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This Week in Real Estate – 10th August 2023
Will Gold Coast Get Games?
Gold Coast Mayor, Tom Tate, is keen to secure the 2026 Commonwealth Games which have been abandoned by Victoria.
Victorian Premier Dan Andrews last month withdrew from hosting the Games in 2026after concerns of massive cost blowouts.
Tate says it could be held on the Gold Coast at a cost of just over $1 billion.
Despite the Mayor’s desire to snare the event, both the federal and state government have said Queensland should instead remain focused on the 2032 Olympic and Paralympic Games.
But Tate says the momentum behind a 2026 Gold Coast Games is growing. The Gold Coast already has a lot of infrastructure in place after hosting the Commonwealth Games in 2018.
“Every news poll has shown overwhelming support – and the irony is that we are not even asking for additional funds from the Federal Government; I simply want the Federal Treasurer to redirect the funds they had planned for Vic2026 to us,” he says.
Gold Coast Hotels Approved
Two luxury hotel developments have been approved by the Gold Coast City Council.
The first is a $333 million development at Movie World and the second a $480 million revamp of Mariners Cove at The Spit, including a six-star Ritz Carlton.
The 22-storey, 600-room hotel at Movie World at Oxenford, will include a panoramic skydeck, infinity pool, bar and restaurants.
The hotel will be built on the theme park’s existing carpark and will include stand-alone entertainment and function facilities.
Planning committee chair Cr Mark Hammel says the hotel will provide a $100 million boost to the economy during its construction and 500 jobs will be provided in the hotel.
Council planners also approved the Mariner’s Cove development with conditions.
Cr Hammel says the project fits in with the overall master plan for The Spit. He says the council is working with those businesses which will be displaced by the project to find other sites.
Quote Of The Week
“The solution has to be putting in place a structure that makes the supply side of the housing market more flexible. And that means zoning and planning deregulation, and it means state and local governments being part of the solution.”
Outgoing RBA Governor, Dr Philip Lowe
Land Shortage Causing Crisis
A shortage of land is contributing to the ongoing housing crisisthroughout Australia.
The latest Housing Industry Association (HIA)-CoreLogic Residential Land Report, on 51 housing markets, says the scarcity of land for property development is a “considerable roadblock” to the supply of new homes in the upcoming year.
HIA senior economist, Tom Devitt, says the volume of residential land transactions fell 37% in the 12 months to March 2023 and as a result the number of new homes that will be built next year will drop.
“An acute shortage of available land saw the price increase by23% over the three years from March 2020 to March 2023.This compares to just a 5% increase in the three years before that.”
Borrowers Coping Well
More than $350 billion worth of home loans are expected to move from fixed to variable rates in the coming months.
Despite predictions it will result in higher levels of loan arrears, major banks report owners are still coping well.
Bendigo and Adelaide Bank CEO Marnie Baker says they are not seeing “material” signs of borrower distress in regional or urban areas.
Its number of loans 90 days in arrears has risen slightly to0.46% and remains close to historical lows.
“Borrowers remain in good shape with 41% of loans at least one year ahead on repayments and 31% of loans two years ahead on repayments,” she says.
Commonwealth Bank has $52 billion of mortgages transitioning off fixed rates in the second half of this year. Only 0.43% of its loans are in arrears more than 90 days.
Sebastian Watkins, of Aussie Home Loans, says the transition will result in a significant amount of financial pain and stress for Australian mortgage holders.
Rent Caps Will Worsen Crisis
Imposing rent controls, may prolong the housing crisis, according to outgoing Reserve Bank of Australia governor, Philip Lowe.
While all levels of Government are discussing restricting landlords from raising rents, Lowe says it won’t solve the issue.
The Greens are pushing for the Federal Government to implement a two-year rent freeze.
But Lowe says the only solution is to build more houses.
“There’s always a tendency to try and come up with short-term solutions,” he says.
“The solution has to be putting in place a structure that makes the supply side of the housing market more flexible. And that means zoning and planning deregulation, and it means state and local governments being part of the solution.”
Lowe has called for deregulation of “restrictive zoning laws” which he says have pushed the cost of land up to levels not experienced elsewhere in the world.
“Thinking longer term, doing something in that space would make a difference to the quality of life in Australia.”
This Week in Real Estate – 10th August 2023
Call For Stadium Tenders
The Gold Coast City Council called for expressions of interest to build a new indoor stadium.
Applications close on August 15.
Mayor Tom Tate says it is part of fulfilling an election promise that he would pursue a boutique stadium for the city.
“For years, I have heard from global festival and concert promoters, as well as local sports and events organisations, how there is a gap in our built-form infrastructure when it comes to venues,” he says.
Tate says the city misses out on events which could host between 10,000 and 12,000 people.
A report by the City Officer to council says without a new stadium, the Gold Coast risks losing billions of dollars in potential income to Brisbane event venues.
The last expansion of the existing Gold Coast convention centre was in 2008.
A site is yet to be locked, although the report says it would need to be built on a site of about 1.5 ha to 2ha.
GC To Continue To Grow
Demand for Gold Coast property is set to continue with new figures showing migration to the coastal city is high.
The Regional Movers Index by the Regional Australia Institute (RAI) and the Commonwealth Bank shows that 9.4% of interstate migration was to the Gold Coast in the 12 months to June.
That puts the Gold Coast within the top three regional centres in Australia for internal migration, second only to the Sunshine Coast.
RAI CEO Liz Ritchie says the appetite for real estate in Queensland’s regional areas, including the Gold Coast, is continuing.
She says the lure of the regions is growing, with many believing such communities offer a happier, cheaper and better quality of life.
“In 2020, 67 per cent of people thought regional living would give them more time for themselves,” she says.
“In 2023, this jumped to 74 per cent.”
Properties on the Gold Coast attract significant online traffic, particularly from potential buyers based in New South Wales and Victoria.
Quote Of The Week
“In 2020, 67 per cent of people thought regional living would give them more time for themselves. In 2023, this jumped to 74 per cent.”
RAI CEO Liz Ritchie
Unit Undersupply Continues
A severe undersupply of apartments is expected to push up rents in 2024, particularly in inner city areas, according to a new report.
The CBRE report says 570,000 apartments are needed over the next three years across Australia’s capital cities, but only 55,000 apartments are being built each year.
Melbourne is tipped to have a 23,800 shortfall in units next year, Sydney will be undersupplied by 18,800 units and Brisbane will be 12,100 short.
The report predicts Perth will have 10,500 less units than it needs and Adelaide, 4,100.
The report suggests the shortage will translate to price increases of up to 13% in parts of western Sydney and 10% in northeast Brisbane.
It also forecasts rent rises of about 9% in inner city markets in Sydney, Melbourne, Brisbane and Perth.
CBRE Pacific head of research, Sammer Chopra says vacancy rates in unit markets in most precincts around Australia will reduce by between 0.2% and 0.5% in the next 12 months.
Prices To End Year On High
Home prices are tipped to be up by the end of 2023 with PropTrack data predicting national property prices will increase by between 2% and 5%.
It says prices are already up 2.3% for the first six months of the year and it expects almost every capital city (with the exception of Hobart and Darwin) to record positive price growth over the remainder of the year.
Hobart prices are predicted to drop by between 3% and 6% while Darwin prices are tipped to drop by 3%.
Perth is expected to be the strongest growth performer with PropTrack saying its prices should increase between 4% and 7% by the end of the year.
It says Sydney and Adelaide are both likely to increase by between 3% and 6%), and Brisbane will be up by between 1% and 4%.
Melbourne is forecast to change between a 1% fall and a 2% increase.
Cameron Kusher of PropTrack says limited supply will drive price growth.
Prices To End Year On High
Home prices are tipped to be up by the end of 2023 with PropTrack data predicting national property prices will increase by between 2% and 5%.
It says prices are already up 2.3% for the first six months of the year and it expects almost every capital city (with the exception of Hobart and Darwin) to record positive price growth over the remainder of the year.
Hobart prices are predicted to drop by between 3% and 6% while Darwin prices are tipped to drop by 3%.
Perth is expected to be the strongest growth performer with PropTrack saying its prices should increase between 4% and 7% by the end of the year.
It says Sydney and Adelaide are both likely to increase by between 3% and 6%), and Brisbane will be up by between 1% and 4%.
Melbourne is forecast to change between a 1% fall and a 2% increase.
Cameron Kusher of PropTrack says limited supply will drive price growth.
Rent Control Won’t Work
Rent control is not a solution to the current rental crisis, according to a leading academic.
Professor with the school of banking and finance at UNSW, Peter Swan, says rents are high and vacancy rates are low and the increased international migration numbers this year are set to make it even worse
He says not surprisingly, the Greens have come up with an “exceedingly anti-market solution” to the problem – rent control.
“They propose a two-year rent freeze and action to stop ‘ruthless landlords, dodgy real estate agents and big investors’ to boot tenants out for no good reason,” he says.
Professor Swan says State Governments are also threatening the same, but history shows it won’t fix the issues.
He says rent freezes, mean many “mum and dad” landlords have no option but to sell their properties, putting evicted tenants back into a tighter rental market.
Analysis of rent control in San Francisco shows it resulted in a 15% reduction in rental supply.
This Week in Real Estate – 3rd August 2023
Everyone Is Moving To Qld
A lack of housing to buy or rent has not deterred Australians relocating to regional Queensland with new figures showing it still attracts the majority of interstate relocators.
The latest Regional Movers Index by the Regional Australia Institute (RAI) and the Commonwealth Bank shows the Sunshine Coast is the most popular destination, with 17% of interstate migrants moving there in the 12 months to June.
The Gold Coast attracted 9% of interstate migrants during the same period, while the Fraser Coast snared 6% of those moving.
The report says migration flows to regional areas were up more than 16% in the June quarter, compared with the same period in 2018 and 2019.
It says this shows the pattern of moving out of capital cities and into regional lifestyle locations, is continuing. But it warns a lack of regional housing is likely to result in a decline in the total number of interstate migrants in the coming quarter.
Southeast Population To Surge
Southeast Queensland’s population is set to surge by 2.2 million people in the next twenty years.
State government modelling shows Queensland’s population will hit six million people by 2046.
The projections show Ipswich City’s population will increase by 126%, while Logan City’s population will almost double.
Moreton Bay region’s population will rise by 62% and Brisbane City will increase by 36%, so that more than 1.7 million call it home.
The modelling also shows that as more people move to the south east of the state, the way people live will also change.
The number of one-person households is expected to rise from about 23% to 40% by 2046.
Deputy Premier Steven Miles says even without such a big population increase Queensland needs more dwellings.
“To meet the needs of our growing Queensland and ensure we maintain our great lifestyle, we need more housing supply and a better mix of housing options. This means building more units, townhouses and terraces,” he says.
Quote Of The Week
“We’ve got stronger housing demand relative to the supply of new listings hitting the market. That’s led to more competitive selling conditions and really underpinned home prices. With interest rates being at their peak or very close to peak, those in the market now are continuing to feel comforted by increased certainty.”
PropTrack Senior Economist Eleanor Creagh
Interest Rates Remain On Hold
Interest rates have remained steady for the second month in a row, giving owners and investors hope the end is close to the constant rate rises.
The Reserve Bank of Australia held the official rate at 4.1% this month, on the back of inflation figures last week, which showed that price increases slowed more sharply than expected in the year to June.
Inflation still remains at 6%, so it is unclear if further rate rises are on the horizon. Many economists believe there are still a lot of mortgage holders who have not been impacted by the rate rises yet as they are still on fixed-interest loans.
Rate rises by the RBA have done little to dampen property prices, which continue to rise.
CoreLogic figures show home values across the eight major capital cities rose by 0.8% in July and are now up 5% since February.
Asking rents also continue to rise, up 9% on the same time last year.
Affordable Market In Demand
As property prices continue to rise buyers are seeking out affordable markets leading to growth in that sector.
CoreLogic figures show while prices are growing the pace of growth has slowed, particularly in the upper quartile of the market.
Nationally the pace of growth slowed by 1.2% in the July quarter but the pace of growth in the upper quartile slowed by 1.8%.
The pace of growth in the lower end of the market only slowed by 1% while in the middle market it slowed by 0.7%.
CoreLogic Research Director Tim Lawless says there has been some resilience in growth across the middle and more affordable end.
“That aligns with housing finance data which has shown a stronger bounce back in the value of lending to first home buyers and investors over recent months,” he says.
“These segments tend to be more active across the middle to lower end of the pricing range where competition to purchase a home may be more intense.
Auction Results Remain Strong
National auction clearance rates remain strong at more than 70% despite an increase in listings.
CoreLogic figures show the number of properties listed for auction increased during July and by a further 17% last week.
SQM Research managing director, Louis Christopher, the increase in listings has made it a more balanced market.
“It’s neither too hot nor too cold. There is some uncertainty, but also a little bit of confidence that perhaps the RBA has reached its peak [in the rate cycle]. There are not overly aggressive prices occurring and there is not much distress selling, either,” Christopher says.
Once again Adelaide had the highest auction clearance rate last week of 82.5%, followed by Sydney, 72.4%, and Canberra, 70.6%.
Melbourne had a clearance rate of 69.9% and Brisbane, 58.3%.
CoreLogic figures show last week was the first time more than 2000 properties were offered for auction nationally since before Easter.
This Week in Real Estate – 28th July 2023
Gold Coast Building Blitz
The Queensland Government has announced plans to establish a Gold Coast community forum which will bring residents and government together to grow the local economy and access priority needs of the region.
More than $4.4 billion in infrastructure spending has been earmarked for the Gold Coast region in the latest Queensland Budget.
The aim of the funding is to improve connectivity, access to healthcare and housing support on the Gold Coast.
Projects include; $2.3 billion invested in infrastructure, $2.1 billion for the Gold Coast Hospital and Health Service and $89.7 million to maintain, improve and upgrade schools.
There will also be $65.7 million dedicated to expanding and improving social housing. About $1.3 billion will be spent on the new Coomera Hospital and $200 million on the Gold Coast University Hospital to deliver a Secure Mental Health Rehabilitation Unit.
Following a Community Cabinet on the Gold Coast, Queensland Premier Annastacia Palaszczuk says the new community forum will meet before the end of the year.
Everyone Wants To Live In QLD
Everyone wants to move to Queensland, with the state now the most sought-after place by interstate and overseas buyers and renters.
The Little Hinges Sight Unseen Report, shows that the Gold Coast, Sunshine Coast and Brisbane are the most popular locations in the state.
The Gold Coast chalked up the highest number of virtual property inspections in Australia, with 40% of interstate buyer inspections and almost 10% of overseas buyers looking at properties in the region.
Almost 39% of interstate inspections and 7% of overseas inspections were for properties on the Sunshine Coast, while Brisbane attracted 23% of interstate inspections and 7% of overseas inspections.
Melbourne and Sydney both had 14% of inspections from interstate buyers and 8% and 7% of overseas buyer inspections respectively.
Mike York of Little Hinges says the number of people inspecting property virtually is increasing again.
“The percentage of buyers inspecting property from interstate are at their highest levels since the start of the year,” he says.
Quote Of The Week
“It’s important to know that rents have moved no more than inflation if we take into account the rent drops during Covid. For those two years the renters had a ball because many foreigners left and there was an immediate oversupply of rental accommodation.”
Harry Triguboff on the constant attacking of investors
Price Predictions Change
NAB has joined the ranks of organisations revising their property price predictions for 2023.
While initially it had not been as bullish, its latest outlook now predicts prices will rise by 4.7% this year and a further 5% in 2024.
It predicts the biggest increases will be in Sydney, up 6.9% this year and 4.9% next year, while it says Melbourne is likely to rise by 2% this year and 7.4% in 2024.
Brisbane prices are tipped to rise by 5.4% this year and 2.9% next year, while Adelaide values are tipped to rise 3% this year and 3.7% in 2024.
Perth prices are expected to rise 6% this year and 6.2% next year, while Hobart prices are expected to rise 6.4% this year and remain steady in 2024.
The bank is also predicting that interest rate rises will soon stop.
“We see the RBA lifting rates to 4.6 per cent by September, then staying on hold until 2024,” the outlook says.
Property Prices Rise
Capital city house prices are continuing to recover with dwelling values up in Sydney, Brisbane, Adelaide and Perth in the June quarter.
Real Estate Institute of New South Wales president Pete Matthews says all population centres showed increases in average dwelling values by more than 2%.
He says both the renter and sales market are “savagely affected” by a lack of stock.
“I’ve never seen (anything like) it in 33 years,” Matthews says.
He says Sydney, in particular, enjoyed “hefty” increases in dwelling values in the June quarter.
CoreLogic figures show Sydney’s median dwelling value rose, 4.9% in the June quarter, Brisbane rose by 3% and Melbourne rose 1.8%.
Adelaide’s median dwelling value rose by 2.1% in the June quarter, Perth, 2.8% and Hobart 0.1%.
Darwin’s median dwelling value dropped by 0.3% in the June quarter, although it rose again by 0.5% in June.
CoreLogic research director Tim Lawless says while housing values are continuing to increase, the pace of growth has eased a bit.
Stop Threatening Investors
Attacking investors and threatening their ability to charge what rent they want, will not help fix the rental crisis, according to developer, Harry Triguboff.
Triguboff, the managing director of Meriton Group, says the “hysterical” reaction to current rent rates has to stop.
“Our famous politicians now think that if they attack the people who lease property, they will gain votes,” Triguboff says.
“It’s important to know that rents have moved no more than inflation if we take into account the rent drops during Covid. For those two years, the renters had a ball because many foreigners left and there was an immediate oversupply of rental accommodation.”
He says now the market is returning to normal supply and demand.
“But if the government threatens investors daily that they will charge too much, what investor will ever come here?”
Triguboff says the lack of investors means many of the sales in his projects are to owner occupiers.
“So, the pressure is on for rents to rise.”
This Week in Real Estate – 21st July 2023
Gold Coast Demographic Shift
The Gold Coast has moved far from its past as a retirement haven, with new data showing the vast majority of those moving to the region are aged between 25 and 40.
Demographer Simon Kuestenmacher says the region’s population is increasing by 15,000 people annually, with many of those new arrivals in the Millennial age group.
“Now that many have reached their mid-30s, Millennials are having babies at scale and that hipster inner-city one- or two-bedroom apartment that Millennials have been living in with their partner becomes too cramped after they add 1.7 kids to their household,” Kuestenmacher says.
He says they can’t find the housing they want in big cities, so the Gold Coast is in their sights.
CBRE research shows the amount of housing development underway on the Gold Coast is below what is needed to accommodate the growing population.
Only 1222 dwellings were added in 2022, while the population grew by more than 14,000 people.
Where GC Is Infrastructure Needed
Gold Coast City Councillors want the Queensland State Government to kick in funds to ensure transport and community infrastructure are ready to handle the 2032 Olympic and Paralympic Games and future growth.
Robina is set to be a focus of future growth, including plans for a new Olympic Athletes Village, including six residential towers.
The Council launched a technical review of Robina to ensure the infrastructure is sufficient to meet demand.
The review says there will be a high impact on the transport network if additional development and redevelopment occurs in the area.
It says additional investment in transport infrastructure, particularly public transport, will be required to support the current and future populations.
Councillor Hermann Vorster says the Council has already spent $140 million under the new Local Government Infrastructure Plan.
“With so many people beating a path to Robina, we are at real risk of ruining the lifestyle that underpins the prosperity of this economic hub,” Vorster says.
Quote Of The Week
“While rental demand from overseas migrants is likely to remain strong for some time yet, particularly across the largest capitals, we’ve already seen a reduction in domestic rental demand via an increase in the average household size.”
CoreLogic Economist Kaytlin Ezzy
Rental Market Reprieve
The pace of rental growth has eased according to the latest CoreLogic Quarterly Rental Review.
The review, for the second quarter of 2023, shows the monthly rate of rental growth slowed in the June quarter, although rents still remain high.
Rents rose by 2.5% in the June quarter, 30 basis points lower than the pace of growth in the previous quarter.
It is the first time the rate of quarterly rental growth has slowed since November.
CoreLogic Economist, Kaytlin Ezzy, says rental growth softened despite an ongoing surge in overseas migration and a continuing shortage of rental properties.
She says this suggests many tenants are reaching their “affordability ceiling”.
“While rental demand from overseas migrants is likely to remain strong for some time yet, particularly across the largest capitals, we’ve already seen a reduction in domestic rental demand via an increase in the average household size.”
National rents are now 27.4% higher than at the start of Covid.
Home Deposit Not Out Of Reach
Saving a deposit for a home is not the impossibility that many would have first time buyers think.
Much of the media analysis on home deposits is based on an assumption that a 20% deposit is required, but there are government schemes now which allow for deposits as low as 5% without requiring lender’s mortgage insurance (LMI).
According to Compare Club home loan expert broker, Sophie Matthews, some lenders are now accepting a 15%.
RateCity research director, Sally Tindall, says a handful of lenders, including St George and Bank of Melbourne, will waive LMI costs for first home buyers with deposits between 15% and 20%.
She says some banks (including Westpac) will consider waiving the fee for certain professions such as doctors and nurses.
If you do manage to snare a loan with a lower deposit, Tindall says to keep in mind the lowest interest rates are usually offered to those with the highest deposit.
Baby Boomers Are Loaded
Australians have become richer and baby boomers are at the top of the tree.
Roy Morgan’s Wealth Report 2023, shows Australia’s wealth increased by 7% between March 2020 and March 2023.
The increase was mostly driven by an increase in the value of owner-occupied homes, up by 43.2%, from $4.16 trillion to $5.95 trillion.
It says half of the Australian population, predominantly homeowners, account for 95.4% of Australia’s net wealth.
Baby Boomers benefit significantly from the rise in property values as they have the highest rate of home ownership in Australia. They were able to buy at a time when housing was more affordable, and they reaped the benefits of rapid price increases.
As their university education was free, many were able to enter the housing market not loaded down with HECs debts.
Successive interest rate rises by the RBA mean one-third of mortgage-holding households, particularly Generation X and Millennials, have experienced a 50% increase in mortgage repayments.
This Week in Real Estate – 14th July 2023
Olympic Fast Rail Resumptions
Eleven homes are to be relocated to make way for a fast rail project between the Gold Coast and Logan in time for the 2032 Olympic Games and Paralympic Games.
Instead of demolishing the resumed homes, the Queensland Government has announced it will move the homes and repurpose them for social housing.
A five-bedroom house has already been moved to Sunnybank while a contract has been awarded for the moving of another.
The 11 homes to be relocated will deliver an additional 36 bedrooms to Queensland’s social housing supply. They are being moved to state-owned land.
The homes have come from various streets in Loganlea, Kuraby, Kingston and Logan Central.
A final number of resumptions for the project is yet to be determined, although 21 property owners have already been told their land will be needed.
The project will result in 20km of the Gold Coast Beenleigh line between Kuraby and Beenleigh being duplicated and train station upgraded.
Quote Of The Week
“The softening in rental growth occurred in spite of an ongoing surge in overseas migration and a continued shortage in rental supply, suggesting an increasing portion of tenants are reaching their affordability ceiling.”
CoreLogic Economist Kaytlin Ezzy
Inland Rail Moves Step Closer
The Federal Government has begun to establish the various entities required to help speed up delivery of the Inland Rail project.
It announced this week that it will separate its governance and delivery arrangements from the Australian Rail Track Corporation’s (ARTC’s) day to day operations.
A new subsidiary, Inland Rail Pty Ltd, will govern the delivery of the project which is designed to meet Australia’s growing freight requirements.
It is anticipated the section between Beveridge in Victoria and Parkes in NSW will be completed by 2027.
Work started on the project in Victoria in February 2023, with construction now underway in two of the three states through which the route will run.
An independent review into the project was started in October 2022, with its recommendations handed down in April 2023.
The review addressed issues that the project was facing significant delays and cost pressures.
One of the recommendations was that enhanced governance arrangements and appropriate environmental approval processes be put in place.
Mortgage Refinancing Booms
The number of homeowners refinancing their mortgages is on the rise as banks shun APRA’s 3% lending buffer.
APRA recommends that banks add a buffer of 3% to current interest rates when accessing a borrower’s capacity to repay.
But some of the big banks are now allowing some owners to refinance without strictly adhering to the 3% buffer. The Commonwealth Bank of Australia, NAB and Westpac are allowing a 1% buffer to refinancers who meet certain criteria.
Despite the change in tactic, banks are still being cautious about who they lend to with key considerations including whether borrowers have savings and the ability to repay the loan.
Banks are also factoring in the additional costs associated with switching lenders such as break costs from exiting an existing loan, establishment and discharge costs.
With the RBA continuing to increase interest rates, the mortgage refinancing market has picked up pace of late with homeowners keen to secure lower repayments where they can.
Unit Rents Surging
Unit rents are increasing faster than house rents, according to CoreLogic’s quarterly rental review.
It shows the difference between median house and median unit rents is now only $34 per week, after unit rents rose by 4.4% in the three months to May. During the same period house rents rose by 2%.
CoreLogic economist Kaytlin Ezzy says while rents are high across the board, the monthly rate of rental growth eased in June.
“The softening in rental growth occurred in spite of an ongoing surge in overseas migration and a continued shortage in rental supply, suggesting an increasing portion of tenants are reaching their affordability ceiling,” Ezzy says.
“While rental demand from overseas migrants is likely to remain strong for some time yet, particularly across the largest capitals, we’ve already seen a reduction in domestic rental demand via an increase in the average household size.”
Nationally rents are 27.4% higher than at the start of COVID, or about $127 per week more.
This Week in Real Estate – 7th July 2023
Progress On 3 GC Stations
Progress is being made on the three new railway stations on Queensland’s Gold Coast.
Recently, the updated designs and onsite works has been stepped up, despite criticism from the LNP that the projects have gotten off to a slow start.
Transport Minister Mark Bailey has defended the Labor Government’s record funding of $2.3 million in this year’s budget for the Gold Coast. He also said there was a sound plan behind the projects and that the design of the station and the obtaining of business cases must come before construction work.
He further noted the hard work on the Pimpama station, and the investigations on the Hope Island and Merrimac stations.
In response to cost blowouts, he concluded that the earlier budget of $120 million had been topped up as planned, with the Morrison government.
GC Mansion Sold For $14.1M
A stunning dream home on Albatross Ave at Mermaid Beach has sold for an incredible $14.1 million.
Built over three stories, the family home of Yatala industrial estate boss Tony Stephens and his stylist wife Alicia sits on a 582sq m lot.
The four-bedroom, four-bathroom abode had been extensively renovated and landscaped since last sold in 2019 for $8.65 million. Marketing agent Amir Mian, of Amir Prestige, said six parties had expressed interest in the contemporary coastal residence and two registered to bid at the auction.
Bidding opened at $13 million and the eventual buyer made an offer of $13.8 million. After just two more bids the property was declared sold.
Albatross Ave is the city’s second-most expensive street behind Hedges Ave, also known as Multimillionaire’s Row.
The median house price on Albatross is $5.4m and on Hedges, $7.5m
Quote Of The Week
“There were a lot of people sitting on their hands last year watching and waiting and expecting that big massive price drop which didn’t happen.”
Ray White Chief Economist Nerida Conisbee on current FOMO in market
FOMO Is Back In Market
The Australian property market is showing strong signs of a rebound with lenders and buyers alike taking advantage of the rising prices.
Data from the Australian Bureau of Statistics show that owner-occupiers and investors drove the surge in June, with respective rises of 4.5% and 6.2%. Experts are attributing this to what is known as ‘FOMO’ (fear of missing out) with buyers wanting to get in before prices continue to rise, citing significant price drops which didn’t occur.
This rise is despite borrowing capacities being cut by a third with the Reserve Bank introducing 12 rises in the past year.
Auction clearance rates have also remained unseasonably strong, with PropTrack recording about 70 per cent of homes selling under the hammer in Sydney and Melbourne.
One factor helping younger buyers is the support coming from their parents, with many willing to support a favourable purchase.
Downsizing Leads To Upsizing
More and more Australians are choosing to downsize in order to upsize their retirement.
Up to 58,000 Australians have taken advantage of the tax-free ‘downsizer’ scheme, selling their principal place of residence and contributing the proceeds to their super. The ATO report showed over the period from July 2018 to April 2023, the overall contribution amounted to $14.5bn, with an average of $250,000 each.
Downsizing a family home to free up extra money for retirement under the downsizer scheme has been around for a few years.
The scheme was recently amended to open eligibility to ages 60 and above. Those interested must meet the ATO’s criteria, such as a minimum of 10 years ownership of the home prior to sale.
It enables Australians to deposit up to $300,000, meaning couples can deposit a total of $600,000. Contributions are separate from non-concessional and attract no tax when money is withdrawn during pension mode.
Rent Freeze Not The Answer
Australia’s 2.2 million real estate investors have been under fire lately, but those who liken all landlords to the devil should be careful what they wish for.
Lumping landlords altogether is just like saying every renter is a tenant from hell who smashes walls and soils bedrooms.
Australia is experiencing a housing crisis and a blanket rent freeze isn’t the answer.
The majority of landlords are trying to do the right thing; covering the rising costs of servicing their loans and fostering long term tenancy agreements. Some have even reduced rent or gone beyond to support tenants during the pandemic.
The Greens’ have recently called for “a two-year emergency rent freeze”. The Greens proposal could be disastrous for investors if they can’t keep up with their large mortgages, leading to fewer properties available for rent.
Good landlords with heart should be praised over those trying to get rich quick.
This Week in Real Estate – 30th June 2023
GC To Hospital Contract
The new Gold Coast Hospital has moved a step closer to reality with the contract for stage one awarded.
Multiplex Constructions won the tender to lead the design stage of the hospital which will be built at Coomera.
Once complete, by the second half of 2027, the $1.3 billion hospital will deliver 404 new beds.
There will be operating theatres, along with surgical, medical, ambulatory, sub-acute, and mental health inpatient beds.
It will include an emergency department, intensive care, and coronary care unit as well as a special care nursery.
Preparatory works have already started on the site with early works on the hospital expected to begin later this year.
The State Government has committed $2.1 billion in health spending on the Gold Coast.
Other projects include the Gold Coast University Hospital sub-acute expansion, Gold Coast Secure Mental Health Rehabilitation Unit which will have 40 beds and the Tugun Satellite Hospital.
Robina Hospital will also be expanded to offer an additional 134 beds.
GC Property Prices Double
Property prices on the Gold Coast have doubled in some suburbs within four to six years, according to new analysis.
Strong demand and limited stock has helped drive up the values, despite rising interest rates, according to PropTrack data.
It shows house prices grew at twice the pace of unit prices, as buyers sought out properties offering a good lifestyle and space.
Beachside and hinterland suburbs achieved the most significant growth.
Houses in Tallebudgera Valley doubled in value in the four years to March 2023.
It took six years for values to double in Burleigh Waters, Mount Nathan, Palm Beach, Worongary, Miami, Bilinga, Mermaid Waters and Wongawallan.
In the unit market, Palm Beach values doubled in seven years, while in Tugun it took eight years.
PropTrack director of economic research Cameron Kusher says while nationally prices have increased by about 32% since the start of the pandemic in early 2020, parts of Southeast Queensland and particularly the Gold Coast had performed even better.
Quote Of The Week
“There’s a lot of factors that support growing demand for apartments. But at the same time, our development pipeline is starting to slow particularly for apartments – so you know that would imply we’re going to see that gap start to close over the coming year or so.”
Anne Flaherty, PropTrack Economist
Auction Market Continues To Fire
The auction market is continuing to fire, chalking up an eighth consecutive week of national clearance rates above 70%.
According to CoreLogic results, 73.8% of homes taken to auction last week sold with Adelaide once again achieving the highest clearance rate (79.7%).
Sydney was next with a clearance rate of 78.7%, Canberra, 72%, Melbourne, 70.1%, and Brisbane, 67.5%.
Auction activity across the smaller capital cities remains steady, with an increase in the number of properties offered for auction in the past week.
While Adelaide may continue to achieve the highest clearance rates, Brisbane continues to have the highest number of properties offered for auction among the smaller capitals.
The strong sales results keep coming despite the RBA continuing to increase interest rates to ease inflation.
A lack of listings and increase in demand throughout the market has resulted in further price growth with the combined capital cities achieving median price growth of 3.4% in the past quarter.
House And Unit Gap Closing
The price gap between houses and units is tipped to close further as lack of stock drives up prices.
Before the pandemic, the Australian median house price was 11.5% higher than the median unit price.
During the pandemic, the rush of buyers to larger lifestyle properties pushed that gap even further apart to 29.5%.
Now with shortages in both houses and units, PropTrack economist Anne Flaherty tips the gap will close substantially in the coming years and has already started in some markets.
“There’s a lot of factors that support growing demand for apartments. But at the same time, our development pipeline is starting to slow particularly for apartments – so you know that would imply we’re going to see that gap start to close over the coming year or so,” she says.
“So, what we’re going to see is those apartment prices which didn’t show that much movement in a lot of markets for quite a long time, are going to start to increase.”
Prices Won’t Crash With Economy
Owners and investors need not fear their properties will lose value if the Australian economy tips into recession.
History shows even a recession won’t result in massive drops in value.
At the peak of the 1993 Recession and the 2007-2009 Global Financial Crisis, property prices only dropped by 10%.
Consecutive interest rate rises have done nothing to dampen enthusiasm from buyers, with many actively looking for homes, with a lack of supply driving up prices.
AMP Capital chief economist Shane Oliver says there is little evidence to suggest a property price crash is looming if there is an economic downturn in Australia.
“It is quite normal to see prices come down,“ he says.
“(But) There’s not much evidence of a crash unless you go back to the 1930s. That was, I guess, an extraordinary downturn and combination of events. But in the post-war period, there’s no evidence of a crash in property prices just because you have an economic downturn or recession.”
This Week in Real Estate – 23rd June 2023
Light Rail To Tweed
A $900 million development on the Queensland and New South Wales border is tipped to reinvigorate the Tweed region.
The proposed 10-year redevelopment on the corner of Wharf and Bay Streets by Elanor Investors Group, will include a mix of residential and commercial space.
It proposes a 13-building project.
Already the $723 million Tweed Valley Hospital at Cudgen is underway and expected to take its first patients in 2024, while the Tweed Mall is also set to undergo a massive overhaul.
The flurry of development has sparked calls by local politicians to extend the Gold Coast Light Rail project through to the Tweed region.
A study has been commissioned into the possibility of extending the project across the border with an updated expected on the study shortly.
The options being investigated include a link from Coolangatta Airport to Tweed Heads or using the former Nerang-Tweed rail and continuing it through Coolangatta to Bay St, Wharf St and Minjungbal Dr.
Investment Will Ease Crisis
Encouraging development and investment are what will help ease the current housing crisis, according to Gold Coast Estate Agent, Andrew Bell.
Bell says opportunities abound for property investors on the Gold Coast. He says high rental returns and capital growth means that the market is in a period of “investment utopia”.
Bell says greater incentives are needed for developers to build affordable housing and governments need to encourage property investors as rental property numbers have been falling for years.
“The rental crisis is simply an incredible shortage of properties that are owned for the purpose of providing rental accommodation to fellow Australians,” he says.
“Measures must be taken to encourage and stimulate greater numbers of Australians to buy an investment property to increase the rental pool.
“In most states, the number of properties that are either tenanted or available for tenancy has dropped between 15% and 20%.”
Quote Of The Week
“Measures must be taken to encourage and stimulate greater numbers of Australians to buy an investment property to increase the rental pool.”
Gold Coast Estate Agent, Andrew Bell
Move In Together: RBA
The only respite most renters will get in the current crisis is to increase the number of people they live with, according to Reserve Bank Governor, Philp Lowe.
Lowe told a Senate Estimates hearing that rents will keep rising and the only way to ease the pressure is to have more people on average in each house.
Plenty are looking to do just that according to figures from Flatmates.com.au which had its busiest month on record in May with a further 69,400 people signing up to the platform.
On the Gold Coast there are hundreds of prospective flatmates looking for somewhere to live.
The website shows there are almost 1800 people actively looking for a room to rent with only 1200 listings available.
Flatmates.com.au community manager Claudia Conley says it’s not just young people first out of home looking for somewhere to live.
The website’s largest growing demographic is members aged 45 to 65 (up 10% in May).
329 New Homes Required A Day
New figures show population growth is continuing to surge with Australia’s population soaring by a record 497,000 people in calendar year 2022.
The increase follows a record net overseas migration of 387,000 people.
It is projected the increase will continue with 2.18 million people to be added to the population in the five years to FY-2027.
The population growth leads to increased demand for housing at a time when dwelling approvals have crashed to a 13-year low.
Treasury secretary Steven Kennedy says this drop in approvals is likely to continue until 2025.
The Housing Industry Association says new home sales in May were 25% below pre-pandemic levels.
HIA Senior Economist Tom Devitt says continual interest rate rises will continue to dampen new home sales with finance becoming unobtainable for an increasing number of buyers.
Australia needs to add 329 homes every day to Australia’s housing stock just to accommodate the 1.5 million net overseas migrants projected to arrive by FY2027.
Stock Levels Continue To Tighten
House are selling at a faster rate than properties are being listed for sale, market analysis by CoreLogic reveals.
In the three months to May, 78,700 were sold, while only 68,250 properties were listed, according to CoreLogic research director Tim Lawless.
“Despite the previously weak housing market conditions through the second half of last year, the sales to new listings ratio has held relatively high compared with pre-COVID levels,” Lawless says.
The current ratio of sales to listings means it is a sellers’ market.
This Week in Real Estate – 16th June 2023
Southport Infrastructure Boom
Southport is set for a $5 billion infrastructure boom over the next decade, according to a new report by Colliers International.
“The Southport CBD has firmly established itself as the Gold Coast’s city centre with the highest concentration of employment and population,” it says.
“With city-changing projects expected to become a reality, commercial redevelopment opportunities are emerging in the precinct, which is a crucial location for the city’s expanding transport network.”
Steven King of Colliers says there has been increasing interest in Southport.
“We’ve experienced a surge in demand from investors, developers and end-users for properties in Southport CBD, which is fast becoming the go-to precinct for many of them,” he says.
King says buyers recognise the untapped potential of the precinct and the planned rejuvenation of Chinatown and refurbishment of Australia Fair have added to the appeal.
“The office market has been particularly strong, with the Southport market ranking among the city’s top markets for the take-up of space.”
GC Budget Targets Growth
The Gold Coast is set to expand rapidly with the Council’s latest budget committing to its largest capital works program ever.
A record $777 million has been allocated to building infrastructure in the FY2024 budget.
Mayor Tom Tate says it is about “building for the future, now”.
Of that investment, $378 million will be spent on transport and road infrastructure.
More than $16million will be spent on parking facilities and regulations, while the Gold Coast light rail system will be allocated almost $36 million.
A road upgrade and bridge construction at Yawalpah Rd, Pimpama has been allocated more than $14 million, while the upgrade of the intersection of Wardoo St and Cotlew St at Ashmore has been earmarked for $8 million in funding.
Before the budget, the Gold Coast City Council asked residents to highlight where they would like to see money spent.
“More than 6,100 responded and they made it clear the road network was the number one city-service most valued.”
Quote Of The Week
“I had thought that we would not see the bounce that we have seen. I think what that shows is the other factors that influence short-term prices in housing, such as population growth, wages growth, stock increases, are all overpowering the increases in interest rates that we have seen.”
Brendan Rynne, KPMG Economist
Prices Rise As Listings Drop
Sellers are feeling more confident about asking prices, as listings remain low, leading to more competition for properties.
New figures from SQM Research show that in May, asking prices increased by 2.1%, the second consecutive monthly rise.
SQM managing director Louis Christopher says at the same time residential property listings were down by 0.3% on the previous month.
“Overall, listings activity for the month of May was a positive for vendors with evidence of higher absorption rates and slightly less competition from other property sellers,” he says.
The biggest drop in listings during the month was in Perth, which was down 3.2%, followed by Brisbane -1%, Hobart -0.7%, Melbourne -0.6% and Adelaide -0.5%.
Listings rose 3.6% in Darwin, 3% in Canberra and 0.4% in Sydney.
Christopher is predicting further drops in listings in June.
“Typically, new listings fall between 10% to 20% over the month of June due to the seasonal winter conditions,” he says.
Investors Diversifying More
Investors have started to diversify where they buy, with new data showing they are purchasing further from home.
Analysis by MCG Quantity Surveyors shows the average distance between where landlords live and where they invest is 857km, up from 559km in the year to November 2021.
Real estate expert John McGrath says the ability of people to work from home has caused a massive migration from capital cities such as Sydney and Melbourne to regional Australia.
These increased prices and rents, making these locations more appealing to investors.
As a result of that increasing demand, capital growth in regional areas is now higher than in many capital cities.
McGrath says values in regional areas are growing from a much lower price base, so investors may feel there is more room for further growth in the regions over the long term.
He says recent rate rises which reduced borrowing capacities may have also lured investors to look to more affordable regional markets.
Prices Tipped To Hit New Highs
Australian house prices are predicted to reach new highs by the start of 2024.
PropTrack figures show house prices steadily increased during the first five months of 2023, and are now only 2.6% below their peak during the pandemic boom.
PropTrack senior economist Eleanor Creagh says with limited stock coming to market, buyer interest is being concentrated which is underpinning price rises and offsetting the affects of continual rate rises.
“If the pace of price growth recorded over the past quarter continues, national property prices will surpass their prior peak by January 2024,” she says.
KPMG Economist Brendan Rynne says most economists thought the market would be cooler than it currently is.
“I had thought that we would not see the bounce that we have seen,” he says.
“I think what that shows is the other factors that influence short-term prices in housing, such as population growth, wages growth, stock increases, are all overpowering the increases in interest rates that we have seen.”
This Week in Real Estate – 9th June 2023
Gold Coast Property Prices Rise
Regional property prices are on the rise again with some Gold Coast values increasing the equivalent of $1000 a week in the past three months.
CoreLogic figures show that Queensland property prices have been rising since February and that the Gold Coast and Sunshine Coast recorded the highest property price increases for regional Queensland.
Since March 2020 Gold Coast property prices steadily increased to hit a peak in May last year. Since then, Gold Coast values dropped by 7.3% and Sunshine Coast by 12%.
But prices have already started to bounce back, with Gold Coast and Sunshine Coast prices increasing by more than 2% in the past three months.
CoreLogic head of research Tim Lawless says the increases in the past quarter have been “extraordinary”.
“If you think about a typical wage being maybe $60,000 to $80,000, arguably, three or four months of growth is going to be equal to someone’s annual income,” he says.
“That’s a pretty rapid return to growth.”
Quote Of The Week
“Our inflation problem is not because the lowest paid workers are getting paid too much, it’s because of a war in Ukraine and busted supply chains and a decade of neglect.”
Treasurer Jim Chalmers
Rate Hikes Keep Coming
The Reserve Bank of Australia has once again raised the cash rate, its 12th increase since May last year.
While many speculated a halt in rate rises, it increased by 25 basis points to 4.1% when it met on June 6.
According to RateCity.com.au the most recent rate rise will cost the average Australian homeowner an additional $70 a month.
RBA Governor Philip Lowe says the move is necessary to try and control inflation.
“Inflation in Australia has passed its peak, but it is still too high, and it will be some time yet before it is back in the target range,” he says.
“This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe.”
While Lowe says there are signs the economy is slowing, inflation is still far outside of its target band of between 2% and 3%.
But he says rising rates and higher costs of living mean household spending will slow which will help ease inflation.
Rents Continue To Soar
Apartments and house rents across the country have been rising, with wages lagging behind.
The median weekly asking rents for capital city units increased 22.2 per cent in the year to March, six times faster than wages.
Despite the increasing financial burden, many are taking a positive approach – moving in with family or flatmates to reduce their costs, or opting to become homeowners.
It is also a chance for people to consider opportunities to look for cheaper properties that can better fit their budgets.
People are changing the type of property they want to rent and changing it to a less expensive property like a townhouse or an apartment.
Westpac senior economist Matthew Hassan said Australian tenants were facing strong competition for homes. Returning migration was adding to already strong demand, amid a time of lower supply.
Rate Hikes Keep Coming
The Reserve Bank of Australia has once again raised the cash rate, its 12th increase since May last year.
While many speculated a halt in rate rises, it increased by 25 basis points to 4.1% when it met on June 6.
According to RateCity.com.au the most recent rate rise will cost the average Australian homeowner an additional $70 a month.
RBA Governor Philip Lowe says the move is necessary to try and control inflation.
“Inflation in Australia has passed its peak, but it is still too high, and it will be some time yet before it is back in the target range,” he says.
“This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe.”
While Lowe says there are signs the economy is slowing, inflation is still far outside of its target band of between 2% and 3%.
But he says rising rates and higher costs of living mean household spending will slow which will help ease inflation.
House Prices Surge Again
Low levels of stock throughout most markets means property prices are once again starting to rise.
CoreLogic’s national Home Value Index shows the pace of house price growth accelerated to 1.2% in May, its third consecutive monthly rise since March.
While PropTrack’s Home Price Index puts the increase at 2% across the combined capital cities for the year to date and says in May values went up by 0.33%.
PropTrack senior economist Eleanor Creagh says the rise in prices seen so far this year gathered pace in May, broadening and accelerating across markets.
Creagh says sellers are benefitting from the reduced levels of competition with other vendors.
While Lawless says advertised listings trended lower through May with roughly 1800 fewer capital city homes advertised for sale relative to the end of April.
“Inventory levels are 15.3% lower than they were at the same time last year and 24.4% below the previous
Australian Property Update – June 2023
Terry’s View: It’s All About Shortage
One word explains everything happening in real estate currently: shortage.
There is a shortage of listings of properties for sale, which is pushing up prices at a time when economists told us to expect falling prices.
In the March-April-May quarter, capital city house prices rose 3%, while apartments increased 2.3%, according to CoreLogic. Every capital city and most regional markets recorded house price increases in May, while unit prices also rose in most areas.
There is a chronic shortage of homes for rent, with vacancies at historic lows, rents rising strongly and clueless politicians floundering to find solutions. And there’s a shortage of new homes under construction, because soaring construction costs are causing developers to scrap or defer projects.
All of this puts major upward pressure on sale prices and rents, with no solutions to the shortage problem in sight. State and federal politicians are unable to conceptualise solutions because they don’t understand the problem. Indeed, most government decisions make the problems worse by increasing costs on builders and discouraging property investors who provide over 90% of the homes rented in Australia.
Lenders Reduce Interest Rate Buffers
Westpac and leading non-bank lender Resimac Group are making it easier for borrowers to escape “mortgage prison” by slashing serviceability buffers.
This move has triggered a strong response from rival lenders. Mortgage brokers are claiming that buyers are leveraging competing lenders to refinance from loans that would otherwise trap them due to insufficient equity in their homes.
Resimac has reduced the servicing buffer from three percentage points to two, and Westpac is believed to have gone even lower.
According to Resimac’s CEO Scott McWilliam, this decision was based on a thorough analysis of the interest rate outlook.
He says the lender is confident that a two percentage point buffer still provides adequate headroom in case of rate rises, while also giving customers a better chance to enter the property market, refinance, or manage their commitments through debt consolidation.
The Australian Prudential Regulation Authority (APRA) requires new home loan applicants to demonstrate affordability by withstanding repayments at a rate three percentage points higher than their application or at the bank’s floor rate, whichever is higher.
Other lenders are reportedly relaxing conditions for borrowers with good repayment histories and stable incomes, albeit more discreetly on a case-by-case basis.
Most Vendors Sold For Profit In April
National data from Suburbtrends suggests that 98% of vendors in the past month made a profit, an outcome driven by low listings and increased demand.
It says one in eight properties sold for over three times the original purchase price. Around 20% of sales achieved twice the vendor’s initial investment.
Experts predict these positive outcomes could lead to an influx of vendors entering the market in the second half of the year.
In New South Wales, out of 3,746 sales analysed, 13.5% were sold for over 200% of the original purchase price. One in four homes sold for at least double the purchase price, while 52% delivered profits ranging from 10% to 99%.
In Sydney, 263 out of 2,170 sales analysed achieved over triple the original purchase price, and 506 homes were sold for twice the vendor’s investment.
Even sellers who bought and sold within the past three years generated decent profits, with 62% achieving gains of at least 10%.
The market has undergone a significant shift, with sellers now often achieving higher prices than what they paid during the Covid boom. The lack of inventory and strong buyer demand have given vendors the upper hand, resulting in properties consistently selling for more than the initial purchase price.
Homes Selling Faster As Prices Rise
New data shows that homes in Australia are selling faster than they were pre-pandemic, driven by rising property prices and resilient buyer demand.
Nationally, houses took an average of 44 days to sell over the 12 months leading up to April, down from 64 days in 2019.
Despite an increase in interest rates, houses and units in Adelaide and Perth are selling faster than a year ago, while units in Brisbane are also being snapped up quickly.
According to PropTrack economist Angus Moore, Hobart currently has the fastest-selling properties among the capital cities, with houses taking a median of 29 days to sell and units taking 31 days.
Melbourne follows with houses selling in 36 days, while Brisbane houses took 39 days. Sydney houses took 42 days to sell, Adelaide houses found buyers in 43 days, and Perth houses took 45 days. Units in Brisbane sold in a median of 37 days.
The faster pace of sales is a reflection of the strong selling conditions experienced in spring 2021 to autumn 2022. While the current market may not maintain the same pace, it is still significantly faster than the pre-pandemic period in 2019, according to PropTrack.
New Homes Shortage Pushes Prices, Rents
Former RBA economist Tony Richards says Australia could have built an additional 1.3 million homes in the past 20 years if it weren’t for costly zoning, planning, and building regulations imposed by local councils.
Richards argues that local councils often succumb to NIMBY opposition, hindering the construction of medium-density housing. He suggests that granting more decision-making powers to authorities outside of local councils may be necessary to address this issue.
Richards believes that the federal government’s target of one million new homes over five years is not ambitious enough, as a much larger expansion is required to address past housing undersupply and accommodate future population growth.
Meanwhile, rising construction costs (up 30% in the past two years) have led to developers shelving projects. According to KPMG, Victoria and NSW have seen a surge in demand for new dwelling approvals, but higher input costs and potentially lower returns on investment have hindered actual construction.
Australian Property Update – May 2023
Homeowners Need Less To Retire
Millennials who don’t own property will need 50% more savings than homeowners to be able to retire comfortably.
A new report by consultancy firm Mercer says homeownership gives Millennials, those born between 1981 and 1996, a significant advantage when it comes to retirement.
The analysis, which was conducted in Canada but can be extrapolated to Australia, assumes that the millennial has an AUD$66,000 income and puts 10% of their monthly salary into savings.
It worked on the basis that to be ready for retirement Millennials needed a 75% probability of not running out of money before death.
The results show home-owning Millennials need to save only 5.25 times of their salary to be able to retire at age 65, but renters need to save eight times their salary to be financially ready and retire at 68 years old.
The report says retired homeowners do not have the same costs of living as most renters do.
“Homeownership also gives retirees flexibility, as retirees who downsize may be able to access a significant amount of money. Renters, conversely, must pay rent every month or face eviction — whether they are 25 years old or 85 years old,” the report says.
New Data Shows Where Migrants Are Heading
Australians are still keen on moving to the regions, with the latest Australian Bureau of Statistics figures showing regional population growth is now on par with that of capital cities.
The latest ABS Regional Population dataset has the first full year of population data after the 2021 Census and is the first set of data post the pandemic lockdowns.
The figures show population in both regional Australia and capital cities grew by 1.2% in 2022.
For capital cities this meant an additional 205,400 people, while for regional areas it equated to an additional 102,700 people.
Brisbane had the highest level of annual population growth, 2.3%, which equated to 59,156 people, buoyed particularly by a large influx of migrants from New South Wales.
Within the regions, Melton in Victoria is now the fastest-growing area in Australia, with a 6.4% annual increase in its population.
The total migration out of Melbourne and Sydney during the 2022 financial year was 78,000 people.
In terms of population drops, the biggest decline was in Brewarrina, New South Wales, which dropped 3.4% which equated to a loss of 1,438 residents.
Property analyst Michael Matusik says Australia is on track for net migration of more than 300,000 people this year which will lead to property price growth.
“Population growth is a key factor when determining underlying demand,’” he says.
He says prices are driven up by the increase in the number of people looking to buy property.
Few Property Fire Sales On The Horizon
High rents and the severe shortage of rental The potential for large-scale distressed property fire sales as a result of rising interest rates has been over exaggerated, according to new analysis of the market.
Online property settlement group PEXA says the rising risk of mortgage defaults is unlikely to trigger any fire sales, because other economic fundamentals such as low unemployment levels, rising demand for property and low supply means the markets will remain stable.
PEXA head of research Mike Gill says even another 50-basis point increase in the interest rates will not lead to property fire sales.
“For fire sales to occur, you have to see high unemployment where borrowers lose their jobs and they’re forced to make these selling decisions. We’re not seeing that,” he says.
“Some borrowers will really struggle to make their repayments and may be forced to sell. But I think on balance, we probably won’t see that to a great degree.”
The research does warn that nearly half of all suburbs in NSW (181 postcodes) have residents who are at high risk of missing a mortgage payment by May.
In Victoria, one in five suburbs (74 postcodes) are at deemed to be at risk and in Queensland 19 postcodes are considered to have above-average risk of default.
Australian Property Update – April 2023
Biggest Ever Rise In Population Looms
Australia is set to experience its biggest two-year population surge in history, with an extra 650,000 migrants expected to move here this financial year.
The return of international students and working backpackers is set to boost the ranks considerably.
While the reopening of borders will also improve Australia’s economy it will put further pressure on the extremely tight rental market.
According to Australia Bureau of Statistics figures, in the year to September 2022, 304,000 overseas migrants moved to Australia, with two-thirds of those moving to NSW and Victoria.
It is hoped the increased spending which comes with the boost in population will help lift consumer spending figures and ease labour shortages.
According to the five-yearly review of productivity by the Productivity Commission, skilled migration needs to improve to produce a greater economic result.
While the return of international students is promising it is still below 2019 levels.
Department of Home Affairs figures show there were 110,000 more student visa holders in Australia in the 12 months to the end of February.
Before the Covid pandemic hit, Australia’s population was expected to grow by 1.2 million in the five years to June 2024.
Even with the boosted arrivals this year, that figure has been revised down to 950,000 people.
The annual natural increase in population is about 123,000 people. That coupled with overseas arrivals has Australia on track to hit a population of nearly 27 million by June 2024.
Rents To Stay High For Longer
High rents and the severe shortage of rental properties is tipped to remain for some time.
The Reserve Bank of Australia’s latest rental report says high demand for properties will continue to force up rents and lock up availability.
Australian Bureau of Statistics figures show vacancy rates are below 1% in all major capital cities and rental increases in 2022 were the highest in a decade.
The RBA report says new rental supply will remain “muted” for years to come with property developers saying higher interest rates and building costs are behind the slowdown in supply.
“The decline in the demand for new dwellings is expected to weigh on overall dwelling investment over the next few years. As a result, vacancy rates are likely to remain at low levels,” the report says.
Housing Minister Julie Collins says the solution to the rental stress is for all levels of government to put substantial investment into new social and affordable housing – a comment which confirms that politicians don’t understand the problem.
The National Housing Accord aims to co-ordinate state and federal government departments with construction firms and institutional investors to help deliver one million new homes in five years from 2024.
Rising Rates Won’t Dampen Prices
Rising interest rates won’t dampen house prices, according to a new report by Quay Global Investors.
It says the market is over-estimating the power of interest rates and that the combination of rapidly rising rents and low supply during a period of high demand, means prices will continue to increase.
It says the conditions in the market at the moment are similar to those during some of the strongest periods of property price growth.
The report says there have been many occasions when property prices have moved out of sync with interest rates in Australia.
The latest figures show that during March there were no price declines in any mainland capital city. The median house price for the combined capital cities rose by 0.5%.
Chris Bedingfield from Quay Global Investors says the Australian property market is complex.
“It is not all about interest rates,” he says.
Rental supply will not improve significantly in the short term, according to CoreLogic’s Eliza Owen, as there has been a 47% decrease in the number of property investment loans.
“The reduction in new investment purchases exacerbates the issue of low rental supply and rising rents. Australians need a new source of investment in rental accommodation,” she says.
Auctions Lift Extends Beyond Seasonal Bounce
The auction market has bounced back, with clearance rates hitting a 12-month high.
Domain’s latest Auction Report Card says the clearance rate for the combined capital cities hit 65% in February.
Sydney had the highest clearance rate of 69%, followed by Adelaide’s 68%, Melbourne 64%, Canberra 58%, and Brisbane 52%.
CoreLogic reports shows clearance rates above 70% during March.
Domain chief of research and economics Nicola Powell says the increase in clearance rates is in line with the seasonal post January jump in auction listings.
“Historically, clearance rates tend to bounce early in the year, and they are often higher than the previous year had closed, but it is too early to use this as a measure of green shoots within the property market, given the normal seasonal bounce that occurs in February,” she says.
But CoreLogic figures show auction clearance rates in 2023 to date have been substantially higher relative to late last year.
SQM Research’s Louis Christopher says, while increased auction clearance rates are typical during this time of year, “it’s now getting to the point of being beyond a seasonal thing”.
“There’s something more to it than that now,” he says.
Christopher says despite the good clearance rates it is too early to determine if the market has bottomed.
Australian Property Update – March 2023
Terry’s View – Terry Ryder is Australia’s Leading Independent Property Researcher
There is a growing body of evidence that property market conditions are strengthening. Against a backdrop of an ever-tightening rental market and increasing rents, there are signs of rising buyer activity and stronger prices. Auction clearance rates are showing steady improvement in recent weeks and a number of research entities are recording price growth, in defiance of high inflation, rising interest rates and relentlessly negative media.Domain’s price report for the December Quarter recorded house price growth in five of the eight capital cities, while SQM Research figures showed most capital cities in January recorded price growth for houses and all but one of them for apartments. In recent weeks, CoreLogic’s weekly value index has shown small increases. Consumer sentiment towards real estate is improving, with an API Magazine survey indicating that 50% expect prices to rise this year and a further 20% expect them to stay the same. Commentators like Stephen Koukoulas are noting the improvement in the market. In noting that house prices appear to have stopped falling and that “the worst is over for house prices”, Koukoulas said: “Who would have thought it?”
Migrants Tipped To Boost Housing Demand
Australians are concerned increased international migration will increase demand for properties and affect housing affordability.
A survey by Send Money Australia of 1,002 Australians found 84% believe boosting migration in the current financial year will help the economy by filling skilled jobs and increased spending.
But 65% are also worried it will mean that house prices and rents will increase further.
The Federal Australian Government increased the number of overseas migrants it will accept this financial year from 160,000 to 195,000.
Loan Lounge director Nathaniel Truong says the higher intake will have both positive and negative impacts.
“The positives are increased demand from migrants wanting shelter for themselves and their families and once they are established, it’s a common dream to own an investment property,” he says.
“This will help drive property prices, construction growth and demand for investment opportunities.”
On the downside, he says it will put further pressure on housing prices and supply which will cause affordability issues.
“There is also pressure on rental yields leading to overcrowding and social issues such as homelessness,” he says.
About 45% of respondents are concerned increased migration will lead to unemployment and job competition. Truong says if it leads to unemployment this could impact the property market, affecting an owner’s ability to repay their loan. “(But) I feel the increased competition will be positive for the property market and economy,” he says. Almost half of the respondents think increased migration will be an overall boost to the economy.
Young Aussies Pool Resources To Buy
Young Australians are combating increased property prices by pooling their resources and buying with friends.
National Australia Bank (NAB) data shows 40% are considering buying a property with someone other than a romantic partner.
One of the main compromises those aged 18 to 29 are prepared to make to get into the market is to buy with friends, second only to reducing the amount they are willing to spend.
NAB executive for home ownership, Andy Kerr, says younger people are becoming more creative when it comes to being able to buy property.
Almost a third of respondents were also prepared to become “rentvestors” – buying an investment property while continuing to rent their home in a desired location.
Kerr says younger Australians are casting the net wider when thinking about who they could buy with.
“Our data shows that first-home buyers aren’t being deterred from entering the property market, despite the market softening overall and rising cost-of-living. Buyers are just thinking outside of the box to make it happen.”
While pooling resources can be a good way to enter the market, Kerr warns prospective buyers to ensure they have a solid agreement about how the asset will be handled.
Land Size Shrinks As Prices Rise
Building a home is becoming more expensive, as block sizes shrink and the price per square metre increases.
A Domain report shows the average size of home sites in larger capital cities has dropped 13% in the past 10 years.
Chief of research and economics Nicola Powell says Darwin has the most affordable per square metre price ($737), while Sydney has the highest ($2,466).
Melbourne land is $1,811 per square metre, Canberra $1,517, Brisbane $1,254, Perth $1,233, Adelaide $1,194, and Hobart $1,087.
In terms of median land size, Perth has the smallest at 503m2, followed by Melbourne at 540m2, Sydney 574m2, Adelaide 600m2, Brisbane 617m2, Hobart 655m2 and Canberra 748m2.
“Policy change, land release and property tax reform are needed to see a drastic change in price per square metre affordability to improve,” Powell says.
She says as land sizes drop the gap in per-square-metre affordability widens.
The reduction in block sizes reflects the preference by many Australians to live closer to a city or the coast in search of a certain lifestyle, location, and access to key amenities and infrastructure.
“The land cost has not reduced — buyers are just purchasing less of it,” she says.
Australian Property Update – February 2023
Terry’s View – Terry Ryder is Australia’s Leading Independent Property Researcher
The reality of statistics is that you can use them to tell any story you like. This reality impacts real estate consumers every day.
You can take any set of figures and use them to tell a positive story or a negative one, depending on your viewpoint. Media, usually, will choose the negative option – and the people who feed press releases to journalists know that sensational negatives get more publicity than balanced analysis of property markets.
So when CoreLogic ran the numbers on price movements in the various locations across Australia in 2022, they found that roughly half had recorded price increases and half had price declines.
All the headlines around Australia screamed that half of locations had dropped – or, to use media parlance, plummeted, nosedived, collapsed or fallen off a cliff.
The headlines could, with equal validity, have shouted that half the nation’s locations actually recorded higher prices– which, given the tone of media coverage lately, is a remarkable outcome.
Tax Reform Impact On Young Buyers
First-home buyers have a difficult time accessing the market and, to ease the burden, the NSW Government recently passed legislation that allows FHBs to avoid stamp duty by paying, instead, an annual fee of $400 plus 0.3% of the land value.
This has been met with mixed reactions from the Opposition, who have branded the annual tax a ‘forever tax’ on the family home.
Stamp duty is a significant roadblock for buyers, with research showing that for an average house in Victoria valued at $824,500, $44,540 stamp duty is payable upon purchase – half an average Victorian’s annual income.
Figures showed that, on average, in Queensland, each home buyer paid $13,516 in stamp duty over the past six months. In NSW, it was $29,031, and in Victoria, customers paid $38,761.
It is argued that having an annual land tax rather than stamp duty could help remove a significant upfront barrier and help more aspiring home-owners acquire properties that meet their lifestyle needs.
As lifestyles have become more mobile, with Australians changing jobs more frequently, accommodating increased consumer mobility is important. The average young Australian will change jobs 12 times in their career, with an average tenure of just 3.3 years.
But an annual land tax may not be the panacea of all property tax problems. Critics of the scheme say an indexed land tax could end up costing families more — especially if they stay in their home for a long time.
Building Costs Start To Ease
The cost of building a home has risen by its slowest quarterly pace in a year, climbing by only 1.9% nationwide over the December 2022 Quarter. It is likely to slow further in the next 12 months due to falling demand.
This is welcome news as residential construction costs surged by a record 12% over the past 12 months, according to the Cordell Construction Cost Index.
Tim Lawless of CoreLogic Research said the slowdown in construction costs should help cool inflation this year. The housing component of the CPI, which includes both home building costs and rents, has been one of the main contributors to high inflation recently.
Dwelling approval figures have dropped by 41% since moving through historic highs in March 2021, and this also should help reduce pressure on the industry, Lawless said.
Although there is still a substantial pipeline of residential construction work to be completed, the declining number of approved homes should help to alleviate construction costs.
Anecdotally, as skilled migration continues to increase, the costs associated with some trades and labour should slow further.
The easing in construction costs could boost builder confidence, but is unlikely to spark another renovation or building boom, says Mark Bainey of Capio Property Group.
Pressures Mount On City Rents
Recent data on rental supply and demand has highlighted a shift in the market, with the return of overseas migrants causing rental supply in the big cities to slump and competition for vacant listings to heat up.
With inquiries per listing rising 31% year-on-year across capital cities, the report noted that rental markets in areas like Melbourne and Sydney have received a fresh sugar hit.
Rental listings are down 26% year-on-year and are at their lowest level since February 2003, causing an immense need for more rental accommodation, particularly in the major capital cities where demand is well in excess of supply.
Cameron Kusher, director of economic research for PropTrack, said that with overseas migration lifting, it looks as if it will become even more difficult to rent a property in the capitals during 2023.
Data shows the largest increases in potential renters per listing in December were in Melbourne (55%), Sydney (27%), and Brisbane (14%).
Kusher said rental markets in the two biggest cities will be under further pressure. “Most of the overseas migration that will occur over the coming years will see those arrivals settle in these two cities, which will increase demand for rental accommodation,” he said.
Australian Property Update – January 2023
Terry’s View – Terry Ryder is Australia’s Leading Independent Property Researcher
Prospects are strong for prices to rise in 2023, with economists’ forecasts of big price decline set to be proven inaccurate.
In recent years it’s become common for economists working for the major banks and other institutions to forecast significant price falls – but in each instance they have been wrong, often spectacularly so. Clearly, the average economist has little understanding of property market dynamics.
The key factors putting upward impetus on house prices in 2023 include the serious shortage of homes, with very low vacancies and sharply rising rents. The increased intake of overseas migrants and the return of foreign students will also impact, as will the high level of big infrastructure projects rolling out across Australia.
The RBA’s decisions on interest rates will be a relatively minor factor, a reality not well understood by economists who believe that rates are the only factor in play.
The level of price growth will be moderate, but significant after the difficulties of 2022. There will be regional differences, as is normal, but smaller capital cities and key regional centres will be at the forefront of the growth in the year ahead.
Prices Remain Elevated Despite Correction
Property price growth may have softened in recent months in the biggest cities, but many areas have still achieved extraordinary growth in the latest property cycle.
According to figures from Domain, the pandemic’s “once-in-a-generation” property boom resulted in national prices peaking in March 2022.
It says despite recent softening in the national data, the price cycle still remains 27% higher for the combined capital cities on average than it did in mid-2020 with the average home price $218,000 higher. In the regions prices are about 30% higher on average.
Domain chief of research and economics Nicola Powell says it has been fascinating watching the real estate market during the pandemic.
“After soaring price growth in 2021, it was inevitable that we would see an adjustment phase of the property cycle in 2022,” she says.
Overall, Powell says the height of the price upswing has been much higher than the downturn.
“It is a reminder that home-owners or prospective buyers need to maintain an overall perspective,” she says.
“History tells us that, in the last 30 years, the duration and steepness of an upswing are longer and greater than a downturn, supporting the idea that it’s not timing the market, it’s the time spent in the market that counts.”
Her analysis shows that since 2020 total overall gains compared to the pandemic trough was highest in Hobart at 47.2%, followed by Adelaide’s 46.9% and Canberra’s 41.2%.
Brisbane is 36.1% higher, followed by Darwin 29.8%, Sydney 28.5%, Perth 21.9% and Melbourne 16.7%.
Ten Ways To Save On Your Mortgage
Despite rising interest rates, borrowers can still save tens of thousands of dollars on their mortgages by shopping around.
Analysis by RateCity shows many borrowers are paying thousands of dollars a year too much because they don’t ask their existing lender for a lower rate.
Director of research Sally Tindall says many borrowers just accept the first offer or accept a discount without checking the real amount they will be charged.
“Banks are falling over themselves to offer refinancers all matter of perks, including rate discounts, fee waivers and cold hard cash to tempt people into switching,” she says.
She says on a $1 million owner-occupier mortgage on a variable rate of 5.86% homeowners should be able to reduce their interest bill by between $24,500 and $40,000 over the next three years.
Experts encourage mortgage holders to:
1. Ask for a better rate
2. Get the shortest term possible
3. Use comparison sites
4. Assess your offset costs
5. Work out what you can afford to borrow
6. Compare loan features
7. Pay down existing debt
8. Save as big a deposit as you can
9. Understand your debt-to-income ratio
10. Consider alternative loan types or terms