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As we fast approach the end of the year, we continue to see slower housing activity and lower dwelling values across Sydney and Melbourne with auction clearance rates tumbling to the lowest level in over six years. The weakest conditions continue to be felt across these markets, where investment buyers have been the most concentrated, supply additions have been the highest, and where housing affordability is the most stretched.

You’ll be reading in the mainstream media that it’s a buyers market, but who are these buyers? One group that make up a huge cohort in the real estate market are Baby Boomers, retirees and downsizers. New data from the Property Council of Australia, shows one-third of older Australians in low-income households are ‘asset rich’ and ‘income poor’, with nearly their entire wealth locked up in the family home. As the Boomer generation heads toward the post-work milestone age, it’s interesting to see the influence they’re having on the nation’s property markets. Not only are they driving prices in some areas as buyers, they’re also moving-out, contributing to supply in others.

Let’s take a look around the grounds at the market.

Sydney

  • October: Capital Growth, Units: - 0.8%

  • October: Capital Growth, Houses: - 0.7%

  • Median Dwelling Price, Units: $729,728

  • Median Dwelling Price, Houses: $956,094

  • Gross Rental Yield, Units: 3.7%

  • Gross Rental Yield, Houses: 3.0%

  • New South Wales Unemployment Rate (Sept): 4.4%

  • Property Cycle, Units: Declining Market

  • Property Cycle, Houses: Declining Market

Sydney values are now down 7.4 percent over the past twelve months, their largest annual decline since 1990. The falls have been orderly - more of a housing correction than a bust market - but buyers need to be careful they’re not overpaying, because further falls could lead to a position of negative equity. There’s also record high housing vacancy at 2.8 percent - the highest in more than eight years - as supply of new housing exceeds demand. In many areas of Sydney, especially in the east, downsizers are underpinning the unit purchasing market, with developers noting a large proportion of local buyers who have sold their houses in search of a “lock up and leave” unit with quality inclusions, allowing them to continue to live locally.

Melbourne

  • October: Capital Growth, Units: 0.0%

  • October: Capital Growth, Houses: - 1.0%

  • Median Dwelling Price, Units: $553,979

  • Median Dwelling Price, Houses: $780,130

  • Gross Rental Yield, Units: 4.1%

  • Gross Rental Yield, Houses: 2.9%

  • Victoria Unemployment Rate (Sept): 4.5%

  • Property Cycle, Units: Starting to decline

  • Property Cycle, Houses: Starting to decline

While Melbourne’s property prices are likely to fall a little further, they are underpinned by a robust economy, jobs growth and the influx of 35% of all overseas migrants. Currently, higher value Melbourne housing continues to lead the market downturn; with the top 25% of the market seeing values fall by almost 9% over the past twelve months. Conversely, more affordable housing markets have seen a 2.9% rise in values over the same period. Regional Victoria is also showing strong growth conditions as demand continues to ripple outwards from Melbourne towards the more affordable cities, peripheral to the city’s metropolitan area. In fact, Geelong is the country’s leading regional city for median house price growth, buoyed by the federal government's support of the $100 million rail duplication project, decreasing the daily commute time for Geelong to the Melbourne CBD.

Brisbane

  • October: Capital Growth, Units: -0.1%

  • October: Capital Growth, Houses: 0.0%

  • Median Dwelling Price, Units: $384,178

  • Median Dwelling Price, Houses: $542,601

  • Gross Rental Yield, Units: 5.2%

  • Gross Rental Yield, Houses: 4.2%

  • Queensland Unemployment Rate (Sept): 6.0%

  • Property Cycle, Units: Approaching bottom of market

  • Property Cycle, Houses: Rising 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 three years. Blue-chip regions close to the CBD are still showing strong performance, with seven of the top ten performing Australian sub-regions located across Brisbane and Adelaide metro areas, demonstrating the resilience to falling values in these two cities. Affordability in Brisbane will continue to be a growth driver, along with reasonable job creation, in part because of the many significant infrastructure projects being built.

Experiencing outpaced population growth, the Sunshine Coast also remains one to watch. The area is a  popular location for Baby Boomers to relocate; meeting housing demand with increased construction works, keeping the vacancy rate close to 2%. Conditions over the next three years are likely to be supported through increased tourism and numerous infrastructure projects, including the second stage of the Sunshine Coast University Hospital and redevelopment of Caboolture Hospital, which is expected to boost the area’s population growth further.

Adelaide

  • October: Capital Growth, Units: 0.2%  

  • October: Capital Growth, Houses: 0.2%

  • Median Dwelling Price, Units: $327,531

  • Median Dwelling Price, Houses: $466,969  

  • Gross Rental Yield, Units: 5.2%  

  • Gross Rental Yield, Houses: 4.2%

  • South Australia Unemployment Rate (Sept): 5.5%

  • Property Cycle, Units: Bottom of market

  • Property Cycle, Houses: Rising market

Adelaide continues to hold the helm as the country's most affordable housing market. The greatest price growth has shifted from the highest valued properties towards the lower-end and middle of the market. Within suburban Adelaide, the most in-demand properties are those with up to three bedrooms on allotments of sub-600 square metres. Within the CBD, and more recently the inner eastern suburbs, we’re seeing a shift in the design of multilevel developments catering to Boomers. Key clearance data from auctions and other market factors suggest Adelaide may be following the trend lines of what we saw in Hobart pre-boom. We’re actively researching and monitoring this market - so watch this space!

Perth

  • October: Capital Growth, Units: -1.0%  

  • October: Capital Growth, Houses: -0.8%

  • Median Dwelling Price, Units: $375,288

  • Median Dwelling Price, Houses: $478,065  

  • Gross Rental Yield, Units: 4.7%

  • Gross Rental Yield, Houses: 3.8%

  • Western Australia Unemployment Rate (Sept): 6.0%

  • Property Cycle, Units: Approaching bottom of market

  • Property Cycle, Houses: Bottom of market

Affordability continues to improve for the West Australian capital, and with the worst of the downturn appearing to be behind us, the capital city looks to be on its way to re-stabilisation and it’s a market we continue to sit and watch.   

Hobart

  • October: Capital Growth, Units: -0.7%  

  • October: Capital Growth, Houses: 1.3%

  • Median Dwelling Price, Units: $374,261

  • Median Dwelling Price, Houses: $475,568

  • Gross Rental Yield, Units: 5.0%

  • Gross Rental Yield, Houses: 4.9%

  • Tasmania Unemployment Rate (Sept): 5.8%

  • Property Cycle, Units: Approaching Peak of market

  • Property Cycle, Houses: Approaching Peak of market

Both Hobart and regional Tasmania continue to record strong market conditions, driven by robust housing demand coupled with a shortage of supply. In fact, regional Tasmania stands out as the only broad region nationally where dwelling values are recording double-digit growth (+11.4%). We continue to see two distinct trends driving the bulk of the activity: With housing still affordable in most areas of the state people can trade-up, which opens up the more affordable homes to the first buyers. The other noticeable trend is the ‘sea change’ drift: coastal towns get a chance to grow, the swelling population puts a few more dollars in the local economy and allows the services to expand.

Darwin

  • October: Capital Growth, Units: 1.2%   

  • October: Capital Growth, Houses: -0.6%

  • Median Dwelling Price, Units: $312,104

  • Median Dwelling Price, Houses: $509,154

  • Gross Rental Yield, Units: 6.4%  

  • Gross Rental Yield, Houses: 5.4%

  • Northern Territory Unemployment Rate (Sept): 4.1%

  • Property Cycle, Units: Declining market

  • Property Cycle, Houses: Start of recovery

Rental yield remains high in Darwin, but we’re starting to see this trend lower as dwelling value movements outpace rental movements. Without any significant growth drivers on the horizon, regional towns across Australia remain stronger options for investment than Darwin.

Canberra

  • October: Capital Growth, Units: 0.2%    

  • October: Capital Growth, Houses: -0.1%

  • Median Dwelling Price, Units: $437,930

  • Median Dwelling Price, Houses: $662,229

  • Gross Rental Yield, Units: 5.7%  

  • Gross Rental Yield, Houses: 4.4%

  • Australian Capital Territory Unemployment Rate (Sept): 3.6%

  • Property Cycle, Units: Declining market

  • Property Cycle, Houses: Rising market

Canberra is the best performing capital city this quarter; with values up 1.5 per cent over the 3 months to October. And it is likely to continue to perform well, underpinned by a stable economy, steady employment (3.6%) and above average population growth (second to VIC). House price growth has outpaced the apartment market, and we’re seeing Baby Boomers downsizing from family homes in the suburbs, opening up more opportunities for buyers. Clearly, Canberra is great for families, and its superior pay packets make it attractive to young professionals. With vacancy rates at 0.6 percent (down from 0.8 per cent this time last year) and a stock shortage, we’re continuing to see properties in good condition being leased quickly - great news for investors.


If you’re thinking of renovating or purchasing in Australia and simply unsure how to progress please get in contact to see if we can help.

Sources: CoreLogic/Herron Todd White/Australian Government, Department of Employment/SQM Research/Australian Bureau of Statistics/Demographia Report/CommSec State of the States Report/Labour Force

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