State of the Economy & Market Update Wagga Wagga LGA
September 2024
Dr Diaswati Mardiasmo PRD Chief Economist
Who is PRD Research? Research Clients
PRD Research Team
Dr Diaswati Mardiasmo Chief Economist
Thomas Kirk
JuniorResearchAnalyst
Campbell Wright
JuniorResearchAnalyst
Yuki Hao
Research Analyst
Steven Hayward Research Analyst
Agenda
State of the Economy
• ReserveBankofAustraliaFinancialStabilityReview | Mon 18 Mar (every6 months)
• ReserveBankofAustraliaStatementofMonetaryPolicy| Tue 6th August (every 3 months)
State of the Market
• HousePrices| How do wecompare to therestof the world?
• PopulationGrowthvs.SupplyinNewSouthWales| Willwe haveenough houses? Wagga Wagga LGA Market Update
• PropertyTrends&Comparisons
• InvestmentAnalysis| Whyinvest in Bungendore?
• FutureProjectDevelopment| What’s in store for the future?
Moving Forward – Where to from here?
• InflationRate&CashRateExpectations
• WaggaWaggaKeyProjects2023-2025| Infrastructure,Commercial, Mixed-Use, & Residential
• AustralianEconomicPropertyReport2024| Different markets, Differentgears
State of the Economy
Where are we now?
Surviving Economy | Australia
• We are paying our mortgage (less than 2%of loans are at risk) BUTatthecostofoursavings
• Survivingeconomyand not thriving – lowestsavings rate for the past 10yrs, lowerthanpre-COVID
Household Balance Sheet | Australia
• Interestinglythere is a slight uptick in extramortgagepayments(offsetaccount)in early 2024,which was not expected– thus showing resilience. However,atwhat cost?
• Approx.45%ofAustralianshavelessthan3mthsinsavings,12%have6-12mths,and20%have24+mths.
• Regardless of whether you are an owner or a renter,many households havehad to makedifficultadjustments in response to challenging conditions. Demandforfinancialassistanceisnowhigherthanpre-COVID-19.
State of the Market
How do we compare?
Australian Consumer Confidence
Prepared by PRD Research. Source:Westpac/MelbourneInstitute. © PRD 2024.
August 2024
Overview
• 85.0 index points Aug 2024
• Fluctuatingtrendsince cashratehikesMay2022
• Slight increasing trend on averagein thepast12 monthsfrom August 2023
• However,areadingbelow 100.0indicatesnegative sentiment.Consumers tendto save as opposedto spend.
• 85.0 index points is lower than when we wereon our way out of COVID – of 88.1 index points in May2020
• Thereis some increasing positivity,butalso aa cautiousconsumerbase for2024–“stickybuyers”
House Prices and Rents | Australia
• Marketrecoveryhappenedquickerthananticipated,both by the RBA and the market in general
• Cash rate hikes did not slow down the property market as much as expected– helped little
• Rentalmarketisseeingsomerelief,advertised rents declining slightly –duetoinvestorscomingback
• Still at a MUCH higherlevel than pre-COVID-19, continue to contribute to CPI’s “stickiness”.
New Residential Construction V Population Change | NSW
$9,000,000
$8,000,000
$6,000,000 $7,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
• Residentialconstruction have roughlyfollowed trends seen in population change between 2013-2019
• However, this dramatically changed in end-2021dueto COVID-19, constructioncost challenges,labourshortage, andlowsupplyofmaterials
• New residentialconstruction has fluctuated since then, but in overallhave declined
• Q1 2024 figuresis likeCOVID times,helped bylower population growth
• Thereisstillamismatch betweendemand& supply
• Productivity stilla challenge & undersupplywillcontinue
• Higherhousepricesinfuture
NSW: NewResidentialConstruction
QuaterlyPopulationChange
Wagga Wagga LGA Market Update LatestTrends
Median House Price | Comparison
Prepared by PRD Research. Source:APM Pricefinder.© PRD 2024. 2024* encapsulates data from 01/01/2024 – 30/06/2024.
-COVID CashratehikeMay2022 WaggaWaggaLGA$588,000*
• 1Y: +1.3%,+$7,500
• 10Y: +86.7%,+$273,000 SnowyValleyLGA$405,000*
• 1Y: -1.2%, -$5,000
• 10Y: +97.6%, +$200,000 GreaterSydney $1,355,000*
• 1Y: +4.2%,+$55,000
• 10Y: +76.0%,+$585,500
• Wagga Wagga is a more affordable market compared to that of Greater Sydney
• Premium marketcompared to some other surrounding LGAs
• Provetoberesilientthrough highercashratesANDhigher 10yrsgrowththanSydney
WaggaWaggaLGA
SnowyValleyLGA
GreaterHumeShire GreaterSydney
House Price Point Breakdown
• The premiumhousingmarket(homes priced at $700,000and above) has seen anotable increase, moving from14.1%ofsalesin2021to31.5% in2024*.WaggaWaggaLGA is becoming more expensive
• Conversely, the proportion of affordablehomes(pricedunder$399,999) hasdeclinedfrom42.1%in2021to9.3%in2024*, this segment of the market has shifted from thelargestsegment to thesmallest.
Prepared by PRD Research. Source:APM Pricefinder. © PRD 2024.
Unit Price Point Breakdown
• Theunit'smarketin theWagga Wagga LGA is relatively balanced,with a largeproportion of the market between $250,000 and $449,999.
• Like the housemarket,the unitmarketis shifting towards more premium pricing. Buttherearemoreopportunitiesforfirsthomebuyers.
• Affordableoptionslessthan$249,999isstillavailable,butsignificantly declined;44.9%in2021vs9.3%in2024*.
Prepared by PRD Research. Source:APM Pricefinder. © PRD 2024.
Rental Market |Gold Coast LGA
Q22024Overview
Houses
• $500 perweek (median)
• Annual growth of +4.2%
• 394 housesrented
• Annual growth of +10.7%
Units
• $380 per week(median)
• Annual growth of +8.6%
• 165 units rented
• Annual growth of -20.3%
• Pricegrowth alongside more houses rented = highlydemandedmarket
• Pricegrowth alongsideless units rented = undersupply
• Beneficialforinvestors lookingtocapitalise
House Rental Yields | Comparison
June-24 Overview
• WaggaWaggaLGAoffersa higherhouserentalyield thanSydneyMetrointhe past10years
• Rental yield fluctuated in the past 12-24months due to changes in cash rates and otherlandlordcosts.
• House rental yield in on a recovery for the past 6 monthsdueto stablecash rates since November2023
• Moreaffordablethan Sydney– more attractive
Wagga WaggaLGA
SnowyValleyLGA
SydneyMetro
Unit Rental Yields | Comparison
• Wagga Wagga unitrental yields havehistorically fluctuated, due to smaller nature ofthemarket
• June2024unitrentalyields showsarecoverypattern andisonparwithSydney Metro–goodforinvestors
• Affordabilityvsrentalreturn is key– WaggaWaggahas both!
Vacancy Rates | Comparison
June-24 Overview
• Wagga Wagga LGA 0.6%
• SnowyValleyLGA1.3%
• SydneyMetro 1.67%
• Wagga Wagga LGA vacancy rates sits below both Snowy Valley LGA and Sydney Metro
• Rates havenot remained low sinceCOVID-19. This is in contrastto other regional areas in NSW. Continuous tightrentalmarket.
• Wellbelow theReal Estate Institute of Australia healthy benchmark of 3.0% = quicker occupancyofrentals
• Entry price ismore affordable than SydneyMetro –thus idealtoinvest
Wagga WaggaLGA
Project Development |Wagga Wagga LGA
Estimatedvalues arebasedon construction value providedby the relevantdataauthority and doesnotreflectcommercial and/orre-sale value.Commencement year quoted foreach projectisan approximate only, asprovidedby therelevant dataauthority.Valuesare based on known dataas providedby Cordell Connect, asperJune 2024 data download.Prepared by PRD Research. Source:Cordell ConnectDatabase.© PRD 2024.
Project Development | Wagga Wagga LGA
Estimatedvalues arebasedon construction value providedby the relevantdataauthority and doesnotreflectcommercial and/orre-sale value.Commencement yearquotedforeach project isan approximate only, asprovided by the relevantdataauthority. Valuesare basedon known data as provided by Cordell Connect, as perJune 2024 datadownload.Preparedby PRD Research. Source:Cordell ConnectDatabase.© PRD 2024.
Moving Forward What Can We Expect?
SMP May 2024 | Inflation Forecast | Australia
• Inflation(forallgroups)tostabiliseandslightlyfluctuatedthroughout2024,with a declining expectation in 2025 and back to targetrate2-3%in late 2025/early 2026.
• “Steady” strategyis as per othercountries, withapotentialincreasein2024.Ratecutseemstobeinearly-mid2025.
Project Development Map 2023-2025 Wagga Wagga LGA
Australian Economic & Property Report 2024
Different Markets. Different Gears.
Regional
Markets Median House Price
• Regional markets asan overall seeing aslight correctionof-4.3%in the past 12 months (to the 1sthalf of 2024).
• Regional WA is in fourth gear,recording a12.7% housepricegrowth
• Regional QLD and SA are in 3rd gear,with 4.7%and4.5%growth.
• Regional NSW and NT are in 2nd gear starting the correctionrouteat -0.7%and-3.7%.
• Regional VIC and TAS are in 1st gear,recording -5.1%&-7.7%growth.
Sneak Peek | AEPR 2024
• For now, astablecashratehas created‘stickybuyers’ – those thatare cautiousto act& sign
• In June2024, thetime to buy a dwelling indexshowed most statesrecordedadeclining trend. Opposite of the June 2023 index reading (increasing)
• TAS thehighest reading,of 109.6 index points.Differenttoothers!
• VICsawaslightimprovement of0.7%,notstrong enough to push a market recovery.
• TheQLDmarketsawadecline of-2.5%due to high price growth in the past 12 months.
• WAsawthebiggestdeclinein of-32.2%.Provideopportunity for firsthomebuyers
Sneak Peek | AEPR 2024
• ResidentialConstruction data from multiple countries
• Australia residentialconstruction was $19.1billion in March quarter of 2024, annualgrowthof3.3%.
• WEARENOTALONE
• New Zealand,France, South Korea, and Canadaalso facing undersupply of housingstock.
• TheUK,USA,andHong Kong are starting to see an improvement in supply,butstillnot enough
• Australiaisabigspender,only outspentbyNZandCanada.
• Past12months to March Q 2024: SA highestgrowth in residential building completed, at 20.6%. QLDsawa-7.1%decline.
Other PRD Reports | 2024
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