My Market Australian Residential Property Outlook - FEBRUARY RELEASE | 2019 - Ironfish
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My Market
Australian Residential Property Outlook
FEBRUARY RELEASE | 2019
Adelaide | Beijing | Brisbane | Chengdu | Melbourne | Nanning | Perth | Shanghai | Shenzhen | Sydney
1
2
Australia
Residential Property Market
Capital City Overview towards a balanced market scenario, strengthened across the industry.
with December 2018 results showing This follows the previous July 2018
The Adelaide property market a rate of 3.4%. This trend is sure to scrapping of the 10% investor speed
represents a combination of solid rental underscore further interest from limit. With plenty of change happening
conditions and attractive affordability. investors looking to secure a piece in the finance space, investors should
In October 2018, rental yields were of Perth real estate ahead of its next spend time speaking with their broker
recorded at 4% for houses and 5.1% growth cycle. On top of a tightening or directly with banks to find out how
for apartments. Rental growth was vacancy rate, Perth’s recovery will be they can secure the best finance option
robust over the 12 months to October aided by the state’s $75 billion pipeline for their specific situation.
2018 and is a trend that is expected to of new mining and resources projects
continue given the fact that Adelaide and the accompanying population and
continues to demonstrate the tightest jobs growth that this level of investment
vacancy rate of all the five major entails.
Royal Commission
capital cities. Capital growth over For property investors, one of the key
the 12 months to October 2018 was The Sydney property market continued
takeaways from the Royal Commission
positive and is expected to continue off to undergo a well-reported correction
included the findings around banking
the back of continued roll-out of the after what had been a very strong
compliance with Responsible Lending
State’s major $89 billion submarine and period of growth. Like Melbourne, most
conduct obligations. The Commission
shipbuilding program. of the decline continued to be felt at the
revealed case examples of non-
more expensive end of the market. With
Brisbane is continuing to show compliant lending practices by banks
the unemployment rate now tracking
positive signs, with many analysts now and as a result, there is now increased
at the lowest levels in over 25 years and
earmarking the Sunshine State capital emphasis to ensure all lenders comply
with major infrastructure projects in
to be a top performer throughout 2019 with these obligations. The Final Report
the pipeline, it is reasonable to expect
and 2020. This optimism is supported did note that many banks had already
Sydney values to stabilise in time before
by Brisbane’s improving vacancy rate improved their lending practices
experiencing more buoyant conditions
which fell from 3.8% in December over the past six to nine months.
in the medium term.
2017 to 3.2% in December 2018. This This occurred in anticipation of the
sign of strengthening rental demand Commission’s findings which led to the
also comes at a time when apartment proactive tightening of credit observed
completions continue to reduce Interest Rates in the markets. As a result, the Royal
dramatically, further placing upward Commission is expected to have little
Leaving the cash rate at 1.5%
pressure on rents. According to BIS to no further impact to lending beyond
throughout 2018 was expected
Oxford Economics, new apartment what has already occurred. Overall,
given existing global and domestic
completions halved in 2018 compared the Royal Commission should be seen
economic conditions. At a national
to the previous year. as welcome news by property investors
level, slow wages growth remained a
as it will help to bolster, what is by
The Melbourne market continues key consideration for the RBA’s decision
international standards, an already
to experience well-reported price to hold rates. And with house prices
strong, stable and resilient financial
adjustments after a period of strong in Sydney and Melbourne reduced
system in Australia.
growth. However, a closer look at the from their peaks, the RBA did highlight
data reveals that these adjustments potential flow-on risks to the broader
have not been uniform across the economy as a result of household
market. Melbourne housing pulled incomes remaining stagnant. In light of Federal Election
back by 5.6% over the 12 months to these developments, many economists
now consider a rate cut to be a real Many are seeing this upcoming Federal
October 2018, whilst apartments have election to be largely one about
been more resilient only reducing ever possibility in late 2019 and 2020.
property with strong and different
so slightly by half a percent. Rental viewpoints given by both parties. A
growth has been robust for both houses key consideration in the mind of voters
and apartments, with landlords being Housing Finance will be the perceived effectiveness of
able to increase weekly rents by $15 each party’s proposals for “managing”
and $10 respectively. Rental growth is In January 2019, NAB joined the the property market and any second-
expected to continue off the back of a remaining Big 4 banks who had order effects to the wider economy.
tight vacancy rate of only 2.2% as well since raised their rates in response to On this issue, the Liberals are aiming
as strong population and economic increased funding pressure. In terms for a regulatory approach to oversee
growth. of financial regulation, APRA removed the property market whereas Labor
the 30% interest only lending cap in has largely campaigned on tax reform.
Perth continued to show promising December 2018 with APRA Chairman
signs as it moves through its recovery The regulatory approach championed
Wayne Byres commenting that by Liberals involves reliance on
phase. The vacancy rate continues to measures had “served their purpose”
tighten swiftly and is quickly heading financial regulators such as APRA
given that lending standards had to manage the property market via
3
Australia
Residential Property Market
macroprudential policies which have and 2.7% over the year. This result reflected in the vacancy rate which has
thus far been effective in curbing fell short of RBA expectations, which continued to tighten. With Brisbane’s
house price growth. On the other previously forecasted growth of 3.5%. superior levels of affordability
end, Labor’s proposed tax reforms The weaker-than-expected economic compared to its east coast
have been grounded in the message growth rate was attributed to reduced counterparts, more investment activity
of housing affordability, particularly construction activity and flat retail and and interstate migration is expected
for young people. These tax reforms manufacturing sectors. As such, it is over the medium term.
include increasing capital gains tax anticipated that the RBA will maintain
liabilities by halving the current 50% current cash rate levels in the near term Melbourne’s market will continue to
concession and a limitation on negative until economic growth strengthens. moderate before stabilising later in
gearing to only those who invest in new In the meantime, an area to watch the year, however apartments will
properties. People with existing rental will be material changes to consumer remain more resilient than houses. With
properties would have investments sentiment with Melbourne and Sydney apartment approvals now slowing
grandfathered. property markets still softening. down, and with Melbourne slated to
Policymakers will keep a close eye on overtake Sydney as the nation’s most
potential effects to consumer spending populous capital city, it’s anticipated
which may impact economic growth that any movement on the downside
Building Activity moving forward – and ultimately, will be short-lived.
Latest ABS data indicates a sharp prompt the RBA to consider a rate Perth will continue to move through
slowdown in residential building reduction to stimulate growth. its recovery phase and be supported
approvals, with most of the decline by positive movement across its
Labour market conditions were
occurring in the apartment space. premium suburbs. The vacancy rate
positive with strong jobs growth and
National trend data for the 12 months for the Western Australian capital is
a low unemployment rate of only
to November 2018, shows an 18.3% a very promising sign given that it’s
5% in December 2018. Major public
drop across all property types, with trending towards a balanced scenario
infrastructure investment pipeline
houses falling by 6.3% and apartments – a milestone which will no doubt add
undertaken by major capital cities
falling by 31.2%. For investors, further emphasis to the market’s long-
across the country is set to support
this translates to a reduced supply awaited growth phase.
strong jobs and population growth over
pipeline over the coming years and
the coming years. Furthermore, surging Finally, Sydney will continue to
the expectation that any existing stock
demand for prime office space has moderate, although certain pockets
levels will be absorbed by the market.
resulted in the national office vacancy will continue to remain resilient. More
The slowdown in approvals, rate tightening to the lowest levels specifically, those properties priced
particularly for apartments, has been since 2012 off the back of strong white below $900K and those positioned
attributed to lessened demand from collar employment growth and limited to benefit from the state’s $87 billion
local and offshore buyers as a result of supply. At a capital city level, Sydney infrastructure pipeline are likely to
tighter purchaser finance environment and Melbourne office vacancy rates outperform the market. The overall
as well as increased foreign buyer have tightened to 10-year lows which is market is expected to stabilise
taxes. In addition, a tougher a positive sign for these markets. throughout the year and be supported
development finance environment as by a very strong economy as indicated
well as escalating construction costs by Sydney’s unemployment rate which
have also played a key role in the Australian Outlook currently sits at 3.5%, the best it has
sharp slowdown in residential building been in over 25 years.
approvals. It is expected that approvals Looking ahead, Adelaide will benefit
will remain subdued in the medium in a big way from the $89 billion dollar Nationally, the market presents
term. According to the ABS, building defence infrastructure program which numerous opportunities for investors
approvals for the nation are now is set to drive economic and population who are able to look to the long
trending at their lowest levels in over 5 growth. This investment also coincides term and read past the headlines
years. Across the major capital cities, with a governmental focus on and instead focus on the underlying
the most significant shifts occurred increasing population and a backdrop fundamentals which drive the many
in Melbourne, Perth and Sydney where, now, Sydney and Melbourne property markets across the country.
apartment approvals where annual buyers are looking for opportunities
declines were 14.2%, 30.4% and 19.9% outside their city to add to their
respectively. portfolio. With a robust rental yield,
strong affordability and a positive
outlook, the South Australian capital is
definitely on investor radars.
Australian Economy
Brisbane continues to experience
The national economy grew by 0.3%
the positive effects of record-level
over the September 2018 quarter
interstate migration. This has been
4
National Property Market Snapshot
Houses Apartments
Rental Market Rental Market
November 2017 - October 2018 November 2017 - October 2018
Houses Rental Yield Median Rent Houses Rental Yield Median Rent
Adelaide 4.0% $380 per week Adelaide 5.1% $310 per week
Brisbane 4.1% $420 per week Brisbane 5.1% $380 per week
Melbourne 2.8% $440 per week Melbourne 4.0% $410 per week
Perth 3.7% $380 per week Perth 4.7% $340 per week
Sydney 3.0% $550 per week Sydney 3.7% $530 per week
Annual Sales Volumes Annual Sales Volumes
November 2017 - October 2018 November 2017 - October 2018
53,050 26,754
-15.1% -21.1%
44,228
16,467
-13.0%
-31.6%
25,658
-10.4% 6,705
18,572 -15.4%
4,315
15,027 -4.3% 2,871 -4.4%
+0.8% -9.7%
Melbourne
Melbourne
Adelaide
Adelaide
Brisbane
Brisbane
Sydney
Sydney
Perth
Perth
Capital Growth and Median Values Capital Growth and Median Values
November 2017 - October 2018 November 2017 - October 2018
Adelaide: $486,472 Adelaide:
$328,303
+2.9% +1.6%
Perth: Perth:
$507,426 $379,663
-3.2% -3.9%
Brisbane: Brisbane:
$561,985 $386,807
+2.0% -1.4%
Melbourne: Melbourne:
$831,395 $566,496
-5.6% -0.5%
Sydney: Sydney:
$955,577 $725,643
-9.3% -5.6%
5
Adelaide
Residential Property Market
Economy Adelaide also recorded the tightest with Brisbane, recorded the highest
vacancy rate of the five major capital rental yield of all major capital city
The South Australian economy grew cities with a vacancy rate of only 1.3% markets at 5.1%. Rental growth was
by 17.6% above the annual average for December 2018. This helped to also robust, increasing by $10 a week.
rate of growth for the past decade. translate to robust rental growth and Like housing, Adelaide apartments
The state’s higher rate of economic will support ongoing capital growth in remain the most affordable property
growth came off the back of a number the years ahead. market of the five major capital cities.
of sectors such as tourism, where
international visitor numbers in mid-
2018 were up by 6% from the previous
year and are now trending at record Houses Outlook
highs. The education and training Adelaide is expected to continue its
Adelaide houses appreciated by 2.9%
sector also played a key role, as have path of positive and reliable growth
over the 12 months to October 2018
a number of major projects across – a trend which will be supported by
bringing the median value to $486,472.
Adelaide’s infrastructure pipeline. the city’s relative affordability, and
As such, Adelaide remains the most
Jobs creation was positive, with the affordable market of all the major attractive rental yields.
state adding almost 14,000 jobs over capital cities. In addition to its lower
Rental growth is expected to remain
the 12 months to November 2018. price point, rental growth has been
robust, particularly off the back of
There were also positive developments robust. Rents rose by $10 a week – and
a very low vacancy rate. The South
in the city’s unemployment rate which have been complemented by a healthy
Australian government’s strategic
trended down to 5.2% for November 4% rental yield which is second highest
focus on increasing population growth
2018 - a solid improvement from the of the five major capital housing
by attracting skilled workers as well
previous year’s result of 5.9%. markets.
as young adults and families, will help
Economically, Adelaide is set to benefit Future housing performance will be to underpin demand for property
in a major way from the $89 billion supported by the continued roll out providing further reassurance for
shipbuilding and frigate program of the submarine and shipbuilding investors.
which will be a tremendous boon for programs which are collectively
In the near term, Adelaide will be a
population growth and jobs growth. valued at $89 billion. Developments
solid performer throughout 2019 and
The program will be a magnet for for the wider program are already
into 2020. In addition to the state’s
skilled interstate and international underway with the November 2018
massive defence investment, continued
migrants and drive further economic commencement of the $3 billion
advancement of Adelaide’s innovation
confidence in the area. Investment Offshore Patrol Vessels project. In
and sustainability agenda will be key.
interest is expected to pick up due to 2020, the $35 billion Frigate Fleet
Projects such as building the world’s
this once-in-a-generation investment project is slated to commence which will
largest virtual power plant and being
into defence. be a significant boost for the Adelaide
the base for Australia’s space industry
economy. The associated influx of new
will all prove to be positive drivers for
jobs as well as skilled workers and their
the economy and the local property
families will have a positive effect on
Supply and Demand market in the years ahead.
what is already a tight rental market.
South Australia’s population grew by Other noteworthy developments
12,500 people over the 12 months to include the December 2018
June 2018. Overseas migration was announcement that Adelaide would
a strong contributing factor to this be home to the new Australian Space
overall increase, adding 12,600 people. Agency. Prime Minister Scott Morrison
However, at the same time, the state announced that the agency would be a
experienced a net interstate migration pivotal step in helping local businesses
outflow of 5,000. Investors should note to access the $480 billion global space
though, that this trend is markedly industry and believes that the agency
improving with recent ABS data will help to create up to 20,000 jobs by
indicating that the rate of interstate 2030.
migration outflow fell by 25% on a
yearly basis to June 2018.
This is a promising sign for Adelaide Apartments
and is a trend that is expected to
continue as a result of the South Adelaide apartments recorded a 1.6%
Australian Government’s focus on gain over the 12 months to October
population growth. In addition to 2018 bringing the median value to
improved population numbers, $328,303. Adelaide apartments along
6
20 Years of Capital Growth
November 1998 - October 2008 (Residex), November 2008 - October 2018 (CoreLogic)
$800,000
$600,000 $486,472
$374,244
$400,000
$130,430 $328,303
$200,000
$294,209
$0 $93,884
1998 2007 2018
+11.12% p.a. +12.1% p.a. +2.66% p.a. +1.1% p.a.
Property Market Update
Houses Apartments
Median Value $486,472 Median Value $328,303
Capital Growth +2.9% Capital Growth +1.6%
Median Rental Yield 4.0% Median Rental Yield 5.1%
Median Rent $380 Median Rent $310
Rental Growth +$10 Rental Growth +$10
City Vacancy Rate Current 1.3% 1-Year Ago 1.5%
*Values as at October 2018. Growth Rates are for the 12 Months to October 2018. Median Rent and Rental Growth calculated on a per week basis. Vacancy is December 2018)
7
Brisbane
Residential Property Market
Economy Queensland’s population increased by However, many analysts are now
84,500. This increase came off the back suggesting that positive growth is not
Queensland’s economy performed of surging net interstate migration and far away. In January 2019, Moody’s
19.1% above annual economic growth robust overseas migration numbers. Analytics tipped Brisbane’s apartment
rate averages for the past decade for Like the previous quarter, Queensland market to lead the nation over the next
the June 2018 quarter. Over the 12 again led all states and territories two years. Brisbane apartments will
months to November 2018, the state for net interstate migration adding benefit from a growing number of first
added 38,500 jobs with health care, almost 25,000 people from other parts home buyers and downsizers who are
retail and construction being key sectors of Australia. Apartment approvals entering a market which is facing a
which contributed to the upswing. and completions remain subdued significantly reduced supply pipeline in
Overall, state economic growth whilst the vacancy rate continues to the years ahead.
numbers were robust at 3.6% and improve significantly, falling from
continued to outpace the national rate 3.8% in December 2017 to only 3.2% in
of 3%. According to SGS Economics and December 2018. BIS Oxford Economics
Planning, last financial year, Brisbane expects new apartment completions this
Outlook
achieved a 3.4% economic growth rate year in Brisbane to be only 5700, which Overall, the market outlook is positive
which was the highest rate in 5 years. is half that of the 10,700 peak recorded for Brisbane. A review of key property
only 2 years ago. With the construction performance indicators such as vacancy
One of the key factors responsible for
cycle now in a slowdown and with rates and rental growth, suggest that
this above-average growth has been
development finance conditions Brisbane will be a place that many
Brisbane’s multibillion infrastructure
remaining tight – new supply to Brisbane investors will look to in the short and
pipeline which has been headlined by
is expected to remain subdued for medium term. Population growth to
major projects such as the $3.6 billion
some time paving the way for upward Brisbane has been robust and looks
Queens Wharf Casino and the $1.3
pressure on rental and capital growth. to be accelerating courtesy of rising
billion Second Runway. The construction
for Queens Wharf Casino is already net interstate and overseas migration.
underway with Economic Development Economically, Brisbane’s proximity to
Queensland approving the plan of Houses Asia as well as its burgeoning tourism
development and excavation of the and education industries will remain
site well progressed. The Casino will Rental yields for Brisbane houses again important growth areas to watch as well
be a major economic driver for the topped all major capital city state as the rollout of the city’s multibillion
nation’s third largest city, with 8,000 housing markets with a 4.1% rental dollar infrastructure pipeline.
jobs expected once the Casino is return for investors. Over the 12 months
to October 2018, Brisbane housing As the year unfolds, houses are
operational. The Casino is expected anticipated to perform at a steady rate
to result in an increase of 1.4 million recorded positive growth of 2% which
is a promising sign for investors as the driven by strong population growth and
extra tourists to the Sunshine State affordability. Meanwhile, apartments
capital, and further underpin Brisbane’s city continues to buck the trend of price
pullbacks occurring across the other two are expected to perform positively as a
global appeal. The Casino is scheduled result of reduced supply forecasts and
for completion in 2022 and will be major east coast cities. According to
the Real Estate Institute of Queensland, growing demand. And finally, due to
supported by Brisbane’s soon-to-be- Brisbane’s more affordable price point
opened Second Runway. The Second Brisbane home prices have now hit
an all-time high as a result of recent and favourable price to income ratios,
Runway is anticipated to deliver 7,800 the market has been less affected by
jobs by 2035 and significantly boost positive and steady growth.
prevailing credit restrictions which have
Brisbane’s airport capacity. According to the most recent October hampered both Sydney and Melbourne.
Brisbane’s unemployment rate 2018 data, the median value of a This positions Brisbane very well for
improved from 7.2% in February 2018 house in Brisbane is now $561,985. At sustainable levels of growth over the
to only 6% in November 2018. Looking a significantly lower price point than medium term.
ahead, analysis by Deloitte confirms competing cities and with a relatively
that Queensland is expected to have the higher rental yield, the Brisbane
strongest annual economic growth rate opportunity continues to attract many.
of all states and territories from 2019 to
2023 rising by at least 3.5% per annum
on average, significantly ahead of the Apartments
expected average annual rate of 2.8%
for the nation. Brisbane apartments again recorded
the highest rental yield of all major
capital city apartment markets along
with Adelaide. Over the 12 months to
Supply and Demand October 2018, Brisbane apartment
Over the 12 months to June 2018, values slightly reduced by 1.2%.
8
20 Years of Capital Growth
November 1998 - October 2008 (Residex), November 2008 - October 2018 (CoreLogic)
$800,000
$561,985
$600,000
$447,886
$400,000
$386,807
$144,463 $352,332
$200,000
$0 $128,505
1998 2007 2018
+11.98% p.a. +10.61% p.a. +2.3% p.a. +0.94% p.a.
Property Market Update
Houses Apartments
Median Value $561,985 Median Value $386,807
Capital Growth +2.0% Capital Growth +1.4%
Median Rental Yield 4.1% Median Rental Yield 5.1%
Median Rent $420 Median Rent $380
Rental Growth $0 Rental Growth $0
City Vacancy Rate Current 3.2% 1-Year Ago 3.8%
*Values as at October 2018. Growth Rates are for the 12 Months to October 2018. Median Rent and Rental Growth calculated on a per week basis. Vacancy is December 2018)
9
Melbourne
Residential Property Market
Economy Houses housing has been largely a result of
tightened lending restrictions. This has
Victoria topped all states and Over the 12 months to October 2018, led to many buyers opting for more
territories in the most recent January Melbourne housing pulled back by affordable property. This is evident
2019 Commonwealth Bank State 5.6%. Most of the decline occurred at in continued resilience of properties
of the States report, receiving top the upper end of the market whereas priced below the $800,000 threshold.
marks across several economic affordable properties under $800,000
indicators including construction largely retained their values. It is Additionally, the Royal Commission
work and economic growth. Victoria expected that housing will continue is not expected to have a significant
added more than 103,000 jobs over to moderate in early 2019 before impact given that lending institutions
the 12 months to November 2018, stabilising later in the year. Rental had already factored in the
with over 94,000 of these jobs being growth has been positive for housing, anticipated findings of the Royal
full-time. Strong employment growth with landlords being able to raise rents Commission which drove the tighter
was also reflected in Melbourne’s by $15 a week. Robust rental growth is credit environment and market
prime office vacancy rates, which expected to continue as indicated by pullback in 2018. As a result, it is very
fell to the lowest levels since 2012. Melbourne’s low vacancy rate which unlikely that we will see any further
Melbourne’s unemployment rate also continues to place upward pressure on tightening to lending which will thus
fell, dramatically improving from 5.2% rents. help the Melbourne market stabilise
in November 2017 to only 4.3% in in 2019, prior to experiencing more
November 2018. stable and positive conditions in 2020.
According to SGS Economics and Apartments The underlying long-term
Planning, Melbourne was responsible fundamentals of Melbourne are
Over the 12 months to October robust with surging population
for 82.7% of state economic growth
2018, Melbourne apartment values growth, strong jobs growth and a
over the last financial year - the
remained largely unchanged reduced supply pipeline. Melbourne
highest share on record. The state’s
recording only a slight pullback of apartments will enjoy more positive
robust economic growth and strong
half a percent. The median value conditions over the short term, given
population numbers has helped to
of an apartment in Melbourne is that more and more people are now
accelerate key infrastructure projects.
now $566,496. The resilience of favouring inner city living and the fact
Over $100 billion worth of new roads,
apartments compared to housing is that affordability has increasingly
rail, hospitals and other infrastructure
a trend that is expected to continue become a key consideration for many.
is in building or planning stage
given the importance of affordability The apartment market will also be
according to an analysis by Deloitte.
and rising demand for inner-city driven by a larger number of first
Moving forward, Melbourne’s strong
apartment living.Rental growth was home buyers and downsizers seeking
construction levels and robust
robust over the year increasing by well-located and well-designed
infrastructure investment pipeline will
$10 a week which is welcome news for apartments.
continue to be key for Melbourne’s
investors. This continues the trend of
sustained economic growth.
sustained rental growth for Melbourne
apartments which have grown by
17.1% over the past 5 years – the
Supply and Demand largest growth for all major capital
city apartment markets.
Over the 12 months to June 2018,
Victoria added over 138,000 people New apartment supply is expected to
– a substantial lead over NSW, which remain subdued. This is due to several
grew by just over 119,000. Victoria’s factors including rising construction
remarkable population growth will costs, increased planning restrictions,
continue to add further pressure to a tightened lending environment for
what is already a tight market, with developers as well as higher taxes
Melbourne’s vacancy rate tracking at for foreign buyers. When coupled
2.2% for December 2018. The vacancy with Melbourne’s strong population
rate is expected to tighten even more growth, economic performance and
over the coming months as a result increased demand for apartments,
of continued population growth and further upward pressure on rents and
reduced completions. Furthermore, values is expected.
apartment approvals declined falling
by 14.2% over the 12 months to
November 2018.
Outlook
The recent pullback in Melbourne
1020 Years of Capital Growth
November 1998 - October 2008 (Residex), November 2008 - October 2018 (CoreLogic)
$1,000,000
$831,395
$750,000
$477,247
$500,000
$566,496
$181,620
$250,000
$362,289
$0 $136,914
1998 2007 2018
+10.14% p.a. +10.22% p.a. +5.71% p.a. +4.57% p.a.
Property Market Update
Houses Apartments
Median Value $831,395 Median Value $566,496
Capital Growth -5.6% Capital Growth -0.5%
Median Rental Yield 2.8% Median Rental Yield 4.0%
Median Rent $440 Median Rent $410
Rental Growth +$15 Rental Growth +$10
City Vacancy Rate Current 2.2% 1-Year Ago 2.1%
*Values as at October 2018. Growth Rates are for the 12 Months to October 2018. Median Rent and Rental Growth calculated on a per week basis. Vacancy is December 2018)
11Perth
Residential Property Market
Economy Houses buyers for the Perth apartment market,
which was the highest proportion of
The WA state economy recorded a Over the 12 months to October 2018, owner-occupiers recorded since the
growth rate that was 8% above annual the Perth housing market experienced inception of the survey back in 2014.
averages for the past decade over the a small 3.2% pullback in house values. The recovery in apartment prices will
June 2018 quarter. Western Australia The rental yield remains robust at continue to be supported by owner-
also added just over 19,000 new jobs 3.7% and rents have remained largely occupiers moving forward, with first
over the 12 months to November 2018. unchanged. With the market now in a home buyers and downsizers expected
According to a 2018 snapshot by SGS period of recovery, positive momentum to play an influential role.
Economics and Planning, Perth grew for housing values are expected over
at its fastest rate in five years, being coming years. According to REIWA,
primarily driven by the professional some of the best performing suburbs
and health industries. Perth’s for price appreciation have been at the Outlook
unemployment rate in November 2018 premium end of the market with REIWA The Perth economy is strengthening
was recorded at 6.2% which is a solid noting that traditionally the top end of off the back of the well-reported $75
improvement from the earlier March the Perth real estate market is usually billion mining and resources pipeline
2018 high of 7.9%. Positive momentum the one that leads a recovery. which is poised to radically uplift the
on the employment front is expected to economy and in turn help accelerate
continue across multiple industries. A According to Domain, Perth house
values are expected to grow faster the recovery in the housing market.
survey by the Chamber of Commerce Business confidence is also on the
and Industry WA (CCIWA) cited five than any other capital city in 2019.
This outlook is underpinned by rise, with the latest WA Super-CCI
key local industries which will help Business Confidence Survey reporting
to underpin short and medium term better economic conditions, higher
commodity prices, stronger population a 10x improvement in optimism for
employment growth. These industries early 2019 compared to mid-2015.
included mining, agriculture, fishing growth, improved employment
prospects and increased building In addition to this, the property
and forestry, services catering to market is now at its most affordable
mining, real estate as well as education activity for mining and resources. The
aforementioned $75 billion pipeline is level in more than two decades.
and training. The Housing Industry Association’s
largely made up of the construction of
major mines which are set to transform Quarterly Housing Affordability
the economy. The December 2018 report demonstrated that the average
Supply and Demand announcement by Rio Tinto to go wage earner only to had to contribute
ahead with a $3.5 billion Koodaideri 26.5% of their monthly pay to meet
Western Australia’s population repayments, which is significantly more
iron ore mine capped off the state’s
grew by 21,700 over the 12 months affordable than cities such as Sydney
pipeline which altogether, will help
to June 2018. This primarily came and Melbourne. As a result, Perth is
to deliver tens of thousands of jobs
off the back of natural increase and actually the most affordable major
for the economy and facilitate the
overseas migration components, capital city housing market from a
Perth property market’s long awaited
which added over 19,000 and 13,000 price to income ratio perspective. As a
recovery.
respectively. However, the state result of a strengthening economy and
continues to experience an interstate growing population, it is anticipated
migration outflow with 11,300 leaving that over the short to medium term,
for other parts of Australia. Overseas Apartments more and more investors will look west
migration is expected to pick up with to add to their portfolio.
the increased demand being driven The Perth apartment market
by Western Australia’s significant $75 experienced a decline of 3.9% over
billion mining and resources pipeline. the 12 months October 2018. Perth
According to figures by job portal, apartment approvals continue to
SEEK, job advertisements for the remain subdued and overall supply
mining, resource and energy industry forecasts remained constrained.
were 32% higher in mid-2018 than the Rental yields remain strong at 4.7%
same time the year prior. for October 2018. The city’s improved
vacancy rate has been pivotal in driving
One of the leading indicators signalling rental growth over the 12 months to
a turn for the Perth market has been its October 2018. Perth recorded the
swiftly declining vacancy rate. The city second highest rate of annual rental
recorded only 3.4% in December 2018 – growth for all major capital city
a significant improvement on the 4.6% apartment markets, with landlords
recorded the year earlier. being able to increase their rents by $10
per week. According to Urbis, Q2 2018
saw owner-occupiers make up 65% of
1220 Years of Capital Growth
November 1998 - October 2008 (Residex), November 2008 - October 2018 (CoreLogic)
$800,000
$507,426
$600,000
$498,015
$400,000
$383,888
$140,706
$200,000
$379,663
$0 $123,325
1998 2007 2018
+13.47% p.a. +12.03% p.a. +0.19% p.a. -0.11% p.a.
Property Market Update
Houses Apartments
Median Value $507,426 Median Value $379,663
Capital Growth -3.2% Capital Growth -3.9%
Median Rental Yield 3.7% Median Rental Yield 4.7%
Median Rent $380 Median Rent $340
Rental Growth -$10 Rental Growth +$10
City Vacancy Rate Current 3.4% 1-Year Ago 4.6%
*Values as at October 2018. Growth Rates are for the 12 Months to October 2018. Median Rent and Rental Growth calculated on a per week basis. Vacancy is December 2018)
13Sydney
Residential Property Market
Economy Houses lending institutions were largely
aware of the potential findings ahead
The state economy continued to Over the 12 months to October 2018, of time, particularly with regard to
perform at a strong rate, trending the Sydney housing market pulled Responsible Lending Conduct. As
25.7% above the annual average back by 9.3%. This follows a period of a result, the major banks begun to
rate of economic growth for the very strong growth where the median tighten their lending well in advance,
past 10 years. This growth was and house value rose by a significant 86% as demonstrated by the clear falls in
continues to be supported by Sydney’s between late-2012 and late-2017. The housing credit growth in 2018.
massive infrastructure pipeline which recent pullback should be taken into
is set to deliver major projects such context with the fact that the market Looking ahead, it is expected that the
as the Western Sydney Airport and had been specifically targeted by Sydney market as a whole will continue
Sydney Metro rail lines. Sydney’s macroprudential policies uniquely to adjust and then stabilise later in the
robust economic growth led to the designed to slow price growth in year. The underlying fundamentals
creation of 111,000 new jobs over Sydney and Melbourne. Weekly rents of the Sydney market are robust,
the 12 months to November 2018 have remained resilient, maintaining however, affordability is a real issue
and was key in Sydney achieving its their values. and will continue to hamper growth
best unemployment rate in over 25 over the medium term. Investors
years - an enviable result of only 3.5%. need to be aware of this and need
Wages growth is anticipated to pick up to be selective when investing in this
further with unemployment trending
Apartments market, ensuring they are getting the
so low. Over the 2018 financial year, Apartments have been more resilient right property at the right price. It
Sydney’s GDP was a robust 3.1% and compared to housing. This reflects the is anticipated that affordability will
represented more than a quarter growing importance of affordability continue be a key driver for demand
of GDP growth. The city continues as well as the influence of higher price- with the sub-$900,000 price bracket
to experience robust labour market pointed property being responsible for projected to fare better over the
conditions which translate well for its most of the decline seen in the housing coming months as the market finds
economic future. market over the past 12 months. its footing, along with property set
Overall, apartment values pulled to benefit from proximity to new
back by 5.6% over the 12 months to infrastructure projects.
Supply and Demand October 2018. However, similar to
housing, this pullback has come after
Over the 12 months to June 2018, a period of very strong growth which
the New South Wales population saw the median apartment value rise
increased by 119,000 people. Most by 64% between late 2012 and early
of this growth came from overseas 2018. This resilience of apartments
migration with 88,000 added. Natural compared to housing has also been
increase also made a significant supported by demographic factors
contribution with over 52,000 added, with more first home buyers and
however net interstate migration flows downsizers seeing apartments as
remained negative with 21,000 people their preferred choice. Importantly,
choosing to move to other parts of the whilst values have declined, rents have
country. been robust growing by $10 a week.
As a whole, the market is continuing
Sydney’s vacancy rate rose in to adjust after a strong period of
December 2018 reaching 3.6%, construction activity, with current
however this slightly elevated figure stock levels now being absorbed
was to be expected due to the and new apartment approvals
seasonality of vacancy rates. More reducing significantly. Consequently,
importantly, the market is now in the the coming years should see a
process of absorbing current supply strong slowdown in supply and it is
and it is expected that the vacancy anticipated that the market will move
rate will tighten towards a balanced towards a balanced market in the
market and then an undersupplied medium term.
scenario in the medium term. The
outlook for new apartment supply
remains subdued with recent building
approvals data showing a near-20% Outlook
annual decline.
Most of the impact from the Royal
Commission has already been felt
in the property markets given that
1420 Years of Capital Growth
November 1998 - October 2008 (Residex), November 2008 - October 2018 (CoreLogic)
$1,200,000 $955,577
$900,000
$562,649
$600,000 $725,643
$285,583
$300,000 $393,357
$217,803
$0
1998 2007 2018
+7.02% p.a. +6.09% p.a. +5.44% p.a. +6.31% p.a.
Property Market Update
Houses Apartments
Median Value $955,577 Median Value $725,643
Capital Growth -9.3% Capital Growth -5.6%
Median Rental Yield 3.0% Median Rental Yield 3.7%
Median Rent $550 Median Rent $530
Rental Growth $0 Rental Growth +$10
City Vacancy Rate Current 3.6% 1-Year Ago 2.6%
*Values as at October 2018. Growth Rates are for the 12 Months to October 2018. Median Rent and Rental Growth calculated on a per week basis. Vacancy is December 2018)
15Sources
Residential Property Market
• Australian Bureau of Statistics • Herron Todd White • The Age
http://stat.abs.gov.au https://www.htw.com.au/month-in- https://www.theage.com.au/
review/archives/
• ANZ • Trading Economics
http://www.anz.co.nz/ about-us/ • HIA https://tradingeconomics.com/
economic-markets-research/ https://hia.com.au/
• ID The Population Experts
• APRA • JLL https://home.id.com.au/demographic-
https://www.apra.gov.au http://www.jll.com.au/australia/en-au/ resources/
research
• Australian Financial Review • UBS
https://www.afr.com/ • Knight Frank https://www.ubs.com/au/en.html
http://www.knightfrank.com.au/
• BIS Oxford Economics research • Westpac
https://www.oxfordeconomics.com/bis https://www.westpac.com.au/about-
• KPMG westpac/media/reports/australian-
• CBRE https://home.kpmg.com/au/en/home. economic-reports/
https://www.cbre.com.au/research- html
reports
• McCrindle
• Charter Keck Cramer https://mccrindle.com.au/
http://charterkc.com.au/news-insights/
• NAB Group Economics
• CommSec https://business.nab.com.au/author/
https://www.commsec.com.au/ nab-group-economic/
stateofstates
• PwC
• CoreLogic https://www.pwc.com.au/
https://www.corelogic.com.au/news
• RBA
• Credit Suisse https://www.rba.gov.au/
https://www.credit-suisse.com/au/
en.html • SQM Research
http://sqmresearch.com.au/
• Deloitte
https://www2.deloitte.com/au/en/ • The Australian
pages/finance/topics/deloitte-access- https://www.theaustralian.com.au/
economics.html
• The Australian Financial Review
• Digital Finance Analytics https://www.afr.com
http://www.digitalfinanceanalytics.
com/ • The Sydney Morning Herald
https://www.smh.com.au/
• Domain
https://www.domain.com.au/
Disclaimer
The information contained in this document has been collected by Ironfish from various government, public and private sources, which may
include property developers, builders and other industry participants. Neither Ironfish nor any representative of Ironfish gives any warranty
as to the accuracy of the information contained in this document and expressly disclaims any liability for loss or damage which may arise
from any person acting or deciding not to act on the basis of any of the information contained in this document. This document is intended
to provide Ironfish investors with general information only and does not constitute an offer, contract or inducement to buy. Investors are
expressly recommended to do their own due diligence in relation to any residential property investment decision they make.
16Resources
Ironfish Residential Property Market Research
My City Reports My Market Reports My Property Reports
Our My City reports are an annual Our Research team monitors Extensive due diligence and research
series of educational, magazine style Australia’s 5 capital city property is done by Ironfish’s Property and
publications that are an essential markets and publishes a quarterly Research division on the merits of
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each major capital city, their unique property data, market commentary project information, demographics
qualities and fundamental property and fundamental analysis of issues and market research presented in a
market drivers. impacting each market. Property Report for investors.
Portfolio Approach Ironfish Seminars PPA Software
Our Portfolio Approach to investing Ironfish provides regular investor Our educational Ironfish PPA
is a simple yet powerful strategic educational seminars in English Portfolio software tool has
approach to build step by step a and Chinese around Australia. been customised to ensure our
diverse portfolio of different types They provide up to date property professional Strategists can help
and locations and hold onto it over market information and effective investors understand firsthand how
a 10-15 year period. investment strategies presented by to cash flow an investment property
many of Australia’s astute property and build equity over time.
experts.
17RESEARCH NEGOTIATION TIME-SAVING
Knowledge is power Group buying will always In a busy world, it pays
when you invest in be more powerful than to have professionals
residential property. acting alone. working for you.
“It’s not what you buy now, but what you own
in 10 or 20 years that will make you wealthy.”
– Joseph Chou
www.ironfish.com.au
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