CoreLogic WA Property Update by The Real Estate Blog

Our Insights. Your Story.

Western Australia Housing market conditions Tim Lawless, research director APAC @timlawless

Firm signs the housing market is set to improveâ&#x20AC;Ś. but the headwinds of tight credit conditions are likely to persist Our Insights. Your Story.

Housing credit levelling for owner occupiers but trending lower for investment in April. Investment lending down 26% over the past year and 53% lower relative to the 2015 peak. More recently, owner occupier lending has dived sharply, down 14% over the past 12 months but up 1% in April. Source: CoreLogic, ABS

Our Insights. Your Story.

Across WA, housing credit has weakened across each sector year on year, with first time buyers showing the most resilience, while investment activity has recorded the largest reduction

-12.5% YoY

-24.4% YoY

-13.2% YoY

-11.1% YoY

-24.4% YoY

Source: CoreLogic, ABS

Our Insights. Your Story.

… already low mortgage rates are set to fall further, probably by another 50 basis points over the next 12 months

Source: ASX

Our Insights. Your Story.

APRA changes: borrower servicing assessments are about to improve Currently: Lenders generally assess a borrowers serviceability at an interest rate of 7.25% (APRA interest rate floor of 7% + 25bp buffer) Proposed: Lenders will assess serviceability with a buffer 2.5% above the going mortgage rate A couple with 2 kids on an income of $150k pa could increase their borrowing amount by around $67k.

Source: CoreLogic

Our Insights. Your Story.

Federal election outcome: Overall, a net positive for housing markets nationally. • • •

• • •

Confidence to make high commitment decisions has improved. Immediate legislation for tax cuts for individuals earning less than $126k Certainty around budget announcements, including a 25% lift in infrastructure spending (including a 25% lift in infrastructure spending (including $1.6 billion for WA road and rail projects) and better GST allocation for WA Investment related tax reform is off the agenda (negative gearing / capital gains tax concession). First home buyers will see some mild stimulus from the FHB deposit scheme. Brokers maintain status quo on commission structure, at least for the next three years.

Source: CoreLogic

Our Insights. Your Story.

While the cost of debt is coming down and credit availability is improving, credit headwinds remain â&#x20AC;˘

The reduction in credit is also attributable to other factors which are either unchanged or in the process of tightening. ANZ estimates 70% of the reduction in borrowing capacity is attributable to less reliance on HEM benchmarks and trimming down borrower incomes. Comprehensive credit reporting also means lenders have much better transparency around borrower debt levels, and lenders are more cautious around lending at higher debt to income ratios (6x plus).

Source: CoreLogic, ANZ

Our Insights. Your Story.

Market trends

Our Insights. Your Story.

Sales activity continues to track lower year on year across Perth, but market activity has levelled across regional WA

Decade avg

Source: CoreLogic Note the sales volumes are modelled based on historic levels of revision however and do not account for unsettled off-the-plan purchases

Our Insights. Your Story.

Every capital city has seen the pace of capital gains either lose momentum or turn negative as credit conditions tightened

Source: CoreLogic

Our Insights. Your Story.

Fall from market peak

0% -5%

-1.3%

-0.5%

-2.4%

-10%

-11.1% -14.9%

-15% -20%

-19.2%

-25% -30% -35%

-29.5% Sydney

Melbourne

Brisbane

Adelaide

Perth

Hobart

The downturn in Perth and Darwin is very different to the downturn in Sydney and Melbourne

Darwin

0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 Months since peak Source: CoreLogic

Our Insights. Your Story.

Regional housing values have recorded a substantially larger correction relative to Perth, declining 33.5% since peaking compared with a 19.8% decline across Perth. Source: CoreLogic

Our Insights. Your Story.

Across the state, the West Pilbara is the only sub-region to record a rise in dwelling values over the past twelve months

Source: CoreLogic

Our Insights. Your Story.

The median house value in Perth is now the lowest amongst the capital cities. For a brief period in 2006/07 it was the highest of any capital city

Source: CoreLogic

Our Insights. Your Story.

The silver lining around the Perth housing downturn is a substantial improvement in housing affordability.

Source: CoreLogic

Our Insights. Your Story.

New listings, rolling 28 day count, Perth

Total listings, rolling 28 day count, Perth

New listings added to the market are at the lowest level for this time of the year since at least 2008. Total listing numbers are now at the lowest level since 2013

Source: CoreLogic

Our Insights. Your Story.

Where’s the market heading?

Our Insights. Your Story.

Economic conditions have lost some momentum tracking below average over the year to March 19, with private sector fixed capital investment the primary drag on economic growth

Our Insights. Your Story.

Rising commodity prices and a ramp up in minerals exploration should provide a launch pad for higher private sector investment

Our Insights. Your Story.

Labour markets remain slack, with jobs growth and employment continuing to under-perform

Decade avg

Our Insights. Your Story.

Decade avg

Demand: Population growth has turned a corner, but remains well below previous highs

Source: CoreLogic, ABS

Our Insights. Your Story.

Supply: Approved housing supply remains low; together with rising population growth, and undersupply of housing will help housing values to find a floor

Source: CoreLogic, ABS

Our Insights. Your Story.

Where to from here? CoreLogic forecasts currently show housing markets will level over the second half of 2019, however recent data flows indicate the trough in housing values will be brought forward

Our Insights. Your Story.

Potential end to the housing downturn? •

Credit availability will be a key determinant of housing market conditions. Borrowers are likely to face tighter lending conditions relative to prior years for some time yet – is this the new normal?

•

Although credit remains tight, APRA is now looking at lowering the serviceability buffer and mortgage rates are set to reduce further which should see an increase in mortgage demand.

•

Low mortgage rates, improving population growth and healthy affordability should help to offset the impact on activity from tight credit.

•

Greater certainty now that the election has passed and there was no change to the Government

•

An improvement in local economic conditions is the missing ingredient to a housing market recovery. With infrastructure spending ramping up as well as commodity prices and exploration rising, an improvement in the economic fundamentals is hopefully around the corner. Our Insights. Your Story.

Disclaimer In compiling this publication, RP Data Pty Ltd trading as CoreLogic has relied upon information supplied by a number of external sources. CoreLogic does not warrant its accuracy or completeness and to the full extent allowed by law excludes liability in contract, tort or otherwise, for any loss or damage sustained by subscribers, or by any other person or body corporate arising from or in connection with the supply or use of the whole or any part of the information in this publication through any cause whatsoever and limits any liability it may have to the amount paid to CoreLogic for the supply of such information. Queensland Data Based on or contains data provided by the State of Queensland (Department of Natural Resources and Mines) 2019. In consideration of the State permitting use of this data you acknowledge and agree that the State gives no warranty in relation to the data (including accuracy, reliability, completeness, currency or suitability) and accepts no liability (including without limitation, liability in negligence) for any loss, damage or costs (including consequential damage) relating to any use of the data. Data must not be used for direct marketing or be used in breach of the privacy laws. South Australian Data This information is based on data supplied by the South Australian Government and is published by permission. The South Australian Government does not accept any responsibility for the accuracy or completeness of the published information or suitability for any purpose of the published information or the underlying data. New South Wales Data Contains property sales information provided under licence from the Land and Property Information (“LPI”). CoreLogic is authorised as a Property Sales Information provider by the LPI. Victorian Data The State of Victoria owns the copyright in the Property Sales Data which constitutes the basis of this report and reproduction of that data in any way without the consent of the State of Victoria will constitute a breach of the Copyright Act 1968 (Cth). The State of Victoria does not warrant the accuracy or completeness of the information contained in this report and any person using or relying upon such information does so on the basis that the State of Victoria accepts no responsibility or liability whatsoever for any errors, faults, defects or omissions in the information supplied. Western Australian Data Based on information provided by and with the permission of the Western Australian Land Information Authority (2019) trading as Landgate. Australian Capital Territory Data The Territory Data is the property of the Australian Capital Territory. No part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Enquiries should be directed to: Director, Customer Services ACT Planning and Land Authority GPO Box 1908 Canberra ACT 2601. Tasmanian Data This product incorporates data that is copyright owned by the Crown in Right of Tasmania. The data has been used in the product with the permission of the Crown in Right of Tasmania. The Crown in Right of Tasmania and its employees and agents: a) give no warranty regarding the data's accuracy, completeness, currency or suitability for any particular purpose; and b) do not accept liability howsoever arising, including but not limited to negligence for any loss resulting from the use of or reliance upon the data. Base data from the LIST © State of Tasmania http://www.thelist.tas.gov.au Our Insights. Your Story.

CoreLogic Contact Tim Lawless Executive, Research Director Asia Pacific CoreLogic Direct +61 7 3114 9857 Mobile +61 401 209 327 Tim.Lawless@corelogic.com.au

Our Insights. Your Story.