Housing Market and Economic Update | Chart Pack September 2016

We’re now into the last quarter of the year and so far the property markets have surprised us on the upside, performing much stronger (particularly in Sydney and Melbourne) than most commentators forecast at the beginning of the year

CoreLogic recently released their latest market figures so let’s have a look at what’s happening as well as some of the economic factors impacting our markets.

Home values increased by 1.1% in August 2016 with values 2.4% higher over the three months to August 2016

Clearly our markets have entered the next stage of the property cycle, with capital growth slowing to a  much lower rate than in the last few years. Home values increased

  • Combined capital city home values increased by 1.1% in August with values rising in all capital cities except for Adelaide and Hobart
  • Home values were 2.4% higher over the three months to August 2016 with home values in Brisbane, Adelaide, Perth and Darwin falling over the quarter
  • Over the first eight months of 2016, capital city home values have increased by 7.5% and Perth and Darwin are the only cities in which values have fallen
  • Over the past 12 months, combined capital city home values have increased by 7.0% which is up from 6.1% at the end of July
  • Across the individual capital cities, the annual change in home values have been recorded at 9.4% in Sydney, 9.1% in Melbourne, 4.4% in Brisbane, 3.1% in Adelaide, -4.2% in Perth, 6.5% in Hobart, -4.2% in Darwin and 7.6% in Canberra

The annual rate of capital gain has slowed from its peak but remains quite strong

What the chart above doesn’t really show is how fragmented our property markets really are:

As you can see in the following graphic capital city vary greatly, with the Sydney property market the strongest market in Australia again.

Values continue to fall in Perth

As the housing market moves through its fourth year of growth, several other measures are potentially indicating that buyers may be starting to gain some leverage in the market.

The number of dwelling transactions across the capital cities has been trending lower, but with fewer good properties on the market at a time when there are still plenty of buyers, house prices are moving up – it’s the old supply and demand ratio at work.

Turnover:capital city transaction numbers


Dwelling transactions

Rental markets continue to weaken  
property investors

  • Combined capital city house rents are currently recorded at $484/week while unit rents sit at $466/week
  • House rental rates have fallen by -0.8% over the past year while unit rents have increased by 0.7% (slowest annual growth on record)
  • In Brisbane, Adelaide, Perth and Darwin, rental rates have fallen over the year while Sydney rents are unchanged over the year
  • The current movement in rental rates, coupled with value growth have resulted in rental yields trending lower over the year
  • Gross rental yields for houses are currently recorded at 3.1% and unit yields are 4.1%, both of which are record lows
  • 12 months ago gross rental yields were recorded at 3.4% for houses and 4.3% for units



Annual change

Selling time of homes has increased slightly, while discounting levels are fairly steady

  • The typical capital city house is currently selling after 48 days compared to 41 days a year ago while the typical capital city unit takes 47 days to sell compared to 37 days a year ago
  • The average level of discount is recorded at 6.1% for houses and units compared to 6.0% for houses and 5.8% for units 12 months ago
  • Auction clearance rates have rebounded in 2016 and have typically sat between 65% and 70% so far in 2016 however, they have been above 70% for each of the past five weeks

Vendor metrics: auction clearance rates


Avg vendor discount

New listings are much lower than a year ago while total listings are at similar levels New listings

  • Over the past 28 days there were 39,908 new homes listed for sale nationally and 24,791 of these were listed across the capital cities
  • New listings are -4.7% lower than they were a year ago nationally and -6.8% lower across the combined capital cities
  • There were 227,129 total listings nationally over the past four weeks and 100,828 total capital city listings
  • Nationally, total listings are -2.1% lower than a year ago while they are 3.6% higher across the combined capital cities
  • In Sydney and Melbourne in particular there a significantly fewer new listings than there were at the same time a year ago


State and territory property listingsIs APRA getting its way?

Investors, who were dominating our property markets last year, are now finding it difficult to get finance resulting in investor participation levels today being back around the average level for the last decade, but lending to both owner occupiers and investors is picking up:

Lending to owner occupiers and investors


Housing finance commitments

The following graphs show lending growth to investors falling.

This is a leading indicator – a sign of what’s ahead (as investors generally obtain their finance pre approval is prior to purchasing) –  suggesting quieter times ahead for our property markets.

The annual pace of investment credit growth

Proportion of total outstanding credit

Corelogic's mortgage index indicates


What’s happening around the States?

The Sydney property boom is over, but its fundamentals are still strong and after a slight retracement at the beginning of the year, Sydney’s price growth has resumed at a much more sustainable level:Annual change in dwelling values

The Melbourne property market performed strongly over the last 12 months,  with strong population growth (around 1.8% per annum) and a relatively strong economy creating more jobs have underpinning the Melbourne property market.Annual change in dwelling values

Brisbane’s property market has confounded those “hot spotters” who were predicting it to be the  place to be this year.

While overall growth has stopped, the Brisbane market is very fragmented and there are still some areas that are performing respectably and have good investment prospects. On the other hand there is a significant oversupply of new high rise off the plan apartments overshadowing the inner city area and nearby suburbs.

Annual change in dwelling values

The little flurry Adelaide experienced at the beginning of the year seems has have run its course and  house prices fallen a  little in the last quarter.

Annual change in values

The Perth property market is still in its slump phase with a significant oversupply of properties for sale and values still falling.

Similarly the oversupply of rental properties in Perth is causing rents to fall.

There is still some considerable downside to the Perth market as it works its way through the excesses  of the mining boom:


Annual change in values 2

Similarly there are few growth drivers for Hobart property prices,  and even though some commentators are suggesting it’s a good place to invest “because it has to catch up”, with minimal population growth and slow economic growth there seems little reason for property values in Hobart to grow substantially.

Despite this year’s growth spurt  Hobart has underperformed over the last decade with property prices only increasing 14.1% over the last 10 years.

Annual change in values 3

Darwin property values are  lower than they were 12 months ago, and like Perth, I believe there is more down side yet to come.

Annual change in values 4

The Canberra property market was destabilised by political uncertainty, but the federal election has been and gone, yet the Canberra remains slow:

Annual change in values 5

Economic data remain mixed Economic data remain mixed

  • New lending to both investors and owner occupiers has fallen from recent peaks with investor lending recording a much greater decline however, both recorded an increase in June
  • Total housing credit is rising however, investment credit growth continues to slow and is now increasing at a rate which is less than half that of APRAs 10% threshold for annual growth
  • The rate of population growth at a national level is trending lower although it did pick-up slightly over the December 2015 quarter
  • Dwelling approvals increased substantially in July, recording the second-highest monthly number of approvals on record, largely driven by a surge in unit approvals
  • Consumer sentiment remains at a fairly neutral setting
  • The unemployment rate was recorded at 5.7% in July however, growth in employment continues to be largely fuelled by part-time employment
  • The Reserve Bank cut official interest rates to a record low 1.5% in August

Housing demand

Net overseas migration

Housing supply

National dwelling approvals


Housing supply: the gap between housing demand and supply

Consumer sentiment remained close to a neutral setting in august


Annual change in consumer sentiment

Labour force: unemployment rate


National unemployment rate

Mortgage rates

ASX cash rate futures

Source of graphs: Corelogic

Settled home sales have continued to trend lower Settled home sales have continued to trend lower

  • Over the 12 months to August 2016 it is estimated that there were 328,772 houses and 125,789 units sold and settled nationally with house sales -8.5% lower and unit sales -16.3% lower over the year
  • Across the combined capital cities there were an estimated 198,533 houses and 90,819 units sold over the 12 months to August 2016. House sales are -11.8% lower over the year while unit sales are down -18.7%
  • Most capital cities are seeing the number of sales trending lower however, there are signs in Perth and Hobart, where home values are falling, that sales volumes are stabilising and potentially increasing a little
  • It is important to note, the large volume of off-the-plan sales currently means there is a high likelihood unit sales volumes will be revised higher over the coming years, these properties will be entered into the database at their contract date but will not be available until they have settled

What can you do to stay ahead?

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'Housing Market and Economic Update | Chart Pack September 2016' have 4 comments


    September 15, 2016 Matt

    I always find it disappointing that Tasmania doesn’t get much coverage, however I find it even more disappointing when your report isn’t accurate and has conflicting statements within the one report. Throughout this report you refer to price growth in Hobart yet at the end you claim house prices are falling in Perth and Hobart????


      Michael Yardney

      September 15, 2016 Michael Yardney

      Matt – please don’t be disappointed – While it’s a lovely place to live and I’ve had many great vacations there, Tasmania is not on my radar as an investment grade location.

      It only seems to get attention from the hot spotting guys who keep getting it wrong



        September 17, 2016 Sonia

        Hi Michael,
        Can I ask why Tasmania is not on your radar as an investment grade location please.
        Thank you


          Michael Yardney

          September 18, 2016 Michael Yardney

          Sonia. Because Tasmania has very few drivers for capital growth, in particular virtually no population growth and it has limited economic growth and job creation


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