residential Property MARKET OVERVIEW AND OUTLOOK
publication 3 / 2013
April 2013
Residential Market Update
Australian Property Market Overview There have been further improvements in the outlook for the Australian residential property market over the past month. Australian dwellings have seen a substantial growth of 2.8% over the past quarter, which is on the back of a 2.4% growth over the past year, as estimated by RP DATA. Property values across the nation have narrowed their difference from the peak prices seen in October 2010, being just 3.0% off the figures then; Sydney has marginally broken through its previous peak dwelling value. Auctions, especially in Sydney and Melbourne, over the past month’s weekends have been very successful, with clearance rates of 70% and 68% respectively. Data sourced from REIV and APM complemented reports suggesting the last full auction weekend of March was one of the biggest on record for the capital cities.
New home sales recorded by the HIA have seen a dip over March with the effects of the state stimulus packages waning; however values remain positive over the 3 month period. Dwelling building approvals are on a 3.1% rise, continuing a gradually recovery. This can further be evidenced from the rise in the WestpacMelbourne Institute Consumer Sentiment Index up 2.2% over March. Affordability remains high with the continuing low interest rates set by the RBA to further stimulate the economy. It is also to curb the rising strength of the Australia dollar, which is causing poorer terms of trade. Forecasts continue to place a 0-1% reduction is the cash rate over the rest of the year 2013.
Key statistics april 2013
ECONOMIC GROWTH WORLDWIDE GDP GROWTH OEDC GDP GROWTH AUSTRALIAN GDP GROWTH AUSTRALIAN GDP GROWTH 4th quarter
3.3% 1.4% 3.6% 0.6%
AUD BUYS
1.04 USD
GDP GROWTH
2012
participation 65%
2
110.5
Westpac - Melbourne institute
2.6%
Australian Employment Unemployment 5.5%
Consumer Sentiment Index
0.2%
0.3%
FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE APRIL 2013
RBA STATS CASH RATE 3% 1.25% INFLATION 2.2% 0.2%
in 2012 in Q4
2.2% FEB
Residential Market Update
Key statistics april 2013
New Dwelling Approvals
Australia wide snapshot
+3.1%
New Home Sales
2.4% Annual Change in Dwelling Values 3.3% Annual Change in Total Property Sales 2.8% Quarterly Change in Dwelling Values Difference from Peak Dwelling Value 3.0%
Median House Price
-5.3%
Median Unit Price
485,000 420,000
Weekly House Rent $ 474 Annual Change 3.2% Rental Yield 4.1% Weekly Unit Rent $ 440 Annual Change 2.8% Rental Yield 4.9% Future estate capital city rating summary STATE
CAPITAL CITY
NSW
SYDNEY
VIC
MELBOURNE
QLD
BRISBANE
WA
PERTH
SA
ADELAIDE
ACT
CANBERRA
NT
DARWIN
TAS
HOBART
FUTURE ESTATE SCORE
OVERVIEW A strong result buoyed by favourable changes in asking price and a tight rental vacancy rate; affordability was also good and indicated future sustained growth. Above average result influenced by excellent affordability a good state wide auction clearance rate; market is gradually resuming from a negative growth phase over past year. An average result that displayed healthy affordability and a good vacancy rate; a high discount rate, a sub-par auction clearance rate and many days on market were negatives. An above average result with an extremely low vacancy rate and a healthy asking price index change; low auction clearance rates negatively influenced the final score. An average result that showed an excellent vacancy rate, but higher discount rates and days on market were key drivers of negative price change over the past year and quarter. An above average score resulting a good discount rate and vacancy rate, but affordability, clearance rates and days on market for property remained just healthy. Asking price has therefore seen a negative change after a good quarterly price movement. An excellent result, with Darwin showing the highest annual growth and recent asking price change which are likely to continue. Auction clearance, vacancy rates were rated excellent and seemed to overcome poor affordability. An average result through poor auction clearance and a high days on market statistic; market was however gradually recovering thanks to excellent affordability as of late.
* Score is out of 5 as indicated by our of 5: Higher score indicates a stronger property market with positive outlook, whereas a lower score indicates a softer market with lower growth prospects.
Source: Future Estate Research
FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE APRIL 2013
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Residential Market Update
Property Market Performance The Australian residential property market is traditionally less sensitive to international factors generally affecting the other markets. Australian property has continued a modest climb over the quarter, with median values across Australia currently at $420,000 for units and $485,000 for houses, an average of 2.8% quarterly increase. RP DATA further reports an annualised increased of the property over
the past years at 2.1%, with dwelling values currently at an average 3.0% below peak values in October 2010. This is in contrast to the 1.9% annualised 5 year growth and 5.7% difference from the 2010 peak that was recorded at the close of 2012. The strong auction clearance rates for Sydney and Melbourne over March is as follows:
March Property Auction Clearance Rates 74.2%
80% 69%
72%
69%
70%
68%
70% 60% 50% 40% 30% 20% 10% 0
Clearance rate 1st weekend
Clearance rate 2nd weekend
Source: Real Estate institute of Victoria; APM Looking at the median capital value growth rates and rental yields, there are some key cities to note. Sydney has seen consistent above capital city average growth since at least mid-2010. It improved by 3.8% over the past year, 1.4% better than the national capital city average, and recently grew by 1.5% over the past month. Melbourne is another city that is of interest. Resuming from a trough in its property market cycle, it is showing signs of recovery. While the national average growth over the past quarter was 0.4% above the past year average,
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FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE APRIL 2013
Clearance rate 3rd weekend Sydney
Melbourne
Melbourne saw a 2.2% greater expansion over the past quarter compared to its growth over the past year. Another large capital city is Perth, which has seen rapid growth over the past year. Fuelled by mining activity, the city grew 5.8% over the past year and continued to consistently outperform the majority of the market over the past quarter, at a 4.3% expansion rate. Brisbane should also be noted for its population growth, which is currently the highest by aggregate numbers and should see a translation to median value growth in the near term.
Residential Market Update
quarterly capital city house and unit price trend House Price Trend Over Quarter (%)
8% 7% 6% 5% 4% 3% 2% 1% 0 -1% -2% -3% -4% -5% -6% -7%
Unit Price Trend Over Quarter (%) 6.0%
4.1%
4.5%
3.7%
4.5%
3.5% 2.4%
2.5% 2.3%
1.9% 2.1%
0.9% Canberra ( ACT )
6.7%
1.7% -0.8%
Sydney ( NSW )
Brisbane ( QLD )
Melbourne ( VIC )
-6.1% Perth ( WA )
Adelaide ( SA )
Hobart ( Tasmania )
Darwin ( NT )
Source: RP DATA
capital city house and unit gross rental yields 8% 7%
5%
5.0% 4.5%
6.0%
5.6%
5.6%
6%
4.7%
4.4%
4.2%
4%
4.4%
4.7%
6.3% 5.2%
5.0%
5.0%
4.4%
3.6%
3% 2% 1% 0
Canberra ( ACT )
Sydney ( NSW )
Brisbane ( QLD )
Melbourne ( VIC )
Adelaide ( SA )
Perth ( WA )
Darwin ( NT )
House Gross Rental Yield (%)
Source: RP DATA
Hobart ( Tasmania ) Unit Gross Rental Yield (%)
Capital City House and Unit Median Prices State
Capital City
Australian Capital Territory
Canberra Sydney
New South Wales Queensland Victoria South Australia
Median House Price ($)
Median Unit Price ($)
Dwelling Trend YTD* (%)
$ 535,000
$ 414,000
3.4%
$ 620,000
$ 488,000
3.8%
Brisbane
$ 435,000
$ 360,000
1.4%
Melbourne
$ 505,000
$ 421,750
0.3%
Adelaide
$ 392,000
$ 312,500
0.3%
Western Australia
Perth
$ 492,000
$ 420,000
5.8%
Northern Territory
Darwin
$ 585,000
$ 400,000
7.3%
Tasmania
Hobart
$ 60,000
$ 260,000
-1.2%
Source: RP DATA
* Year to Date
FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE APRIL 2013
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Residential Market Update
Key Cyclical Themes Cyclical Outlook Global economy and policy
Domestic growth and policy
Housing affordability
Population growth
Dwelling construction
Consumer confidence
Household savings / demand for credit
Summaty
Future Estate View
Comments
■■ In
general, global crisis has subsided however Euro uncertainty remains ■■ Asian growth story continues
■■ Indirect
impact to residential property market via confidence and credit growth ■■ Less of an impact than in 2013
■■ Saving
■■ Near-trend
growth, although unemployment rising slightly ■■ Non-mining sector improving
■■ Near-trend
GDP growth is supportive of housing market growth ■■ Key driver will be unemployment and impact on interest rate setting
■■ Likely
■■ Highest level of affordability since 2009 ■■ ~4x median house price / income ratio
■■ Lower
■■ Improving
■■Population growth accelerated in 2012 – 1.6% p.a. ■■359,640 persons increase in 2012 up 39% on 2011 at 258,616 persons ■■Rising trend continues
■■ Population
growth expected to rise in 2013 predominantly by overseas longterm migration ■■ In-bound migration focused on East Coast capitals
■■ Impact
■■ Below-trend
■■ House approvals declining ■■ Unit approvals ticking up
■■ Insufficient
■■Consumer confidence emerging ■■Investor confidence substantially improved from previous lows
■■ Over
■■ Growth
■■Household savings ratio remains elevated at ~10% of income – back to 1908’s levels ■■Demand for housing credit still low
■■ With
■■ Demand
well below previous highs
continues
dwelling construction
interest rate environment has stimulated demand, led by the investor segment, in particular inner city apartments
■■ Driven
major unforseen crisis, the indirect impact will continue to lessen
mild increase in unemployment, which may result in further rate cuts by mid-year
house prices likely to be off-set by lower interest rates ■■ Historic low interest rates stimulating investor demand, but not yet first home buyer on housing demand /supply imbalance substantial – housing shortage to reach 300,000 this year ■■ QLD and WA major interstate beneficiaries ■■ VIC major inbound international growth
construction levels to satisfy population growth demand – the recent symptom has been rental growth
50% of investors expect house prices to rise in 2013 vs. 8% expect a fall confidence emerging, it is anticipated that demand for housing credit will emerge, especially given substantial buffer to mortgage repayments given recent savings
expectations still muted, although rapid improvement from 2012
for housing credit is still increasing, albeit it at very low levels Investor credit demand is leading owner■■ occupier demand
Key Investment Themes Theme
Summary ■■ Sustainable
above-market capital growth
■■ Generally larger centres and capitals ■■ Population growth driven by employment
■■ Significant
■■ Distressed
opportunities reducing due to market improvement ■■ Adelaide and Hobart hardest hit of capitals in 2012, recovery emerging
■■ Value
■■ Sustainable
■■ Darwin / Brisbane has highest of capitals ■■ Regional centres (top 20 population) offer
■■ Yield
Key growth opportunities
Key value opportunities
Defensive yield
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Comments
Future Estate View ■■ Capital cities re-emerging ■■ Darwin boom continues ■■ Sydney offers medium-term performance ■■ Focus on population growth as long-term driver ■■ Affordability remains key theme
discount to comparable, market analyst valuation
rental income, above market yield
sustainable yield
FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE APRIL 2013
highest
opportunity and relative housing affordability
more at the suburb, rather than city level and more particularly at the asset-level ■■ Distressed value without capital and income growth potential questionable – i.e. lifestyle / coastal compression possible / likely in 2013 as housing recovery gains momentum growth unlikely to exceed capital growth materially
■■ Rental
Residential Market Update
Future Estate capital city rating PERTH
DARWIN
35% State Auction Clearance Rate 130 State Days on Market (days) 7.4% State Discount Rate 0.7% Asking Price Index Change 0.8% City Vacancy Rate 3.10 State Property Market Score* Future Estate Capital City Rating
State Auction Clearance Rate 95% State Days on Market (days) 165 State Discount Rate 5.9% Asking Price Index Change 6.4% City Vacancy Rate 1.4 % State Property Market Score* 2.85 Future Estate Capital City Rating
BRISBANE
3.93
3.12
State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
34% 165 10% 0% 1.9% 2.60
Future Estate Capital City Rating
2.54
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
62% 116 7.8% 2.6% 1.6% 4.25
Future Estate Capital City Rating
QLD
3.69 WA
BRISBANE
SA
CANBERRA
NSW SYDNEY
PERTH
ACT CANBERRA
VIC
ADELAIDE
MELBOURNE
State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
43% 95 5.7% -3.9% 1.5% 3.8
Future Estate Capital City Rating
3.12
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% 160 8.5% -1.8% 1.4% 3.05
Future Estate Capital City Rating
2.96
State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
HOBART 58% 110 8.3% -1.1% 3.0% 4.25
Future Estate Capital City Rating
3.24
State Auction Clearance Rate State Days on Market (days) State Discount Rate Asking Price Index Change City Vacancy Rate State Property Market Score*
24% 190 10.5% 1.4% 1.9% 3.8
Future Estate Capital City Rating
2.52
* The State property Market Score 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.
Sources of data: Australian Property Monitors, Domain.com.au and SQM Research.
FUTURE ESTATE RESIDENTIAL PROPERTY MARKET UPDATE APRIL 2013
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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. Please contact our team at Future Estate for more information on our methodology and/or our range of other property investment advisory services.
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Copyright © Future Estate Group Pty Ltd 2012
This document contains general information and does not contain personal advice or financial product advice. This information has been prepared without taking account of your objectives, financial situation or needs. Accordingly, before acting on this information and making financial decisions, you should consider whether this information is appropriate for you and are recommended to seek independent financial, investment, tax and/or legal advice having regard to your own objectives, financial situation and needs. This information may contain material 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 not2013 be relied upon as an indication of future performance. FUTUREin ESTATE RESIDENTIAL PROPERTY MARKET APRIL
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