Last week on Real Estate Talk we did with around Australia with nine experts giving their take on the national property market.
Today we’re finishing off this series of 5 blogs with an overview of what’s happening around Australia from Dr Andrew Wilson, Chief Economist for the Domain group:
Kevin: As you have heard during this show, there’s somewhat of a patchy market around Australia with some real highs and lows. I want to bring all of this into perspective now, talking to the Chief Economist for the Domain Group, Dr. Andrew Wilson, who’s a regular guest on our show.
Andrew, thank you for your time.
Andrew: My pleasure.
Kevin: I guess you could call the last twelve months really a bit of a two-horse race between Sydney and Melbourne. It just seems that way, anyway.
Andrew: It does, Kevin, but although we still see that patchiness in a number of capital city markets, we have that spring energy starting to rise in the market. I guess we could say spring has sprung to a large degree.
Most capital city markets have this spring selling season where we do have more buyer and seller activities.
Now, not all markets, but this year, we are starting to see more of a consistency in terms of that higher level of buyer and seller activity now into spring.
We have Brisbane and Adelaide and Hobart rising. Canberra is rising again, and Sydney and Melbourne continue to I guess keep that heat in the marketplace that’s being consistent over the last twelve months.
Kevin: What do you think is behind that massive growth in Sydney and Melbourne? We’re hearing a lot that it has to do with people moving into those cap cities, but is there going to be enough jobs for them?
Andrew: The question mark remains, particularly in that Melbourne market, whether the performance of the local economy can continue to sustain what’s been a strong performance in Melbourne over the last twelve months.
Those unemployment rates, despite a better number over August, are still at levels not recorded for the last ten years in Melbourne, so there are some headwinds still in that Melbourne market.
But Sydney keeps on keeping on, and a lot of the Sydney energy really is investors. Investors are probably the big difference between Sydney and the other capital city markets.
That prices growth that Sydney has recorded over the last twelve months, which is decade-high levels of prices growth, has certainly acted as a magnet to investors.
Investors in Sydney now are at record levels. In fact, nearly 60% of the New South Wales market in total is now in investor activity, as measured by ABS housing loan data. So a big attraction for investors is that Sydney market.
If this continues to feed off its own energy. Melbourne is a similar experience, as well. Confidence is always a key, particularly in housing markets, and confidence is at pretty strong levels at the moment in Melbourne and Sydney.
Kevin: In Melbourne, we’re hearing reports of oversupply of units in the CBD. Would you agree with that?
Mark: Yes, I would. There’s no surprise that there are record levels of CBD high-rise construction. It’s a significant generator of jobs and economic activity, and you can understand how the state government – considering what’s happening with the local economy there, which is certainly underperforming – has been wanting to generate as many jobs as they can.
But the question is whether the amount of high-rise construction that’s happening, particularly in the CBD, can be met by underlying demand. I don’t think the underlying demand is there.
We’ve seen overshoots in CBD high-rise markets before, and I think Melbourne really is on track to have at least in the short term an oversupply of high rise apartments in the CBD area.
In the suburban area, it’s a different story. There’s still plenty of demand for apartments in Melbourne’s suburbs.
Kevin: Just before we round out, I wanted to get comment from you on two other cap cities, that being Brisbane and Perth. Brisbane we’re seeing has underperformed for quite a long time, but there’s a lot of good news on the horizon there.
Andrew: Brisbane is certainly in catch-up mode, no doubt about that. Confidence is returning to that market, particularly mid-price range and upper-price range suburbs in Brisbane.
Inner suburban middle-ring suburbs in Brisbane are attracting plenty of buyer interest at the moment.
Some of those outer suburbs are still a little patchy – higher numbers of listings there – and that reflects what is still a little bit of a weak economy in Brisbane.
But the confidence is rising, and the Brisbane market is certainly on track to be one of the best performers this year.
Kevin: Perth we’re hearing, too, is in a little bit of a holding pattern. It has significantly slowed down.
Andrew: Absolutely. I think that’s good terminology. It is a holding pattern. It’s reached, I guess, a plateau. Perth grew for eight consecutive quarters in terms of house price growth, and it was always going to have a pause.
Unemployment has been rising in Perth, as well, as that resource economy starts to flatten. I think pop price is great and buyer activity will rise sooner rather than later in Perth, but certainly, it’s pausing to catch its breath at the moment.
Kevin: Give me a bit of a snapshot on what you think’s going to happen in the next twelve months.
Andrew: I think that we’ll continue to see quite active levels of buyer activity, but we’re not going to see the type of prices growth generally that we’ve had over the last twelve months. Wages growth is flat.
There’s not the capacity to keep pushing prices up, particularly in that Sydney market. But there’s certainly better news for Adelaide, Brisbane and Hobart.
Kevin: Great stuff. Dr. Andrew Wilson from Domain Group, thank you very much for your time and for helping us get all of that into perspective. Thank you.
Andrew: My pleasure.
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