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January is a notoriously quieter time for Australian property as people enjoy the sun, surf and chat up their local mixologist [a person who is skilled at mixing cocktails and other drinks] for discounted Mojitos.
Sydney:
Capital Growth, Units: - 1.0% ⬇︎
Capital Growth, Houses: - 0.8% ⬇︎
Median Dwelling Price, Units: $762,509 ⬇︎
Median Dwelling Price, Houses: $1,048,371 ⬇︎
Gross Rental Yield, Units: 3.7% -
Gross Rental Yield, Houses: 2.9% -
New South Wales Unemployment Rate (December): 4.8% ⬆︎
Property Cycle, Units: Starting to Decline
Property Cycle, Houses: Starting to Decline
Unless you’ve been living under a rock, we know the Sydney market is cooling, it’s nothing new and it’s going to continue. The number of properties advertised for sale has increased by 26.5%* in the past 12 months, which simply means there are a lot more properties on the market and that supply is going to outweigh demand. There has also been a 30% reduction in the number of skilled workers (due to the tightening of the 485 visa) coming to Australia - most of which would have called Sydney home. Over the summer period, typically a very buoyant time for the rental market with expats moving to Sydney for a few years of work, we are seeing quality properties sit vacant for much longer periods of time. Combine this with the huge amount of apartments that are coming online in the inner ring suburbs (5 - 10kms from the CBD) and vacancy rates are sitting at 2.6% (we don’t invest in markets where the vacancy rate is higher than 2%).
Investors whose properties have increased on average 74% since 2012 are selling up and putting their money into other markets with better rates of return. As a comparison, the median gross return (capital growth + rental yield) for an investment property in Sydney in 2017 was 6.3%, compare that to a market like Canberra that returned 9.6% or Hobart 18%. Homeowners are also staying put and upgrading their existing property, with the average cost of moving in Sydney circa 100K**, it’s an expensive exercise.
More supply, less demand = lower property values.
Melbourne:
Capital Growth, Units: -0.2% ⬇︎
Capital Growth, Houses: -0.2% ⬇︎
Median Dwelling Price, Units: $572,115 ⬇︎
Median Dwelling Price, Houses: $832,972 ⬆︎
Gross Rental Yield, Units: 3.9% ⬆︎
Gross Rental Yield, Houses: 2.6% -
Victorian Unemployment Rate (December): 6.1% ⬆︎
Property Cycle, Units: Peak of Market
Property Cycle, Houses: Approaching Peak of Market
The rate of growth in Melbourne continues to slow, for much the same reasons as Sydney. The upside for Melbourne is it’s incredibly strong population growth, supported by data in the last census*** that the population grew by 12.1% to NSW’s 9.8%, marking the states 15th year in a row of the largest growth rate in Australia.
The 12-month change in houses advertised for sale is also a very modest increase of 4.2%*. New job ads on employment website SEEK are also up 15.8% YoY compared with NSW at 10.8%. So overall the slight decline in January is just the holiday hangover. There's still some gas left in this market, just not at the same level of recent times.
Brisbane:
Capital Growth, Units: 0.1% ⬆︎
Capital Growth, Houses: -0.1% ⬇︎
Median Dwelling Price, Units: $384,551 ⬆︎
Median Dwelling Price, Houses: $532,395 ⬆︎
Gross Rental Yield, Units: 5.3% -
Gross Rental Yield, Houses: 4.2% ⬆︎
Queensland Unemployment Rate (December): 6.0% -
Property Cycle, Units: Declining Markets
Property Cycle, Houses: Rising Market
The number of properties advertised for sale in the greater Brisbane area has dropped by 1.7%*. Although we don’t recommend purchasing apartments in or around the Brisbane CBD, there are great opportunities in the detached housing market 20mins from the CBD. The greater Brisbane area has a vacancy rate of 3.8%, however, we've pinpointed areas that tick the boxes - with vacancy rates of 1.6%, 12-month capital growth of 7% and total gross returns of 11.8% (in 2017). With increasing population rates and healthy household incomes circa 9k/month, we forecast continued sunny days for these regions. With the Gold Coast Commonwealth Games kicking off on the 4th of April, the spotlight will be on South East Queensland - its time to shine.
Canberra:
Capital Growth, Units: -0.2% ⬇︎
Capital Growth, Houses: 0.0% -
Median Dwelling Price, Units: $431,218 ⬆︎
Median Dwelling Price, Houses: $671,691 ⬆︎
Gross Rental Yield, Units: 5.4% -
Gross Rental Yield, Houses: 4.2% ⬆︎
Australian Capital Territory Unemployment Rate (December): 3.7% ⬇︎
Property Cycle, Units: Declining Market
Property Cycle, Houses: Rising Market
I’ve got a dirty secret and that’s my love for Canberra! The January figures are lacklustre as expected, however, on the ground, open houses are jam-packed, filled with families, professionals and the exact profile of people we look out for. The median price for properties in Canberra is certainly affordable (compared to other capital cities). However, unlike other capital cities, Canberra holds the award for the highest monthly household income, meaning people can afford to rent and buy, unlike other markets where prices are low due to affordability issues. With vacancy rates in the greater Canberra area sitting at 1.3%, a growing population and a healthy economy we forecast a strong year ahead and continued love :).
Adelaide:
Capital Growth, Units: 0.3% ⬆︎
Capital Growth, Houses: -0.2% ⬇︎
Median Dwelling Price, Units: $333,669 ⬆︎
Median Dwelling Price, Houses: $458,454 ⬇︎
Gross Rental Yield, Units: 5.0% -
Gross Rental Yield, Houses: 4.2% ⬆︎
South Australia Unemployment Rate (December): 5.9% ⬇︎
Property Cycle, Units: Bottom of Market
Property Cycle, Houses: Rising Market
Adelaide is mostly a slower market (not just over the holiday period). On the ground, there’s not a lot of major infrastructure happening. The state government is very proactive in trying to gain a slice of the Australian startup community offering lucrative government grants to set up shop in the CBD and hire local staff. The office vacancy rate in the CBD has decreased from 16.1 to 15.4% (compared to a national average of 9.6%) in the six months to January 2018. A decrease none the less but nothing to write home about. Positive news for the state is the $535M build of the Osborne South Shipyards being constructed by Lendlease (22km/33mins by car from the CBD), creating 600 jobs during the construction. The yard will be used to build 9 war frigates starting in 2020.
Much like Brisbane, there are certainly pockets of Adelaide that are tightly held with low vacancy rates and healthy capital growth and rental yields. Character/heritage houses within 2km of the CBD where the price point is generally $700k + are the ones to look out for.
Hobart:
Capital Growth, Units: 0.1% ⬆︎
Capital Growth, Houses: 1.2% ⬆︎
Median Dwelling Price, Units: $336,263 ⬆︎
Median Dwelling Price, Houses: $432,035 ⬆︎
Gross Rental Yield, Units: 5.2% ⬆︎
Gross Rental Yield, Houses: 5.0% ⬆︎
Tasmanian Unemployment Rate (December): 6.1% ⬆︎
Property Cycle, Units: Rising Market
Property Cycle, Houses: Rising Market
Hobart was the only capital city to see an increase in detached housing capital growth in January and a relatively healthy one. As we all know house prices have surged in the capital for the past couple of years - over the past 12 months the total gross return has been 18%, not bad! The state election has been scheduled for the 3rd of March, with the incumbent Liberal government headed by premier Will Hodgman holding out for a second term.
There has been a drop of 43%* in properties advertised for sale, meaning supply is incredibly tight, with high demand. Signs continue to point in an upward direction with large infrastructure projects in the tourism and education space planned or commenced and the announcement of the Hobart City Plan in January. Hobart’s median house values are roughly 59% lower than Sydney and 48% lower than Melbourne - so housing is incredibly affordable for investors. However, with the average weekly earnings the lowest in the country (as a May 2017), homes are still unaffordable for locals, driving up rental deemed with yields the lowest in the country at a staggeringly tight 0.3%.
Limited supply, cracker demand = escalating prices.
Perth:
Capital Growth, Units: -0.8% ⬇︎
Capital Growth, Houses: -0.3% ⬇︎
Median Dwelling Price, Units: $404,121 ⬇︎
Median Dwelling Price, Houses: $483,791 ⬇︎
Gross Rental Yield, Units: 4.3% -
Gross Rental Yield, Houses: 3.8% -
Western Australia Unemployment Rate (December): 5.7% ⬇︎
Property Cycle, Units: Declining Market
Property Cycle, Houses: Bottom of Market
There are a number of positive signs for the Perth market, property advertising listings have dropped by 6.4% and mining, resource, and energy job ads were the fastest growing by 94% in the past 12 months. We are seeing jobs growth in full-time employment, however a decline in part-time employment. With jobs growth comes migration and the need for housing, the current vacancy rate in greater Perth is 4.6%, far from ideal, however over the past two years rental listings have dropped from circa 12,000 to around 9,000 now. WA holds second place for the highest average weekly wage in the country, with a median rent of $350/week representing 19.7% of the full-time weekly salary, compared to NSW’s 34% and Victoria’s 26%. Very appealing to people seeking a more affordable lifestyle.
The number of units approved for development has fallen by 1.3% in December, marking four consecutive months of declines and decreased by 0.9% for detached houses, marking seven consecutive months of declines (less housing, more demand, you get the picture). Although we don’t forecast any gangbuster moments in 2018, however, Perth is a market we’re monitoring closely.
Darwin:
Capital Growth, Units: -0.9% ⬇︎
Capital Growth, Houses: 0.1% ⬆︎
Median Dwelling Price, Units: $344,565 ⬇︎
Median Dwelling Price, Houses: $472,802 ⬇︎
Gross Rental Yield, Units: 6.2% ⬆︎
Gross Rental Yield, Houses: 5.8% ⬆︎
Northern Territory Unemployment Rate (December): 5.2% ⬆︎
Property Cycle, Units: Bottom of Market
Property Cycle, Houses: Bottom of Market
Houses and units are at the bottom of the market for Darwin, unfortunately, there are no key drives that indicates when that bottom will actually hit! Once again the capital takes the crown for having the highest rental yields for both apartments and units as property prices continue to decline.
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.
Milk Chocolate was founded seven years ago by Richie Ragel and Michael Cleary, to purchase residential and commercial property in Australia on behalf of our clients, looking for a home or investment property. To see how we can help you get in touch here.
Thanks, Michael
Sources: CoreLogic/Herron Todd White/Australian Government, Department of Employment/SQM Research/Australian Bureau of Statistics/Brisbane City Council/Access Canberra/Property Council of Australia/Real estate institute of WA/Four Points Immigration Lawyers
*as at 31 December 2017, compared to the same period last year/**selling agent advertising and fees, stamp duty, removal fees, conveyancers based on the median Sydney house price/•••2016 census the population data.
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