Housing Market gloom – is it justified?

//Housing Market gloom – is it justified?

Housing Market gloom – is it justified?

Try this housing market quiz.

Question 1. What is the change in median house prices in Sydney and Melbourne in the period September 2016 – September 2018 (the most recent quarterly data available)?

Sydney Melbourne
Fall of more than 10%
Fall of 5 – 10%
Fall of 0 – 5%
Increase of 0 – 5%
Increase of 5 – 10%
View Answer

Question 2. What is the change in median house rents in Sydney and Melbourne in the period September 2016 – September 2018?

Sydney Melbourne
Fall of more than 10%
Fall of 5 – 10%
Fall of 0 – 5%
Increase of 0 – 5%
Increase of 5 – 10%
View Answer

Question 3. What is the change in number of housing loan commitments made by banks comparing the months of September 2016 and September 2018?

Australia
Fall of more than 10%
Fall of 5 – 10%
Fall of 0 – 5%
Increase of 0 – 5%
Increase of 5 – 10%
Source: Australian Bureau of Statistics
View Answer

What does this mean?

1. House Prices

Media reports that imply a property market collapse is taking place are not supported by the facts. This is consistent with commentary from the Reserve Bank of Australia to the effect that a mild correction is occurring.

As shown in the answers to the quiz, property prices and rents in Melbourne and Sydney are still higher than they were 2 years ago. In fact anyone who bought a house in Sydney or Melbourne more than five years ago is still sitting on a substantial capital gain (Sydney averages over 50%, Melbourne over 40%).

2. Rents

In recent years, rents did not keep pace with the increase in sale prices, particularly in Sydney. For example, in the period 2011-2017 for houses:

Increases in: Houses (Note 1) 2011-2017 Melbourne Sydney
House Prices 48% 85%
House rents 13% 28%

For apartments the gap is smaller

Apartments
2014-2018 (Note 2)
Apartment prices 22% 35%
Apartment rents 16% 12%

Note 1
Median house / apartment prices and rents: data sourced from Real Estate Institute of Australia reports. Interpretation and application ©Woodhams Relocation Centre 2019.

Note 2
Data available only from March 2014

For property owners this has meant their rental returns have fallen for a number of years. However with rising capital values, their overall returns were adequate. With property prices stalled, that is no longer the case and at some point one would expect rents to rise.

A leading indicator of pressure on rental rates is the Vacancy Rate. This refers to the % of rental properties available at a given time. A higher rate indicates greater choice for prospective renters, and downward pressure on rent levels. As a guide a 3% vacancy level is considered to provide market stability with no overall upward or downward pressure on rent levels.

Although in Melbourne and Brisbane there has been a significant tightening – and a prospect of rising rent levels – in Sydney the opposite is the case.

Capital city Vacancy rate (%)
Sep-18 Sep-17 Sep-16
Sydney 2.9 2 1.9
Melbourne 2 2.1 2.5
Brisbane 2.2 2.9 4.1
Adelaide Not available Not available Not available
Perth 3.9 6.9 6.6
Canberra 0.6 0.7 1.3
Hobart 1.5 1.7 2.4
Darwin 7.9 5.9 6.7

Source: Real Estate Institute of Australia surveys of Real Estate Agent Property Managers. Interpretation and application ©Woodhams Relocation Centre 2019.

Woodhams Relocation Centre’s Rental Guides

Every quarter we update our Rental Guides for each capital city, with detailed information on rental levels in the areas most popular with those relocating. Some extracts from the latest Guides (issued January 2019) are shown below:

Trends in Rent Levels

Median Weekly Rents – Sept Quarter 2018
Annual % Change
Capital City 3 Bedroom Houses 2 Bedroom Apartments
Sydney -2 -1.8
Melbourne 3.9 4.8
Brisbane -1.3 0
Adelaide 2.9 1.7
Perth 0 0
Canberra 4.2 4.5
Hobart 10.8 9.7
Darwin -10 -4.1
Brisbane Rental Guide (Weekly Rents)
The prices below reflect mid-level properties suitable for corporate assignees. The properties tend to be well-presented & maintained homes with modern kitchens and bathrooms, in quieter locations, with close proximity to schools and/or beaches and convenient for commuting to work. Executive-level homes can be significantly more expensive.
” N/A ” denotes limited availability e.g. a 4 bedroom house in the City Centre.All figures are for unfurnished accommodation without the inclusion of utility costs.
CITY AREA In the heart of Brisbane, this area covers both sides of the River for about a 2km radius. This is a multi-cultural area with a diverse population. The current trend is for executives and young and middle aged couples moving from outer suburbs to inner city living. There is plenty of activity day and night. Walking distance to the city and Fortitude Valley there is an abundance of good restaurants, bars, boutiques and speciality food outlets. There are several art galleries and theatres in the area. New Farm & West End have both modern and Queenslander style homes, while other neighbourhoods have old & newer style apartments. Older apartments are large, while newer units tend to be smaller. There have been a number of exclusive new developments built along the river and further 1 and 2 bed apartment complex developments are underway. There are a number of private schools and colleges, available within 3 kilometre radius of the central business district.
Apartments Houses
Bedrooms 1 2 3 2 3 4
New Farm $405 $555 $845 $640 $940 $1,095
Teneriffe $520 $705 $975 N/A N/A N/A
Newstead $515 $670 $1,075 N/A N/A N/A
Fortitude Valley $475 $600 $795 N/A N/A N/A
West End $515 $650 $940 $585 $780 $910
South
Brisbane
$550 $715 $910 $760 $755 N/A
Kangaroo
Point
$470 $625 $910 $515 $690 $975

For each city, the areas selected for the survey are those most commonly chosen by people relocating interstate or internationally. For example, in Sydney we look at the following areas:

  • Sydney City and Surrounds
  • Lower North Shore
  • Eastern suburbs
  • Inner West
  • Hills District
  • Upper North Shore
  • Northern Beaches
  • Western Sydney

Underlying rental data is sourced from realestate.com. Interpretation and application ©Woodhams Relocation Centre 2019.

For a copy of our latest reports (December 2018) please email Jo at relocations@relocationcentre.com.au

2019-01-31T04:00:23+00:00January 25th, 2019|

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