Australian property market update - August 2019

As we enter into the warmth of spring and the temperature rises, so too has buyer confidence with the latest property update signalling a steady market recovery. 

Overall, dwelling values in August increased across five of the eight capital cities with the exception of Adelaide, Darwin and Perth. According to CoreLogic, national housing values have gathered momentum and increased +0.8% over the month. This is the first rise in values over a three month period since November 2017. 

This is the first rise in National dwelling values over a three month period since November 2017. 

Has lower interest rates, tax cuts and easing credit policy been behind this increase in buyer confidence? More importantly, will this acceleration in housing values continue throughout the year? 

National property values: August 2019

Houses
$533,303
Monthly change: +0.6%
Units
$489,880
Monthly change: +1.3%

The best performing areas over August were the largest metropolitan cities, Sydney (+1.6%) and Melbourne (+1.4%) followed by Brisbane (+0.2%), Hobart (+0.5%) and Canberra (+0.8%) all seeing modest increases. 

On the flip side, Adelaide (-0.2%) and Perth (-0.5%) continue to trend in the negatives, with Darwin emerging as the weakest performing capital city, down -1.2% for an annual drop of -9.7%. 

Although regional market values have continued to decline, regional Tasmania bucks the trend as the only major region where dwelling values are at an all time high up +4.4% over the past 12 months. 

While housing values are on the rise, the same cannot be said for the rental market with national rents falling a further -0.1% over August. This is the third consecutive month of declining rental values. Interestingly, Brisbane, Adelaide and Hobart were the exceptions where rental rates increased.

Market update: Sydney and regional NSW

Houses
$877,220
Monthly change: +1.5%
Units
$699,126
Monthly change: +1.8%

Overall dwelling values in Sydney have gone up by +1.6% in August, making it the third successive month of capital gain in Sydney. Houses have gone up by +1.5% to $877,220 and units by 1.8% to $699,126. However, dwelling values still remain -13.3% below their previous peak. 

Sydney has shown the largest increase in dwelling values across the capital cities, aligning with auction rates being the highest they have been since early 2017. However, some areas of Sydney have shown a decline over the past year including Ryde (-10.2%), Inner South West (-11.3%) and also in the Central Coast (-10.8%).

In terms of the rental market, Sydney had the lowest rental yield, 3.3%, compared to the other capital cities. Rental rates have also further decreased in Sydney. However, with the low mortgage rates, this is unlikely to be a disincentive to investors. 

Certain areas of regional NSW have shown a significant decline over the past year, particularly in Hunter Valley (-4.5%), Southern Highlands (-6.6%), Newcastle and Lake Macquarie (-7.3%) and Illawarra (-10.3%).

However, Newcastle and Lake Illawarra have shown an increase in value in the past quarter, evidence that growth is returning to these areas. The Riverina has also had an annual change of +4.3% and the Murray of +1.0%, making them some of the best performing regional areas in Australia.

Market update: Melbourne and regional VIC

Houses
$716,542
Monthly change: +1.3%
Units
$540,056
Monthly change: +1.5%

Melbourne’s story has been similar to Sydney’s in August, showing the second-highest increase in dwelling values of +1.4%. Houses have had a 1.3% rise to $716,542 whereas units have had a 1.5% rise to $540,056. However, overall dwelling values are about -9.5% below Melbourne’s previous peak.

August is the third month in a row where Melbourne dwelling values have increased. This has also been reflected in the climbing auction clearance rates, now at their highest since early 2017.

Melbourne has shown the second-highest softening of rental yields, to 3.6%, and has seen a decrease in rental rates over the month. 

Over the past year, areas that have declined the most in dwelling values in Victoria are Outer East Melbourne (-9.3%) and Mornington Peninsula (-9.9%). 

There has been evidence of growth returning to Geelong over the past quarter with the area showing an overall increase in dwelling values. Warrnambool and South West have been one of the top-performing regional areas in Australia with a +1.9% annual change in dwelling values over the past year.

Read: How to use auction clearance rates to be a smart buyer or seller

Market update: Brisbane and regional QLD

Houses
$533,101
Monthly change: +0.0%
Units
$375,423
Monthly change: +1.1%

The upward trend in Sydney and Melbourne are also being seen in Brisbane with its second successive month of increases in dwelling values. Albeit small, they have gone up by +0.2% in August. However, with the value of houses staying about the same at $533,295, the increase is mainly made up by the +1.1% increase in the value of units to $375,423.

Despite rental rates decreasing in most of the capital cities, Brisbane has shown an increase in August. The rental over the past month was about 4.6%, higher than in Sydney, Melbourne, Perth and Adelaide. 

Regional areas of Queensland have emerged as some of the best performing in Australia. In particular, the Mackay, Isaac and Whitsunday region has had an annual change of +3.0% and Wide Bay of 2.9%.

However, other regional areas of Queensland haven’t had the same sentiment. The Darling Downs/Maranoa region has gone down by -7.1% and Outback Queensland by a whopping -36.3% over the past year. 

Market update: Hobart and regional TAS

Houses
$498,734
Monthly change: +0.8%
Units
$375,831
Monthly change: -0.9%

In Hobart, August noted the third successive month of capital gain, along with property market giants, Sydney and Melbourne. This total +0.5% growth in dwelling values from July took Hobart median prices to $465,535 in August and ranked the Apple Isle capital as the best capital city sub-region for annual change in dwelling values.

The good news doesn’t stop there. In CoreLogic’s August Hedonic Home Value Index, Hobart also recorded a +0.2% upswing in gross rental yields, joining much of the country in a positive change in rental movements.

Much of this same positive sentiment can also be said about regional Tasmania, as dwelling values are also up +0.4%. Here, South East, West/North West and North East Tasmania contributed much of the positivity as they were recorded among the best non-capital city sub-regions, reflecting 5.8%, 4.5% and 3.8% annual growth respectively. This saw overall regional Tasmania median house prices go up a total of +0.2% to $307,891, and median unit prices up +2.7% to $242,728.

Market update: Canberra and the ACT

Houses
$665,887
Monthly change: +1.1%
Units
$426,088
Monthly change: -0.3%

Just like many of the other capital cities, an upward trend in Canberra and the Australian Capital Territory are also being seen. Despite the slight -0.3% drop in unit prices, the +1.1% increase in house prices over the last month have taken Canberra’s median dwelling values up +0.8% to $592,870.

According to CoreLogic, this has placed the ACT second in the top ten best sub-regions for annual change in dwelling values.

Market update: Adelaide and regional SA

Houses
$462,945
Monthly change: -0.3%
Units
$375,423
Monthly change: -0.4%

While the median monthly change in dwelling values across Adelaide for units and houses dropped slightly in August, it’s not all bad news. When we look at Adelaide as a whole, we see that Adelaide - North and Adelaide - South were amongst the top ten sub-regions for annual positive change in dwelling values. 

Adelaide - North recorded  an upswing of +1.1%, with Adelaide - North recording a positive, albeit small, change of +0.1%. Joining Brisbane and Hobart, Adelaide also experienced an increase in rental rates over the past month. On an annual basis, Adelaide’s gross rental yield increased from 4.3% to 4.4%. 

This positive change is expected to slowly spread across the region and continue over the next few years according to a report from BIS Oxford Economics. 

Adelaide is largely viewed as a steady market with no extreme highs or lows. The report predicts that by 2022 the overall median property price in Adelaide will hit $550,000. Driven by strong population growth and a steady supply of housing, Adelaide is expected to have the second highest property growth after Brisbane over the next three years.

Read: Here are the best suburbs to invest in Adelaide

Market update: Perth and regional WA

Houses
$454,774
Monthly change: -0.6%
Units
$349,084
Monthly change: -0.1%

Median house and unit values continued to slip in Perth over the last month. Perth’s south west, inner, south east and Mandurah regions were amongst the worst performing capital city regions. 

CoreLogic’s latest Pain and Gain report also noted that a quarter of Perth homes are selling for less than their purchase price. If we compare Perth’s peak in 2014, as of last month, values are down around -20.6%.

Is there a silver lining? According to CoreLogic, the three month trend, while downward, has slowed slightly, showing an improvement in decline, but it’s still hard to know when it will finally bottom out and start staging a comeback.

If there’s one thing we’re sure of, it’s that Perth property is the most affordable it has been in a decade - median house price to income ratio is the lowest it has been since the early 2000s. This makes it a fantastic market for first home buyers in-particular - and the latest data backs this up. Of all owner-occupier buyers entering the Perth market, nearly a quarter were first home buyers.

If you’re looking to sell, you may sell at a loss, but if you’re buying in the Perth market and looking to upsize or move to a premium suburb, the loss actually represents a bigger saving overall. 

Market update: Darwin and regional NT

Houses
$470,009
Monthly change: -1.6%
Units
$289,687
Monthly change: -0.5%

Median house prices continued on a downward slope in Darwin over the past month. Given Darwin’s small size, the local market is more susceptible to local events, and is still suffering from the end of the mining boom, slow migration and a sluggish employment market. Values are currently around 30% below the May 2010 market peak, and it’s unlikely that Darwin will recover to that level anytime in the next decade.

12 month changes in dwelling values tell a different story when we look outside of Darwin and into regional NT. Here we see a +3.5% change in dwelling values, particularly in the Northern Territory’s Outback region, which has joined the ranks in the top 10 sub-regions for annual change in dwelling values.

Like Perth, the three month downward trend in Darwin has slowed, which suggests an improvement in the rate of decline. The one upside of current market conditions is that housing is more affordable, so if you’re an owner-occupier looking to upsize or a first home buyer, now would be a great time to pounce.

What does all this mean and what can we expect?

All signs seem to be pointing to a property market rebound with housing credit restrictions easing and mortgage rates likely to reduce further. 

Clearance rates are also currently at the highest levels since early 2017 in Australia’s major capital cities of Sydney and Melbourne. 

The upcoming spring selling season will be the real test of the market recovery as stock levels and auction volumes rise. 

Read: National property market predictions 2020 

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