- Aussie housing capital values soft while rents up - SPECIALISED PROPERTY GROUP UPDATE
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30 April 2011
RP Data – Rismark Home Value Index Release
While Australia’s capital city home values were flat in March (-0.2% seasonally adjusted and 0.0% raw), they softened by -2.1% (seasonally adjusted) over the March quarter (-0.4% in raw terms). In contrast to these results, weekly rental rates are up 4.6 per cent over the last six months.
The latest RP Data-Rismark Home Value Index results show capital city dwelling values were flat in the month of March (-0.2 per cent s.a. and 0.0 per cent raw). However, over the March quarter capital city home values softened noticeably (-2.1 per cent s.a. and -0.4 per cent raw).
Over the twelve months ending March 2011, Australian capital city dwelling values were broadly unchanged (-0.6 per cent).
According to RP Data research director Tim Lawless, while residential property owners may not have seen any capital growth over the past 12 months, many are realising robust increases in rental yields.
“In contrast to the fall in home values, gross rental yields have been improving with apartments and houses now delivering a gross return of 4.9 per cent and 4.2 per cent, respectively, in March 2011 according to RP Data-Rismark’s estimates,” Mr Lawless said.
Ben Skilbeck, joint managing director with Rismark International, said this is consistent with the sprightly rental appreciation documented by the ABS in its inflation measure, with the dollar value (as opposed to the price yield) of the rental component of the ABS’s inflation benchmark rising by a striking 1.3 per cent over the March quarter alone.
According to Tim Lawless, Brisbane has recorded the weakest results over the quarter and the year.
“Unsurprisingly, the flooding that has occurred within South East Queensland has likely compounded Brisbane’s weak market conditions. Brisbane homes were the worst performers during the March quarter, with values tapering sharply by -4.6 per cent s.a. (-3.3 per cent raw). Brisbane values are down 6.8 per cent over the year to March 2011,” he said.
In the non-capital city regions the story has been similar. In the year to end March 2011, ‘Rest of State’ house values were relatively unchanged (-0.5 per cent s.a.). However, the March quarter was a weaker one, with house values declining by -1.8 per cent s.a. (-0.7 per cent raw).
At the end of the March quarter, in the capital cities the national median dwelling price was $455,000. For all regions across Australia, the national median dwelling price substantially lower at $410,000.
The moderation in Australian housing valuations are likely to be warmly welcomed by prospective home buyers, particularly first timers who have been confronted with affordability barriers.
RP Data’s research director, Tim Lawless said, “With household incomes growing at 6 per cent per annum, interest rates potentially approaching the peak of the tightening cycle, rents increasing, and house values going nowhere, buyers are seeing an improvement in their position.”
“With first time buyers now representing a bit less than 15 per cent of all owner occupier housing finance commitments, it is likely that market activity in the first-time buyer market will increase in the medium term,” Mr Lawless said.
Rismark’s Ben Skilbeck, added, “Rismark forecast a soft-landing in the Aussie housing market in the second half of 2010, and projected that this would persist through 2011. These forecasts are coming to fruition. If the RBA does raise interest rates one or two more times this year, we expect to see further valuation improvements.”
RP Data’s Mr Lawless said the tightness in the rental market combined with flat to negative change in home values is providing a boost to rental yields.
“Based on the RP Data-Rismark Total Return Index, we estimate that weekly asking rents are up 4.6 per cent over the last six months. While the highest yields are found in the Darwin apartment market (5.7 per cent), apartments in Hobart (5.4 per cent), Canberra (5.4 per cent), Brisbane (5.2 per cent) and Sydney (5.1 per cent) also offer attractive yields,” Mr Lawless said.
He added that key leading indicators point towards a sedate capital growth environment for the remainder of the year.
“Clearance rates are bouncing around the low fifty percent mark each week, the number of homes being advertised for sale is almost 30 per cent higher than at the same time last year, and sellers are being forced to adjust down their price expectations. Before there is any real upwards pressure on home values there will need to be some absorption of effective supply and a return of sustained buyer confidence to the market,” he said.
Rismark’s Joint Managing Director, Mr Ben Skilbeck, pointed out that it is sometimes useful to distinguish between the actual ‘raw’ and ‘seasonally-adjusted’ index results.
“In actual raw terms, Sydney dwelling values rose by 1.1 per cent over the March quarter. Yet once this data is ‘seasonally-adjusted’ to reflect the strong conditions that normally prevail in the first three months of a year, the index result was down 1.1 per cent. Similarly, Melbourne dwelling values did not actually move in raw terms during the March quarter. However, on a seasonally-adjusted basis the Melbourne index is off 1.5 per cent,” he said.
- Rent/Lease Reduced on 236-117 Old Pittwater Road in Brookvale
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Brookvale, New South Wales - Announcing a rent/lease reduction on 236-117 Old Pittwater Road, a commercial. Now $27,500 AUD Yearly - (Plus GST).
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- Commercial For Sale in Collaroy
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Buy Now In Prime Beachside Location
• commercial
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$339,000
- Asking
Collaroy, New South Wales
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DON’T MISS THIS MAIN ROAD, GROUND FLOOR RETAIL / OFFICE OPPORTUNITY! As a business owner, have you ever wanted to work in a lifestyle location just minutes walk from the beaches? All in a fairly new building containing both residential units and commercial premises and previousy housing a financial company expanding into other city areas.
There is superb main road positioning in this busy beachside suburb with approximately 60,000 plus vehicle movements daily, resulting in superb exposure for your business. Great for financial or real estate agencies - or retail (was a florist shop at one stage)! This strata unit on the ground floor is zoned for business use.
Either buy or lease or perhaps if you are unsure why not call the agent to explore the possibility of renting with an option to purchase? There are many ways to structure a deal to suit so call the Agent below for an appointment to view now.
Features:
* Fantastic wide frontage for maximum exposure to foot and road traffic.
* Beachside strata unit zoned for business use, with residential development above.
* 2 secure car spaces available with separate storage facility.
* Modern Kitchenette in office.
* Size 42 sqm approximately internally. Total 71 sqm. Zoned business use.
* Available to rent at $22K pa G plus GST (gross rent, owner pays strata, rates etc).
* Asking $339,000K plus GST.
Strata $391/qtr
Council $225/qtr
Water $129/qtr
FOR FURTHER INFORMATION CONTACT GRAHAM TAYLOR ON:
Mob: 0438 247 033 OR 1300 65 10 55.
Specialised Property Group can help with your property search. We also have extensive contacts with other agents, developers, etc to help find what you are looking for.
web: www.specialisedpropertygroup.com.au
email: enquiries@specialisedpropertygroup.com.au
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- Property Market News - Capital Gains & Rental Markets 12th November 2010 - Specialised Property Group
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Capital gains and rental markets over five years
During the last five years, capital gains in the housing market have been lower than the preceding period however, conditions have been such that rents and values have increased by fairly equivalent amounts during the period.
During the five years to September 2010, the Australian residential property market has experienced a variety of conditions, modest growth conditions in 2005/06, rapid appreciation in 2007, falling values in 2008 followed by another strong growth phase in 2009/10. Despite the range of conditions over this five year period, overall property values have increased at the average rate of 7.1% year on year.
Property values across the combined capital cities have increased by a total of 40.5% for houses and 42.2% for units over the last five years. On an average annual basis this represents growth of 7.0% for houses and 7.3% for units. In dollar terms, house values have increased by a total of almost $140,000 over the last five years and unit values have increased by approximately $123,000.
Five years ago, house values were 18% greater than unit values and as at September 2010 the differential was recorded at 17% indicating that the price differential has remained relatively consistent over the period. With median house prices currently recorded at $485,000 and units at $415,000, affordability factors have likely contributed to the superior performance of units to houses over the period.
Over the same period rental rates have also ramped up and, similar to the capital gain performance, the growth has not been uniform from year to year. Between September 2005 and the end of 2008, rental rates were typically trending upwards at the rate of almost 11% year on year. In 2009 capital city rents increased by just 0.9% and we are now seeing the first evidence of rental growth once again returning to the market.
Rental rates have increased by a total of 41.2% for houses and 46.6% for units over the last five years. Note that the total growth in rents is slightly superior to the total growth in property values over the period. Given this growth the dollar value of weekly rents have increased by $127/week for houses and $135/week for units.
Whilst the gap between house values and unit values has remained quite consistent, the gap in rental costs has closed markedly. During September 2005, rental rates for houses were 6.7% greater than unit rents, today the gap has closed to just 2.8%.
Over the five years highlighted, Darwin has recorded the greatest total growth in property values for houses (92.3%) followed by Melbourne (61.0%). Meanwhile, Sydney has been the poorest performer (22.0%) followed by Hobart (30.6%)*.
In terms of rentals, house rents have recorded the greatest increases in Darwin (76.5%) and Perth (60.2%). Rental growth has been comparatively less in Adelaide (32.6%), Brisbane (32.7%) and Sydney (33.8%).
For units, Darwin has again recorded the strongest value growth during the past five years (99.8%) followed by Adelaide (69.6%). Unit rental growth has well and truly lagged in Sydney (27.8%) and to a lesser extent also in Brisbane (44.8%).
Unit rental growth over the last five years has also recorded significant increases in Darwin (84.0%) and Perth (61.7%). The three largest cities have recorded the lowest levels of rental growth at 39.6% (Melbourne), 40.6% (Brisbane) and 42.8% (Sydney).
For houses, if you purchased at median prices during September 2005, we estimate the current gross rental yield would be recorded between 5.7% (Sydney) and 10.7% (Darwin). Whilst for units the current yield is recorded between 6.9% (Brisbane) and 12.3% (Darwin).
Overall the results highlight the virtues of having a long-term hold strategy in relation to property purchases with property values, rents and subsequently yields having historically proven to increase over time. Over the next 12 months we are anticipating fairly flat growth in property values however, we do expect that rents and yields will improve. With an insufficient supply of homes, upwards pressure will remain on housing prices over the long term, however price inflation will be offset by affordability constraints which will hamper prospective purchaser’s ability to enter the residential market. As a result, competition for rental accommodation is likely to intensify and weekly rents will rise. These conditions highlight just how imperative it is that Government’s find a solution to housing supply issues, as the national graphs highlight, over the last five years conditions have been such that either property values have increased, rental rates have increased or both have been climbing. Supply is clearly a large contributor to these prevailing conditions.
- PROPERTY WRAP UPDATE 12th November - SPECIALISED PROPERTY GROUP
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Higher density living gaining popularity
Fifteen years ago only 25% of capital city home sales were for units and apartments. Today, medium and high density housing accounts for about 35% of home sales.
More buyers are choosing to live in higher density housing, particularly in inner city areas of capital cities. Since 2005, coming out of the last significant property boom, the proportion of unit and apartment sales had been moving lower until the trend was disrupted in 2009. The boost to the First Home Owners Grant and the sharp drop in interest rates saw first home buyers flow back into the market resulting in a rebound in demand for detached houses. With the highest level of housing affordability since 2002, it was no real surprise to see first time buyers targeting detached homes. The jump in the proportion of houses being sold during 2009 can also be partly attributed to the longer settlement time large apartment developments involve. There may be some revisions to the proportion of sales as these larger projects settle.
Based on RP Data’s modeled volumes for the month of August 2010, there were 36,305 dwelling sales during the month and of these, 70% were house sales and 30% were units. A decade ago, houses accounted for 73% of all sales with the remaining 27% unit sales.
The results highlight that whilst the unit market continues to emerge, the improving levels of affordability in recent times has seen purchasers revert to detached homes rather than higher density forms of housing.
The proportion of house sales within the combined capital cities is, as you would expect, lower than that across the nation. As at August of this year, house sales across the combined capitals accounted for 65% of sales compared to the 70% nationally. Across the capital cities there has been a significantly greater increase in the proportion of house sales coming out of the GFC as many buyers utilised the First Home Owner’s Grant Boost and/or low interest rates as a way of purchasing a house. Plus, property values had fallen during 2008 also contributing to increased affordability.
In the two most populous markets, Sydney and Melbourne, there are a significantly greater proportion of unit sales. During August, unit sales in Sydney accounted for 43% of all dwelling sales and in Melbourne, the figure was recorded at 37%. Outside of Sydney and Melbourne, Canberra and Darwin have also recorded a significantly greater proportion of unit sales with house sales accounting for 62% and 63% of sales respectively in these markets during August 2010. The common trend between these four cities which have recorded an above average volume of unit sales is that they are also the four most expensive capital city markets.
During the last decade, Melbourne has recorded the greatest increase in the proportion of unit sales, up by 6.1% (despite the increasing demand for houses in recent years). With the introduction of significant amounts of new unit development in areas such as Docklands and Southbank it is probably no surprise to see that units have increased in prominence over the period.
Overall, the national results show that although there is significant focus on the unit market it still only accounts for around one third of the total market.
At its lowest point unit sales accounted for 39% of sales in the market. Given that affordability constraints are now returning to the market and that across the capital cities median unit prices in August were $68,000 more affordable than house prices ($485,000 vs. $417,000) we would expect that the proportion of unit sales will once again begin to increase.
The cities which have recorded the greatest proportion of unit sales compared to houses are also typically those cities in which unit prices are significantly more affordable than houses. In Sydney, median unit prices are $125,000 lower than houses, in Melbourne they are $65,000 lower, in Darwin the difference is $127,500 and in Canberra it is $125,000.
The driving force behind the increasing prominence of unit living will be that they are relatively affordable and are in much greater supply in desirable locations close to public transport, retail and dining amenity and major working nodes. Units also afford the opportunity to live in suburbs in which many purchasers would not be able to afford to own a house. As a result units are viewed as a viable and more affordable alternative.
Another factor that is driving more unit sales is changing lifestyle preference. Empty nesters are downsizing to apartments for the lower levels of maintenance involved in apartment living and also what are often better locations, being closer to work and social precincts.
Looking towards the future, we expect that medium and high density living will continue to become increasingly prominent. Australia’s most mature residential market, Sydney, is already showing close to 50% of all home sales as units. The drivers are going to be affordability, increasing densification of the inner city and major transport spines, and changing lifestyle preferences. Over the last five years we have already started to see units outperforming houses in terms of capital growth (7.3% annual gain for units vs 7.0% for houses). With demand likely remain high in the unit, apartment and town home markets these higher capital gains may continue.
- 2 Story For Sale in Bayview
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TRANQUIL & PRIVATE CONTEMPORARY LIVING
• 3 bath, 4 bdrm 2 story - $990,000 - More Than
Bayview, Sydney - Relax in this spacious family home in serene surroundings, nestled in a safe, quiet cul-de-sac just minutes from the beach, schools, restaurants, marinas and inland waterways.
** CONTACT AGENT TO VIEW THIS PROPERTY BY APPT. OR VIEW AT OPEN HOUSE ON SATURDAY 13TH NOVEMBER AT 1.00 PM – 2.00 PM OR WEDNESDAY 10TH NOVEMBER 11:30 AM - 12:00 PM. **
Features:
*Open plan living, 4 beds, all built in robes.
* En-suite to main bed plus spa in main bath.
* Modern kitchen, Miele, stainless appliances.
* Reverse cycle air con in living area with ceiling fans in all beds.
* Lower teen retreat with own bed, bath & study.
* Elevated deck with views, room for a pool.
* Fully enclosed pet-friendly easy-care garden.
* Off leash dog park nearby with water access.
* Int access from DLUG with huge storage.
* Convenient express bus to city minutes walk away.
** CONTACT AGENT TO VIEW THIS PROPERTY BY APPT. OR VIEW AT OPEN HOUSE ON SATURDAY 13TH NOVEMBER AT 1.00 PM – 2.00 PM OR WEDNESDAY 10TH NOVEMBER 11:30 AM - 12:00 PM. **
FOR FURTHER INFORMATION contact GRAHAM TAYLOR on 0438 247 033 or Office: 1300 65 10 55.
Specialised Property Group can help with your home search. We also have extensive contacts with other agents, developers, etc to help find what you are looking for.
If you would like us to let you know of suitable properties or need additional information, please email us:
Email: enquiries@specialisedpropertygroup.com.au or go to our website
specialisedpropertygroup.com.au or speak to one of our team on 1300 65 10 55.
SPECIALISED PROPERTY GROUP
Suite 13 ‘LIFESTYLE WORKING’,
117 Old Pittwater Rd,
Brookvale 2100.
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- First Open on 13 Valley Close in Bayview
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Bayview, Sydney - Announcing First Open Home on 13 Valley Close, a 3 bath, 4 bdrm 2 story. Now $990,000 - More Than.
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- Rent/Lease Reduced on 1-1026 Pittwater Road in Collaroy
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Collaroy, New South Wales - Announcing a rent/lease reduction on 1-1026 Pittwater Road, a commercial. Now $22,000 Yearly - (Plus GST).
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- Apartment For Sale in Townsville City
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Fabulous Investment Or Owner Occupied
• apartment - $520,000 - From
Townsville City, Queensland - ONE BRIGHT POINT, MAGNETIC ISLAND:
(Location is in QLD, just a short ferry ride from the busy port of Townsville, with many hundreds of millions of dollars worth of infrastructure completed, etc. This is definitely a key business and tourist location in this part of Australia, a short plane trip to the mining activities inland).
We have a very good deal for this remaining Beach House Apartment at the renowned One Bright Point Resort on Magnetic Island. We also have some remaining 'Directors Stock' on offer. This is generally not offered directly to the public as such, but through specialists such as ourselves.
This apartment is offered at 6% return for 5 years, minus a management fee of 8%.
1/ $955,000.00 x 6% = $57,300.00.
2/ Take off the 8% fee = $52,716.00 per annum, returning $4,393.00 monthly.
We are also including a free furniture pack valued at $36,000.00.
A CAPITAL GUARANTEE is also available for this period of 5 years - this shows the complete confidence that Meridian have in this excellent complex, which is fully operational with average growth of around 10% per annum.
We believe this is the only offer currently in Australia where a 'Blue Ribbon' Development Company has made an offer of this type in relation to the guarantee!
We also have additional 2-3 bed units in this complex from low $500K's. Remember this complex is established and operating - you can buy an investment now for the holiday market (V8 Supercars, etc) and retire later on here - we have an onsite Sales Manager Jill who moved up from Sydney and resides in a waterfront apartment she purchased there! We are happy for any enquiries to call her directly for a personal chat - firstly contact us as below, thanks.
We can provide much data and research documents on this deal so please contact Graham Taylor on 0438 247 033 or phone 1300 65 10 55 now.
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- Price Reduced on One Bright Point Magnetic Island in Townsville City
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Townsville City, Queensland - Announcing a price reduction on One Bright Point Magnetic Island, a apartment. Now $520,000 - From.
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- Lot / Land For Sale in Church Point
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Build The Home You Have Always Desired!
• lot / land - $840,000 - More Than
Church Point, New South Wales - One of the last vacant blocks at Church Point! An exciting opportunity to purchase rare land just a few metres stroll to the park and waterside amenities at Church Point.
Don't miss this opportunity! The land is just off an established shared access driveway (leading to two very substantial homes), which is common for properties in this location.
The access is easy and not a steep driveway which also can be common in these parts. Homes consistently sell in the $2 Million to $3 Million range and above.
The agent (who has built on the Northern Beaches) can also help with suitable building contacts and take the buyer through the council process and time frames.
The owner wishes to sell so seize this opportunity and explore the possibility of building - in the knowledge that your home will be surrounded by similar prestigious properties.
Features:
* Huge block size of 1,217sqm. Positioned opposite Rostrevor Reserve.
* Prestige location, tranquil and a stroll to water’s edge.
* North facing aspect.
* For boat owners the location couldn’t be better - opposite a Marina!
* Survey report available. Contact agent for email copies.
* Close to private and public schooling, local shops (5 min to Mona Vale shopping centres), public transport, all sailing and boating facilities, golf course, etc. The national parks and reserves at McCarrs Creek and West Head offer the opportunity for bush walking and cycling.
* The vendor has agreed to refund any geo tech reports necessary to the approved purchaser.
* Recent Council Land Valuation Report available. Total aggregated value in report is $925,000 (issue date 21st January 2009).
** VIEW BY APPOINTMENT WITH AGENT **.
FOR FURTHER INFORMATION contact GRAHAM TAYLOR on 0438 247 033 or 1300 65 10 55.
Specialised Property Group can help with your home search or property appraisal. We also have extensive contacts with other agents, developers, etc to help find what you are looking for.
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- Price Reduced on 23A McCarrs Creek Road in Church Point
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Church Point, New South Wales - Announcing a price reduction on 23A McCarrs Creek Road, a lot / land. Now $840,000 - More Than.
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- PROPERTY MARKET RENTAL GROWTH UPDATE 2nd September 2010 - SPECIALISED PROPERTY GROUP
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House rental growth minimal nationally but some areas stand out:
The rental market has been sluggish in terms of growth over the last year, however not all regions around Australia have seen weekly rents remain flat. In this week’s Property Pulse we focus on house rents, looking at the best and worst suburbs for rental rate gains over the year to June 2010
RP Data recently reported in our Quarterly Rental Review for June 2010 that across the country’s capital cities, rents for the combined house and units markets increased by 2.9% over the year. In comparison, house rents have increased by a total of 40.0% over the last five years and unit rents increased by 45.8%. Across the capital cities, house rents have increased by as much as 6.7% (Adelaide) over the last year and have been flat in Sydney, Melbourne and Perth.
The rental market has been recording lower levels of growth largely due to the fact that first home buyer demand was so strong during 2009. This trend can mostly be attributed to the lowest interest rates in almost 50 years and the First Home Owner’s Grant Boost which dramatically improved affordability. As a result, a record number of first time buyers (who were mostly previously renters) were active during 2009 which in-turn eased upwards pressure on rental rates.
Despite the sluggish rental growth performance nationally over the last year, certain areas have outperformed and others have well and truly underperformed. The results detailed are for well established rental markets only, as such, results have been published for those suburbs which have had at least 30 rental advertisements both this year and the previous year (median rents can be quite volatile in markets where volumes are low or there is a lot of new rental stock being introduced).
The results of the 40 strongest performing suburbs are quite varied however, Sydney well and truly dominates the list with 28 of the 40 best performing suburbs. The suburbs detailed mostly fall into two broad categories: premium markets with prices in excess of the capital city median price or outer more affordable suburbs which are located close to working nodes which results in strong rental demand.
Across the capital cities, Vaucluse recorded the largest increases in rental rates (+35.4% across 64 listings) over the year to June. Vaucluse is one of Sydney’s most desirable residential suburbs and with median rents of $1,625/week the rental market receives its demand from premium and executive rentals.
Over the 12 months to June 2010, the Perth suburb of Applecross has recorded the greatest fall in median weekly advertised rent of -38.3% across 54 listings. Applecross is one of Perth’s most prestigious suburbs, located adjacent to the Swan River and has seen rents fall from $810/week to $500/week with a greater number of rental houses advertised over the last 12 months than during the previous 12 months.
Of the capital city suburbs which have recorded the greatest fall in median weekly rents over the last year, 20 of the 40 suburbs detailed have a current median house price in excess of $1 million. The remaining 20 suburbs are characterised as mostly having median prices in excess of the capital city median price.
The results are a little surprising with the list of best and worst performers each seeing a significant number of premium markets within. The results may suggest that those looking for premium rentals are becoming more discerning, willing to pay more to be in a location which they perceive as being more desirable. Rental yields in most of these premium markets remain very low, however suggesting that most investors are motivated by the prospect of capital gains and tax deductions rather than rental income.
Overall the national market has been witnessing fairly limited growth in rental rates during the last 12 months at a time when property values have been ramping up. With property value growth now slowing and fewer active buyers, we are anticipating that rents are likely to start to increase across the capital city markets. The reason for this being that with fewer active buyers, clearly more people are choosing to rent. Coupled with this, the construction of new dwellings remains at low levels resulting in a lower level of additional rental accommodation becoming available. As a result, there is likely to be increased competition for the available rental properties. The net result of flat property values and increasing rental rates will be improved rental yields over the coming year – great news for investors but no so great for renters.
Over the 4 weeks to August 29, RP Data has been tracking a total of approximately 84,600 rental listings nationally with rental advertisements trending lower over the last month and a half. With rental vacancy rates remaining tight and supply of new rental stock limited thanks to the insufficient supply of new stock, we anticipated that over the coming months vacancy rates will tighten further and upwards pressure on rental rates will return.
It’s also important to consider that although both sides of politics have said they will cut immigration, the proposed levels are still above the long-term average level and few new migrants buy homes straight away. This also results in additional competition for available rental stock.
- PROPERTY MARKET UPDATE 31st August 2010 - SPECIALISED PROPERTY GROUP
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Australian home prices are stable in July after June falls...
After a large 1.0% seasonally-adjusted fall in June, Australian home values changed little in the month of July, recording an increase of +0.1% (up +0.4% seasonally-adjusted).
According to the market-leading RP Data–Rismark Hedonic Home Value Index, Australia’s capital city home values remained relatively flat in the month of July recording a modest, seasonally-adjusted increase of 0.4% (on a raw basis home values were up only +0.1% in the month).
The July results follow a 1.0% seasonally-adjusted decline in the month of June; the first negative movement in Australian capital city home values in 17 months.
The slow-down in Australia’s housing market had been long-anticipated by RP Data and Rismark and was noted by the Reserve Bank of Australia in its most recent Board Minutes.
According to RP Data’s research director, Tim Lawless, the July index results are further evidence that Australia’s housing market has experienced a controlled soft-landing after a resounding recovery during the course of 2009.
“In the period between end 2008 and March 2010, Australian home values rose by 16.3%. Yet monthly growth rates have declined consistently since the start of the year. RP Data and Rismark expect to see the market track sideways over the second half of the year. There is the possibility of modest gains if mortgage rates remain in check and economic conditions continue to improve,” he said.
The deceleration in capital growth rates is evident across the cheaper, middle and more expensive suburbs tracked by the ‘stratified’ version of the RP Data-Rismark Hedonic Index. This index shows that while the most expensive 20% of suburbs realised the highest capital growth between end 2008 and March 2010, these same suburbs have suffered the largest falls in home values in the period since.
According to Mr Lawless, “As has been the case previously, the illiquid top-end of the market is showing higher volatility than lower priced markets. Home values in Australia’s most expensive suburbs fell more in 2008, rebounded quickly in 2009, and are now tapering at a more rapid rate than cheaper property markets. Home values in the most expensive 20% of suburbs were down 2.0% over the three months ending July 2010 compared with smaller declines of 0.4% and 0.7% in the cheapest 20% and middle 60% of the suburbs, respectively.”
RP Data-Rismark’s Rest of State Hedonic Index, which tracks the 40% of all homes not situated in the capital cities, shows that regional markets have also experienced a synchronous slow-down with house values off -0.2% since April 2010. In recent times, the Rest of State markets have underperformed the capital cities. For example, between end 2008 and July 2010 house values in the Rest of State areas rose by 8.5% compared with much stronger 16.1% growth in the value of detached houses located in the capital cities.
Christopher Joye, Managing Director of Rismark International, said, “In contrast to claims that the decline in home values recorded in June would accelerate, we have seen quite the opposite: Australia’s housing market appears to have gravitated back to a no-to-very low growth trajectory, as we forecast.”
Mr Joye added, “RP Data’s leading indicator data also paints an encouraging picture. After falling from historically high 70-80% levels, national auction clearance rates have now leveled at around the 60% mark. While outstanding inventory levels have expanded in response to the weaker demand, they have recently settled. Perhaps most significantly, the futures market is currently pricing in no further interest rate hikes over the next 1-2 years. In recognition of the flat yield curve, we have seen some banks cutting the cost of fixed-rate loans.”
“Looking forward, I would expect to see the major banks pushing housing credit growth a little harder as profitability gains--driven by reduced impairment provisions across their business lending books--dissipate. Australian housing credit growth has been running at record low levels, and has experienced a downward trend since 2006. An increase in credit growth back to reasonable single-digit rates will provide further support to the market in the next 12 months.” Mr Joye said.
Mr Lawless agreed that substantial falls in Australian home values look very unlikely.
He said, “The number of homes being advertised for sale across Australia is only 5% higher than what we saw at the same time last year. We aren't seeing a blow out in stock levels and properties are taking on average about 40 days to sell, which is only a little higher than recent experience.
“And while we have noticed an increase in vendor discounting, this is coming off the very low base we recorded during 2009,” he said.
- PROPERTY MARKET UPDATE 30th June 2010 - SPECIALISED PROPERTY GROUP
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Where are residents upwardly mobile and where are they staying put?
The length of tenure, or a property’s ‘hold period’ is a very under utilised property statistic. In this week’s Property Pulse we are going to shed some more light what a hold period is and look at those suburbs with the longest and shortest average hold period.
The hold period is a calculation which measures the time period between sales expressed in years. The hold period calculation at a suburb level is expressed as an average across all sales during the last 12 months. On average, across the combined Australian capital cities, the hold period for a house is 7.5 years and 6.5 years for a unit.
The hold period calculation is not widely utilised but is a very valuable tool for property market professionals and investors. As a real estate agent, if you know the average hold period within your area it can help you to target those property owners which are most likely to be selling during the coming years. If you are a mortgage broker or bank and you are aware of the hold period it can assist to indicate the level of equity owners are likely to have in their property and may be a good trigger for them to look at reinvesting some of that equity.
Throughout the capital city markets houses tend to have a longer hold period than units. Melbourne and Sydney have the longest average hold periods for houses and units (9.6 years and 8.0 years and 9.1 years and 7.4 years respectively) whilst Darwin and Adelaide have the shortest average hold period (4.7 years and 4.0 years and 6.6 years and 6.2 years respectively). The cost of housing in Sydney in particular, but also within Melbourne, may be contributing to the longer average hold period, especially when you consider the higher property prices in those cities and the cost of moving.
Meanwhile, the strong and consistent value growth in recent years within Darwin and the relatively more affordable property prices in Adelaide are probably contributing to a greater propensity to sell properties within these cities.
Taxes such as stamp duty on the purchase of houses can also contribute to owners choosing to maintain ownership of properties rather than selling homes more often. This is especially the case within the more expensive areas given that stamp duty is generally based on the purchase price and higher priced properties incur greater stamp duty. As a result owners of more expensive property may look to renovate their property rather than relocating.
Looking throughout the capital cities, Ivanhoe East in Melbourne recorded the longest average hold period of all capital city suburbs at 16.0 years. Over that 16 year period between May 1994 and May 2010 median house prices within Ivanhoe East have increased from $250,000 to $1.25 million. As a property professional with this knowledge at hand you would know that potential sellers could have up to or in excess of $1 million dollars worth of equity in their home. You would also start to target those owners who have owned their house within Ivanhoe East for 15 years to see if they are interested in selling given that it is getting close to the average length of ownership for that suburb.
At the other end of the spectrum, the capital city suburbs with the shortest average hold period over the last 12 months was Burnside Heights in the Melton region of Melbourne and Berrinba in the Logan council area of Brisbane. Burnside Heights and Berrinba houses were, on average, owned by the vendors of the last year for just 1.7 years. Both of these suburbs are located a significant distance from the city and are both characterised as being home to new housing development. In areas such as these maintaining relationships is important for property professionals as owners have a greater propensity to sell.
For the most part, the areas which have the longest hold periods are long established areas and are mostly located in inner city areas or in coastal / waterfront areas. Those suburbs with the shortest average hold period tend to be characterised as having a significant amount of new development.
A sound understanding of the hold period and what it means can afford a competitive advantage when looking to target new business.
