We are now halfway through 2020, and what a year it has been so far! Overall, the Australian property market has declined for a second consecutive month with the lagging effects and impacts of COVID-19 and Australia’s dire economic conditions catching up. The rental market has also fragmented, with demand for inner-city apartments suffering the heaviest blows as students, both foreign and domestic, have continued their studies remotely. A 19-year high unemployment rate of 7.1% and 13.8% underemployment have contributed a surge of rental listings as those that are typically aligned with renting are those that are a part of the hardest-hit industry sectors, according to CoreLogic’s Tim Lawless.
So let’s take a dive into how each region performed in June:
Sydney
June: Capital Growth, Houses: - 0.9%
June: Capital Growth, Units: - 0.6%
June: Capital Growth, All Dwellings: - 0.8%
Median Dwelling Price, Houses: $1,010,426
Median Dwelling Price, Units: $761,792
Gross Rental Yield, Houses: 2.7%
Gross Rental Yield, Units: 3.4%
New South Wales Unemployment Rate (May’20): 6.4%
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
Sydney’s median dwelling (a combination of houses and units) values dropped by 0.8% in June 2020 to a median value of $875,749; however, it still sits comfortably at double digits with an annual dwelling value change of 13.3% and a total return of 16.7%. Sydney’s premium market also experienced a drop in dwelling values, down 1.3% over the past quarter. Rental yields in Sydney have slipped to a record low of 2.92% with a drop in rent of 0.7% and 2.1% for houses and units respectively. With such a large percentage of inner-city rentals catering to both domestic and foreign students, a combination of remote learning and the stoppage of international migration have weakened demand to the point where more rental listings within these areas have ballooned by more than 40%.
Melbourne:
June: Capital Growth, Houses: - 1.3%
June: Capital Growth, Units: - 0.7%
June: Capital Growth, All Dwellings: - 1.1%
Median Dwelling Price, Houses: $802,551
Median Dwelling Price, Units: $575,009
Gross Rental Yield, Houses: 2.8%
Gross Rental Yield, Units: 3.9%
Victoria Unemployment Rate (May’20): 6.9%
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
Like Sydney, Melbourne’s median dwelling values dropped by 1.1% in June 2020 to a median value of $683,529; however, it still also sits at double digits with an annual dwelling value change of 10.2% and a total return of 13.8%. Melbourne’s premium market also experienced a drop in dwelling values, down 3.7% over the past quarter.
Rental yields in Melbourne have slipped to a low of 3.2% with a drop in rent of 0.3% and 2.0% for houses and units respectively. Like Sydney, the massive gap generated by a lack of demand from students has caused inner-city rentals to explode by more than 40%.
Brisbane
June: Capital Growth, Houses: - 0.4%
June: Capital Growth, Units: - 0.8%
June: Capital Growth, All Dwellings: - 0.4%
Median Dwelling Price, Houses: $557,265
Median Dwelling Price, Units: $387,420
Gross Rental Yield, Houses: 4.2%
Gross Rental Yield, Units: 5.2%
Queensland Unemployment Rate (May’20): 7.9%
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
Brisbane’s median dwelling values dropped by 0.4% in June 2020 to a median value of $503,148; however, it still sits positively with an annual change in dwelling value of 4.4% and a total return of 8.4%. The property market in Brisbane is still priced around 55% of Sydney’s median, with household income coming in at only around 12% lower. This creates a very desirable situation for both owner-occupiers and investors alike. Queensland's reliance on the Chinese economy, especially with regards to tourism, exports, and foreign investors will likely cause the property market to drop even further than already indicated. Rental yields in Brisbane sit at a healthy 4.4%, with a negative change in rent of 0.4% and 2.0% for houses and units respectively.
Adelaide
June: Capital Growth, Houses: - 0.2%
June: Capital Growth, Units: - 0.3%
June: Capital Growth, All Dwellings: - 0.2%
Median Dwelling Price, Houses: $476,639
Median Dwelling Price, Units: $332,016
Gross Rental Yield, Houses: 4.2%
Gross Rental Yield, Units: 5.3%
South Australia Unemployment Rate (May’20): 7.9%
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
Adelaide’s median dwelling values dropped by 0.2% to a median value of $440,267, but still sits at a positive annual change of 2.0% and a total return of 6.5%. Historically, the volatility of Adelaide’s property market has been relatively low when compared to the larger, more expensive capital cities of Sydney and Melbourne. The unemployment rate in South Australia also ties Queensland as the second-highest rate of unemployment at 7.9%, trailing only Western Australia. Similar to Brisbane, rental yields sit at a healthy 4.2% for houses and 5.3% for units. Changes in rent provided growth of 0.2% for houses and a drop of 0.2% for units.
Perth
June: Capital Growth, Houses: - 1.1%
June: Capital Growth, Units: - 1.3%
June: Capital Growth, All Dwellings: - 1.1%
Median Dwelling Price, Houses: $459,376
Median Dwelling Price, Units: $357,379
Gross Rental Yield, Houses: 4.3%
Gross Rental Yield, Units: 5.2%
Western Australia Unemployment Rate (May’20): 8.1%
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
Perth’s median dwelling values dropped by 1.1% to a median value of $441,977 after recording three consecutive rises in dwelling values over the past quarter. Perth also sits at - 2.5% annual change in dwelling values, with a 1.6% total return, however, it is worth noting that during the March 2020 update, Perth sat at an annual change of negative 3.1%. Western Australia also leads the country with the highest unemployment rate at 8.1%. In the rental market, we can see the rental market fragmentation come into play, with Perth recording strong rental yields to contrast the weakening conditions in Sydney and Melbourne. At gross rental yields of 4.3% for houses and 5.2% for units, Perth has the highest positive change in rents for capital cities at 1.0%.
Hobart
June: Capital Growth, Houses: 0.4%
June: Capital Growth, Units: 0.0%
June: Capital Growth, All Dwellings: 0.3%
Median Dwelling Price, Houses: $516,600
Median Dwelling Price, Units: $399,404
Gross Rental Yield, Houses: 4.7%
Gross Rental Yield, Units: 4.8%
Tasmania Unemployment Rate (May’20): 6.4%
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
Hobart’s median dwelling values have remained relatively unphased by Australia’s macroeconomic developments, bringing in a stable increase of 0.3% to $487,827. Hobart’s annual change in dwelling values also sits at a healthy 6.4% and a total return of 11.9%. The real weakness with Hobart now rests with their rental market, as the city has experienced rapid rental appreciation over the past few years, however, in more recent times, dropping demand and restrictions on interstate travellers have caused a rental oversupply, especially those converting from an existing AirBnb to a long-term rental, to rise. Due to this, houses and units in Hobart have experienced the worst changes in the rent of all the capital cities, at negative 2.0% and 3.7% respectively. However, gross rental yields still remain stable at 4.7% for houses and 4.8% for units.
Darwin
June: Capital Growth, Houses: 0.4%
June: Capital Growth, Units: 0.1%
June: Capital Growth, All Dwellings: 0.3%
Median Dwelling Price, Houses: $470,136
Median Dwelling Price, Units: $271,757
Gross Rental Yield, Houses: 5.4%
Gross Rental Yield, Units: 6.8%
Northern Territory Unemployment Rate (May’20): 7.4%
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
Darwin’s median dwelling values have increased by 0.3% to $387,914, which is the lowest median value among capital cities in Australia. Like Perth, Darwin was at the beginning of a recovery cycle pre-COVID, which therefore shows a negative annual change in dwelling values at 1.5% with a total return of 5.7%. Darwin holds the trophy for the highest gross rental yields in June 2020, with houses and units sitting at 5.4% and 6.8% respectively. Darwin also experienced both a positive and negative change in rents, with houses increasing by 0.1% and units decreasing by 0.3%.
Canberra
June: Capital Growth, Houses: 0.1%
June: Capital Growth, Units: 0.3%
June: Capital Growth, All Dwellings: 0.1%
Median Dwelling Price, Houses: $716,150
Median Dwelling Price, Units: $444,181
Gross Rental Yield, Houses: 4.4%
Gross Rental Yield, Units: 5.8%
Australian Capital Territory Unemployment Rate (May’20): 4.1%
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
Canberra is also one of only three capital cities that recorded an increase in dwelling values in June 2020 at 0.1% and a median value of $639,965. Annual change in dwelling values also sits at a comfortable 6.3%, with a healthy double-digit total return of 11.2%. Gross rental yields for Canberra sits at a healthy 4.4% for houses and 5.8% for units, with a change in rent for houses a negative 0.3% and units at 0.7%.
Summary
All in all, on average the Australian property market is definitely beginning to suffer the effects of COVID-19. Nationally, the property market showed an overall drop of - 0.7%. However, these recent declines in values are more of an interruption to an otherwise upward trend for most capital cities. Looking back to February 2020, five of eight capital cities sat at their peak, with Sydney looking to join them, as the adverse effects of COVID-19 had yet to impact the market. Despite the weak economic conditions caused by COVID-19, a drop of only - 0.8% this quarter shows that while the impact of the virus has caught up with the property market, government stimulus and financial institutional support have softened the blow and helped assist the market return back on track. If there’s one thing about the Australian property market, it’s that it's incredibly resilient to negative shocks.
However, two significant risk factors that must be considered in the upcoming removal of such stimulus and financial institutional support alongside possible steepening of the Coronavirus curve, both of which will likely cause a further negative impact on the market. In the long-term, the economy will likely return to its original path, as the property market continues along its upward trajectory from pre-COVID days.
Index results as at June 30, 2020
Source: Corelogic Hedonic Home Value Index
CoreLogic Home Value Index Tables
Source: CoreLogic Hedonic Home Value Index
Changes in rents, March 31 - June 30
Source: CoreLogic Hedonic Home Value Index
Gross Rental Yields, June 2020
Source: CoreLogic Hedonic Home Value Index
Sources: CoreLogic Hedonic Home Value Index | Michael Yardney’s Property Update
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