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House rents grow through pandemic while apartment returns plunge


A two-speed residential rental economy has emerged post-COVID-19 with apartment owners in the eastern mainland states the biggest losers as a growing number of tenants opt for the space and security of houses.

New data from MRI Software, which tracks real-time rental performance across 4000 real estate offices, reveals the average national house rent has risen through the pandemic to $526 – 4 per cent more than in late 2019.

The reverse is true for apartment rents, which fell 7 per cent on a national basis over the same period due to border closures, few domestic tourists, a lack of business travel, no foreign students and stock oversupply in certain CBDs.

Josh Symons, Residential Industry Principal at MRI, said the increased number of people working from home has also had a major impact.

“Many people have been looking to get more space so they have that work-life balance even while working from home,” Mr Symons said.

“I think another critical point is that expats have returned, moved back into their houses and pushed those tenants out into the market.

“Because you have got this inflection point of people wanting more space, demand has been rising while supply has been decreasing.”

He added that not only have apartments fallen, but it also takes longer to rent an apartment than a house.

In December 2019 the average time between apartment tenancies was four weeks, but it is now more than six weeks. This metric has remained stable for houses at five weeks.

Apartment owners in Melbourne, Sydney and Brisbane have been hardest hit.

Melbourne’s apartment rents have steadily declined in the past 18 months, falling 17 per cent from an average of $493 pre-COVID-19 to $412 in early June.

Apartment rents fell by 8 per cent in Sydney and 4 per cent in Brisbane.


In all other capital cities, apartment rent grew over the past 18 months. The strongest increases were in Perth and Hobart, both up by 8 per cent, while Adelaide apartment rents edged ahead by 2 per cent, the same as the Gold Coast.

House rents increased in all markets except Melbourne, where they dropped 4 per cent to $455, making it one of Australia’s lowest-cost rental markets.

The Perth market played catch-up as demand caught up with supply and the city had the biggest rental increase of 8 per cent for house rents, which reached an average of $451.

That is still the second-lowest capital city rent, but in a sign that increases will continue in Perth, the average rent on new leases in the metro area is now at $516.

Adelaide remains Australia’s cheapest housing rental market despite a 5 per cent increase in rents to an average of $416.

Hobart house rents rose 2 per cent to $507, significantly slower than unit growth in the city.

Already high rents on Gold Coast houses increased a further 1 per cent to reach $665, much more than in near-neighbour Brisbane, where the average rent grew 2 per cent to reach $483.

The cost of renting a Sydney house was up 2 per cent over the past 18 months, with the average rental rate at a national high of $729.


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Australians increasingly searching for properties in higher price brackets


Australians are adapting to the hot property market, with one figure showing how much property prices are actually increasing.

Australians looking for a new house are increasingly searching for properties in higher price brackets with almost half of Sydney buyers looking to spend more than $1.5 million.

There’s been an explosion in property prices across the country this year with many home buyers pushed to the upper limits of their budgets to secure a property.

CoreLogic’s home value index for all properties shows Sydney prices have grown by 11.66 per cent year-on-year, Melbourne by 5.43 per cent, Brisbane (including Gold Coast) by 12.44 per cent, Adelaide by 11.98 and Perth by 8.40 per cent.

Figures released last week showed categories of all housing in Sydney grew by three per cent in May — one of the largest monthly rises on record.

The median price of a house in the Harbour City is now $1.186 million, while the median unit price is $782,000, according to CoreLogic. Prices have climbed 10 per cent since January. figures now show home buyers are adjusting their expectations and searching for properties at higher prices.


Almost half of Sydney home buyers on are now looking to spend more than $1.5 million on their next property.

An analysis of search activity found the most searched price bracket on the website is more than a million dollars.

About 43 per cent of all Sydney buyers of a house or apartment are now looking to spend over $1.5 million — double the national average and 16 per cent more than the next best capital, Melbourne.

Melbourne data shows over half of online searches in April were for homes worth between a maximum of $1 million and $1.5 million.

Almost a quarter of searches were for properties valued up to $1.5 million, a 5 per cent increase over three years.

Only 26 per cent of searches were made for properties worth $750,000 or less compared to 46 per cent in 2019, according to the data.

“The supply of homes valued under $750,000 is reducing,” REA Group economic research director Cameron Kusher said.

The Real Estate Institute of Victoria revealed exclusively to the Herald Sun in April that Melbourne’s median house price had exceeded $1 million in the first three months of 2021.

This figure took into account houses sold from January 1 to March 31.


In Greater Brisbane, number of buyers searching for homes in the $1 million price point has also gone up 30 per cent in three years, from 20 per cent of all buyers in 2019, to 26 per cent today.

By comparison, the number of buyers searching for homes around $500,000 has tanked by 43.3 per cent, and those shopping around $750,000 has fallen 16.6 per cent.

Median house values across Brisbane range from $380,000 (Archerfield) to $2 million (Teneriffe), with the median house value in the Brisbane local government area now $754,500.


A greater number of buyers are searching for homes in the $1 million price point in Greater Brisbane.Source:Supplied

South Australia

Property searches for homes worth up to $1 million in South Australia have climbed over the past two years.

Figures from show searches climbed from 14 per cent in April 2019, to 18 per cent in the same month of 2020, then to 20 per cent in 2021.

Properties up to $500,000 remained among the most popular but the data showed the proportion of searches in that price range dropped from 45 per cent in April 2019, to 36 per cent in the same period of 2020, then 29 per cent in 2021.


There has been a substantial rise in the number of potential buyers in Tasmania searching in the $750,000 and $1 million price brackets over the past three years.

While the $500,000 range remains Tasmania’s largest price bracket, the interest in this range has dipped significantly.

In April 2019, 18 per cent of home searches were in the $750,000 bracket, but in April 2021 that percentage has shot up to 29 per cent, or almost one-third of all searches.

In the $1 million range, searches have grown from 9 per cent up to 16 per cent.

Meanwhile, the $500,000 range represented 56 per cent of searches in 2019 but has receded to 43 per cent this year.

Tasmania’s most affordable search, $250,000, has shrunk from 11 per cent to just 3 per cent.

The story was similar in greater Hobart with searches dropping from 5 per cent to just 1 per cent.

Most property searches in greater Hobart this year were in the $500,000 bracket (34 per cent in 2021, down from 50 per cent in 2019).

The $750,000 range grew to 31 per cent, which was up from 23 per cent, followed by $1 million searches (21 per cent, up from 14 per cent) and $1.5 million (7 per cent, up from 5 per cent).


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‘Craziest’ market in 30 years: the impact of the global housing boom

global housing boom

The eastern Melbourne suburb of Hawthorn is home to some of the nation’s wealthiest residents.

They need to be. The median price for a house in this exclusive enclave is now $2.6 million, having jumped by $200,000 over the past 12 months on CoreLogic figures. Almost all of the homes sold this year in the suburb have achieved seven-figure price tags.

Hawthorn is also the home of federal Treasurer Josh Frydenberg, his wife Amie and their two young children. Pressed this week on whether his children would ever be able to afford to live nearby in their own homes, the usually confident Treasurer could not quite answer.

“We have seen a rise in housing prices but I think that the measures that we have introduced will enable more first-home buyers to get in the market,” he said.

“Obviously, there is both a supply and demand side to this equation. We don’t have the levers … around supply as much as the states do, in terms of land release. But yes, house prices have got up.” He added household assets were five times higher than household debt, ensuring homeowners had the capacity to meet their loan obligations and low interest rates were helping more people get into the market.

CoreLogic data this week confirmed what anyone who owns a home or has endured a Saturday auction already knew – the national property market is on fire.

House values in Sydney jumped 3.5 per cent in May to be 15.1 per cent up since the start of the year. Only the Canadian Pacific coast city of Vancouver has experienced a sharper rise.

It’s barely different in Melbourne, where values lifted another 2.2 per cent last month to be 9.4 per cent up since January 1. Sydney’s median value is now just shy of $1.2 million, climbing by $1220 a day. Melbourne is at $908,000, inching up $770 a day.

That’s just the nation’s two largest property markets. Smaller capitals such as Hobart, Darwin and Canberra have seen an increase in values of more than 11 per cent this year. Darwin values alone are up more than 21 per cent over the past year. Dwelling values have also soared in tree-change country towns and sea-change bolt holes.

While the immediate focus has been on the past year, the last decade illustrates the growing wealth gap between those with a home and those without.

Data compiled by Domain shows that in 2011, about 15.5 per cent of all Sydney homes that year exchanged hands for at least $1 million. So far this year, almost 52 per cent of homes sold in Sydney exceeded the $1 million mark. It’s a similar story in Melbourne, where a decade ago about 10 per cent of homes went for $1 million. So far this year, it’s almost a third.

A global phenomenon

It’s not only Australian home buyers facing a tough market. Property prices around the world are surging on the back of ultra-cheap interest rates and stimulus measures put in place to deal with the coronavirus pandemic.

In the United States, prices have climbed 13.2 per cent in the 12 months to the end of March. The Arizona capital, Phoenix, is leading the way with prices there up by 20 per cent. On the Pacific coast, San Diego prices have jumped by 19.1 per cent.

To the north, prices across Canada jumped 23.1 per cent in the 12 months to the end of April. From Quebec (20.1 per cent) to Vancouver (22.1 per cent), prices are on a tear.

In Britain, it is the regions that are taking off. Prices in Yorkshire (up 14 per cent) and across the north-east (up 13.7 per cent) are soaring compared to London, where they have lifted by a comparatively modest 3.7 per cent.

New Zealand has seen price rises that would make a real estate agent blush. Across a string of provincial areas such as Gisborne, Napier and Palmerston, values have jumped more than 30 per cent over the past year. In the capital Wellington, values have lifted by 23.7 per cent while in the nation’s largest city, Auckland, they have jumped 15.6 per cent.

The explosion in worldwide home prices has rekindled the debate about housing affordability and the potential long-term generational damage.

Australia went into COVID-19 with some of the most expensive capital city dwelling prices in the world and there were already concerns about how low and middle-income earners as well as younger people would be able to buy without relying on the bank of mum and dad. Sydney’s median house price was almost 12 times the median household income while in Melbourne it was close to 10 times. In the late 1990s, they were less than half that.

Even as the surge makes national news, no one seems prepared to take direct responsibility.

Reserve Bank deputy governor Guy Debelle this week said ultra-low interest rates were not only boosting house prices but supporting the broader economy and the jobs market.

The bank’s focus is not on what it calls the “distributional” consequences of prices that make it almost impossible for young people to buy in and enriches those who already own properties. Instead, it is focused on the economy as a whole.

“There are a number of tools that can be used to address the issue, but I don’t think that monetary policy is one of those tools,” Debelle said on a podcast.

The Australian Prudential Regulation Authority oversees bank lending standards but isn’t going to step in to help first-time buyers either, seeing its role as limited to cracking down when risky borrowing takes place.

Famously, it tightened policies in 2016 in a move that rapidly slowed house price growth when investors were pouring into the market. APRA chairman Wayne Byres says standards have yet to slip. He is not convinced the responsibility for dealing with soaring prices falls to the Council of Financial Regulators either, saying “it’s a broader government responsibility”.

The Coalition is under pressure from backbenchers to consider controversial policies such as letting first-home buyers dip into their superannuation for a deposit.

Frydenberg said affordability was being addressed, pointing to a suite of recently introduced policies including changes to its First Home Super Saver Scheme. This enables people to put extra savings into their super and pull them out when needed to help buy a house. The maximum withdrawal had been $30,000 but the cap was increased to $50,000 in last month’s budget.

But the budget also contained measures which, by themselves, feed into housing demand. They included the creation of the Family Home Guarantee under which 10,000 single parents over four years will get a government guarantee of up to 18 per cent of the value of a property, leaving them to come up with a deposit of as little as 2 per cent.

In addition, the government extended its First Home Loan Deposit Scheme to another 10,000 people for 2021-22. First-time buyers under this scheme need just a 5 per cent deposit.

In both cases, people who would ordinarily be unable to enter the property market because of insufficient savings will get a government leg-up. That’s more potential buyers competing for properties, a recipe any auctioneer recognises as pivotal to a bidding war.

Tackling the housing crisis is emerging as a theme for the upcoming federal election. Opposition Leader Anthony Albanese has promised to put $10 billion into a fund to build tens of thousands of low-cost homes should Labor get in. Even bank bosses have urged governments to fast-track housing approvals.

But future promises of home building while current institutions and governments pass the buck will be of scant comfort to those dealing with the nation’s priciest cities right now.

PK Property Group director Peter Kelaher says 2021 has been the “craziest” period he has seen in 30 years of business. In the past month, he has completed $60 million of home purchases for clients.

“This is the first time in a long time that I have seen the general marketplace not just in Sydney, but in NSW and most other states, firing on all cylinders at the same time,” he says. “It’s just fuelling an emotional property boom.”

While there have been major booms in the past, notably after the global financial crisis, Kelaher says first-home buyers were previously able to buy in the outer suburbs. They’ve now been pushed into country towns, where property markets are running just as hot.

“The economy is going quite well, employment is coming up, so I am thinking we will have a steady market through winter. If stock is short in winter it’ll keep being strong,” he says. “People are trading up and down. Downsizers who have realised they aren’t travelling for years are in the market.”

The risks of rising prices

So far there are no major signs current homeowners have taken on more than they can handle to get into the market.

Ratings agency S&P Global tracks the proportion of loans in residential mortgage-backed securities that are at least 30 days in arrears. Its report this week shows in most of the country, arrears rates are falling. At the height of the pandemic, tens of thousands of homeowners took up mortgage holidays but the sharp recovery in jobs and the economy has meant the majority went back to their usual repayment plan.

In Victoria, the highest rate is in the Melbourne suburb of Altona East at almost 7 per cent. But it is an outlier, with the rate less than 2 per cent across the state and most of Melbourne.

The Sydney suburb of Cecil Hills has NSW’s highest arrears rate at 4.36 per cent. Sydney’s overall arrears are slightly higher than Melbourne’s but still quite low.

‘This is the first time in a long time that I have seen the general marketplace … firing on all cylinders at the same time.’

PK Property Group director Peter Kelaher

A sign of how high house prices and government assistance have helped drive down arrears rates is being played out in the suburbs of Perth. Years of falling prices and stagnant wages growth meant many suburbs in the WA capital had high arrears rates. But they have all fallen over the past year by as much as a third.

Of greater concern, S&P notes more than 42 per cent of loans in these mortgage-backed securities have higher loan-to-value ratios. Two years ago, the proportion was less than 37 per cent.

But the agency observes low interest rates and government stimulus have made a large contribution to the market’s overall strength.

Both will come to end, although the RBA this week maintained interest rates will stay on hold until 2024 while the federal government’s own budget forecasts deficits for the rest of the decade.

Commercial banks are also playing a role. Lenders have reduced the sticker-price shock of high mortgage repayments on increasingly expensive homes by extending the length of time people have to pay.

Until the GFC, the traditional mortgage ran for 25 years. Now borrowers can be expected to have 30 years of repayments. It might seem a win for the buyer, who can make smaller payments, but it’s a bigger win for the lender.

Where did reserve banks come from – and what’s monetary policy?

For instance: if you borrowed $450,000 at 2.4 per cent over 25 years, the monthly repayment would be about $2006. Over the life of the loan, you would pay $152,000 in interest and bank fees.

Now extend that loan out to 30 years. The repayment has fallen sharply, to $1765 a month. But the amount paid in interest and bank fees rises to more than $185,000. The borrower has a home and the bank has captured $33,000 in risk-free cream on a $450,000 loan.

Where lenders have not been able to assist is an issue the federal government and RBA are struggling with: stagnant wage growth. In the past, rising wages have helped owners pay down their loans more quickly. This is where the run-up in house prices could prove a long-term issue.

Assume our borrower with the 30-year, $450,000 mortgage is earning $100,000 a year. Their $1765 monthly repayment gobbles up about 30 per cent of their take-home pay. If they enjoyed a 3 per cent average annual pay rise over the next decade, their 2030 pre-tax income would be closer to $136,000. The $1765-a-month repayment would fall to 21 per cent of their take-home pay. Income inflation has reduced the burden of the mortgage.

Yet if our borrower averages only 2 per cent wage rises over the next 10 years, the mortgage’s share of take-home pay would be more than 23 per cent. All this is predicated on interest rates not increasing over a 10-year period.

What happens next

One of the biggest factors in house prices, here and overseas, has been the collapse in interest rates. Central banks, in a desperate attempt to protect their economies through the pandemic, have delivered trillions of dollars of support via ultra-low rates and quantitative easing.

This has translated into a string of Australian lenders offering variable and fixed interest rates under 2 per cent. The last increase in official interest rates in Australia was back in November 2010. Since then, more than a million first-home buyers have taken on a mortgage – almost 307,000 in Victoria and 219,000 in NSW – encouraged by various state and federal government incentive schemes and low rates.

House price party will end in tears unless someone turns off lights soon

Over the past year alone, 46,500 Victorian first-time buyers and 35,900 in NSW have entered the market. None know what an interest-rate rise means to their repayments.

The run-up in prices has occurred despite population growth across Australia, and most of the world, falling through the pandemic. Australia’s population is expecting its smallest growth since World War I. A net 96,600 people are forecast to leave the country this financial year with another 77,400 to roll through the departure lounge in 2021-22. Both Sydney and Melbourne have lost residents to the regions or other parts of the country.

Analysts believe that, eventually, the heat will come out of the market. Just not yet.

Another 10 per cent rise this year and a similar increase in 2022 are considered likely. But it’s how it ends – in a bang or a whimper – that is of interest to homeowners and potential buyers.

AMP Capital chief economist Shane Oliver, who says fear of missing out is a key contributor to the current surge, can see a gradual end.

He notes poor affordability will drive out buyers, particularly those looking for their first property. There are already signs of that with a slight drop in first-time numbers over the past two months (only to be replaced by investors).

APRA and the RBA will tighten standards, even if not officially.

The drop in migration, the end to government stimulus programs and a realisation among those forced to work from home through the pandemic that they do not have to live in Sydney or Melbourne will all slow growth.

Finally, the biggest factor continues to be interest rates. “While variable rate hikes are probably two years away at least, three and four-year-plus fixed mortgage rates have started to move up with the rise in bond yields and further increases are likely. This is significant, as fixed rates now account for around 40 per cent of new housing finance,” Oliver says.

“So it’s likely that the 30-year tailwind for the property market of falling interest rates has now run its course.”

That might be the saving grace for those struggling to get into one of the world’s most expensive property markets.


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Property Listing Shortfall Squeezes Prices

Property Listing

Residential stock is being cleared out nationwide as the number of buyers outstrips sellers and listings continue to fall.

Property listings fell 6.3 per cent in May and are down 19.2 per cent on last year, according to data from SQM Research.

The low level of stock is continuing to squeeze the market with house prices rising in all capital cities and regional areas.

Old stock on the market is also getting moved—the number of properties on the market for more than 180 days was down 44 per cent on the year and by 9.2 per cent in May.

Total property listings

City May 2021 Monthly Change Yearly Change
Sydney 27,440 -3.5% -8.7%
Melbourne 40,958 -7.4% -1.4%
Brisbane 23,519 -7.1% -18.4%
Perth 22,075 -1.7% 1.5%
Adelaide 12,033 -7.1% -21.4%
Canberra 3250 -9.7% -21.7%
Darwin 1430 2.9% -13.5%
Hobart 1346 -11.2% -36.1%
National 245,953 -6.3% -19.2%

^Source: SQM Research May 2021

SQM Research managing director Louis Christopher said property listings fell in May due to strong market conditions.

“The downward trend in old listings suggests strong absorption rates, so new property listings are not completely offsetting the falls in old listings,” Christopher said.

“This is indicating there are more buyers than sellers in the market, which is fuelling the property boom.

“This is contributing to strong growth in asking prices, particularly in regional and coastal locations, such as the NSW Mid North Coast and on the Gold Coast.

“The trend is also pronounced in the inland regions, such as the Murray Region.”

Christopher said with interest rates looking set to remain low for 2021, and many households awash with cash as the jobless rate continues to fall, SQM expected to see sustained gains in house prices for the rest of the year.

This week, the Reserve Bank of Australia decided to keep the cash rate at 0.10 per cent for the seventh month in a row.

“Housing markets have strengthened further, with prices rising in all major markets,” the bank said.

“Housing credit growth has picked up, with strong demand from owner-occupiers, especially first-home buyers. There has also been increased borrowing by investors.

“Given the environment of rising housing prices and low interest rates, the bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”


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