Property market update: Brisbane, April 2019

Over the month, dwelling values in Australia declined by 0.5 per cent down to 7.2 per cent, with all capital cities except Canberra witnessing a decline.

Darwin saw the biggest decline at 1.2 per cent down to $390,621, followed by Hobart, which fell by 0.9 of a percentage point; Sydney, which fell 0.7 of a percentage point down to $780,672; Melbourne, which fell by 0.6 of a percentage point down to $621,759; then Brisbane and Perth, which both fell by 0.4 of a percentage point down to $484,047 and $440,546, respectively; and then Adelaide, which only fell by 0.1 of a percentage point down to $430,352.

However, declines have been slowing down, according to the CoreLogic April 2019 home value index. This, combined with a rise in mortgage-related valuations, improvement in ABS household finance data and auction clearance rates holding around 50 per cent means that the housing market has potentially moved past the worst of the downturn.

CoreLogic’s Tim Lawless said: “Values are still broadly declining; however, the pace of decline has moderated since December last year and there are some tentative signs that credit flows have improved, albeit from a low base.”

“Considering that tighter credit conditions were one of the primary catalysts for the housing market downturn, any sign that credit availability is improving would be a welcome outcome for the housing market.

“The prospect for lower interest rates is another factor that could support an improvement in housing market activity later this year.”

Rental market

In contrast, rents rose by 0.3 per cent over April to 4.1 per cent, according to CoreLogic’s national hedonic rental index.

Looking across the major capital cities, Melbourne at 0.5 of a percentage point, Perth at 0.4 of a percentage point, the ACT and Sydney both at 0.3 of a percentage point, Brisbane at 0.2 of a percentage point and Hobart at 0.1 of a percentage point. Both Darwin and Adelaide held steady.

Over the quarter, Canberra was found to have the most expensive rents of all capital cities, followed by Sydney. Brisbane maintained its rents from the previous quarter, Adelaide rents rose for the first time in over five years while Perth rents are found to be the most affordable around the country.

According to the latest Domain Rental Report, rents are slowly rising in the greater Brisbane area.

“Tenants will find the rental market is now entering new territory,” the report noted.

“Not only will they start to find competition to secure a lease has increased, the choice of available rental stock will be narrowing.”

Brisbane’s local economy is expected to be assisted by a relative level of housing affordability, solid job prospects, major infrastructure projects and some spending coming in from the federal budget.

Supply and demand

New listing volumes were also down in every capital city this month, resulting in a combined capital city loss of 28.7 per cent.

The largest declines were seen in Melbourne with 34.1 per cent, Sydney at 33.6 per cent, Perth at 24.1 per cent. Darwin saw the smallest decline at 11.1 per cent.

Houses remained more popular than units, with Hobart witnessing the fastest time on market for houses at 40 days, followed by Canberra with 41, while Perth, Darwin and Brisbane had the slowest time on market at 79 days, 78 days and 70 days, respectively.

For units, Hobart was the fastest at 26 days, while Darwin, Perth and Brisbane were the slowest at 134, 81 and 77 days, respectively.

Vendor discounting was between 5 per cent and 8.3 per cent for houses across most capital cities and between 5.2 per cent and 9.6 per cent for units, with Canberra as the low-end exception for houses, Hobart as the low-end exception for units and Darwin as the high-end exception for both units and houses.

New home sales

Meanwhile, new home sales were a little more stable during the quarter after falling by 8.5 per cent in 2018, according to the Housing Industry Association’s (HIA) New Home Sales report.

The majority of the five largest states saw new home sales rise, with South Australia leading the charge at 8.6 per cent, followed by NSW at 4.8 per cent and Western Australia at 2.3 per cent.

Queensland, on the other hand, saw the sharpest decline at 4.7 per cent, followed by Victoria with a decline of 2.9 per cent.

HIA’s senior economist Geordan Murray said: “Given the rapid decline in new home sales throughout 2018, this moderation in the fall in new home sales suggests that the credit squeeze is easing as the market adjusts to the new lending norms.”

“The credit squeeze impacted the market at a time when the natural housing cycle was already beginning to cool. Banks reduced the amount of money they were willing to lend, and the time it took to get a loan approved blew out. The market is now showing signs of adjusting to the new levels of lending.

“There is uncertainty surrounding the federal election, which typically subdues new home sales and approvals as investors and owner-occupiers put decisions on hold until after the election. The election result will rectify this uncertainty, but the potential for higher taxes on housing means a post-election rebound in sales may not eventuate.”

Auction clearance rates

The latest CoreLogic Quarterly Auction Market Review report found that clearance rate across Australia’s capital cities of 49.9 per cent out of 14,647 residential auctions, an increase of 6.6 per cent over the December 2018 quarter.

Sydney’s clearance rate of 53.2 per cent was the strongest over the quarter, followed by Melbourne’s 51.8 per cent, Adelaide’s 48.8 per cent, Canberra’s 45.3 per cent, Hobart’s 44.8 per cent, Perth’s 31.4 per cent and Brisbane’s 31.3 per cent.

On the other hand, Canberra’s auction clearance rates declined 1.6 per cent, while Hobart’s declined by 5.2 per cent.

At a suburb level, Sydney’s Erskineville saw a clearance rate of 83.3 per cent, Melbourne’s Hillside saw a clearance rate of 75 per cent, and Brisbane’s Sunnybank Hills saw a clearance rate of 35 per cent.

In terms of the level of auctions, Melbourne saw the highest level at 6,375, while Hobart saw the fewest at just 45.

At a suburb level, Melbourne’s Craigieburn Reservior area saw the highest number of auctions for the quarter at 99, followed by Sydney’s Randwick at 73, Brisbane’s Sunnybank Hills at 24, Canberra’s Curtain at 23, Adelaide’s Norwood and Adelaide area at 15 and Perth’s Dianella and East Perth area at 10.

Growth drivers 

The increase of international students in Australia’s major capital cities are expected to spur growth in the property market, according to CBRE’s Global Living report.

International students, especially those from the Asia-Pacific region, are becoming more mobile, thus putting investors and developers in a good position to provide accommodation for this demographic, with the potential for higher yields.

In fact, 9 per cent of investors identified student accommodation as the most attractive alternative real estate sector, higher than last year’s 4 per cent, based on CBRE’s recent Global Investor Intentions survey.

Developers also recorded a current pipeline of approximately 18,000 beds in 51 projects over the course of 2019 to 2023. Of this pipeline, the majority are in Melbourne, making up 44 per cent, followed by Perth at 15 per cent, Brisbane at 12 per cent, and then Sydney at just 5 per cent.

There are also $100 billion worth of infrastructure projects announced in the federal budget, which is expected to allow Australia to survive a global economic slowdown and ultimately place the country in a favourable economic environment moving forward, according to the International Construction Market Survey 2019 by Turner & Townsend.

“The federal government’s $100 billion investment in infrastructure over the next decade, in addition to the state government investments, will help cushion the economy and keep jobs growth strong,” according to Garry Emmett, economist for Turner & Townsend.

“Sydney Metro, Melbourne Metro, Cross River Rail in Brisbane and Perth’s METRONET will help counterbalance downturns elsewhere. The announcement of the Inland Rail project for freight adds to the high levels of infrastructure investment.

“An already busy construction sector in Sydney and Melbourne in 2018 was boosted by a pledge of around $50.4 billion of public funding for road and rail projects in these states alone.”

The strong mining and energy exports, along with commercial, health, defence, retail, hotel and natural resources construction, are also contributing to the Australian economy, he said.

In order to assist the improvement of the property market and the local economies, property experts are pushing for a greater focus on policies that will develop city centres, such as the City Deals policy, which will roll out projects surrounding cities, taking on board all three levels of government.

“Australia’s major cities are among the fastest-growing in the developed world. The way we plan for and invest in our cities will have a huge impact on our future economy and quality of life,” Property Council of Australia CEO Ken Morrison said.

“Delivering good growth in our cities and regions demands more than just tinkering with immigration levels. Good growth requires real policy purpose and investment in priority infrastructure projects to help our cities and their residents reach their full potential.”

“Our four biggest cities will continue to attract the overwhelming majority of migrants because that is where most Australians already live and work. Let’s keep our eye on the main game: great cities for current and future generations of Australians.”

Apart from the improvement of City Deals, experts also recommend the improvement of major infrastructure projects through an advisory board, funding for a future cities cooperative research council, further investment in infrastructure and the restoration of the asset recycling fund in order to incentivise major state projects.

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