Nationally housing prices have been falling since mid-2017 and are now 10% down from their peak.
But lately, people are starting to ask: “Are we there yet? How much further property prices likely to fall?”
This current market downturn, which looks like it will end up as the longest and most severe downturn in modern history, is being caused by the constrained ability to access finance, poor consumer confidence and the oversupply of too many of the wrong properties, rather than the typical cause of a market downturn such as economic recession or high interest rates.
However, some green shoots are appearing… so let’s look at the latest graphs and statistics from CoreLogic to get a better idea of what’s happening around our property markets in Australia
CoreLogic report that:
- Nationally dwelling values fell for the 18th consecutive month in April 2019, recording a -0.5% decline
- Over the month, combined capital city values fell by -0.5% which was the smallest decline since October 2018.
- The combined regional markets recorded a -0.3% fall.
- Over the past year, national dwelling values have fallen by -7.2% which is their largest annual fall since February 2009.
- Combined capital city dwelling values were -8.4% lower over the year and combined regional market values were -2.6% lower.
- The number of property transactions is down 14.4% nationally year on year, Adelaide and Darwin were the only cities in which sales volumes rose over the year.
Monthly price declines are now moderating, suggesting that we are probably past the worst and prices should begin to stabilise by late 2019.
However, it looks like this will be the longest and deepest property downturn in modern history, despite the fact that the underlying economic fundamentals are sound.
The Sydney property market peaked in mid-2017 after dwelling values surged almost 80% since the beginning of the last cycle in 2012.
Sydney real estate values have been falling consistently since then, with dwelling values falling by 2.5 % over the past three months, but the rate of decline is easing (0.7% over the month of April – the smallest decline in 6 months).
The Sydney market is now down 13.9% since values peaked in July 2017.
This time round there has been a larger decline in the value of houses in Sydney than for Sydney apartments and more expensive properties are experiencing a bigger downturn than cheaper properties.
This is due to affordability factors as well as a surge in first home buyer activity which is supporting demand across the more affordable end of the market.
First home buyers are active in Sydney creating stronger markets over the lower quarter of the market – especially apartments.
With dwelling values having fallen by – 10.9% over the year to April 2019, only two regions, both of which are located in the Blue Mountains (Blue Mountains North and Wentworth Falls), have recorded annual growth.
Sydney homes now an average of 62 days to sell, compared to 33 days a year ago, however, vendors are discounting their properties by an average of 6.9% compared to 4.9% a year ago to affect a sale.
The fact that Days on Market and Vendor Discounting is dropping and auction clearance rates are rising are all positive signs for Sydney property market.
The Melbourne property market peaked in November 2017 and CoreLogic report a 10% fall in values over the last year, but values only fell 0.6% over the last month (the smallest decline since June last year.)
Over the last year, there were 25% fewer sales than the previous year, a sign that sellers are not putting their properties on the market unless they really need to sell.
Melbourne homes now an average of 43 days to sell over the March quarter, compared to 27 days a year ago, however vendors are discounting their properties by an average of 6.2% compared to 3.8% a year ago to affect a sale.
But the Melbourne property market is very fragmented, with values of detached houses having fallen more than apartments. Apartment values were down 4.1% over the last year compared with a 12.6% drop in house values.
The resilience across the apartment sector, despite higher supply levels, probably comes back to a combination of affordability constraints in the market as well as more first home buyers supporting housing demand across the lower price points of the market, thanks to the First Home Owner incentives.
Many have been predicting that now is the time that the Brisbane property will finally have its turn in the sun, but despite performing better than much of Australia, CoreLogic report that recently market conditions have softened a little.
Brisbane house values slipped 0.4% lower in the month of April are down 1.9% over the last 12 months despite rising demand from a growing population and relatively affordable prices.
However, the markets are very fragmented, with apartments (-2.4%) continuing to underperform free-standing homes (-1.8%), and some suburbs strongly outperforming others.
The slower Brisbane housing market means that:
- The average selling time of a home is 60 days (34 days a year ago) and
- Vendors are discounting their properties an average of 4.7% to affect a sale (4.2% a year ago)
- 9.3% fewer properties sold in the last 12 months compared to the previous year.
We are not expecting the Brisbane market to have a substantial correction like Melbourne and Sydney are experiencing because the lower property values in Brisbane have made it less susceptible to being caught out in the fallout from the tighter lending restrictions.
At the same time the underlying strong demand from home buyers and investors from the southern States at a time when yields are attractive and housing affordability is relatively healthy and putting a floor under property prices.
Our property markets are slowing
CoreLogic report the number of property transactions is down 14.4% nationally year on year, Adelaide and Darwin were the only cities in which sales volumes rose over the year.
Other signs of our slowing property markets are rising Days on Market (the time it takes to sell a property) which is a sign that there more properties available for sale then there are active buyers, and also the increase vendor discounts necessary to sell a property.
Vendors seem to have got the message that it isn’t a great time to sell, with fewer new listings being added to the market than over recent years, while total advertised stock levels are tracking much higher, due to a slower rate of absorption.
Auction clearance rates are higher than they were late in 2018 but much lower than a year ago with volumes also much lower.
Our rental markets are also doing it tough
Rental markets continue to trend lower.
National rents were 0.3% higher over the month and 0.4% higher over the past year which remained at their slowest annual rate of growth on record (data from 2005).
Rental yields have continued to lift from their record lows as rental growth outpaces value growth, however, yields generally remain well below the long term average in most cities
Other market indicators
The trend in population growth has eased over the twelve months ending March 2018, as both the rate of net overseas migration and the rate of natural increase fell. Slower population growth has a negative implication for housing demand.
Dwelling approvals are trending lower and expected to fall further, despite a slight increase over the month.
Housing finance data and credit aggregates highlight the slowdown in mortgage demand.
While housing finance commitments were slightly higher in February, they are substantially lower year-on-year.
Housing credit is growing at an historically low annual rate of 4.0% with owner-occupier credit growth slowing to 5.7% while investor credit growth increasing at a historic low rate of 0.7%.
Official interest rates remain at 1.5%, however, the expectation from the market is that cuts are more likely than increases from here.
In fact, if employment figures don’t improve we could have the first of a number of rate cuts very soon.
Are these Australia’s cheapest blocks of land?
Just when we thought we had found the cheapest – a patch of dirt for $4.94 a square metre near the Queensland and NT border – we found another one.
And this “dirt cheap” vacant block is on the market for $2.08 a square metre – less than a 2L bottle of milk!
The fully fenced rural block of land has town water available and “power close by” but is only suitable for horses or recreation, hence the price.
It is listed with LJ Hooker Gayndah.
In Camooweal, yes that one near the border, a “drovers dream” is listed at 54 Cronin Street for $10,000.
With 2024sq m of vacant land that works out to be $4.94 a square metre — less than a beer at the local pub or a foot-long sub on discount day.
To help you wrap your head around that, that block of land would cost you over $1 million in Ipswich.
A recent report by property services group Oliver Hume found that Ipswich had the best value dirt in southeast Queensland, with land averaging $507 a square metre.
That is nearly half the price of vacant land in Brisbane, where buyers can expect to pay an average of $970 a square metre, so that block of land in Camooweal would set you back almost $2 million in the big smoke.
Bronwyn Finch of Jays Real Estate Mount Isa is marketing the Camooweal vacant block, which is located off the Barkly Highway.
Camooweal had a population of 208 at the time of the 2016 Census, with the average resident aged 36.
“It is walking distance to the local shop and garage, and you can wave at the tourists as they go past,” Ms Finch said.
“I sold another block about a year back, same deal for about $8000.”
Ms Finch said the cheap blocks were usually purchased by retirees looking for a spot to park their van between trips.
She noted it would be a tough ask to get a car park in Brisbane for the same price.
“It is quite close to the Gregory River, which is beautiful, and Adels Grove, our premiere tourist attraction out here, is about an hour away.
“That’s close for us. That’s a daily commute in the city.”
Meanwhile in Mungallala, a tiny outpost on the Warrego Highway west of Mitchell, is a 1012sq m vacant lot of land that is on the market for $6000, or the nearest offer.
That’s $5.92 a square metre – less than a cup of coffee in Ascot.
It is listed with Ray White Charleville agent Glenda Fill.
“There has been a new house built in the town in the last two years,” she said.
“It is very small town off the Warrego Highway and had a population of 136 in 2016.
“It is an hour and a quarter from here (Charleville) so it’s a bit closer to the coast than we are.”
And in Westwood, which is about half an hour from Rockhampton, the beef capital of Queensland, is an 1800sq m block for $9000.
There is also another 1174sq m lot for $8000, and the 962sq m lot, which was listed for $6000, has sold.
“Blocks are not serviced and would suit ‘off grid’ living,” the listing says.
“There is no town water in Westwood – households rely on tank or underground (bore) water.
“No town sewerage (septic or bio), Westwood has electricity – no current supply to this estate.”
Marketing agent John Neumann of Discover Real Estate said “it’s a bargain” with a “rural outlook”.
“There is a rail line nearby, a mining one,” he said. “I think there is a pub, a post office and a police officer there.
“It is only about 50km from Rockhamption and it is on the western highway to the mining belt.”
Mr Neumann said he had already had some interest in the lots, mostly from grey nomads looking for a base and people keen to “go off-grid”.
He said he had even had inquiries from uni students looking to get a leg – or toe – on the property ladder.
Westwood had a population of 174 during the 2016 census.
It was the first new town proclaimed in the Queensland Government Gazette, after the state became a separate colony back in 1859.
‘The margin will never be this close again’: Brisbane’s waterfront secret where property is still affordable
Think “Brisbane waterfront” and Moreton Bay darlings Wynnum and Manly quickly spring to mind.
But only 30 kilometres northeast, on the other side of the airport and a similar distance to the CBD, another bay-front suburb, Sandgate, appears.
The photogenic village topped Domain’s best performing Brisbane suburb list in 2018 with 18.8 per cent median house price growth.
Despite this overall rise in housing value, data-savvy local agent Jacqui McKeering makes the case that Sandgate’s waterfront properties are still undervalued compared to southside bay designer homes.
Ms McKeering, of Jim McKeering Real Estate, says Sandgate waterfront still remains great value because family groups have to buy further back to get more features.
“When the price-to-rateable-land-value gap narrows, you are getting a bit of a bargain,” she says.
“A simple calculation to illustrate this point shows the market value of Sandgate waterfront properties not that much greater than the rateable land value; on average 32 per cent greater.
“In fact one waterfront property sale, back in 2017, sold for 15 per cent less than the rateable land value, yet one block back and without bay view properties have a greater gap of 42 per cent.
“One particular [non-waterfront] property sold as high as 66 per cent greater than the rateable land value.
“The outtake here is there is plenty of money to be made on Sandgate waterfront properties.
“I do believe the margin between waterfront properties and the neighbouring streets will never be this close again.”
Flinders Parade, which runs along the foreshore of Sandgate and into Brighton, plus Eagle Crescent and Shorncliffe Parade, are the waterfront property strips in focus.
Ms McKeering says a lot of people have been buying these older houses and renovating and that at the moment there is some choice in “real cheapies” from about $900,000 to about $1.35 million.
“I know someone who bought for $1.4 million in 2017 with a $1.8 million renovation budget,” she says.
“When you see that sort of money coming into an area, it tells me people are seeing long-term capital value in this area.”
Fellow Sandgate agent Tamara Wecker of RE/MAX agrees suburb 4017’s waterfront properties are priced and selling considerably under their comparable Brisbane market values.
“When compared to Wynnum and Manly,” Ms Wecker says, “absolutely; I mean you can live in the Taj Mahal in Sandgate for about $1.5 million.”
She is seeing buyer migration from Sydney and “a little bit from Perth” because of affordability, and thinks Sandgate’s strict rules, which prohibit multi-unit developments on its waterfront, is a further drawcard.
“People tend to think of Wynnum and Manly but here you can have a premium home and lifestyle only 30 minutes from the city,” Ms Wecker says.
“To be honest, it has been a bit of a secret because we are off the highway so you have to have a reason to come here, but that is changing in the past 18 months.
“We are getting more inquiries from people, even from Brisbane, who just did not know about us.”
Mark Crew has been selling Sandgate housing since 1990 and thinks people have woken up to how great a suburb it is in the past 18 months.
The Professionals’ agent has reported strong interest from Sydney buyers “looking for a better family lifestyle”.
He estimates 25 to 30 per cent of Sandgate buyers this year have come from the neighbouring suburbs of Shorncliffe, Deagon and Brighton; people who want to upgrade but stay in “the village”.
“It is 31 minutes to the CBD and you can be walking on the waterfront with your kids after work and we’ve got excellent schools too,” Mr Crew says.
Regarding Sandgate’s waterfront property market and its value, he says three factors should be considered.
“There are few waterfront properties for sale, land is scarce and over the past 20 years there has been a lot of change to the houses themselves, a lot of renovation and/or raising older three-bedroom cottages and transforming them into often substantial five-bedroom luxury houses,” he says.
“So these houses on their waterfront blocks are, quite rightly, going to fetch more in sale prices when they do one day return to the market; and that is showing.”
Cheap Units In Brisbane Suburbs
Twelve suburbs in Brisbane have a median unit price of just under $400,000, according to Domain’s June House Price Report.
Ten out of these 12 suburbs are in the inner city, the report said.
Bowen Hills, Fortitude Valley, Albion, and Spring Hills are all within three kilometres of the Brisbane CBD. The median unit prices in these suburbs are below $400,000, the figures showed.
East Brisbane, Coorparoo, Clayfield, Nundah, Taringa, and Kedron also offer some of Brisbane’s cheapest unit values, according to the report.
Bowen Hills is the cheapest suburb to buy a unit, with prices falling 13.7% in the past 12 months, the figures showed.
Here are Brisbane’s cheapest suburbs to buy units by median price, according to Domain:
|Suburb||Median price||YoY % growth||5-year % growth|
In Greater Brisbane, the median unit price fell 8.6% over the year to June, according to the report.
The capital city’s unit prices are “sitting at 2013 levels”—down from their peak in 2015, according to Domain research analyst Eliza Owen.
However, prices are expected to bottom out this year, with the end of the downturn in the unit segment in sight, Owen said.
“Unit listings are also moderating, which should reduce downward pressure on prices,” she said.
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