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The Australian
Property Price Surge Many Australian banks are forecasting significant growth in the next 12 months. Are you prepared?
1300 766 791 contactus@freedompropertyinvestors.com.au
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Disclaimer: Information contained herein is gathered from sources we deem to be reliable however warrant no guarantee as to the accuracy of third party data. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser. All rights reserved.
April 2021
Welcome Thank you for reading this report. Freedom Property Investors is not a property company. We are a community of investors accessing the hidden market of positive cash-flow properties located in high growth locations across Australia. Led by Scott Kuru and Lianna Pan, two of Australia’s most successful property investors, we aim to provide our members with investment properties that outperform market averages for both capital growth and rental yield. Lianna Pan is one of only 3,000 qualified Actuaries in the country, and together we have perfected a detailed methodology
covering all fundamental aspects affecting the residential property market. Spending tens of thousands of dollars on our research, we also employ a full-time research team with access to property specific data not easily accessible to the everyday investor. Utilising a wide team of hundreds of experts around Australia, we work toward a common goal of helping create financial freedom for our members through property. We hope you enjoy this report and we look forward to helping you leverage our data insights to achieve your financial freedom.
Lianna Pan
Scott Kuru
Founder, Director of Research
Founder and CEO
In what was the largest month-on-month increase in value since August 2003, the latest housing market data from CoreLogic has confirmed that Australian home values rose by 2.1% in February, making the current growth phase one of the strongest on record. The Australian economy has weathered the COVID-19 health crisis and since late 2020 our property market has been showing signs of a rebound that continues to exceed the expectations of many. In a recent address by the Reserve Bank of Australia (RBA) to the National Press Club, Governor Philip Lowe made several observations: • Australians respond well in crises • The economic downturn was not as deep as many experts had initially feared • The bounce-back has been earlier and stronger than what was expected. For example, in August 2020 the RBA had forecast the unemployment rate at the end of 2020 would be close to 10%, but instead, the unemployment rate was 6.6% by December 2020 (and by January 2021 the rate had dropped further to 6.4%).
04
The Australian Property Price Surge
Online spending surged by 70% over 2020 which provided a significant boost to the overall economy. Online Share of Retail Sales
This better-than-expected result has been attributed to a number of factors, including the success in containing the virus. Comparing the situation in Australia to that of many countries overseas, it is clear that the health of the population and the health of the economy are closely linked.
% 10
8
6
4
2
0
4 1 02
6 1 02
8 1 02
02
Source: Australian Bureau of Statistics (ABS), Reserve Bank of Australia (RBA)
Another factor, highlighted by the RBA, was the way in which Australians adapted and innovated throughout 2020. Businesses changed their business models, introduced new technologies, and moved online. Households changed their spending patterns as well, redirecting their spending from travel and entertainment to electronics, homewares, and home improvements/renovations. Online spending surged by 70% over 2020 which provided a significant boost to the overall economy.
Change in Dwelling Values as at February 28, 2021 Month
Quarter
Annual
Total Return
Median Value
Sydney
2.5%
3.6%
2.8%
5.3%
$895,933
Melbourne
2.1%
3.5%
-1.3%
1.8%
$717,767
Brisbane
1.5%
3.5%
5.0%
9.3%
$535,618
Adelaide
0.8%
2.7%
7.3%
11.8%
$478,587
Perth
1.5%
4.2%
4.6%
9.3%
$491,795
Hobart
2.5%
4.8%
8.7%
14.0%
$535,994
Darwin
0.7%
5.5%
13.8%
19.4%
$438,645
Canberra
1.9%
3.7%
9.7%
14.6%
$706,454
Combined Capitals
2.0%
3.6%
2.6%
5.9%
$675,014
Combined Regional
2.1%
5.4%
9.4%
14.4%
$438,185
National
2.1%
4.0%
4.0%
7.6%
$598,884
Source: o C reLogic
Australian Home a V lue Inde x at 82 February, 1 20
The Australian Property Price Surge
05
Driven largely by an influx of first home buyers entering the market, as well as a significant migration of buyers purchasing in regional areas, property markets across the country are bouncing back at astonishing rates. In the previous month, regional home values continued their strong growth trend with the combined regional values up by 2.1%. However, it is the capital city values that showed a stronger rebound in values, recording a growth of 2.0% in combined values for an overall increase of 1.3 percentage points from January. This lift in values was driven by the Sydney and Melbourne markets, with Sydney growing by 2.5% and Melbourne by 2.1% (up 2.1 percentage points and 1.7 percentage points, respectively). The February result was a positive signal for Melbourne in particular, which had lagged behind the other capital cities in home values due to an extended health
crisis. With a February median value in Melbourne of $717,767, the month-on-month increase of $25,605 is the highest monthly change in values across the country and is most certainly welcome news for homeowners in Melbourne. Furthermore, market indicators suggest that the current price trends are set to continue for the foreseeable future. For example, in the latest data on new housing loans (a key leading indicator of demand), the value of new loan commitments is still on the upward trajectory from the previous low in May 2020. By January 2021, the value of new loan commitments (excluding refinancing) was up 76% from May 2020. Loan commitment value for owner-occupiers is up 81% over this period, and for investors the value is up 62%. This shows that demand is increasing and investors should act quickly to take full advantage.
Value of New Loan Commitments (ex. refinancing) Total
Owner Occupier
Investor
35
30
$ billions
25
20
15
10
5
0 Jan-03
Jan-06
Jan-09
Jan-12
Jan-15
Source: ABS Lending Indicators, January 2021
06
The Australian Property Price Surge
Jan-18
Jan-21
National Rents – Houses 500
475
Prior e Y ar
450
-2 1
Jan
ov -2 0 D ec -2 0
N
ct -2 0 O
Au g20 Se p20
-2 0 Jul
-2 0 Jun
-2 0 aM y
pr -2 0 A
aM r -2 0
b20
425
Fe
We ekley Rent $
Last 12 o M nths
Source: SQM Research, January 2021
More welcome news for investors holding rental properties is rental stock and vacancy rates continuing to fall across the country. For most of the last 12 months, rental stock levels have stayed below the corresponding month from the prior year. The dwindling rental stock levels and low vacancy rates are putting upward pressure on rental returns. In January this year, the weekly average rent displayed a 9% increase over the month. In this current environment of increasing demand and competition for housing, it pays to partner with a team that tracks the housing market and identifies often unseen opportunities for the right property in the right locations. At Freedom Property Investors, we study the entire property market and analyse a broad range of key economic factors to position our members toward areas of high performance and return on investment. Right now there are multiple factors which are leading many of the big banks to forecast a surge in property prices. Whether you’re actively building your portfolio or just getting started, our team will help you identify the opportunities that match your goals. Contact our friendly team today:
Get in touch The Australian Property Price Surge
07
1300 766 791 contactus@freedompropertyinvestors.com.au
freedompropertyinvestors.com.au