Our property markets keep bounding along with the five capital city index increasing 0.4% over the last week alone.
Over the past three months, property values have increased 6.9% in our major capital cities, yet we are only a third of the way through the year.
Recent residential auction market momentum continued over the last weekend, capital city auction volumes the second-highest week this year and no impediment to prices marching higher still. Clearance rates remain high.
An interesting period lies ahead with signs there is a noticeable uplift in new supply entering the market in the coming weeks.
The Federal Treasurer announced over the weekend more support for first home buyers, set to be featured in Tuesday’s Federal Budget, a budget that will have housing as one of its focus points.
A Family Home Guarantee Scheme was announced on the weekend.
The aim of the scheme is to help single parents enter the housing market, a scheme kicking off on 1 July.
Under this scheme, single parents with children will have the benefit of a Federal Government guarantee for up to 18% of the value of the home, on say a minimum 2% deposit.
It is being available under a means test for incomes up to $125,000, and an offering for 10,000 places is being made available.
Note that it is a government guarantee, not a subsidy, with normal mortgage lending criteria applying.
The Government also increased the First Home Super Saver Scheme from $30,000 to $50,000, it extended the First Home Loan Deposit Scheme into 2021-22 as well as additional monies to boost the stock of public housing.
And in the meantime…prices continued on their merry way higher.
- Sydney properties increased 0.5% over the last week alone
- While Melbourne properties increased in value by 0.3% over the week
So far this year property values around Australia have increased 7.8%.
This surge in property value has caused all our major banks to forecast 20% to 30% rises in property values around Australia this cycle with strong growth continuing for some time and then slowing down over the next couple of years.
The number of properties for sale in Australia has seasonally peaked
An interesting period lies ahead with signs there is a noticeable uplift in new supply entering the market in the coming weeks.
The Federal Treasurer announced over the weekend more support for first home buyers, set to be featured in Tuesday’s Federal Budget, a budget that will have housing as one of its focus points.
As you can see from the chart below, there are 10.9% for your properties for sale this year than they were 12 months ago.
But as always property markets are fragmented and while Melbourne has significantly more properties for sale than 12 months ago, just see what’s happening in some of the other states in the table below.
Clearly, strong demand at a time of limited supply must lead to continued property price growth.
To help keep you up-to-date with all that’s happening in property, here is my updated weekly analysis of data and charts as of May 10th provided by NAB, Corelogic, and realestate.com.au.
What’s happening in our property markets?
The REA Buyers Index
The REA Insights Buyer Demand buyer demand increased by 0.7% last week as buyer activity remains heightened.
According to Paul Ryan, Buyer demand is now only -7.8% below the historic peak recorded in mid-February this year.
Demand remained broadly stable across most state and territories, with the exception of Western Australia and the Australian Capital Territory, where demand was up over 4%.
Over the past year, unit demand has been the stand-out. In line with increased first home buyer activity, unit demand has increased by 38.6% – almost twice the increase seen for houses (21.4%).
However, it’s worth noting this compares to a period in 2020 when demand was recovering from onerous lockdowns across the country.
Buyer demand has increased strongly across Australia, however the smallest increases have been seen in Tasmania and the Northern Territory, increasing by 11% and 14%, respectively.
Demand remained high throughout the latter half of 2020, but has increased further in 2021 so far.
This suggests ongoing momentum in the housing market.
Demand is likely to remain at elevated levels over the coming weeks and months as interest in the property market remains high.
However, more stock coming onto the market will likely lead to more buyers transacting on new homes, which in turn could weigh on the overall level of demand.
The REA Rental Demand Index
The REA Insights Rental Demand Index, increased slightly last week, rising 1.2%.
According to Paul Ryan, Western Australia saw the biggest increases in rental demand, up by almost 5%.
Aggregate rental demand is at very similar levels to a year ago, when the country was emerging from national lockdowns in response to the coronavirus pandemic.
But there has been regional variation over the year: rental demand is up 31% in the Australian Capital Territory, but is down 10% in Queensland.
Rental demand has been driven by units, which have increased 4.5% over the year.
By contrast, house demand has fallen by -6.4%.
But while rental demand remains 20% below the peak seen in interest in mid-January this year, the level of demand remains much higher than seen prior to the pandemic.
This is surprising given that foreign students – traditionally a strong source of rental demand in inner-cities – remain unable to enter the country.
First-home buyer activity remains strong, making up the highest share of new lending since 2009, so we may see rental demand continue to drift lower over the coming weeks and months.
But once border closures are removed, expect rental demand to return – particularly in inner-city regions when students are prevalent.
Median property prices
NOW READ: Why Bluechip property will rebound strongly in 2021
Vendor Metrics
Vendor metrics suggest we’re in a seller’s market with the number of days to sell a property decreasing (a sign of the tight supply situation), and vendor discounting (it’s easier for them to sell) at realistic levels.
The shortage of good properties on the market is seeing properties selling quickly with minimal discounting.
Our Rental Markets
Rental market conditions remain diverse, with significant differences between the regions and housing types.
From a geographic perspective, the tightest rental markets are Darwin and Perth, where both house and unit rents are recording double-digit annual growth.
Tim Lawless research director of Corelogic explains …
“Rents are rising at a record-setting pace across both Perth and Darwin, with the quarterly trend up 5.9% and 7.7% respectively.
Rental prices in Perth and Darwin started surging higher in September last year.
The monthly growth in rents across Perth quickly accelerated from an already high 1.1% in September 2020, to 2.0% by March 2021.
Darwin rents have risen by an average 2.1% per month for the past seven months, including a 2.4% lift in March 2021.
Both these markets have seen a recent history of low housing investment which has kept rental supply low at a time of rising demand.
Although rents are surging in these cities, it is off the back of a long period of rental value declines. Perth rents remain -16.0% ($80/week) below the 2013 peak and Darwin rents remain -24.6% ($150/week) below their 2014 peak.”
Weaker rental conditions can be seen in the unit sector, both at a macro level and across the sub-regions of each city.
Overall, unit rents have been showing weaker conditions relative to houses throughout the COVID period to-date.
Since March last year, capital city house rents are up 5.2% while unit rents are down -3.8%.
The biggest drag on unit rents are Melbourne and Sydney, where unit rental conditions have been much weaker due to the demand shock caused by stalled overseas migration and international border closures.”
Sydney unit rents have posted a subtle rise over the past three months, while unit rents in Melbourne have held firm over the same period.
With housing values rising faster than rents, gross rental yields have been trending lower.
Most regions are still showing a gross yield higher than typical mortgage rates, implying some opportunity for positive cash flow investments.
Sydney and Melbourne stand out as having a much lower yield profile.
Both cities have seen gross yields fall to new record lows in March, with Sydney recording a gross yield of 2.7% and Melbourne dropping below the 3% mark for the first time on record.
Last weekend’s auction clearance rates
There were 2,563 capital city homes taken to auction this week and of the 1,923 results collected so far, a 78.7% preliminary auction clearance rate was recorded.
Both volumes and clearance rates are up on last week’s figure when 2,041 properties were auctioned across the capital cities and the preliminary auction clearance rate was 80.5%, later revising down to 78.5% by final collection on Wednesday.
Now is the time to take advantage of the opportunities the current property markets are offering.
Sure the markets are moving forward, but not all properties are going to increase in value at the same rate. And some sectors of the market will continue to languish.
Now, more than ever, correct property selection will be critical.
You can trust the team at Metropole to provide you with direction, guidance and results.
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Source of graphs and data: CoreLogic, NAB and REA
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'This week’s Australian Property Market Update – Latest Data, State by State 10th May' have 27 comments
May 4, 2021 Bahee
Our syndicate is a small time developer/investors. Lately I am focusing at St Marys, NSW.
The price of a townhouse yet to pickup even though with the Western Sydney airport and St Marys being the main interchange. Is there a reason for that?. We just bought a land to build 12 townhouses (yet to go through DA application).
May 4, 2021 Michael Yardney
There is no reason for property values to rise just because there’s a new airport coming up. No one wakes up in the morning and things “i want to live near an airport” I wouldn’t be investing in those locations that have always underperformed
March 9, 2021 Joe
Hi. Love your website, fantastic resource. I recently moved to Oz, so figuring out lay of the land and me and my partner are currently figuring out where we want to base ourselves. I have $200k in savings that I had earmarked for a property, and wondering if I can make this work for me in an investment sense. Not sure where I’d even start on this journey as I have no experience. Any advice very welcome. Thanks Michael. 🙂
March 9, 2021 Michael Yardney
Joe – since you’re new to Australia seek independent professional advice. Are you an Australian citizen or permanent resident – that makes a huge difference in the type of property you can buy
December 19, 2020 Lisa
Hi Michael, we’ve had a townhouse in Kedron for 5 years that we purchased for $520k and is only valued at $580k. It’s neutrally geared – would you suggest selling to look at land / something with more CG potential or better to hold for longer?
December 19, 2020 Michael Yardney
Lisa – Kedron is a good area but clearly your property has underperformed. There are a number of different neighbourhoods in Kedron some of which do not perform as well as others and obviously some properties in these locations will outperform others. There are too many variables to take into account for me to answer this correctly without a lot more information, but we have some spreadsheets and frameworks we can use to help give you the right answer.if you’d like help making the decision, please email me michael at metropole.com.au and I’ll set things up for you
December 2, 2020 Rod
Hi Michael,
I’m interested to get your thoughts on Newcastle and Hunter Region areas. Newcastle now has the 4th highest median property price in the country. Massive growth opportunity (area) or have people missed the boat?
December 2, 2020 Michael Yardney
Rod, there’s no doubt the Newcastle in the Hunter region great locations to live, but I have found in the past when locations grow too fast, they then revert back.
Just see what happens when Brisbane property prices were almost the same as Sydney a couple of decades ago and are now half of Sydney and similarly when Perth’s median property price was almost the same as Sydney’s and is now half of Sydney’s median price.
At the price you would have to pay to get investment great properties in Newcastle, I think they’re better long-term opportunities elsewhere.
November 17, 2020 Richard Jones
Hi Michael,
In the past couple of days it has been reported an increase of 18% in Perth’s property market 2021 – 2023. After years of negative growth and lowest house prices across the nation, could you provide some comments on why such a big % increase is expected and will it last? – Many thanks Richard
November 17, 2020 Michael Yardney
Richard, I didn’t make that forecast so I can’t really comment. Who did? Possibly “an expert’ chasing a headline.
Don’t believe all the forecast you hear. Think about it – did all those forecasts “experts” made at the beginning of this year come true?
October 13, 2020 Ben
I wish Core Logic would present current statistics, and not ones which are 2-3 months old. A lot has happened since August. I also appreciate that your focus is the big markets of Sydney and Melbourne, but perhaps these posts could improve with a contribution from expert writers who know something about the rebounding regional markets – not just the major state capitals?
October 13, 2020 Michael Yardney
Ben – thanks for your thoughts. Much of this Corelogic data is updated weekly.
You’re right – we don’t cover the the regional market much do we.
October 6, 2020 Linnet Marshall Joseph
I found this blog pretty helpful. It’s really sad to see the kind of impact Covid-19 has had on all the sectors and specifically the real estate sector. I personally feel that the sudden re-appearance of Covid cases in Australia may lead to a further decline in the property prices and may take a while to bounce back. The future is always uncertain and unreliable. Luckily, I came across a real estate agent Broadbeach who is a great advisor with excellent market knowledge. I will be taking his help in making my investment decision for the right property at the right time because the current scenario doesn’t seem to be going well for making investment decisions and without the proper guidance from a real estate advisory help, property investment may be risky.
October 6, 2020 Michael Yardney
Linnet yes it’s a shame what’s happened to our beautiful country – be careful, most Real Estate agents are great at selling properties but very, very poor at giving investment advice. They are not licensed to, nor trained to and should not even ventured down that path. In today’s very challenging market to be careful who you seek advice from
August 5, 2020 Philip
The spike in search for property listings is not due to interested buyers but by an increase in distressed sellers checking out what their failed investment is now worth on READ and how much they have lost. Winter should normally be quiet season for property sales. It is unusual to see an increase in property sales volumes in winter. Can only be explained by distressed sellers
August 5, 2020 Michael Yardney
I can see why you might come to that conclusion by looking at one stat in isolation – that’s why we look at the complete picture and Corelogic and independently Dr. Andre Wilson keep track of buyers and transactions – there ARE more genuine buyers around. REA believes so also becuase they keep coming back to the same property on search
July 21, 2020 Geoff Hadley
With the record levels of existing household debt, falling real wages, rising permanent unemployment, contracting bank credit, declining immigration, contracting GDP, depletion, of superannuation, ineffectiveness of the first home buyer and other assistance schemes (only leads to inflated prices) absence of investors, over supply of units (of dubious quality) abismal rental prospects, 1.2 million vacant properties and a persistent declining world economy, why would I expect the general property market to rise. Granted premium properties will hold up but what about the vast new estates and over valued areas like Perth and Darwin? What happens when the present support schemes finish in Sept or later next year. What happens when the supposed V shaped recovery turns out to be an L with stagflation and real unemployment/under employment >8%. We can’t all afford to buy in Middle Park? And what happens when interest rates rise in the next 5 – 6 years.?
Get real! I would appreciate an answer. Maybe I an wrong.
Geoff
July 21, 2020 Michael Yardney
Thanks for your comment Geoff- I agree with all the issues that you have mentioned – there are a lot of headwinds that will hold back your economy and our property markets.
But there isn’t one Australian property market, and interestingly there are still a number of suburbs where property values are increasing in value, well outperforming the averages (I guess that’s how averages work – some outperform and some are underperform)
I’ve always learnt taking a long-term perspective is important when investing, and I’m not really sure that in this particular blog I suggest of the property market is going to increase in the short-term – in fact I said the opposite.
With regard to your comment about interest rates. I really hope they will increase in a few years time, because the only reason interest rates are going to increase is because our economy will be booming, property values will be increasing, unemployment will be very low and wages will have risen considerably. So the RBA will need to raise interest rates to slow down the boom. that’s the economic cycle
June 2, 2020 Craig Poole
IN todays report you quote “Sydney house values increased by 0.3% last month (+15.8% over the last year)” however the reported data in the ear;y part of the report and the news states that values fell by 0.4%? Can you help me understand the difference between the two stats against the same apparent period.
Thanks
June 2, 2020 Michael Yardney
I update the top section of this blog weekly and the lower half, state by state section monthly
May 16, 2020 ANN HOME
Very informative. Thank you for sharing.
March 24, 2020 Michael
I think that’s about 27 State by State market updates in a row, where you’ve told us there will be a downturn in Tasmania.Which has still yet to eventuate. It’s all good and well that say that the growth has ‘dropped by 2%’ or what have, but when that’s 7% growth down to 5% growth, still out performing most of the country.
May 27, 2020 Long Time Fan Losing Faith
While once a massive Yardney fan, credibility is in question at the moment, and not because you’re not seeing the future (no one can), but for continually stating the boom is over, the markets on the slide, yet as Michael March 24 states, doesn’t eventuate. Surely self-analysing and learning from our errors makes us better at what we do moving forward? Instead of the cut and paste job for Hobart and to a lesser extent Darwin. Perhaps those areas are too far away for you to profit from their investors? It;s also interesting that you pick and choose which graphs some cities appear in. Come on mate, you’re better than that.
May 27, 2020 Michael Yardney
Thanks for letting me know your thoughts.
Yes I don’t comment a lot about Darwin and Hobart, because it’s really difficult to write something different every month about these very, very small market.
While no doubt the re are opportunities in most property markets around Australia, I have only been prepared to “risk” my money in the three big capital cities and that’s the only place we Recommend our clients invest.
Since we don’t have any properties for sale and my only interested in ensuring our clients don’t lose money, going with the big long term trends has stood us well for over 40 years. I’m happy to stand on that track record.
December 25, 2019 Rio Siva
Hi Michael,
I recently read that the Queensland government might bring the following laws which do not favor property owners. Is this true and how likely this is going to happen??
The Queensland Government has announced Stage 1 of its proposed rental reform, with changes to include:
– Forcing property owners to consent to pets
– Allowing tenants to modify properties without consent
– Forcing property owners to renew tenancies indefinitely
– Introduction of minimum housing standards requiring the rental property and its inclusions to meet prescribed standards and to be in a certain state of repair.
Thanks,
Rio
December 18, 2019 Tam
We have recently been looking at Boondall and surrounding suburbs in Brissy and have found that there seems to have been up to a 5% increase in basic entry level properties and even a bigger increases for some quality or well presented entry level properties.
December 18, 2019 Michael Yardney
Sure Tam – but be very careful – entry level properties in this location are NOT likely to be long term “investment grade” properties