Welcome to a new (financial) year and the Australian property market continues to experience a continued decline amongst the re-ignition of COVID cases, especially in Victoria. Overall, national dwelling values fell by a further 0.6%, which marks the third consecutive monthly decline. However, the Australian property market continues to remain resilient in the face of the COVID impacts, with only modest declines in major markets and even increases in some (namely Adelaide and Canberra).
So let’s take a dive into how each region performed in July:
Sydney
July: Capital Growth, Houses: - 1.0%
July: Capital Growth, Units: - 0.7%
July: Capital Growth, All Dwellings: - 0.9%
Median Dwelling Price, Houses: $1,002,107
Median Dwelling Price, Units: $747,238
Gross Rental Yield, Houses: 2.9%
Gross Rental Yield, Units: 2.7%
New South Wales Unemployment Rate (June’20): 5.7% (↓ 0.7%)
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
Sydney’s median dwelling (a combination of houses and units) values dropped by - 0.9% in July 2020 to a median value of $866,110; however, it still sits comfortably at double digits with an annual dwelling value change of 12.1% and a total return of 15.3%. The upper quartile of values is also down 2.5% over the past four months. Rental yields in Sydney have slipped to another record low of 2.9% with a drop in rent of 1.1% and 3.2% for houses and units respectively.
Prior to the effects of COVID-19, the Sydney property market was recording its quickest turnaround in property values and was well at the peak of the market earlier this year. Since then, dwelling values have dropped a cumulative total of 1.2% since April 2020. On the bright side, this is a great time for buyers that are looking to purchase in the upper percentile, with values lower than earlier in the year, and likely lower than this time next year.
Melbourne:
July: Capital Growth, Houses: - 1.4%
July: Capital Growth, Units: - 0.7%
July: Capital Growth, All Dwellings: - 1.2%
Median Dwelling Price, Houses: $793,548
Median Dwelling Price, Units: $572,848
Gross Rental Yield, Houses: 2.9%
Gross Rental Yield, Units: 3.9%
Victoria Unemployment Rate (June’20): 7.5% (↑ 0.6%)
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
The Melbourne property values, like Sydney, have experienced a monthly change in dwelling value of - 1.2% to a median value of $678,334 with an annual change in dwelling values of 8.7% and a total return of 12.3%. Gross rental yields have remained at 3.2% and a quartile change in rents of -1.1% for houses and - 3.2% for units. With many short-term migrants departing the country and foreign arrivals, especially international students stalling, demand for inner-city apartments has greatly decreased, with rental listings for such properties more than doubling since the previous quartile.
Unfortunately, Melbourne has been hit by consecutive increases in COVID-19 cases over the past few weeks, with Premier Daniel Andrews putting the city into a stage 3 lockdown earlier in July and an unprecedented stage 4 lockdown a few days into August. Only time will tell how this will impact the property market in Melbourne and Victoria as a whole. Sale activity is still present under these circumstances, however, much of the future lies with consumer confidence and how many potential buyers and sellers are ready to go once restrictions have been lifted.
Brisbane
July: Capital Growth, Houses: - 0.3%
July: Capital Growth, Units: - 0.5%
July: Capital Growth, All Dwellings: - 0.4%
Median Dwelling Price, Houses: $555,284
Median Dwelling Price, Units: $384,681
Gross Rental Yield, Houses: 4.2%
Gross Rental Yield, Units: 5.2%
Queensland Unemployment Rate (June’20): 7.7% (↓ 0.2%)
Property Cycle, Houses: Declining Market
Property Cycle, Units: Declining Market
Brisbane’s median dwelling values dropped by another - 0.4% in July 2020 to a median value of $502,167; however, it still sits positively with an annual change in dwelling value of 3.8% and a total return of 7.7%. Rental yields in Brisbane remain at a healthy 4.4%, with a negative change in rent of 0.3% and 1.0% for houses and units respectively.
Brisbane’s property prices still remain around 58% lower than Sydney’s (57.9795% to be exact), with median household income only being 12% lower. Overall, Brisbane’s housing market has held up relatively well compared to other capital cities, even the downturn a few years back shows that Brisbane had recorded less of a downward pressure. Liveability, affordability and rapid gentrification are some of the few reasons as to why the Brisbane property market will remain a solid purchase decision in the long-term for both owner-occupiers and investors alike.
Adelaide
July: Capital Growth, Houses: 0.1%
July: Capital Growth, Units: - 0.1%
July: Capital Growth, All Dwellings: 0.1%
Median Dwelling Price, Houses: $478,175
Median Dwelling Price, Units: $332,975
Gross Rental Yield, Houses: 4.3%
Gross Rental Yield, Units: 5.3%
South Australia Unemployment Rate (June’20): 8.8% (↑ 0.9%)
Property Cycle, Houses: Rising Market
Property Cycle, Units: Rising Market
Adelaide’s median dwelling values rose by 0.1% to a median value of $441,826 but still sits at a positive annual change of 2.4% and a total return of 6.8%. The unemployment rate in South Australia has ballooned to 8.8% to take the title of the highest unemployment rate across the country for June 2020. Gross rental yields sit at a stable 4.4% with a 0.5% increase in rents for houses and - 0.2% decrease for units.
Adelaide remains as one of the most stable capital city markets in Australia, as one of only two capitals that have recorded an increase in dwelling values (albeit only 0.1%).
Perth
July: Capital Growth, Houses: - 0.6%
July: Capital Growth, Units: - 0.8%
July: Capital Growth, All Dwellings: - 0.6%
Median Dwelling Price, Houses: $455,813
Median Dwelling Price, Units: $352,959
Gross Rental Yield, Houses: 4.3%
Gross Rental Yield, Units: 5.2%
Western Australia Unemployment Rate (June’20): 8.7% (↑ 0.6%)
Property Cycle, Houses: Bottom of the market
Property Cycle, Units: Bottom of the market
Perth’s median dwelling values dropped by - 0.6% to a median value of $439,092. 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’s unemployment rate has now been surpassed by Adelaide, however, they do still sit solidly in second place with a rate of 8.7%. On the rental front, gross yields sit at 4.4% with increases in rents for both houses and units at 1.5% and 0.3% respectively.
Prior to the effects of COVID-19, Perth was actually beginning their recovery in dwelling values from their sharp decline a few years prior. However, the overall impacts of the virus and Australia’s overall economic landscape have temporarily stunted that growth.
Hobart
July: Capital Growth, Houses: - 0.4%
July: Capital Growth, Units: 0.6%
July: Capital Growth, All Dwellings: - 0.2%
Median Dwelling Price, Houses: $514,392
Median Dwelling Price, Units: $398,833
Gross Rental Yield, Houses: 4.7%
Gross Rental Yield, Units: 4.9%
Tasmania Unemployment Rate (June ’20): 6.9% (↑ 0.5%)
Property Cycle, Houses: Rising Market
Property Cycle, Units: Rising Market
Hobart’s annual dwelling values have begun to experience the impacts of Australia’s macroeconomic factors, with dwelling values decreasing by - 0.2% to a median dwelling price of $486,771. Annual changes remain at a positive 5.9% with a healthy total return of 11.5%. Rental yields for Hobart sit at 4.8%, with negative drops in rent of 2.0% and 4.4% for houses and units respectively.
With much of Hobart’s economy depending on the tourism sector, it is likely that the longer COVID-19 affects the nation’s overall economy, the more drastic the losses that Hobart would face.
Darwin
July: Capital Growth, Houses: - 0.2%
July: Capital Growth, Units: -0.7%
July: Capital Growth, All Dwellings: - 0.3%
Median Dwelling Price, Houses: $466,959
Median Dwelling Price, Units: $267,948
Gross Rental Yield, Houses: 5.4%
Gross Rental Yield, Units: 6.9%
Northern Territory Unemployment Rate (June’20): 5.7% (↓ 1.7%)
Property Cycle, Houses: Bottom of the market
Property Cycle, Units: Bottom of the market
Darwin’s median dwelling values have dropped by - 0.3% to $384,533, which is the lowest median value among capital cities in Australia by a considerable amount (with Hobart at $486K being the second-lowest). Like Perth, Darwin was at the beginning of a recovery cycle pre-COVID, which explains the negative annual change in dwelling values of - 2.2% and a total return of 4.4%. Darwin once again tops the rental market, with houses and units sitting at 5.4% and 6.9% respectively. Darwin also experienced both a positive and negative change in rents, with houses increasing by 0.6% and units decreasing by - 0.1%.
Darwin struggles with some of the major contributing factors to increasing property prices, with a lack of infrastructure, immigration, and low employment opportunities. This likely means that even further along the horizon, Darwin might not necessarily take off if these factors (or lack thereof) are not addressed.
Canberra
July: Capital Growth, Houses: 0.7%
July: Capital Growth, Units: 0.1%
July: Capital Growth, All Dwellings: 0.6%
Median Dwelling Price, Houses: $718,443
Median Dwelling Price, Units: $444,167
Gross Rental Yield, Houses: 4.3%
Gross Rental Yield, Units: 5.7%
Australian Capital Territory Unemployment Rate (June’20): 5.1% (↑ 1.0%)
Property Cycle, Houses: Rising Market
Property Cycle, Units: Declining Market
Canberra is also one of only two capital cities that recorded an increase in dwelling values in July 2020 at 0.6% and a median value of $641,360. Annual change in dwelling values also sits at a comfortable 7.2%, with a healthy double-digit total return of 12.2%. Gross rental yields for Canberra sits at a healthy 4.3% for houses and 5.7% for units, with a change in rent for houses a negative - 0.4% and units at - 1.0%.
The past month marks the second consecutive monthly increase in dwelling values for Canberra (previously +0.1%). Canberra is less likely to feel the economic impacts of COVID-19, as a good majority of the population is employed under the public sector, therefore having greater stability during tough economic times.
There are three influential factors that are currently impacting the Australian property market and the Australian economy as a whole, these include:
The impact of COVID-19 on the overall employment rates across the nation, and the economic life-support packages such as job-keeper and job-seeker as well as loan repayment holidays from lenders
A recession, not seen in Australia for almost 30 years
Global political and social unrest
Despite these factors, Corelogic’s head of research, Tim Lawless is correct in saying that: ‘housing markets have remained relatively resilient through the COVID period so far’.
A combination of record-low interest rates, loan repayment holidays and government support packages have prevented the property market from collapsing, however, with support from both the government and the banks looking to expire between October 2020 and March 2021, only time will tell how the property market holds up.
Index results as at July 31, 2020
Source: Corelogic Hedonic Home Value Index
CoreLogic Home Value Index Tables
Source: CoreLogic Hedonic Home Value Index
Changes in rents, March 31 - July 31
Source: CoreLogic Hedonic Home Value Index
Gross Rental Yields, July 2020
Source: CoreLogic Hedonic Home Value Index
Sources: CoreLogic Hedonic Home Value Index | Michael Yardney’s Property Update | Victoria Stage 4 Lockdown - Michael Yardney
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