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House Prices Keep on Ticking Despite Crisis

House Prices Keep on Ticking Despite Crisis

Australia’s median house price has continued to rise, if only at a nominal rate, lifting 1.7 per cent over the quarter according to the latest data from property listing portal Domain.

Nationally, house and unit prices increased over the first quarter of 2020, however economists have warned growth will be likely short-lived.

Australia’s property market has traditionally fared relatively well during global economic shocks, with the market experiencing six falls over the past three decades.

Despite this, market activity is likely to deteriorate in the coming months as economic uncertainty and job security fears heighten, with the extent of the impact on prices remaining a little less certain.

Domain senior analyst Nicola Powell pointed to the four weeks leading to mid-April, where hesitant sellers began to withdraw listings causing a 20 per cent drop in new listings across capital cities.

“Despite homes selling quicker than last year, sellers are adjusting expectations, and auction prices have slipped,” Powell said.

“The slowdown aligns to the shutdown of non-essential services, the temporary ban on onsite auction gatherings and open inspections.”

Median house prices

Sydney$1,168,806▲ 2.6%▲ 13.1%
Melbourne$918,350▲ 2.0%▲ 12.6%
Brisbane$584,778▲ 0.6%▲ 2.1%
Adeliade$542,4180.0%▲ 1.3%
Perth$527,3220.0%▼ -1.0%
Hobart$514,097▲ 2.2%▲ 9.3%
Canberra$779,050▲ 0.3%▲ 4.4%
Darwin$494,281▲ 1.2%▼ -3.9%
Combined$819,860▲ 1.7%▲ 8.9%

Sydney, which has seen the strongest annual growth since mid-2017, saw houses prices life by 13.1 per cent and units 8.5 per cent over the year thanks in part to low mortgage rates and improved borrowing capacity fuelling buyer demand.

Worryingly, quarterly house price growth has slowed to less than half, and unit price growth one-third lower than the previous quarter.

“Early signs suggest that the rate of price growth had peaked before the coronavirus pandemic hit,” Powell said.

“A combination of weak wages growth and rising prices had once again stretched affordability for some buyers, while a rise in new listings early in the year had helped to service demand.”

New listings also began to fall from mid-March, along with 14 per cent of listings have had prices revised in March, up from 5 per cent in late 2019.

In Melbourne house prices have now risen for four consecutive quarters, pushing annual gains to double-digits for the first time since 2017.

Unit prices, which hadn’t seen double-digit annual growth in almost a decade, surged by 13.8 per cent over the year.

Despite this, new listings also dropped about 11 per cent over mid-March through to mid-April, suggesting few forced sales.

Powell noted that the rapid cautionary response from sellers will be counterbalanced against a drop in buyer demand and in turn result in property prices faring better than transactions over the coming months.

Median unit prices

Sydney$744,672▲ 2.7%▲ 8.5%
Melbourne$554,306▼ -0.4%▲ 13.8%
Brisbane$374,846▼ -4.2%▼ -4.6%
Adelaide$323,846▲ 4.2%▲ 1.1%
Perth$348,535▲ 1.6%▲ 2.3%
Hobart$431,8420.0%▲ 9.8%
Canberra$441,055▼ -5.2%▼ -4.3%
Darwin$262,562▼ -8.1%▼ -16.2%
Combined$570,229▲ 0.9%▲ 7.4%

^ Source: Domain

Brisbane saw house prices nudging up 0.6 per cent over the first quarter to a record $584,778 and lifting 2.1 per cent higher than last year.

However, the city’s unit prices recorded the steepest annual fall in almost two decades, down 4.6 per cent and 9.8 per cent below the 2016 peak.

Despite South Australia holding the highest unemployment rate in the nation, Adelaide was one of only three capital cities to record stable or rising prices for houses and units, along with Sydney and Hobart.

The modest 1.3 per cent annual growth pushed house prices to a new high of $542,418 while unit prices jumped 4.2 per cent over the quarter.

Hobart, which remains heavily exposed to the economic shock of the coronavirus pandemic due to its heady reliance on tourism, saw house prices rise to a new record high over the first quarter of 2020, up 2.2 per cent with unit prices holding.

House prices flatlined over the quarter in Perth with values sitting 14.4 per cent below the late-2014 peak.

“The slow recovery of Perth’s housing market over the past six months could be stalled by the economic fallout from the coronavirus pandemic,” Powell said.

“The ability to pause mortgages will be a lifeline to some homeowners, reducing the number of distressed sales.

“Perth will also benefit from WA’s two biggest exports, with iron ore exports expected to hit a high this year and gold prices at an all-time high.”

In the nation’s capital, values lifted slightly by 0.3 per cent over the quarter while unit’s dropped by 5.2 per cent.

Powell said Canberra would remain somewhat insulated to the economic shock due to its high proportion of government works, where job losses have been minimal to date.





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Unit oversupply remains an issue in Brisbane CBD: RiskWise’s Doron Peleg

oversupply issue in Birsbane

Unit oversupply remains an issue in Brisbane CBD: RiskWise's Doron Peleg


The inner-city Brisbane unit market, already hit hard by unit oversupply, continues to remain a huge danger zone for investors since the advent of COVID-19.

Not only is equity risk the major issue for investors, increased vacancy rates and risk to cash flow are also heavily impacting the market.

According to RiskWise Property Research CEO Doron Peleg, things have not improved in the market since the pandemic hit and, if anything, have become worse.

“RiskWise reported in July 2018 that there were 14,813 units in the pipeline in inner-city Brisbane for the next 24 months, being an addition of 20.1 per cent of the current stock,” Mr Peleg said.

“Two years later and there is still a very high level of supply with 5,431 units in the pipeline, making up an addition of 5.9 per cent of the current stock.”

Pete Wargent, co-founder of Buyers Buyers, a national marketplace now offering affordable buyer’s agent services to all Australians, said that rental demand had been weak for CBD apartments for some time.

“The trend has been exacerbated by the pandemic, and CBD rents have been very soft” Mr Wargent added.

Analysis by RiskWise in 2018 showed unit over-supply in inner-city Brisbane had created weakness in the market leading to an elevated level of risk for investors and, therefore, lower valuations and rising defaults on settlements.

“The issue of oversupply is not a new problem and has been there for a few years and the continuous weakness of the unit market in inner-city Brisbane should raise red flags for developers and lenders,” Mr Peleg said.

“Defaults have been rising and will continue to do so.

“One of the key factors has been developers’ lack of foresight regarding unit oversupply as well as the impact of lending restrictions introduced from 2014. It seems there has been no methodological and structured risk-management approach including identification, assessment, and mitigating action plans to address those risks.

“This takes us back to the feasibility stage which includes the assessment of the projected fair market value and the likelihood of defaults and their potential consequences. Developers and lenders must find the right balance between taking risk and making profit.

“COVID-19 has only served to increase the risk. Currently, there are many high-rise properties being offered to a smaller number of investors. This is because there are less investors in the market due to the pandemic.

“The point is that if developers and lenders had put more proper risk-management practices in place, this could all have been avoided.”

Mr Peleg said it must also be remembered the value of off-the-plan property could decrease between the original contract date and settlement resulting in capital loss, as the equity in the home could be reduced, and this was well known in inner-city Brisbane.

He also stressed that investors buying rental apartments unsuitable for families were taking an enormous gamble, with both equity and cash flow risk expected to materially increase. Serviceability is also a major factor for investors who rely on a stable rental income to cover the costs associated with property and particularly the mortgage.

Mr Wargent of Buyers Buyers said houses for investors often carried significantly lower risk for those with the right budget because renters, especially in the more established suburbs, included families and, in many cases, those with permanent full-time jobs. They were also more likely to deliver good medium and long-term capital growth.

Additionally, as rental properties are not fully substitute products with owner-occupied dwellings, there is inherent risk associated with them as they do not appeal to families looking for three bedrooms, with outdoor space, close to schools, transport, and employment hubs.


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Queensland Extends Commercial Eviction Moratorium

Commercial Eviction Moratorium
Queensland Extends Commercial Eviction Moratorium

Queensland commercial tenants impacted by the pandemic are set to get further relief, with the state government extending the ban on evictions until the end of the year.

The move means that to the end of 2020 commercial leaseholders can’t have their lease terminated if they fall into arrears as a result of the Covid-19 pandemic.

First introduced in March by the national cabinet, the six-month ban on evictions are due to expire at the end of this month.

Leaving out residential tenancies, the Queensland government’s latest announcement pushes the moratorium on evictions in the commercial space to the new date of 31 December 2020.

Queensland’s announcement comes as other states have extended eviction protection.

Last month, Victoria extended its own ban on evictions for both residential and commercial tenants until 31 December.

While Western Australia and South Australia have each put a six-month extension in place for residential and commercial tenancies until the end of March.

Attorney-General Yvette D’Ath said that landlords and tenants had been working together “in good faith” to “tackle the economic challenges”, describing the announcement as “a shot in the arm” for many small businesses still struggling because of the pandemic.

“This extension is about giving businesses, and the thousands of workers they employ, the certainty they need in these challenging times,” D’Ath said.

With no mention made about Queensland residential tenants, the end of the moratorium looks set to remain as 29 September.

The Queensland government’s decision has been criticised by three of the five members of its Covid-19 Housing Security Subcommittee; Queensland Council of Social Service (QCOSS), Q Shelter and Tenants Queensland.

“Since the Covid-19 crisis began, demand for the state’s tenant advisory services has increased drastically,” Tenants Queensland chief executive Penny Carr said.

“Particularly from tenants fearing eviction after losing their jobs or having their income reduced as a result of Covid-19.”

The code extension means that affected businesses can come forward to receive assistance under the code until 31 December.

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Buyer Demand Builds in the Outer Suburbs

Buyer Demand Builds in the Outer Suburbs
 Buyer Demand Builds in the Outer Suburbs

Buyer demand has significantly jumped compared to last year across all capital cities aside from Melbourne.

The Domain buyer demand indicator shows that the market has rebounded in recent months—revealing the top suburbs piquing buyer interest.

Houses and apartments in the outer-suburban areas of Sydney, Melbourne, Brisbane and Perth, were the highest in demand for the month up to 6 September.

This follows a state of hiatus caused by caused by Covid which is ongoing in Victoria where restrictions have stopped inspections and dropped listings.

Domain senior research analyst Nicola Powell said they tracked people who were most likely to buy, indicated by shortlisting, sending inquiries, inspecting and frequently viewing photos.

“The current health crisis has changed the way we use our homes, and for some altered our purchasing decisions and property wish lists,” Powell said.

“And while Covid-19 lockdowns sent buyer demand into a state of hiatus, activity from people likely to buy has rebounded in all capital cities apart from Melbourne.”

Top greater Sydney suburbs

 Buyer Demand Builds in the Outer Suburbs

NSWHousesUnitsPost-Covid Demand
1.Hawkesbury demand increase since CovidRouse Hill-McGraths HillWollondilly (Houses)
2.Rouse Hill-McGraths HillPennant Hills-EppingRichmond-Windsor (Houses)
3.WollondillyMarrickville-Sydenham-PetershamCamden (Houses)
4.HornsbyEastern Suburbs-southGosford (Units)
5.Dural-Wisemans FerryWarringahHawkesbury (Houses)

Top greater Melbourne suburbs

 Buyer Demand Builds
VICHousesUnitsPost-Covid Demand
1.Whitehorse-westMornington PeninsulaMacedon Ranges (Houses)
2.Macedon RangesCardiniaManningham-east (Houses)
3.Manningham-eastKnoxMornington Peninsula (Units)
4.Mornington PeninsulaMaroonahYarra Ranges (Houses)
5.Yarra RangesKingstonFrankston (Units)

Top south-east Queensland suburbs

 Buyer Demand
QLDHousesUnitsPost-Covid Demand
1.NambourBribie-BeachmereMudgeeraba-Tallebudgera (Houses)
2.NundahCoolangattaNoosa hinterland (Houses)
3.CarindaleRedcliffeGold Coast hinterland (Houses)
4.Surfers ParadiseIpswich innerNoosa (Units)
5.Mudgeeraba-TallebudgeraCleveland-StradbrokeNambour (Houses)

Meanwhile major gains have been made in national vacancy rates to pre-Covid levels with outer suburbs also showing the most improvements.

Residential property prices dropped by 1.8 per cent in the latest quarter according to the Australian Bureau of Statistics.

In Perth, Mundaring houses and Wanneroo units topped the list, Canberra’s Weston Creek was listed for houses and Gungahlin for units. Litchfield, Darwin topped the list in the Northern Territory for both houses and units.

Hobart was the only other city to record a fall in activity over the four week period to 6 September, along with Melbourne, where the most demand was seen for Sorrell-Dodges Ferry and Hobart.

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