National Property Report – February 2018
NEW SOUTH WALES
Property prices have fallen in Sydney for the first time in a long time, signalling a turning of the tide
The crackdown on lending policies is beginning to put a dampener on Sydney’s capital growth.
According to CoreLogic’s Hedonic Home Value Index for October 2017, while many regions experienced a slowdown in capital gains, Sydney was one of only three capital cities to record negative growth.
“Lenders have tightened their servicing tests and reduced their appetite for riskier loans, including those on higher loan-to-valuation ratios or higher loan-to-income multiples,” explains Tim Lawless, head of research at CoreLogic.
“Interest-only borrowers and investors are facing premiums on their mortgage rates, which are likely to act as a disincentive, especially for investors who are generally facing low rental yields on investment properties.”
This drop in dwelling values in Sydney is the first decline since May 2016, and for Lawless, seeing Sydney in this position is jarring. “Seeing Sydney listed alongside Perth and Darwin, where dwelling values have been falling since 2014, is a significant turn of events.”
There is a silver lining to this situation for investors, however, as rental yields are getting a boost from the decrease in prices.
“If the Sydney market continues to see values slip lower while rents gradually rise, yields will repair. However, a recovery in rental returns is likely to be a slow process,” Lawless says.
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UMINA BEACH: Apartments shine in Central Coast suburb
Situated on the ‘Woy Woy Peninsula’ on the Central Coast, Umina Beach is one of the most populated suburbs in the area. It is close to West Street, the retail hub of the Peninsula.
Units outperformed houses in Umina Beach, with price growth in the former coming in at 19.4%, in contrast to the latter’s 14.7%. Apartments also generated better returns at 3.6%, compared to 3.2% for houses. With both types of properties displaying an upward trend over the past 10 years, Umina Beach has excellent long-term potential for capital gains.
The local beach is certainly a popular recreational attraction, but there’s definitely more to Umina Beach. The town centre is serviced by top brands like Woolworths, Bunnings and Aldi, and there are several medical practices in the suburb.
Units: The apartment market in Umina Beach is recording steady growth with reasonable yields
Recreation: The local beach is one of the most well-known swimming spots on the Central Coast
Melbourne is holding to positive, if slowed, growth in the face of lending restrictions and affordability issues
Despite investor interest taking a hit as a result of tightened lending criteria, Melbourne has continued to sustain increases in dwelling prices.
“Investors are still a stronger part of the Melbourne market than they ever have been, but they haven’t been as big a part of the market as they were in NSW,” explains Angie Zigomanis, senior manager for residential property at BIS Oxford Economics.
Concessions from the state government have also helped drive buyer demand. However, with build completions expected to peak in the next year, buyers should expect to see a slowdown.
“[The Melbourne market] won’t be that strong over the next 12 months. The weaker investor demand will cause the market to soften, so we don’t necessarily see strong growth coming through,” Zigomanis says.
“It may not necessarily experience the declines that Sydney’s had, [but] I think Melbourne is starting to run out of steam as well. You can’t keep going at [a growth rate of] 10% per annum forever.”
The findings from CoreLogic’s October 2017 Hedonic Home Value Index support this, showing the slowest increase in dwelling values in over a year.
The report indicates that booming population growth as a result of record migration inflows, high levels of job creation and more reasonable property prices have given Melbourne an advantage over Sydney.
Nonetheless, investors may need to be careful. With Melbourne’s average rental yield already being the lowest among the capital cities, market movements that affect capital gains could make investing here risky in the long run.
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WANGARATTA: Unit prices zoom up
Over the 12 months to November 2017, Wangaratta saw apartments outperform houses in terms of growth.
The unit market recorded a 10.7% increase in prices, as opposed to 1.8% in the housing market. Nonetheless, both types of properties are very affordable, with median prices under $300,000.
Wangaratta’s significant distance from the metro certainly contributes to its affordability. It is situated at the junction of Ovens River and King River. It is also considered the administrative centre of the Wangaratta LGA and is one of the regional suburbs highlighted for sustaining demand and reporting a fall in average time on the market.
Wangaratta is known for its food and wine industry. There are also several schools in the area, including the Goulburn Ovens Institute of TAFE and Wangaratta High School.
Schools: There are several schools and tertiary institutions in Wangaratta, including Charles Sturt University
Affordability: Both houses and units have low median values, at $286,315 and $217,783 respectively
Population growth from significant migration inflows is turning the Sunshine State into a top market for investors
With Sydney and Melbourne slipping further out of reach for many homebuyers, more and more are turning to Queensland as the next best thing.
Angie Zigomanis, senior manager for residential property at BIS Oxford Economics, says Sydneysiders coming into the market to capitalise on the state’s comparatively low prices make up a growing proportion of the buyer demographic.
“We’re starting to see increased interstate migration flows out of NSW – that’s being reflected in first-time buyer numbers in Queensland,” he says.
While CoreLogic research suggests that growth in Brisbane remained low as of October 2017, investors ought to look at Queensland’s prospects from a long-term perspective.
“Queensland is emerging as a new investment hotspot driven by affordable pricing, strong interstate migration and high levels of government infrastructure spending,” says James Nihill, managing director of Patrick Leo.
The median house price in Brisbane as at November 2017 was $650,000, which would certainly appeal to owner-occupiers and investors from the southern states. The Brisbane CBD is thus predicted to see a 21% boom in population growth by 2036.
“The real opportunity emerges as housing in some key areas is undersupplied and will further tighten as the population continues to grow as forecast,” Nihill adds. The Ipswich house market is very likely to attract new buyers on a budget, as the median value came in at $350,000 in November 2017, with an average annual rental yield of 5.4% – a win-win situation for investors. Logan’s median house price was higher, at $400,000, but it offers considerable value for money as well.
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BEAUDESERT: High yields in affordable suburb
The suburb of Beaudesert is located within the ‘golden triangle’ of Brisbane, the Gold Coast and Ipswich, and is a great option for owner-occupiers looking for affordability and seeking to live the semi-rural lifestyle.
The median house price just exceeds $330,000 after 5.7% growth, while the median unit price is under $240,000 following a 2.5% price boost. While growth has been gentle over the past fi ve years, it has been positive and consistent, suggesting that this market has long-term potential. Average yields are also high, at 5% and 6.6% for houses and units respectively.
The Bromelton inland port project is expected to generate many direct and indirect employment opportunities, according to Simon Pressley, managing director of Propertyology. This spells good news for Beaudesert’s future prospects.
Infrastructure: Projects in the Beaudesert area will create jobs and foster
Affordability: With the median property price under $350k, Beaudesert is perfect for those looking to save
Perth is languishing at the bottom of the market, but rising positive sentiment is a good sign
Perth may still be a while away from stabilising, but there are seeds of hope in the market.
“Positive sentiment has been growing in the WA property market as we reach the bottom of this market cycle,” says Allison Hailes, CEO of the Urban Development Institute of Australia (UDIA) WA.
“Sales activity and housing values declined in WA over the past two years; however, [these figures] have shown signs of steadying in the last six months with little to no change in the median price of homes in recent months.”
While there continues to be debate on how much longer Perth’s down period will last, UDIA notes that new land prices went up by 3.9% year-on-year as of September 2017. The Real Estate Institute of Australia also reported a fairly steady median house price over the September 2017 quarter.
“Anecdotal evidence from a number of property developers supports the positive sentiment moving into 2018, with many experiencing an increase in general enquiries and interest from buyers. Record low interest rates are also providing accommodative conditions for buyers,” Hailes reports.
Moreover, ABS data indicate that housing finance commitments for owner-occupiers increased slightly by 0.3% in September 2017, marking the fifth straight month of upswing in this regard. However, the number of total dwellings approved for construction rose as well, which could dampen the market given the already-high levels of supply.
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CLAREMONT: House values trend upwards
The decline in WA seems to have missed the housing market in the premium suburb of Claremont, as prices have increased there by 26.1% over the past five years.
The median house value is now just over $1,450,000, and investors are looking at a strong capital growth market on this side of Australia. However, from a cash flow perspective, yields are quite low, at just 2.5%.
On the flip side, units are not doing too well, with prices beginning to drop. Over the most recent three-year period, apartment values have fallen by 9.5%.
Situated on the Swan River, Claremont has a busy shopping hub in the St Quentin Avenue precinct, a private hospital, and several schools.
Amenities: Claremont can easily meet residents’ shopping, school and entertainment needs
Accessibility: Stirling Highway runs through the suburb, and there are several railway stations
Flat prices in the outer ring and a solid performance by premium suburbs define Adelaide’s divided market
Adelaide continues to fly under the radar as a soft market with limited prospects. It is not crashing in the same way that Perth and Darwin have been, but buyers are starting to steer clear.
“[Adelaide’s] not had necessarily strong population growth. It hasn’t got a strong economy. Construction’s probably been slightly above underlying demand for dwellings for the last few years, so it’s not a tight market,” says Angie Zigomanis, senior residential property manager at BIS Oxford Economics.
Economically, Adelaide has had little to offer in terms of employment opportunities, with only two state infrastructure projects set to commence in the near future.
“The main one that everyone talks about will be defence – there are a couple of big naval contracts and submarine contracts,” Zigomanis says.
“[However,] we’re not 100% sure on what the impact on Australia will be. There will be extra employment, but how much of it is still open to debate.”
Thus, while the Adelaide market could experience a slight boost, it’s not expected to outperform other states any time soon.
“The future of urban development in South Australia is probably a little more uncertain at this particular point in time than it has been for a while,” says Pat Gerace, chief executive director of the Urban Development Institute of Australia SA.
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FINDON: Inner-city suburb flourishes
About 6km west of the Adelaide CBD, the suburb of Findon is enjoying solid performance of its property market.
Houses saw 10% growth in the 12 months to November 2017, to a median value slightly under $500,000. The unit market is also experiencing gentle, consistent price increases and a reasonable yield of 4.1%.
Findon is well stocked with amenities, including a local community centre, shops on Findon Road and Grange Road, and parks. Several schools serve the suburb, namely Findon High School and the Nazareth Catholic College Primary and Early Childhood Centre. Findon Oval is the main haunt of local sports clubs, and the suburb’s cycling club gathers at Findon Cycle Speedway. The massive Adelaide Arena is located here as well.
Recreation: Findon is home to the Adelaide Arena, so sports fans flock to the suburb
Parks: There are many parks in Findon, including Matheson Reserve and part of the Basa Reserve
Hobart has maintained its streak as the strongest capital city in Australia in terms of price growth
With property prices increasing by 12.7% over the 12 months to October 2017, according to CoreLogic, Hobart has held its position as one of the top capital cities in the country.
“Hobart is benefiting from renewed housing demand in the form of interstate migration, particularly Sydneysiders and Melbournites who appear to be utilising their enhanced wealth positions to buy very well in Hobart, where housing prices are substantially lower than those in Australia’s largest cities,” says Tim Lawless, head of research at CoreLogic.
While the majority of the Apple Isle’s growth has been concentrated in Hobart, the countryside is also picking up, albeit at a slow pace. Over the year ending October 2017, regional Tasmania recorded a 5.4% increase in prices.
“The property boom which is currently underway in Hobart is in no small way attributed to the remarkable transformation of Tasmania’s economy,” says Simon Pressley, managing director of Propertyology.
He cites regional centres such as Burnie and Devonport as areas with considerable potential.
Migration inflows drive demand
As a whole, Tasmania is not a particularly strong market, but Hobart’s ability to draw attention from interstate buyers has boosted its population growth significantly.
“If you look at the data for Tasmania [and] start splitting it out between Hobart and the rest of the state, it’s a bit like looking at Melbourne/Sydney versus the rest of Australia for the last few years,” says Angie Zigomanis, senior manager for residential property at BIS Oxford Economics.
“Most of the migration/ population growth that goes into Tasmania is going into Hobart, and some of the population from the rest of Tasmania is going into Hobart. That’s fairly solid population growth from the Hobart/Tasmania perspective.”
In terms of demographics, older adults make up a good proportion of the population. Quite a few of these residents are returnees who left Tasmania in their 20s and 30s and are now coming home.
“It’s not necessarily retirees, but it’s probably people who are starting to downsize and downshift. So you might find a bit of reversal from people who are coming from Sydney and Melbourne back to Tasmania,” Zigomanis explains.
With Hobart’s economy going strong due to tourism and education, the number of jobs created could continue to sustain demand. Tasmania has also been keeping supply levels low, which translates to tight vacancy rates, especially in the city.
The Top End is expected to spend another couple of years at the bottom of the cycle
Dwelling prices keep on sinking across the NT as demand levels stay down and the economy remains stagnant.
“From August 2015 to August 2017, the number of jobs in Greater Darwin decreased from 83,300 to 81,200 at a time when total jobs in Australia increased by 3.7%,” says Simon Pressley, managing director of Properytology.
“Darwin’s one and only major infrastructure project, the $40bn Ichthys LNG plant, is scheduled for completion in early 2018. The cupboard will then be bare for new infrastructure projects to replace the jobs that peaked at 8,000 in 2016. We believe that a fourth year of property price falls will occur in 2018.”
According to the October 2017 Hedonic Home Value Index published by CoreLogic, values fell by 5.3% over the 12 months to October 2017, representing a drop of 20% since Darwin’s last peak in May 2014. The city’s inability to recover economically from the mining investment loss is a major factor causing its inhabitants to leave for greener pastures.
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RAPID CREEK: Houses thrive in north Darwin suburb
Darwin may not be in a good spot as a whole, but select suburbs are sustaining positive growth.
Rapid Creek is one of those suburbs, as house prices went up by 7.3% over the year to November 2017. This follows a drop in values of 2.4% over the last three years. By contrast, the unit market has continued to plummet, with prices falling by 11.1% in the past 12 months.
Rapid Creek is the home of Darwin’s oldest market, the Rapid Creek Market. This popular Sunday market sells a wide range of fresh produce, seafood and exotic plants. To the west, Rapid Creek’s sister suburb, Nightcliff, is the site of schools like Nightcliff Primary School and Nightcliff Middle School. To the south, the suburb of Millner provides access to one of Darwin’s biggest shopping complexes, Homemaker Village.
Education: Rapid Creek is close to shops and schools in neighbouring suburbs
Growth: Demand for houses has been adequate to keep the suburb growing
AUSTRALIAN CAPITAL TERRITORY
Canberra continues to be a top spot for property investment as the city’s favourable economic performance drives demand
With the job market expected to remain stable, Canberra’s property market could look even better in the coming months.
“Market activity has been incredibly strong. For the 12 months ending August 2017, the 8,250 property transactions was an increase of 89.5% on the previous year – this was the biggest increase in volume of any state or territory,” says Simon Pressley, managing director of Propertyology.
“The attraction appears to be employment opportunities. Propertyology has observed an increase in professional services jobs in the private sector, while tourism is also strong, as is the agriculture sector in the surrounding region.”
First home buyer activity is picking up as well, with an increase in the number of housing finance loans approved for such buyers in the first quarter of the 2017–2018 fiscal year, according to Domain Group’s data scientist, Nicola Powell.
As of September 2017, Powell reports, first home buyer loans accounted for 20.5% of all loans taken by owner-occupiers, jumping from just 13.5% one year previously, The loan amounts taken by FHBs in Canberra are also among the lowest in the country.
On the flip side, the ACT recorded a drop in non-first home buyer loan activity.
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SCULLIN: Positive trending in the housing market
Scullin houses are in popular demand as the ACT gets stronger. This market has recorded significant and consistent growth over the past five years, with price increases coming in at 20.7% in the 12 months to November 2017.
Located in the Belconnen area, Scullin is named for former prime minister Henry Scullin. It is just a short distance from the Belconnen Town Centre, Hawker Shopping Centre and the Canberra CBD, making it an ideal residential suburb for those who seek convenience. There are several schools in the vicinity as well, including Southern Cross Early Childhood School and Hawker College.
For buyers on a budget who are willing to get into the apartment lifestyle, the median unit price in Scullin is just over $350,000, following a 2.9% drop in value over the year.
Location: Scullin is near the Belconnen Town Centreand the Canberra CBN
Growth: The suburb has reported steady growht over the last five years