A dramatic fall in one particular section of the property market has dragged down house prices and led to losses not seen since the GFC.
The sharp drop-off in investors purchasing properties dragged the national housing market to its heaviest losses this side of the Global Financial Crisis, experts say.
The falls were exacerbated by policies that limited access for overseas investors, including the percentage of dwellings in new apartment buildings allowed to be bought off shore as well as a stamp duty hike.
The value of lending to investors was down 45.4 per cent in April from its peak in April 2015, according to the Australian Bureau of Statistics.
Four years ago, investors were borrowing $12.5 billion but that fell back to $6.8 billion.
“We are now looking at a very different property market to what it was like during the boom,” realestate.com.au chief economist Nerida Conisbee said.
She said investor lending is unlikely to get back to where it was any time soon.
“Buyers from Asia, a key market for new development, have dropped dramatically,” Ms Conisbee said.
“Over the past 12 months alone, property seekers from China have dropped by over 60 per cent to the lowest level we have ever recorded.
“And confidence in the new apartment sector is low following some high-profile structural issues.”
CoreLogic head of research Cameron Kusher said investors abandoning the sector could be attributed to property policy as well as an oversupply of dwellings.
Mr Kusher said investors being charged a premium on top of the higher rate for interest-only loans — typically used for investment properties — was a disincentive.
“There’s also been a large volume of new stock in the apartment segment hitting the market at a time when values have started to fall and it highlights that a lot of investors chase the capital growth not necessarily the rental return,” he told news.com.au.
“Once values started to fall, there was less inclination from an investor to purchase a property because the value wasn’t increasing.”
Mr Kusher said investors account for about one-third of the market, therefore a dramatic pull back in purchases was always going to drag prices lower.
“And now we’re also seeing the owner-occupier segment drop off as well,” he said.
“That’s a key contributor to why dwelling values are falling, when a third of the market starts to slow pretty rapidly, it does have an impact.”
Brisbane was the only capital city where the median house price increased in value in the three months to June, according to the latest figures from realestate.com.au.
The Queensland capital was up 0.1 per cent in the quarter to $490,000, weathering the national downturn despite risks its over supply of apartments threatened to derail financial stability, Ms Conisbee said.
“The upswing is also extending to regional areas, with Mackay seeing the strongest price growth of any region in Australia over the past 12 months, and many smaller mining towns are roaring ahead,” she said.
Sydney and Melbourne both lost 0.4 per cent in the quarter to $805,000 and $650,000 respectively.
“If this downturn has now ended, the price fall from peak to trough ended up being 11 per cent, far less than what most commentators predicted,” Ms Conisbee said of Sydney.
“Melbourne prices may have flat lined in June, but it is still too early to tell whether this means the worst is behind us.”
Adelaide, Hobart and Perth all fell 0.7 per cent in the three months to $440,000, $430,000 and $460,000.
Darwin experienced the heaviest fall, losing 1.6 per cent to $430,000, while Canberra was down 0.3 per cent $592,500.
Sentinel Sells Brisbane Industrial Site for $17m
Sentinel Property Group has offloaded another Brisbane site, this time an industrial facility 11 kilometres east of the Brisbane CBD in Hemmant for $17 million.
Centuria Capital snapped up the partially tenanted property in Brisbane’s east through Blue Commercial managing director Gary O’Shea.
The site, which comprises 47,951sq m of general industrial zoned land and features an 11,785 warehouse and 1,240sq m of office space, is located within the Trade Coast Precinct at 46-68 Gosport Street.
Sentinel’s Industrial Trust purchased the property for $16 million in 2012.
Sentinel’s divestment follows on from its recent sale of the Citilink Business Centre at Bowen Hills for $76 million to Prime Super.
The group also purchased the Makerston House office building in Brisbane CBD’s legal precinct for $103 million from investment management company Challenger.
Along with the Brisbane transactions Sentinel managing director Warren Ebert said the group, established by Ebert in 2010, has been active in regional Queensland.
“Particularly in Mackay where our portfolio is approaching $100 million,” Ebert said.
“Mackay has been an important regional market in the national growth and success of Sentinel over the past decade and the company has tremendous confidence in the region’s economic future, particularly with the opening up of the Galilee Basin with Adani’s Carmichael coal and rail project finally approved.”
Melbourne Top Investment Choice for Chinese Buyers
Chinese buyer enquiries for residential property in Australia has recorded two consecutive quarters of year-on-year growth for the first time since 2016, with Melbourne still the most popularAustralian city.
Australia has been losing Chinese buyer interest to other parts of the world due to increased taxes and banking restrictions.
But Australia’s hefty state foreign buyer taxes have been counterbalanced by its weakening dollar according to the latest Juwai.com report, which has seen it drop around 11 per cent of its value against the Chinese Yuan since mid-2018.
Juwai.com CEO Carrie Law says she expects Chinese buying to remain flat in 2019, with forecasts it could start to grow again inline Australia’s property market recovery.
“Chinese buyers make 83 per cent more enquiries about acquiring Melbourne property than they do Sydney,” Law said.
Brisbane has the second fastest rate of Chinese buyer growth. Law said Brisbane recorded 30.8 per cent more Chinese buyer enquiries in 2018.
“Brisbane is becoming a real alternative for the two traditional gateway cities of Melbourne and Sydney.
“The fastest growing cities, in terms of Chinese buyer interest, are Hobart, Brisbane, and Canberra.”
Melbourne receives 43.8 per cent of Chinese buying enquiries in Australia, Sydney 23.9 per cent, Brisbane 10.1 per cent, Perth and Adelaide 6.1 per cent, the Gold Coast 3.7 per cent, Canberra 3.6 per cent, and Hobart 2.6 per cent.
Weak Aussie dollar boosts buyer interest
Despite the tougher state foreign buyer taxes, Australian’s weakening dollar means it now costs less to secure real estate.
“A buyer holding Yuan today needs the equivalent of $88,800 less in funds compared to 2017 to purchase an $800,000 dwelling,” Law said.
“The plummeting Australian dollar, which has lost 11.1 per cent of its value against the Chinese Yuan since July 2018… [That] compares to the 8 per cent rate of the highest foreign buyer taxes, which are in New South Wales and Victoria.”
Law says Chinese demand is driven largely by growing wealth, a desire to store assets ‘safely’ overseas, education, travel, commercial ties, immigration and high-net-worth immigration, along with environment and lifestyle.
“Eighty-three per cent of Chinese consumers cite education as their reason for immigration, 69 per cent cite environment, 57 per cent cite food safety, and 28 per cent cite asset security.”
Australia’s Most Expensive Capital City to Rent a House Might Surprise You
When it comes to the nation’s most expensive capital city to rent a house, Sydney takes second place in what may come as a surprise to some, with Canberra crowned as Australia’s most expensive capital.
While Domain’s rental report shows Canberra remains as the nation’s most expensive capital to rent a house, it also shows it’s more expensive to rent a house in Hobart than Melbourne.
The latest report, which covers the median rental price for houses and units across the country, shows Melbourne house rents remained unchanged over the year at $430 per week, while unit rents increased 2.4 per cent over the year.
Taking in the unit market, despite Sydney’s price falls of almost 5 per cent over the year the harbour city is still the most expensive capital city to rent a unit.
Strong construction of new housing has weighed on rents in Sydney, and also contributed to the vacancy rate increasing to 3.2 per cent in June, up from 2.4 per cent one year ago, Domain’s Economist Trent Wiltshere says.
House rents fell by 3.6 per cent over the year to $530 per week.
While unit rents dropped by 0.9 per cent in the quarter and 4.5 per cent over the year.
“Rents held up the best on the Central Coast and on Sydney’s north shore, but fell in other Sydney regions,” the Domain report notes.
While largely thanks to the significant property price falls over the past few years, Sydney’s rental yields have risen slightly.
Melbourne’s strong population growth since 2013, averaging an annual 2.6 per cent, has seen ongoing rental demand.
House rents grew fastest in the Mornington Peninsula and in Melbourne’s inner-south, but were unchanged in Melbourne’s eastern suburb, for the past year.
Melbourne’s unit rents have increased by 2.4 per cent over the year.
While rent on a typical unit has increased 14 per cent over the past five years to $420, despite the city’s apartment construction boom during this time.
Melbourne’s house rents have also increased 13 per cent during this period.
Domain says unit rentals have held steady in recent years, despite the large supply of new Brisbane apartments.
“House rents were steady in most parts of Brisbane over the past 12-months, but unit rents increased 6 per cent in the inner city.”
Unit rents also increased by 2 per cent on the Gold Coast and the Sunshine Coast.
And while rental prices for houses across Greater Brisbanerecorded falls in the June quarter, rental prices have remained unchanged year-on-year.
Brisbane’s rental vacancy rate fell from 2.6 per cent to 2.2 per cent over the past year, a sign of a strengthening rental market, Wiltshere says.
House rents in Adelaide dropped 1 per cent in the June quarter, but have recorded an increase of 2.7 per cent over the year.
Adelaide’s unit rentals have increased by 1.7 per cent over the year, with the typical unit renting for around $305 a week, this makes Adelaide the cheapest across all capitals.
Hobart remains the fourth most expensive city to rent a house behind Canberra and Sydney, according to Domain’s report.
Canberra house rents dropped 3.5 per cent in the June quarter, but are unchanged over the year at $550 per week. Unit rents increased by 4.4 per cent over the year, sitting at $470.
Canberra unit rents have increased a staggering 18 per cent over the past three years, despite an apartment construction boom.
And Darwin rents for houses have now dropped from the 2014 highs of $700 a week to $490. Darwin units have dropped over the past five years from $570 to $385, reflecting declining demand as the city’s population decreases.
Perth remains the most affordable capital city to rent a house in Australia at $365 a week. Rental prices for both Perth houses (up 4.3 per cent) and units (up 3.3 per cent) have increased over the past year.
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