Raine & Horne: Market Report April 2017

April, 2017

NSW Real Estate Overview

The Sydney real estate market continues to motor along, recording annualised growth of 18.9%, according to the latest CoreLogic Hedonic Home Value Index.

While CoreLogic attributes the pace of growth in Sydney to low interest rates and a rebound in investor activity, James Pratt, Director of Auctions, Raine & Horne, says low listing levels remain a factor. “There are fewer homes for sale in Sydney than this time last year, and this is fuelling strong auction clearance rates,” said James. “The strength of demand for property is also illustrated by the large numbers of properties that are selling prior to auction.” About 25% of properties in Sydney’s Inner West are selling before auction day. Moreover, about 40% of properties slated to sell under the hammer in Sydney’s northern and eastern suburbs are selling prior.

Meanwhile, the Illawarra region continued to deliver the highest value growth for property owners, according to the latest CoreLogic Regional Report for the quarter to December. Over the March quarter, CoreLogic research confirmed, Illawarra recorded the largest annual increase in values for both houses (15.2%) and units (14.8%). The state’s Central West is another region to watch. Raine & Horne Bathurst director Michelle Mackay told the Western Advocate that Bathurst’s affordability compared to places like Sydney is drawing attention to the regional centre and helping it to become a hot spot. “I think it is the amount of work that is available and how affordable houses are,” she said. “The median house price is about $360,000 and units are around $285,000.”

Queensland Real Estate Overview

Regional Queensland’s property affordability, high-yielding returns and low vacancy rates mean it’s time for investors from Sydney and Melbourne to sit up and take notice.

“March was very challenging for Queenslanders in the wake of Cyclone Debbie but taking a longer-term view, regional centres in the state represent excellent value for investors,” said Steve Worrad, General Manager, Queensland, Raine & Horne. “places like Nanango have quality rental properties as low as $145,000, which is a fraction of the price of a Sydney or Melbourne apartment. Many regional markets have low vacancy rates and properties delivering returns of 7-8%.

“The biggest problem for these regional centres is that the great investment opportunity remains a secret to Australia’s biggest audience of investors in NSW and Victoria.”

Steve urges investors to consider buying into regional Queensland towns with strong, diversified economies that provide plenty of job opportunities.

Western Australia Real Estate Overview

In a strong signal that Perth real estate is starting to rebound, research from the Real Estate Institute of WA (REIWA) shows that some suburban markets in the city are selling faster than during the heady days of the boom in 2013 and 2014.

In southern Perth, Rossmoyne experienced the biggest improvement in average selling days, with REIWA data revealing it is now 22 days quicker to sell in the area than it was in the year to January 2014. “Churchlands, Glen Forrest and Dalkeith are also experiencing faster selling times, with each suburb improving by 15 days in the year to January 2017 compared to the year to January 2014,” said REIWA President Hayden Groves.

Interestingly, eight of the 10 suburbs on the list have an annual median house price (for the year to January 2017) above $750,000, with four of those above the $1 million mark.

“These results show the quickest sales are happening in the suburbs that predominantly cater to the trade-up sector of the residential property market. Buyers looking to take the next step in their property journey clearly recognise there is good opportunity in the current market to take advantage of more affordable house prices to upgrade to a new home,” said Hayden.

Victoria Real Estate Overview

Real Estate Institute of Victoria (REIV) President Joseph Walton said the 2017 auction market is one of the strongest in recent years, with volumes up 13% on the same period last year. 

“Multiple auction records fell in February when more than 3,200 homes went to auction and close to 2,570 sold under the hammer,” he said. “High auction volumes have continued throughout March with the current clearance rate of 79% signalling ongoing buyer and vendor confidence.”

Mr Walton added that the solid start to the year followed the strongest December in the state’s history – in terms of both auction volumes and sales.

“The 2016 auction market remained buoyant right up until Christmas eve with low interest rates and high clearance rates encouraging more vendors to sell their homes well after the traditional spring selling season.”

Northern Territory Real Estate Overview

Demand for Darwin rental properties is booming, with leading property specialist Raine & Horne Darwin finalising leases on more than 60 properties in February. 

“This result follows the 60 properties we leased to tenants in January,” said Glenn Grantham, General Manager, Raine & Horne Darwin.

“Consequently, rental yields for Darwin houses have improved and are currently 5.1%, which is the highest in Australia. The Darwin apartment market is also starting to pick up some pace.”

The Darwin rental market is still above the 2% vacancy rate sweet spot achieved a few years ago, with vacancies running at more than 7%.

“That said, the vacancy rate for properties managed by Raine & Horne Darwin is only 4%, which is well below the city’s average,” said Glenn. “Investors need to be sensible about presentation and pricing to ensure a vacant investment property is tenanted as quickly as possible. It seems our landlords are listening.”

Rental days-on-market have fallen to an average of about 32 days in Darwin, according to Glenn. “Vacancies are headed in the right direction, which is a good sign. However, it means investors shouldn’t be complacent about pricing and presentation,” said Glenn.

For first home buyers seeking to exit the rental treadmill, Raine & Horne Darwin recently held the launch of the Zuccoli Aspire display village. “There are 22 homes in the village, making it the biggest display ever in the Northern Territory,” said Glenn.

South Australia Real Estate Overview

In Adelaide, demand for character homes near the CBD is pushing up prices in suburbs such as Goodwood, Unley and Millswood, according to Herron Todd White’s Month in Review April 2017.

As a result, neighbouring city-fringe suburbs are heating up as home buyers widen their search. Clarence Gardens and the nearby suburbs of Cumberland Park and Daw Park are particularly attractive to buyers, as they are only about 8 kilometres from the CBD, and offer good transport and shopping. Detached homes are in short supply in these city-fringe suburbs, especially in Clarence Gardens, and if that situation continues, prices are likely to start heading higher, says Herron Todd White.

Across the Adelaide market generally, buyers continue to have their sights set on detached housing in the $500,000 to $800,000 range. In areas where in-fill development is under way, owner-occupiers are competing for properties with developers.

Turning to regional South Australia, in Mount Gambier, the unit market has seen a significant increase in activity. Sales volumes have been rising in the past 2 years, with almost double the amount of sales in 2016 than in 2014. Herron Todd White foresees that the higher-than-average level of interest in units is likely to continue, thanks to low interest rates and good yields for investors.

Mount Gambier agents have also reported increasing confidence in the house market in the past 9-10 months. According to RP Data figures, the greatest activity in the past 12 months has been in the $200,000 to $250,000 price range, with investors seeing gross rental returns of 6-7%.

Tasmania Real Estate Overview

Hobart has been the fastest-growing capital-city real estate market in Australia for three months in a row, according to CoreLogic RP Data’s Home Values Index.

In the quarter ending March 31, houses and units in Hobart both rose in value by 5.6%. Zooming out to look at the past 12 months, Hobart’s property market is up 10.2% compared to this time last year, Tim Lawless, RP Data’s head of research.

Tim told realestate.com.au that the strong performance can be attributed at least in part to the city’s affordability. Hobart’s median price of $355,000 is $84,000 less than the next most affordable capital, Adelaide, where the median is $439,000. And Hobart clocks in at less than half the median price of the most expensive state capital, Sydney, which sits at $805,000.

The RP DATA figures show that Hobart and Darwin share the honours of having the nation’s strongest rental markets, with a gross rental yield of 5% for houses and 5.6% for units. “This high-yield profile is very attractive for investors. Hobart also has a real ‘lifestyle’ appeal about it,” Tim said.