pick up.
Hobart could be a surprise package next year, but generally capital growth will be soft away from Sydney and Brisbane.
We’ll release our 2015 housing market forecasts by capital city shortly.
Our forecasts will show the strongest growth expected in Sydney, with Brisbane not far behind, which is why we will be focusing on those two cities in the next calendar year.