residential Property MARKET OVERVIEW AND OUTLOOK
publication 5 / 2013
JUNE 2013
Residential Market Update
The Australian Residential property sector across the capital cities closed at a 2.9% growth year on year to the end of May, after a -0.4% change over the last 3 months.
Residential property median values in Australia contracted by 1.2% in May, settling at a net annual growth rate of 2.9% at the close of the year ending last month (RP Data). This decline extended the 0.5% fall in values over April. Nevertheless, the median value movements lag the key leading indicators of the market, which were being reported at boom levels of late 2010. The ABS annualised rate of 2.5%, along with a lower than expected adjusted unemployment rate of 5.5%. This, combined with the RBA’s low cash rate of 2.75% and the Australian dollar at annual record lows of 0.9057 USD (accurate as at 11:15am on 8 July 2013), was contributing towards consistently high Auction clearance rates and low sale discounting in the past months. The Western Australian property market outpaced other
The new home sales recorded by the HIA further extended its growth this month by 3.9%, after last month’s 4.2% change. This, combined with new dwelling approvals improving by 9.1% (trend of around 0%) and up 1.2% indicated towards a better than expected health of the property market. Building approvals, tracked by the HIA, for Australia’s most populous state of NSW improved by a seasonally adjusted 33.3%. The RBA, amid a tentative economic climate, also delayed a further cut of the cash rate earlier in June. Yet, most commentators expect a further small cut of 0.25% to better stir the local growth later on in the second half of the year. The consumer sentiment about the markets was positive this month, rising 4.2% to 102.2 on the Westpac Melbourne Institute consumer index.
growing by 1.9% to settle at a 6.4% year on year growth statistic. Victoria’s capital city, however, experienced a 1.9% decline in the growth in May.
Dwelling trenD year on year 7%
Dwelling Trend YoY (%)
6.4%
6% 5%
4.7% 3.9%
4%
2.9%
3%
2.1%
2%
2.0% 1.3%
1% -1.6%
0% -1% -2%
Perth ( WA )
Darwin ( NT )
Sydney ( NSW )
Source: RP DATA
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FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE JUNE 2013
Canberra ( ACT )
Melbourne ( VIC )
Hobart ( TAS )
Brisbane ( QLD )
Adelaide ( SA )
Key statistics JUne 2013
ECONOMIC GROWTH 2.8% 0.5% 3.1% 0.6%
AUD BUYS
0.9057 USD
GDP growth
2012-2013
0.25% 0.4%
in MAY
UNEMPLOYMENT 5.5%
0%
PARTICIPATION
0.1%
in Q1
65.2%
Australia wide snapshot
3.9%
Median House Price $ 520,000
-0.4%
-1.2%
2.9%
monthly
+9.1%
1.2%
quarterly
$ 22,653
2.9%
total dwelling commitments
annual
Dwelling Values
housing finance
Median Unit Price
4.7% MAY/JUNE
Australian Employment
New Home Sales
New Dwelling Approvals
Westpac - Melbourne institute
102
2.4%1
RBA STATS CASH RATE 2.75% INFLATION 2.5%
Consumer Sentiment Index
annual CHANGE IN total property sales
-3.6%
WORLDWIDE 2012 US, EUROPE & JAPAN 2012 AUSTRALIAN 2012 AUSTRALIAN 1st quarter 2013
Difference from Peak Dwelling Value
$ 440,000
Weekly House Rent $ 474 * Annual Change 3.2%* Rental Yield 4.1% Weekly Unit Rent $ 440 * Annual Change 2.8%* Rental Yield 4.9% Source: ABS, RP DATA, HIA, RBA, Westpac - Melbourne Institute ยน Current at 11:15am 8 July 2013 * Data updated to April 2013
FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE JUNE 2013
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Residential Market Update
FUtUre estate capital city rating sUmmary STATE
CAPITAL CITY
FUTURE ESTATE SCORE
OVERVIEW
NSW
SYDNEY
Sydney’s FE Score dropped as the state wide aggregate auction clearance rates declined from a high last month. SQM’s asking price index for Sydney declined and the
VIC
MELBOURNE
Melbourne’s rating improved as its state discount rate reduced and the asking price index monthly change increased to 1.1%. While its median price movements in currently high.
QLD
BRISBANE
Brisbane’s FE Score improved by the largest amount this month, brought about due to the early signs of recovery. Vacancy rates and discount rates improved, along with
WA
PERTH
Perth’s FE Score declined over the past month. Despite marginal improvements in the state days on market and vacancy rates, Perth’s asking price index slowed and its discount rates increased. The State Property Market Score was higher.
SA
ADELAIDE
Adelaide’s score fell after a large contraction in the unit with a reduction in auction clearance and an increase in the vacancy rates. There was a good improvement in the discount rates, however.
ACT
CANBERRA
Canberra scored higher on the FE model after improvements in the days on market statistic, the discount rate and the SQM tracked asking price index change. The minor decline.
NT
DARWIN FE score. Its auction clearance declined marginally, while all other statistics saw an improvement. However, Darwin’s softer future forecast.
TAS
HOBART
Hobart experienced a substantial reduction in its score, given a poorer result for the auction clearance, asking price index change and vacancy rate statistics. Discount rates and days on market for sale of property sale did marginally improve.
* Score is out of 5 as indicated by out of 5: Higher score indicates a stronger property market with positive outlook, whereas a lower score indicates a softer market with lower growth prospects.
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FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE JUNE 2013
Source: Future Estate Research
property marKet perFormance The Australian Residential Property market has lately been reacting to a complicated mix of various macroeconomic and microeconomic factors. It is a combination of statistics being produced by the market data providers. While median prices have been recorded declining by 1.2% in the past month, auctioneers continue to report record auction clearance rates as high as 80.3% properties are seeing sales well above reserve prices. nature of the property market today, investment. The ABS published data shows a rise of 3.5% and 1.5% in the number purchase and construction, respectively, compared to a 1.2% rise for established
introduced by the state governments towards the end of 2012. While prospective owner
residential property investors are still reacting to the shift in the growth areas. Units in the tourism dominated areas, the domain of savvy property investors until recently, are now underperforming. Far north Queensland and the Gold Coast areas experienced growth until 2010 fuelled by tourism; units in these areas are now already close to 20% under their peak values. This can be compared to houses in the Pilbara region of WA, NT, North West region of QLD and Mackay in QLD, which grew by 19.8%, 10.3%, 10.2% and 5.5% respectively on an annualised basis over the past 5 years. All these areas were either a mining or transport hub for Coal and Iron ore. The future investment trends are now
split house and land close to workplaces in the city, and thus are moving into denser
unit apartments in the inner city suburbs. As capital city populations continue to grow, development activity has reignited in these areas of town.
aUction clearance rates The auction clearance rates recorded across two of Australia’s largest cities remained very strong this month. Predominantly auction oriented property markets, the clearance rates for Sydney and Melbourne published by the Real Estate Institute of NSW and Victoria, as well as the APM and RP Data, all showed 67% to 80% range. A 65% clearance rate is indicative of a strong property market and sustained clearance rates in excess have only previously been seen in 2010. Auction volumes were below expectations over the Queen’s Birthday long weekend, but strong for the winter season regardless. The low
Australia’s GDP growth rate was an annualised rate of 2.5% in unemployment was lower than expected and the cash rate remained at 2.75%.
and job security, thanks to the higher terms of trade with the falling AUD, could be one reason behind the strength in auctions.
capital cities The capital city market medians saw a contrast to the strength in the auction clearances reported. Sydney closed with a year on year growth of 3.9% throughout movements of 0.1% and -0.6% for houses and units, respectively. Victorian city of in the house values and a -4.0% change in units. The underlying theme in these capital cities was the increasing shortage of land needed to house growing populations. Meanwhile, it was an opposite trend for Brisbane, where the comparatively higher unit dwellings grow by 1.2% more than house medians. Perth was an outlier amongst all capitals; despite the slowing mining sector, the city’s house prices were up 1.7% 4.2% rise. Rental yields in the northern territory were again a star performer, seeing shortage and high dwelling prices here.
FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE JUNE 2013
5
Residential Market Update
RP Data recorded a weekly Auction Clearance Rate
property aUction clearance rates may: 2013 May Property Auction Clearance Rates 80% 70%
auctions in Sydney for the week ending 2nd June 2013. This record in several years and indicated RBA rate cuts and low unemployment
3000
75% 70%
70%
2850
70% 2500
60% 2000
50%
1500
40% 30%
1459
1000
20% 500
10% 0
0
Month Average
Last May Weekend
Source: Real Estate Institute of Victoria; Real Estate Institute of NSW.
Total May Auctions Sydney
Melbourne
Source: Real Estate institute of Victoria; Real Estate institute of NSW
property aUction clearance rates: weeK enDing 16th JUne Auction Clearance Rates 80% 70%
77% 68%
67%
69%
70%
67%
60% 50% 40% 30% 20% 10% 0
Australian Property Monitors
RP Data
* REINSW’s latest auction clearance rates are for the week ending 9th June, 2013
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FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE JUNE 2013
REIV/REINSW* Sydney
Melbourne
qUarterly capital city hoUse anD Unit price trenD
5%
House Price Trend Over Quarter (%)
4.2%
Unit Price Trend Over Quarter (%)
4% 3% 2.3%
2%
1.7% 0.8%
1% 0
0.4% -5.6%
-2.5%
0.1% -0.6%
-0.6%
-0.9% -1.3%
-1.3% -3.5%
-1.6% -4.0%
Darwin ( NT )
Canberra ( ACT )
Melbourne ( VIC )
-1% -2% -3% -4% -5% -6%
Hobart ( TAS )
Perth ( WA )
Adelaide ( SA )
Sydney ( NSW )
Brisbane ( QLD )
Source: RP DATA
capital city hoUse anD Unit gross rental yielDs Gross Rental Yields 8% 7%
6.2% 6.3%
6% 5.1%
5%
5.6%
5.5%
5.3% 4.8%
5.1% 4.6%
4.5%
5.0%
4.9% 4.4%
4.6%
4.3% 3.7%
4% 3% 2% 1% 0 Darwin ( NT )
Source: RP DATA
Hobart ( TAS )
Brisbane ( QLD )
Canberra ( ACT )
Perth ( WA )
Adelaide ( SA )
Sydney ( NSW )
House Gross Rental Yield (%)
Melbourne ( VIC ) Units Gross Rental Yield (%)
FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE JUNE 2013
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Residential Market Update
CAPITAL CITY hOUSE AND UNIT mEDIAN PRICES State
Capital City
median house Price ($)
median Unit Price ($)
Dwelling Trend YTD* (%)
New South Wales
Sydney
$ 675,000
$ 500,000
1.9%
Victoria
Melbourne
$ 567,250
$ 445,000
-0.2%
Queensland
Brisbane
$ 442,000
$ 360,000
0.2%
South Australia
Adelaide
$ 395,000
$ 328,998
0.1%
Western Australia
Perth
$ 519,000
$ 423,250
2.7%
Tasmania
Hobart
$ 340,000
$ 265,000
5.1%
Northern Territory
Darwin
$ 529,000
$ 435,750
-1.0%
Australian Capital Territory
Canberra
$ 565,000
$ 415,000
1.9%
Source: RP DATA * Year to Date
KEY INVESTmENT ThEmES Theme Key growth opportunities
Summary Sustainable above-market capital growth
Future Estate View Capital cities re-emerging Long term Darwin boom continues
Comments Generally larger centres and capitals currently experiencing and slow dwelling completions
performance in inner city and outer suburbs Population growth and dwelling undersupply are long-term drivers
high, with cash rate low and expected to further drop and unemployment higher than expectations
theme, subject to cash rate Key value opportunities
discount to comparable properties, market analyst valuation
Distressed opportunities reducing due to market improvement Adelaide and Hobart hardest hit of capitals in 2012, recovery
Value more at the suburb, rather than city level and more particularly at the asset-level Distressed value without capital and income growth potential coastal
Defensive yield
Sustainable rental income, above market yield
Darwin, Brisbane and Perth have very high yields due by property undersupply Regional centres (top 20 sustainable yield
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FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE JUNE 2013
likely in 2013 as housing recovery gains momentum, but subject only to growth in construction investment Rental growth unlikely to exceed capital growth into the longer term
KEY CYCLICAL ThEmES Cyclical Outlook
Summaty
Future Estate View
Comments
Global economy and policy
The global economic crises in the US and EU have
Indirect impact to residential property market via consumer
The global impact on Australian property as a whole appeared
Asian growth, even after having slowed, is still estimated above 7.4% for 2013
and changes in growth areas Negative impacts easing in 2013
international economic turmoils, which are subsiding
Domestic growth and policy
Growth estimated at 2.5% for the year, which is on par with US growth and well above Japan and Europe Non-mining sectors are growing with higher
Lowered cash rate and sustained growth is assisting in housing market growth Unemployment, at 5.5% and a lower participation rate may have will be a deciding factor
Likely mild increase in unemployment, which
Housing
Highest level of
Lower interest rates have translated to strong auction clearance rates in the major capital cities, areas with high employment
Improving house prices likely
seeing the low cash rate and 5.5% unemployment The median house price at around 4, which is low internationally Population growth
Dwelling construction
Population growth was recorded at 1.8% over the year in 2012 394,200 persons annual increase in period ending December 2012 WA recorded highest growth: 3.5% Population recently reached 23M
Population growth expected to rise in 2013, driven predominantly by overseas skilled migration Migration to Australia concentrated in capital cities of NSW, VIC and WA
Below-trend dwelling development continues, as evidenced by lower spending in a sector with
House approvals have stayed
emerging
with construction and completions remain poor New Home Sales are stronger
demand for credit
Household savings ratio remains elevated at ~10% levels Demand for housing credit still comparatively low
supply imbalance substantial 300,000 this year and construction investment slowing QLD and WA major interstate
25,000 fewer homes built in 2013 compared to a decade ago Construction has fallen since has been high as a result
Over 50% of investors expect house prices to rise in 2013 vs. 8% expect a fall
substantially improved from lows in 2012 Household
rates Historic low interest rates and new home buyer grants stimulating owner occupier property demand; investors noticing high growth areas
through international migration
to credit Consumer
on the lower end of the RBA preferred range may lead to further interest rate cuts later into 2013 by another 25 basis points
is anticipated that demand for housing credit will emerge, especially given substantial after recent savings
RP Data is reporting 250 suburbs around Australia tipped to double property values in 10 years HIA reports hotspots are emerging Demand for housing credit is still increasing, albeit it at very low levels Investor credit demand is leading owner-occupier demand
FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE JUNE 2013
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Residential Market Update
FUtUre estate capital city rating
PERTH State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
BRISBANE
DARWIN State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
34.5% 114 6.5% 1.4% 1.2% 3.50
86.5% 151 5.2% 1.6% 1.1% 2.00
Future Estate Capital City Rating
Future Estate Capital City Rating
3.60
3.45
State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
32.5% 160 8.9% -0.4% 1.8% 2.40
Future Estate Capital City Rating
2.53
SYDNEY
DARWIN
State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
NT
57% 112 6.7% 0.7% 1.7% 2.75
Future Estate Capital City Rating
QLD
3.25 WA
BRISBANE
SA
CANBERRA
NSW SYDNEY
PERTH
ACT CANBERRA
VIC
ADELAIDE
State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
41% 86 5.1% -0.9% 1.5% 2.25
MELBOURNE
Future Estate Capital City Rating
2.95
TAS HOBART
ADELAIDE State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
MELBOURNE 41% 155 8.0% -0.4% 1.5% 2.60
Future Estate Capital City Rating
2.72
State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
HOBART 57% 113 7.7% 1.1% 2.7% 2.95
Future Estate Capital City Rating
3.34
* The State Property Market Score, which is out of 5, takes into account several factors, including demographic factors that indicate Future Growth, Quarterly House and Unit Median Price Growth Rates, Annual Dwelling Growth Rates and the Median Mortgage Payments as a proportion of the Median Household Income.
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FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE JUNE 2013
State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
21% 182 10.0% -0.5% 2.5% 3.55
Future Estate Capital City Rating
2.31 Sources: Australian Property Monitors, Domain.com.au and SQM Research.
Future estate’s research team has developed an extensive quantitative modelling process to critically assess the australian residential property market. For the capital city rating, our team records, benchmarks, assigns weights to and scores various key property market lead indicators and descriptive statistics. our services include: Buyers’ agency research – suburb reports and due-diligence markets personalised advice and investment strategy panel of “endorsed projects”- over $1bn portfolio of “investment grade” projects nationally contact us to arrange a complimentary consultation to discuss your needs
please contact our team at Future estate for more information on our methodology and/or our range of other property investment advisory services.
1300 future (388 873) info@futureestate.com.au www.futureestate.com.au @futureestate future.estate future estate
Copyright © Future Estate Group Pty Ltd 2012
provided to Future Estate Group Pty Ltd by third parties. While such material is published with necessary permission, Future Estate Group Pty Ltd and its related entities accept no responsibility for the accuracy or completeness of this information, nor endorses it. To the maximum extent permitted by law, Future Estate Group Pty and its related entities disclaim all liability for any loss, costs or damage which arises in connection with the use or reliance on the information and material contained in this document. Any forward looking statements and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Furthermore, past performance is not a true indicator of future performance. Any past performance information this document has been given for illustrative purposesUPDATE only and should be relied upon as an indication of future performance. FUTUREin ESTATE RESIDENTIAL PROPERTY MARKET JUNEnot 2013
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