Raine & Horne: Market Report November 2017

November, 2017

NSW Real Estate Review

The September housing finance figures released in November by the Australian Bureau of Statistics (ABS) show that first home buyers are continuing to make their presence felt in the property market.

The proportion of first home buyers, as part of the total owner-occupied housing finance commitments, increased to 17.4%. This is the highest proportion since November 2016, according to one industry report.

“First home buyers are clawing their way back into the Sydney market after being beaten to the punch by investors for the last five years,” said Angus Raine, Executive Chairman, Raine & Horne. For example, a first home buyer won the race for a renovated 2-bedroom apartment at 50 Joseph Street, Summer Hill. The property was sold under the hammer by Gabrielle Rodriguez, Principal of Raine & Horne Summer Hill. The property sold for $1.252 million, which was above the reserve. “This sale demonstrates that buyers are still showing interest in well-priced and well-presented homes in Sydney,” noted Angus. Bidding started at $1.1 million and the auction attracted an audience of 45 people.

Regional markets in NSW continue to shine with Steve Pryor, Director of Raine and Horne Kiama recently selling a 49-acre rural parcel with an older brick home at Mount Brandon Road, Jerrara.

Steve told the Illawarra Mercury that: “Results like this just show the strength of the current market [that is] still in our area,” he said. “The rural market in the Kiama area is “hot, with a big demand”

“Anything 20 acres to about 100 acres is really hot,” he said. “A lot of our Sydney buyers don’t want to be on the south-western side of Jamberoo Village, they feel a bit isolated… They want to be able to jump in the car, drive down and go for a swim at the beach, and ten minutes later be back on their rural property.”

Queensland Real Estate Review

Savvy investors are sure to have noted regional real estate markets in Queensland are showing green shoots of recovery.

The Gold Coast vacancy rate eased by 0.2 percentage points to 1.9%, according to Real Estate Institute of Queensland. This market remains in the tight range with demand for rental accommodation outstripping supply.

The Sunshine Coast SD (incorporating Noosa and the Sunshine Coast LGA) is a similarly tight market, at 1.4%. Caloundra Coast is the tightest market in the state, with vacancies at just 0.6%. The Fraser Coast also tightened to 2.2%.

Regional markets of Mackay and Rockhampton experienced the largest improvements, with vacancies falling 1.7 percentage points each. “Towns such as Mackay and Rockhampton offer real estate prices that are significantly below the Brisbane median, while rental returns compare favourably to those generated by properties in the major capital cities such as Sydney and Melbourne,” said Angus Raine, Executive Chairman, Raine & Horne. “These regional growth centres appeal to owner-occupiers and investors who are prepared to look further afield, because of quality schools and hospitals, employment, diverse economies, and a comfortable way of life,” said Angus.

The Townsville market has reported its fourth consecutive fall in vacancies, to reach 4.3%, its lowest level since September 2013.

Western Australia Real Estate Review

The Western Australian real estate market is set to transition in 2018 following some challenging years, according to Craig Abbot, General Manager, Raine & Horne in Western Australia.  

“We’re seeing an increase in prices in the western suburbs of Perth, where quality, well-located properties are selling like hotcakes,” said Craig. “Nedlands, Dalkeith, Crawley and Claremont are the suburbs attracting the most interest.”

The improved real estate market outlook can be attributed to stronger economic conditions. “Overall the much-maligned resources sector is improving,” said Craig. “In Kalgoorlie, for example, there have been more gold permits recently rubber-stamped, which is translating into more mining sector jobs. There is a lot of positive trends and therefore we believe 2018 will be a stronger year for property markets across the state.”

At the same time, Craig is urging buyers and investors that now is a great time to secure a property in Perth. “In Perth, the median property price is about $463,000 compared to $906,000 in Sydney and $710,000 in Melbourne, while it’s possible to find yields of 6-8%,” said Craig. “The savvy buyers will jump in and buy now before values start to rise.”

South Australia Real Estate Review

After five years of very strong returns in Sydney and Melbourne, Michael McDonald, General Manager of Raine & Horne in South Australia is predicting investor attention will start shifting to Adelaide real estate.

“For starters, average Adelaide property values are $430,000, which is virtually equivalent to a house deposit in Sydney,” said Michael. “Moreover, we have a host of infrastructure projects underway, which will create plenty of jobs and economic growth, which augers well for Adelaide real estate longer-term.”

The South Australian Government announced a record infrastructure spend in the June 2017 budget. The $2.2 billion spend in 2017-18 is the highest on record, and well above the state government’s average annual commitment of $1.5 billion. The total infrastructure investment of $9.5 billion over four years is expected to support 5,700 extra jobs on average annually, according to numbers released by the government. A further $1.5 billion will be spent on public transport, while South Australian roads will receive $1.9 billion.

There are other major infrastructure projects heading to Adelaide in the coming years, headlined by the $50 billion contract to build a new fleet of submarines for the Australian navy. “The state and federal government spending will provide a necessary shot in the arm for the South Australian economy and therefore, Adelaide real estate prices should grow at an average of 3-5% p.a. over the next three years or so,” said Michael. “Ongoing low interest rates won’t hurt our market either.”

Victoria Real Estate Review

Record population growth has been the key ingredient of the Melbourne residential market upturn, according to the QBE Australian Housing Outlook 2017–2020.

High net overseas migration and record net interstate migration inflows have driven strong underlying demand in the Victorian capital. Low interest rates, rising rents and tight vacancy rates have contributed to sturdier market conditions, resulting in strong investor and upgrader activity. A deficiency of dwellings remains across the Melbourne market despite surging new dwelling supply, and the median house price in Melbourne increased by a cumulative 56% in the four years to $852,700 at June 2017, noted QBE. Over the year to June 2017, price growth has been heavily concentrated in middle (13.1%) and outer ring suburbs (16.4%).

In other news, the Real Estate Institute of Victoria (REIV) reports that two-bedroom houses continue to outperform other property types for growth and price, as affordability sees a shift away from the traditional home. The latest REIV figures show the citywide median price for a two-bedroom house grew by 17.1% over the year to September.

Tasmania Real Estate Review

With annual growth of 12.7%, Hobart remains Australia’s hottest market for owner-occupiers and investors right now.

Overall, the recovery in the local Tasmania economy and interstate migration is expected to keep price growth strong in Hobart in 2017/18, noted that latest QBE Australian Housing Outlook 2017–2020. The presence of an undersupply and a tight rental market will also keep upwards pressure on prices. Hobart’s median house price is forecast to rise to $470,000 by June 2020, reflecting growth of around 4% per annum or a cumulative 11%, with most of the price growth occurring at the start of this period. CoreLogic reports that average housing values in Hobart are $417,000.

On the commercial property front, Raine & Horne Commercial’s latest Commercial Insight’s report noted that Hobart a lack of stock is the main factor holding back the city’s commercial market at present. “This reflects considerable interest among investors, driven by several infrastructure projects including the runway extension of Hobart Airport to accommodate international flights, the Royal Hobart Hospital Upgrade and the relocation of several faculties of the University of Tasmania to the Hobart CBD,” said Leslie Simpson from Raine & Horne Commercial Hobart.

Northern Territory Real Estate Review

A 60% increase in the number of groups at open for inspections is a significant indicator the Darwin real estate market is set to surge, according to leading NT real estate firm, Raine & Horne Darwin.

“Compared to 12 months ago we have double and even triple the number of groups at each open home on a Saturday,” said Glenn Grantham, General Manager, Raine & Horne Darwin. “Around 75% of buyers are savvy locals, who have been at our open homes regularly over the last six months.

“They recognise that a median house price of $445,000 and rental yields of 6-10% means that there is plenty of value in Darwin real estate right now.”

On the supply side, Glenn confirmed there are 1,500 properties for sale in Darwin and Palmerston. “However, we only need 1,000 investors from around Australia looking to take advantage of our real estate affordability and robust yields that are better than anywhere else in Australia,” he said.  “If we could grab 300 investors from NSW, 200 each from Victoria and Queensland, and 100 buyers from Perth, Adelaide, and Canberra to our market, we’d quickly see listings dry up, and values start to head north.”