Raine & Horne: Market Report October 2017

October, 2017

NSW Real Estate Review

The media is in a bit of a lather about the latest Domain State of the Market Report, which shows that Sydney’s house prices were down 1.9% for the September quarter and down 0.8% for apartments.  

Let’s not forget that Sydney house prices are up in excess of 10% over the last year and significantly more than that since the middle of 2012 when low interest rates helped to turbo charge returns. Domain Group Chief Economist Andrew Wilson said, “Although there has been a minor dip in property prices since June, Sydney remains the highest-priced capital city in Australia, ahead of quick growth Melbourne. Sydney is still an ideal city for homeowners and investors looking to sell and unlock the value of their property.”

Meanwhile, the CoreLogic September home value results showed that growth rates have been remarkably strong in some regional NSW markets, particularly those close to Sydney. The strongest regional performer was the Newcastle and Lake Macquarie, where values were 15.3% higher over the past twelve months. Southern Highlands and Shoalhaven (+14.3%) and Illawarra (+13.5%) rounded out the top three regional markets based on the 12 month change in dwelling values.

Queensland Real Estate Review

Australia’s third largest city, Brisbane, has recently attracted more attention as improved housing market conditions take hold, according to CoreLogic.

Historically, peaks in the Sydney property market have proven to be good news for Brisbane. Following Sydney’s dwelling value growth peak in August 1988 of 67.1%, Brisbane dwelling values peaked at an annual growth rate of 35.3% in February 1989.  Annual growth in Sydney dwelling values also peaked in January 2002 at 20.8% with Brisbane’s rate of growth not peaking until December 2003 at 30.7%.

Moreover, Queensland has historically been a popular migration destination for people from New South Wales. CoreLogic noted that migration from New South Wales to Queensland recently picked-up, with a peak of 13,487 persons over the December 2016 quarter shifting north. Moreover, Cameron Kusher from CoreLogic said, “Since April 2017, annual employment growth in Queensland has been greater than in New South Wales.”

The latest REIQ Queensland Market Monitor reporting on June quarter median price moves has revealed that Brisbane LGA, Gold Coast, and Sunshine Coast are the powerhouse markets driving solid, sustainable capital growth. The Brisbane LGA median house price grew 3.6% in the 12 months to June, to reach a new high of $655,000. The Gold Coast grew a whopping 6.8% over the 12 months to June, reaching an annual median house price of $595,000, while the Sunshine Coast SD grew 6.2% over the year to June, to a median house price of $550,000.

Western Australia Real Estate Review

Perth’s median house price remained steady for a third straight month in September, adjusting back marginally by 1% to $510,000 for the three months to September.

REIWA President Hayden Groves said market conditions had levelled out across the city in the lead up to the traditional ‘spring selling season’, which historically peaks in November. “With the exception of sales and leasing activity, conditions across both the sales and rental market were stable. The median rent price held up at $350 per week, while stock levels in the sales and rental markets fell over the month, noted  Hayden.

Joondalup South was the top performing sub-market in September for sales activity, recording a 24% lift in September, followed closely by Kwinana with a 21% increase in transactions. The Belmont and the Western Suburbs sub-markets also posted strong results, both experiencing an 8% lift in sales,” said Hayden.

South Australia Real Estate Review

The Adelaide market with an average median house price of $519,517 is a friendly starting point for first home buyers, according to the latest Domain State of the Market Report with some of the most affordable properties of all Australian capital cities.

The increasingly popular city still offers investors and buyers the opportunity to achieve a solid return on their investment. Although there was a slight drop this quarter, the house price growth for the previous five quarters is a sign that shouldn’t be ignored. Kate Smith, Principal of Raine & Horne Semaphore, said “We have seen a strong increase in enquiries now that the footy finals and the long weekend are behind us. That said, we’ve had a pretty consistent year – we don’t really experience market lulls.

“At the same time, we’ve seen a spike in in stock levels since the grand final weekend. Because of the balance between supply and demand, we have a very strong market. Basically, from now until Easter, we’ll have a pretty strong market and a strong auction market as well.”

Victoria Real Estate Review

Buyers are often encouraged to purchase the worst house in the best street, however, REIV data suggests the right postcode may be worth more than the street name – and by up to $836,000 more to be exact.

In the year to June 30, apartments on Beach Rd Hampton recorded a median price of $1,361,000. This is $643,000 more than apartments also located on Beach Road but in Black Rock and $836,000 more than those in Mentone.

On Chapel Street apartments in desirable South Yarra recording a median price of $772,000 – $230,000 more than those at the St Kilda end of the famous retail strip. Apartment prices on Dandenong Road also varied significantly depending on the postcode with those classed as Prahran fetching $215,000 more than those in Malvern East.

REIV President Joseph Walton said a home’s postcode, which can change depending on which side of the street you live on, generally adds more value than a street address. “Given there are quite a few Melbourne roads spanning multiple suburbs, a postcode is now often worth more to the value of a home than a street address.

“Suburb rezoning in the past decade has resulted in hundreds of thousands of dollars being added to the value of many homes overnight – particularly at the higher end of the market.”

Tasmania Real Estate Review

Hobart cemented its position as Australia’s best performing housing market in September, said CoreLogic. 

The past twelve months has seen Hobart dwelling values surge 14.3% higher; the highest annual growth rate since 2004. Despite the strong capital gains, the cost of housing remains substantially lower than any other capital city with a typical house value of $412,340 and a median unit value of just under $320,000.

The Domain State of the Market for September supports this outlook for Hobart saying, “Local confidence and a balanced market suggest that Hobart’s growth will continue moving forward.”

Investors should also note that Hobart’s median weekly asking rent this quarter for houses was $375, a huge 4.2% increase compared to last quarter, and units were $320 per week, with no increase from last quarter

Northern Territory Real Estate Review

A 60% surge in the number of groups at weekend open for inspections is a strong indicator the Darwin real estate market is set to surge.

“Compared to 12 months ago, we have double and even tripled 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 6 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.”

A local buyer, for example, has snapped up a spacious, well-presented 4-bedroom house with a pool at 15 Hodgson Drive Leanyer for $533,000. “The buyer has secured a great deal for a property that would have been worth significantly more at the peak of the market a few years ago,” Glenn said.

On the supply side, Mr Grantham 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.

“Just a small percentage of property investors from other capital cities would make a significant difference to the relatively small Darwin real estate market in a short period of time.”

Longer-term the economic outlook for Darwin is promising and should flow through to the city’s property markets. “There is talk of another big oil and gas project on the way, while the ongoing troubles on the Korean Peninsula mean that an additional influx of US troops into the Darwin rental market isn’t out of the question.”