State by state: An update on the Australian property markets, September 2018

Who’s property market forecasts are you going to believe?

Those of the media outlets who tell us our property market is “collapsing” when in reality values have fallen a total of 2% over the last year. 15 Australia 10

Or our new treasurer, Josh Frydenberg, who after consulting with the RBA and APRA has concluded that we’re in for an “orderly” soft landing in the Sydney and Melbourne markets.

Now I’m not suggesting property values won’t fall further in some locations – they will, but there is no sign of a general market collapse.

The current tight lending criteria and subdued consumer confidence will continue to weigh on the market, but recently ANZ Bank suggested that there are signs the property markets could stabilise by year end.

So let’s take a look at what’s really happening around the Australian property markets as we unpack the latest Corelogic charts and stats:

Index Results

Over the last year property values have trended higher in Hobart, Canberra, Adelaide and Brisbane; but are lower in Perth, Darwin, Sydney and Melbourne.

Quarterly Data Highlights

 

Dwelling Values

THE UPPER END OF THE MARKET IS SUFFERING MOST

As is normally the case at this stage of the cycle more expensive properties, which are more subject to discretionary spending, are the weakest segment of the market.

CoreLogic recorded a 5.4% fall in values across the upper quartile of the combined capitals over the past twelve months, while the broad middle of the market is down 0.5% over the year and the most inexpensive quartile has recorded a 0.6% rise in values.

This trend towards weaker premium housing market conditions is largely attributable to larger falls across Sydney and Melbourne’s most expensive quarter of properties where values are down 8.1% and 5.2% over the past twelve months.

Dwelling Values2

 

SYDNEY HOUSING MARKET

The Sydney property market peaked in mid 2017 and is experiencing a soft landing after 5 years of strong price growth.

Over the past five years, median dwelling prices have increased by 51.0% compared to household incomes increasing by just 16.1%.

It has been a similar story over the past decade with median price growth (89.0%) more than double the household income growth (42.0% meaning housing affordability has become an issue for some segments of the market. 

investor-enquiry-form

While Sydney is the most expensive city in Australia, it is also clearly the most valuable and will continue to experience a chronic shortage of homes.

Strong economic growth and jobs creation is leading to population growth and ongoing demand for property in Sydney with underlying demand is well ahead of supply and the rental market is tightening.

At the same time international interest from tourists, migrants and investors continues.

However now more than ever, critical property selection will be more important to find an investment grade property that will outperform the property markets

Sydney is currently offering investors an opportunity to buy established apartments in the eastern suburbs, lower north shore and inner west in a “buyer’s market” with little further downside and the prospect of the market moving forward again in 2019.

If you’d like to know a bit more about how to find these investment gems give the Metropole Sydney team a call on 1300 METROPOLE or click here and leave your details.

Dwelling Syd

Sydney property market

MELBOURNE HOUSING MARKET

The Melbourne property market peaked in November 2017 and is experiencing a soft landing after 5 years of strong price growth.

MelbourneProperty values are now 3.5% below their peak.

Over the past five years, median property prices in Melbourne have increased by 41.5% and over the past decade they are 77.3% higher.

By comparison, household incomes are just 12.4% higher over the past five years and 34.7% higher over the decade, both of which are much lower than price growth, meaning housing affordability has become an issue for some segments of the market.

While Melbourne’s property prices are likely to fall by a little further, they will be underpinned by a robust economy, jobs growth Australia’s strongest population growth and the influx of 35% of all overseas migrants.

Melbourne rates as one of the 10 fastest growing large cities in the developed world, with its population likely to increase by around 10% in the next 4 years.

If you’d like to know a bit more about how to find investment grade properties in Melbourne please give the Metropole Melbourne team a call on 1300 METROPOLE or click here and leave your details.

Dwelling Melb

Melbourne property market

BRISBANE HOUSING MARKET

Property price growth in Brisbane has been slow over the past few years, however Brisbane is the market with the most potential for growth over the next 3 years.

Housing is relatively affordable in Brisbane compared to the other east coast capital cities.

Over the past five years, median prices are 16.1% higher while household incomes have increased 9.2%. Brisbane

Throughout the 10 years to June 2018, prices are 24.1% higher while household income growth has been stronger at 31.3%.

Queensland has led the nation in net interstate migration over the past year 

The population of Qld. increased by 81,461 persons over the 12 months to December 2017 with QLD accounting for 21.0% of the nation’s population growth over the year.

The 81,461 person increase in population was split between: natural increase of 29,602 persons, net overseas migration of 29,349 persons and net interstate migration of 22,510 persons.

Over the year, natural increase was the lowest it’s been since June 2006, net overseas migration was the lowest it’s been since June 2016 and net interstate migration has increased for 12 consecutive quarters and is at its highest level since September 2007.

In another positive sign Queensland’s job creation is quite strong but the unemployment rate remains stubbornly high

The trend unemployment rate in Qld was reported at 6.1% in June 2018, slightly higher than the 6.0% recorded a year earlier.

Over the past 12 months, Qld has created 62,739 jobs.

Based on 62,739 jobs created over the past year, total employment has increased by 2.6% which has accounted for 19.6% of all jobs created nationally.

If you’d like to know a bit more about how to find investment grade properties in Brisbane please give the Metropole Brisbane team a call on 1300 METROPOLE or click here and leave your details.

Dwelling Bris

ADELAIDE HOUSING MARKET

The annual rate of property price growth continues to slow in Adelaide, but prices are up 1% over the last 12 months, a better result that in some other capital cities.property markets Adelaide

The greatest price growth has shifted from the highest valued properties towards the lower and middle of the market.

There is also a 12.5% increase in new unit supply expected over the next two years, and this is likely to put a dampener on the market.

With little price growth, housing remains relatively affordable in Adelaide.

Over the past 5 years dwelling prices are 15.6% higher compared to an 11.9% increase in household income growth.

Over the past decade total house price growth (31.6%) and the growth in household incomes has been very similar.

I know some investors are looking for opportunities in Adelaide hoping (“speculating”) prices will increase but there are few growth drivers in Adelaide which is experiencing above average unemployment rates and poor employment growth.

There are better places to invest than Adelaide.

Dwelling Adelaide

Adelaide property market

PERTH HOUSING MARKET

The Perth property market has been on a downward trajectory since peaking in June 2014.

For a brief period earlier in the year, Perth’s housing market was showing some positive month on month improvements in housing values, however values have ticked lower over each of the past four months to be down 2.3% over the first eight months of the year.

The local unit market has recorded weaker conditions relative to houses, with unit values down 5.5% over the year to date while house values are down a lower 1.5%.

Vendors are understandably reluctant to sell their property with conditions remaining soft; in fact new listing numbers are tracking at a six year low and we are yet to see the normal seasonal ramp up in listing numbers in line with spring.  Perth Property Update

Prices and rents have been falling in Perth since 2014 and as a result there has been a substantial improvement in housing affordability.

Household income has grown at a faster pace over the past five (3.7%) and 10 years (30.6%) than median dwelling prices over the past five (1.1%) and 10 years (11.6%) leading to a significant improvement in affordability, yet Perth house prices keep falling due to local economic conditions, poor consumer confidence and an adverse supply and demand ratio.

While the Perth market may level out in the next six months, it’s much too early for a countercyclical investment in the west – I can’t see prices rising significantly for a number of years.

Due to the significant oversupply of new apartments there is little to no prospect of capital growth or rental growth in the Perth apartment market for many years.

Like the other states, Western Australia’s population trend has a significant impact on the overall performance of its property market.

To get people back into the State more jobs will need to be created.

Dwelling Perth

Perth property market

HOBART MARKET UPDATE

Hobart has been the strongest performing capital city over the last 2 years.

Over the last five years median dwelling prices have increased at about double the rate of household income growth creating a deterioration in housing affordability in the Apple Isle.

This together with investors moving their aim to the next “hot spot” suggests that Hobart’s strong property price growth will slow down in the coming year.

Dwelling Hobart

DARWIN HOUSING MARKET

The Darwin property market peaked in August 2010 is still suffering from the effects of the end of our mining boom today 8 years later falling a another 4% over the last year, and our research suggests that house prices are likely to keep falling for some time yet.

Darwin is Australia’s most affordable capital city housing markets due to its high wages at a time of continuing house price and rental falls.

Over the past decade, prices are up 30.3% compared to a 60.8% increase in household incomes.

As opposed to the east coast capital cities where many jobs are being created, Darwin had a net loss of jobs last year, showing how its economy is languishing.

Darwin does not have significant growth drivers on the horizon and would be best avoided by investors.

Dwelling Darwin

CANBERRA MARKET UPDATE

Canberra’s property market is a “quiet achiever” having grown 3.4 % over the last year, and is likely to continue to perform well underpinned by a stable economy which has led to steady employment and to above average population growth (1.8% per annum.) 43154379_l

Houses price growth has outpaced its flatter apartment market.

Housing affordability in Canberra has deteriorated over the past five years, as median house prices grew 23.6% during a period when household incomes only grew 15.5%. Interestingly over the past decade, median prices have increased at a similar rate (40.0%) to household incomes (41.4%).

The ACT Government predicts ongoing strong population growth of 6% in Canberra by 2020.

Around 60% of this growth will be due to natural increase and about 40% through net overseas and interstate migration.

Having said that, I don’t consider Canberra a good place to invest as their horrendous land tax rates chew into your cash flow more than anywhere else in Australia.

Dwelling Canberra

CLEARLY OUR PROPERTY MARKETS ARE SLOWING

Our quieter markets have translated into fewer property sales with transaction volumes much lower than they were a year ago.

Sales

RENTAL GROWTH HAS STALLED

At the same time as house prices are fallen rental growth has been sluggish around Australia, and rents have fallen a little in Sydney and Darwin.

Rent

Rent 2

 

Another sign of our slowing markets is the increased length of time it takes to sell a property which increased relative to a year ago.Dwelling Sale

And vendors are reluctant to put their properties in the market.

Advertised Property

Auction clearance rates are another sign of the lack of depth of our property markets, but they may have found their plateau.

Auction Clearance

POPULATION GROWTH

Population growth remains strong however, and this will underpin our property markets.

Housing Demand

HOUSING FINANCE

APRA has quelled our property boom and demand for investor finance is waning, leaving owner occupiers as the dominant source of finance demand.

Dwelling Approval

Housing Finance

Housing Finance2

 

Mortgage Rates

THE BOTTOM LINE…

We’re clearly in the next stage of the property cycle, one of moderate growth in some regions and virtually no growth in others and falling prices in yet others. risk investment market

Australia’s property markets are very fragmented, driven by local factors including jobs growth, population growth, consumer confidence and supply and demand.

This makes it an opportune time for both home buyers and investors to buy property at a time when they’ll face less competition.

However correct asset selection will be more important now than ever, so only buy in areas where there are multiple growth drivers such as employment growth, population growth or major infrastructure changes.

Similarly suburbs undergoing gentrification are likely to outperform.

WHAT CAN YOU DO TO STAY AHEAD?

As signs point to softer growth conditions for Australian property over the coming months, independent professional advice and careful consideration will be as important as ever in navigating Australia’s varied market conditions.  

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If you’re looking for independent advice, no one can help you quite like the independent property investment strategists at Metropole.

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.

Whether you are a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat. Or call us on 1300 20 30 30.

Source of graphs and data: CoreLogic

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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'State by state: An update on the Australian property markets, September 2018' have 3 comments

  1. Avatar for Property Update

    September 28, 2018 Peter

    Plenty of good data stated in this report, however am wondering why Brisbane does not warrant mention of Key Statistics when is covered for Adelaide and Perth?

    Reply

  2. Avatar for Property Update

    September 28, 2018 Peter

    Wondering what the Total Return % mean in the first table “Indexed Results as at August 31, 2018”. Over what period are these Total Returns based?

    Reply


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