We are now a quarter of the way through the start of 2020, and what an eventful few months it's been so far! The Australian property market continues to flourish off the heels of the past year; with national housing values rising by 1.1%. Not only that, according to CoreLogic, five of Australia’s eight capital cities reached record-high dwelling values, these cities being: Melbourne, Brisbane, Canberra, Hobart, and Adelaide. The RBA also recently announced a further 25 basis point cut to the cash rate in response to the economic impact posed by the Coronavirus outbreak, however, we will expand more on this cut in next month’s market update.
So let’s take a dive into how each region performed in February:
Sydney
February: Capital Growth, Houses: 1.8%
February: Capital Growth, Units: 1.5%
Median Dwelling Price, Houses: $1,001,357
Median Dwelling Price, Units: $763,962
Gross Rental Yield, Houses: 2.7%
Gross Rental Yield, Units: 3.5%
New South Wales Unemployment Rate (Mar’20): 4.5%
Property Cycle, Houses: Rising Market
Property Cycle, Units: Rising Market
Leading the current value upswing, Sydney median dwelling values have surged by 1.7% to $872,934 (Houses & Units) as Sydney’s house prices breaching the $1 million checkpoint, with overall median values rising 4.6% over 3-months to February 2020. However, Sydney housing values still remain 3.7% below the 2017 peak; despite this, the Sydney market is projected to pass the 2017 peak by May 2020 based on the 4.6% rate of growth over the past quarter. Sydney’s premium market also experienced a major upswing in dwelling values, with the top quartile of the market recording an increase of 13.3%.
Melbourne:
February: Capital Growth, Houses: 1.3%
February: Capital Growth, Units: 1.0%
Median Dwelling Price, Houses: $809,719
Median Dwelling Price, Units: $583,294
Gross Rental Yield, Houses: 2.8%
Gross Rental Yield, Units: 4.0%
Victoria Unemployment Rate (Mar’20): 5.4%
Property Cycle, Houses: Rising Market
Property Cycle, Units: Rising Market
With housing values rising by 1.2% to a median value of $689,088 Melbourne is the latest of five capital cities to have their housing values surpass the 2017 peak. Following closely behind Sydney, Melbourne’s top quartile market experienced a 10.7% rise in dwelling values over the past twelve months. Melbourne, like Sydney, has now experienced its ninth consecutive month of market value growth. Melbourne’s population has also been booming, adding around 125,000 residents in 2019, which is more than the entirety of Queensland. In fact, Melbourne’s population is predicted to overtake Sydney to become the biggest city in Australia by 2025.
Brisbane
February: Capital Growth, Houses: 0.6%
February: Capital Growth, Units: 0.3%
Median Dwelling Price, Houses: $551,766
Median Dwelling Price, Units: $384,396
Gross Rental Yield, Houses: 4.3%
Gross Rental Yield, Units: 5.3%
Queensland Unemployment Rate (Mar’20): 6.3%
Property Cycle, Houses: Rising Market
Property Cycle, Units: Rising Market
The Brisbane property market currently sits at its peak, with a modest 0.6% change in dwelling values and a median value of $503,265. The property market in Brisbane is priced around 53% lower than Sydney, however, household income is only around 11.35% lower, which makes Brisbane a very desirable city for owner-occupiers and investors alike. According to Domain’s February 2020 property price forecast, Brisbane is predicted to experience some of the biggest house price rises over the next 24 months, with predictions of 7 - 9% house price increase, which would bring median house prices in Brisbane to rise above $600,000 for the first time ever.
Adelaide
February: Capital Growth, Houses: 0.0%
February: Capital Growth, Units: 0.1%
Median Dwelling Price, Houses: $477,129
Median Dwelling Price, Units: $325,243
Gross Rental Yield, Houses: 4.3%
Gross Rental Yield, Units: 5.5%
South Australia Unemployment Rate (Mar’20): 5.7%
Property Cycle, Houses: Rising Market
Property Cycle, Units: Rising Market
Like Brisbane and Melbourne, Adelaide’s dwelling values currently sit at the peak, with a median value of $439,453 and a change in dwelling value of 0.1%. Over the past 5 years, Adelaide’s house prices have risen by a steady average of around 3% p.a. House and unit prices are projected to continue to rise around 3% p.a over the next 24months, according to Domain.
Perth
February: Capital Growth, Houses: 0.2%
February: Capital Growth, Units: 1.0%
Median Dwelling Price, Houses: $458,582
Median Dwelling Price, Units: $357,593
Gross Rental Yield, Houses: 4.2%
Gross Rental Yield, Units: 5.1%
Western Australia Unemployment Rate (Mar’20): 5.8%
Property Cycle, Houses: Bottom of the market
Property Cycle, Units: Bottom of the market
The Perth property market has, hopefully, witnessed the end of a long-running downturn, with dwelling values increasing by 0.3% to a median value of $442,691, which marks four consecutive months of positive dwelling values; something not seen since the 2014 mining boom that peaked at a median value of $616,042, which at the time, established Perth as the most expensive city for houses. These days, Perth values sit 21% below the peak.
Hobart
February: Capital Growth, Houses: 0.9%
February: Capital Growth, Units: 0.2%
Median Dwelling Price, Houses: $520,201
Median Dwelling Price, Units: $398,394
Gross Rental Yield, Houses: 5.0%
Gross Rental Yield, Units: 5.2%
Tasmania Unemployment Rate (Mar’20): 5.9%
Property Cycle, Houses: At the Peak
Property Cycle, Units: At the Peak
Hobart is another city that sits at the peak, with dwelling values increasing by 0.8% to a median value of $488,968. Hobart has continued to establish itself as the tightest rental market, with rents up 5.5% over the past year. The result of intense demand has provided a total return (gross yield + annual capital gain) of 10.5%, which places Hobart behind only Sydney and Melbourne at 14.4% and 14.3%, respectively.
Darwin
February: Capital Growth, Houses: 0.8%
February: Capital Growth, Units: - 4.7%
Median Dwelling Price, Houses: $469,526
Median Dwelling Price, Units: $271,847
Gross Rental Yield, Houses: 5.4%
Gross Rental Yield, Units: 7.0%
Northern Territory Unemployment Rate (Mar’20): 5.3%
Property Cycle, Houses: Bottom of the market
Property Cycle, Units: Bottom of the market
The odd one out, Darwin is the only capital city in February where dwelling values fell by - 1.4% to a median value of $386,345. Darwin is recorded to be the weakest performing capital city this quarter, however, gross rental yields are the highest of any capital city at 5.9%. Unfortunately, this is more of a determinant of dropping median values, rather than a positive growth in rental yields.
Canberra
February: Capital Growth, Houses: 0.8%
February: Capital Growth, Units: 0.5%
Median Dwelling Price, Houses: $704,865
Median Dwelling Price, Units: $445,354
Gross Rental Yield, Houses: 4.3%
Gross Rental Yield, Units: 5.8%
Australian Capital Territory Unemployment Rate (Mar’20): 3.0%
Property Cycle, Houses: Rising Market
Property Cycle, Units: Rising Market
The fifth city at the peak, Canberra has experienced a 0.8% change in dwelling values to a median value of $631,862. Overall, Canberra values have risen 4.1% in the past 12 months, and are forecasted to rise by around 4% p.a over the next 24 months.
All in all, the Australian property market is still rebounding strongly from the early 2019 downturn with February being the eighth consecutive month of positive growth. Five of the eight capital cities are currently sitting at the peak, with Sydney looking to join those ranks by the end of May 2020. Corelogic’s Tim Lawless contributes the primary driving factors of this rebound to an extremely low cost of debt and improved borrowing capacity, which would be further exasperated with the March 2020 emergency cash rate cut. However, he also mentions that household income growth, housing affordability is rapidly eroding away opportunities in cities like Sydney, Melbourne and (to a lesser extent) Hobart.
While it seems that the adverse effect of the Coronavirus outbreak has had little effect on the Australian housing market, the impact of the virus on foreign buyers, and key economic sectors of the Australian economy will likely look to further deteriorate an already weak economy and low consumer sentiment. On the other hand, the population growth remains strong, which is driven by a stable immigration rate, especially in Sydney and Melbourne, therefore, the demand for housing remains strong.
Therefore, the overall impact of the Coronavirus will likely not be seen or felt in the property market until months to come.
Index Results as at February 29, 2020
Source: CoreLogic Hedonic Home Value Index 2 March 2020
Change in Dwelling Values
Source: CoreLogic Hedonic Home Value Index 2 March 2020
Sources: CoreLogic Hedonic Home Value Index | The Sydney Morning Herald | Domain Property Price Forecasts
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