June Residex Property Market Update

Property price growth was lower than expect in May.

The growth numbers for May are not as high as what was achieved in recent months. In fact, there are a number of capital cities that have fallen in value.

However, the monthly numbers are “beautiful” as far as I am concerned and that are what I had been hoping for.

With any luck, the statistics will continue on this new trend of lower rates of growth over the next few months.

The growth rates in May are not sufficient to confirm that this lower rate of growth is about to be a new feature, but my best guess is that this will in fact be the case.

Here are the Australian-wide outcome for May 2014.

Capital City Property Market Update May 2014

Housing markets, particularly Sydney, were moving to a “boom” like performance.

This was dangerous and could have led to a “bubble” and a severe correction if it continued. The slowing of the market at this point in time suggests that we are going to avoid this outcome.

Having said this, the market is still overvalued and in reality too expensive.

Here is a summary of national affordability.

Property Market Affordability Indicators

The data clearly points to the difficult affordability conditions for the median family in most capital cities.

The percentage of after tax income it takes to make home loan repayments does not adequately tell the story.

A better statement of the position is the calculated number of after tax dollars a median family has to spend after meeting home loan repayments.

The Sydney median family who buy the current median property valued at $823,500 with a 20% deposit only have around $821 per week to spend after making home loan repayments.

This amount is clearly insufficient for comfortable living.

The trend in the growth numbers for Sydney.

Sydney Property Market Capital Growth Trend

The data in the graph clearly indicates that the Sydney unit market has passed its peak.

However, it is nowhere near as clear that the house and land market has arrived at the same position.

The Sydney house and land assets are more often traded via the auction market and hence clearance rates are potentially a lead indicator for this sector.

In recent weeks across the nation, auction clearance rates are softer – the clearance rate as calculated by Residex was 68% for the week ending 14 June.

This figure suggests a market that is now slowing.

The last 12 months has seen some potentially exceptional growth performances across Australia.

As one would expect, Sydney has produced the highest performing growth postcode with houses in Waitara producing a dollar profit for the year of about $335,000, which equates to an increase in value by 35.5%.

Interestingly, the unit market in country Victoria produced the best outcome in the suburb of Meredith, where unit owners saw growth of 31.1% – an increase of about $81,700.

Another interesting statistic coming out of this growth period was the fact that you can still buy a property with a cost under $150,000.

 Best Capital Growth Performers May 2014

Best Capital Growth Performers May 2014

Bourke has a current median value of $133,500, and while only a few properties were sold in the town last year, there were enough sales to allow a sensible determination of growth.

The Bourke house and land market saw the second highest growth rate in Country Australia of 24.7%.

Perhaps this is not the place to go out and immediately buy property as it is very small, but it is affordable.

However, for me it would be just a little too hot with the record temperature reaching 49.7 degrees Celsius and an average high of 27.6 degrees.



Want more of this type of information?


John Edwards

About

John is Consulting Analyst for Onthehouse, Australia’s most comprehensive real estate portal, and Founder of Residex, a leading Australian research organisation providing quality information on the real estate market to government, financial institutions, valuers, real estate agents, accountants, solicitors and the general public. Visit www.OnTheHouse.com.au/


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