Read Time: 6 minutes
It’s a momentous occasion, the housing correction reaches it’s 12-month anniversary, with national total values down 2.7% since the peak of the market in September 2017. Hardly a crash. As we have been saying all along, this has been dragged down buy the robust and strong Sydney and Melbourne markets that have both come off the boil in this period.
Luckily, Oz is a big country and some of the under dogs have been punching above their weight to keep the economy and market in check. Luckily for some….(our clients) - investing in other strong markets in this period have reaped significant reward.
Let’s take an around the grounds look at the market.
Sydney:
September: Capital Growth, Units: - 0.2%
September: Capital Growth, Houses: - 0.8%
Median Dwelling Price, Units: $734,900
Median Dwelling Price, Houses: $976,365
Gross Rental Yield, Units: 3.8%
Gross Rental Yield, Houses: 3.0%
New South Wales Unemployment Rate (August): 4.7%
Property Cycle, Units: Declining Market
Property Cycle, Houses: Declining Market
Sydney is now down 6.1% from the heighty heights of the last boom. Dwelling values across Sydney’s most expensive quarter are down 8.4% and the least expensive quarter down by 3.3%.
To be expected and hardly a bust market as the mainstream media outlets are spruiking on a daily basis. The heat has come out of the market and the FOMO clearly dispersed. What we are now seeing is a renovation and construction boom in the harbour city, with most cashed up home-owners who enjoyed the significant growth of the last 5 years, now cashing in and doing the number on their residence. Builders of course, are having a field day!
Melbourne:
September Capital Growth, Units: - 0.2%
September Capital Growth, Houses: - 1.1%
Median Dwelling Price, Units: $562,250
Median Dwelling Price, Houses: $799,657
Gross Rental Yield, Units: 4.1%
Gross Rental Yield, Houses: 2.8%
Victoria Unemployment Rate (March): 4.8%
Property Cycle, Units: Starting to Decline
Property Cycle, Houses: Starting to Decline
As we have seen historically, Melbourne is following suit on the back on Sydney’s cooling market. Gradual declines in the market have also highlighted the end of the boom in Melbourne. Again, off the back of significant growth in the last 5 years, Melbourne, was due to hit it’s peak. Melbourne is now down 3.4% from the heighty heights of the last boom. Dwelling values across Melbourne’s most expensive quarter are down 6.7% and the least expensive quarter down by 4.1%.
It’s important to note that both Sydney and Melbourne are global cities, mentioned alongside the greats of New York, London and Hong Kong to name a few. They have jobs (high paying ones), industry, infrastructure, culture and are bluechip places people want to live. The markets will move up and down, however, if you purchase in the correct suburb, with the correct property for the correct price, ultimately you will do ok.
Brisbane:
September Capital Growth, Units: 0.3%
September Capital Growth, Houses: 0.1%
Median Dwelling Price, Units: $380,866
Median Dwelling Price, Houses: $495,474
Gross Rental Yield, Units: 5.3%
Gross Rental Yield, Houses: 4.2%
Queensland Unemployment Rate (August): 6.4%
Property Cycle, Units: Approaching the Bottom
Property Cycle, Houses: Rising Market
Over the past 12-months, If you have been reading the mainstream newspapers, Brisbane is moving at a snail's pace and in a slump. If you're on the ground week in week out, it’s a completely different story. And yes sure, there are some areas that are not performing, however, we have handpicked several regions in the north and northeast within 8km from the CBD that are showing strong growth. Furthermore, blue-chip regions close to the CBD are also strong performers and will be moving forward. Affordability in Brisbane will continue to be a growth driver. The ratio of the median house price to the median salary sits at a multiple of six, compare that to the Sydney market where it’s sitting at a multiple of 12! In the last CommSec State of the States report, Queensland leads the way on employment growth. And, population growth is at a four year high. Like Sydney and Melbourne, there are a large number of infrastructure projects being built or slated to be built from entertainment districts to public transport. Vacancy rates are sharply decreasing from highs of 4% in January this year to currently 2.9%. We do have concerns about the Brisbane apartment market with the oversupply and lack of quality inventory in the large mass built blocks. However, definitely not cross-pollinated with house growth. So don’t be fooled, there are good times ahead for Brisbane.
The Sunshine Coast is also starting to tick a lot of boxes, with the construction of the Maroochydore CBD underway, the billion dollar upgrade to the Sunshine Coast University Hospital, the extension of the airport runway to allow more additional flights and the proposed light rail. With a current population of 303,389 people, the economists are forecasting this to grow to 500,000 by 2041, bring with it an expanded workforce, business, and industry.
Canberra:
September Capital Growth, Units: -0.4%
September Capital Growth, Houses: 0.5%
Median Dwelling Price, Units: $443,791
Median Dwelling Price, Houses: $686,582
Gross Rental Yield, Units: 5.6%
Gross Rental Yield, Houses: 4.2%
Australian Capital Territory Unemployment Rate (March): 3.7%
Property Cycle, Units: Declining Market
Property Cycle, Houses: Rising Market
Houses in Canberra saw the biggest rise for September. Once known as the home to sneaky politicians and not much to do on the weekend, the city is having somewhat of a renaissance and the housing market keeps on chugging along nicely. The capital sits second behind Victoria with the largest increase in population at 1.8% (February 17’ - February 18’) with 24 new people per day calling Canberra home. The ACT government consistently ranks third in the CommSec State of the States report and the latest Deloitte Access Economics' business outlook also placed the ACT as having the fastest growing economy in the country. With the highest median wage in the country at $1,810/week, the lowest unemployment of 3.7% and increasingly tight vacancy rates, we’re seeing properties priced at fair market value moving and those in great condition being snapped up by renters - great upside for investors. On the ground, the city and surrounds are a virtual construction site, with the new light rail project, hospitals, housing developments and new amenities being built or slated to commence. Ranked third by Lonely Planets list of global cities to visit in 2018, this once sleepy government town is forging a new and exciting path.
Adelaide:
September Capital Growth, Units: 0.3%
September Capital Growth, Houses: -0.3%
Median Dwelling Price, Units: $324,932
Median Dwelling Price, Houses: $466,636
Gross Rental Yield, Units: 5.2%
Gross Rental Yield, Houses: 4.1%
South Australia Unemployment Rate (February): 5.7%
Property Cycle, Units: Bottom of Market
Property Cycle, Houses: Rising Market
As the price has increased in Hobart, Adelaide now takes the title of the most affordable capital city in Australia. A lot of property forecasters are now starting to talk more favourable about the city, however, on the ground, there’s not much to report on Adelaide, for us the key metrics have remained the same for a long period of time. As property prices are affordable we will see the borderless investors start to pick up properties for reasonable prices. There are certainly micro-markets of the city performing well, especially in the 1-2km radius of the CBD. The newly installed Liberal government is firm on its commitment to Adelaide becoming the startup capital of Australia to create employment and grow the population. It’s exactly what this city needs! We are keeping a close eye on this market.
Hobart:
September Capital Growth, Units: 0.8%
September Capital Growth, Houses: 0.3%
Median Dwelling Price, Units: $370,609
Median Dwelling Price, Houses: $464,515
Gross Rental Yield, Units: 5.0%
Gross Rental Yield, Houses: 4.9%
Tasmanian Unemployment Rate (March): 5.8%
Property Cycle, Units: Approaching the Peak
Property Cycle, Houses: Approaching the Peak
Hobart’s has certainly been the rock star of the Australian property market over the past few years and more recently the past 24 months as prices in Melbourne and Sydney have started to cool. The housing report card is littered with A+’s (unless you're a local looking for a rental property). It's the only capital city to record double-digit growth in the past twelve months, although the rate of growth has slowed and last months (August 2018) there has been a subtle drop of 0.1%.
The supply vs. demand levels have been incredibly tight, with extremely limited stock on the market and we don’t see that changing soon, with the bureaucracy surrounding land releases and the shortage of talented and qualified builders. Hobart is a market for active investors, ones who are looking for a shorter-term play. The economy continues to profit from tourism, health services (for the aging population) forestry and aquaculture. Given the median weekly wage is the lowest in the country at $1,377.30 and the resurgence in the economy is largely driven by tourism and the services sector there is a cap on what locals can afford to pay for a property and that ceiling will be reached. There is also a large number of mainlanders that cashed in on their equity to purchase affordable housing in Hobart that is then listed on the short-term rental market as tourist accommodation. As developers build a plethora of new hotels with 4,000 additional rooms being constructed or in the pipeline this is also of concern for us.
Perth:
September Capital Growth, Units: -1.0%
September Capital Growth, Houses: -0.6%
Median Dwelling Price, Units: $390,326
Median Dwelling Price, Houses: $475,774
Gross Rental Yield, Units: 4.5%
Gross Rental Yield, Houses: 3.9%
Western Australia Unemployment Rate (March): 6.4%
Property Cycle, Units: Approaching the Bottom
Property Cycle, Houses: Bottom of Market
The old wild west continues to be spoken of in more complimentary tones. Resource job listings are up a good sign for our resource heavy states of QLD and WA. We continue to see markets within Perth performing well, although overall the cities rental vacancy rates continue to sit at an uncomfortable 5.6%. WA also has the equal highest unemployment rate nationally with QLD.
The rate of decline is certainly subsiding and the market is at the bottom, there are positive indicators on the horizon and Perth is a market we continue to sit and watch.
Darwin:
September Capital Growth, Units: -0.1%
September Capital Growth, Houses: -0.5%
Median Dwelling Price, Units: $309,654
Median Dwelling Price, Houses: $505,414
Gross Rental Yield, Units: 6.5%
Gross Rental Yield, Houses: 5.2%
Northern Territory Unemployment Rate (March): 4.0%
Property Cycle, Units: Declining Market
Property Cycle, Houses: Bottom of Market
House values in Darwin are still generally in decline. The city and region still sit in the last place on just about every indicator - besides renatl yield, where it’s been top of the pops for a long time now. However, once it’s all said and done, regional towns across Australia are stronger centres for investment than Darwin at the moment.
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 two 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.
Cheers
Richie
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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