A stirring rebound has plumped the Australian property market back in the headlines. Sentiment has swung from a property abyss to a prospective boom. After two years of well-documented struggles, Australia’s housing markets are rising, delivering 4 months consecutive months of growth.
Tax cuts, three interest rate cuts and an easing by banks of their constricting lending guidelines have come together to produce significant growth. Buyers appear to be back borrowing funds and looking for a new home or investment property, while vendors are tentatively coming back into the market.
However, Australia’s property markets are highly fragmented. Melbourne and Sydney show clear signs of recovery while other states continue to struggle.
Moreover, it is the premium end of Melbourne and Sydney’s markets are driving this rebound.
Sydney’s Property Market
Sydney property is on the move! Having bottomed out in May Sydney home prices have clawed back 5.3 per cent of its 14.9 per cent decline. This is one of the briskest property bounces in decades.
Sydney house values spiked +5.0 per cent over the past quarter with unit prices grew +4.2 per cent.
Evidence suggests this recovery is concentrated at the premium end of the market where prices declined more precipitously. Off-the-plan apartments are being shunned by investors. Many who bought off the plan several years ago are experiencing problems settling with valuations on completion being well below their contract price. This when banks are reluctant to lend on these properties.
Melbourne’s Property Market
Over half the losses incurred during Melbourne’s recent property downturn have been reclaimed in one of the fastest rebounds on record. Melbourne house prices grew +5.7 per cent in the last quarter with unit prices up +5 per cent placing Melbourne’s premium properties in the vanguard of the recovery.
However, Melbourne’s property sector is highly fragmented. While inner and middle ring suburb prices are picking its cheaper outer suburbs remain in the doldrums. Still, vendors are slowly returning to the market and auction clearance rates are increasing.
Robust jobs growth, a sound economy and Australia’s healthiest population growth cemented by a 35% share of all international migrants are underpinning the economy.
The property dip in Brisbane has been shallow compared to Sydney and Melbourne. However, growth was similarly anaemic averaging only 0.8 per cent per annum over the last five years. Brisbane house prices grew +1.0 per cent over the last quarter with unit prices rising +1.7%.
With interstate and international migration levels increasing, housing affordability rosy and supply stable, Brisbane’s housing market fundamentals are looking healthier compared to comparable capital cities.
Moreover, underlying homebuyer and investor demand are placing a floor under property prices.
Adelaide’s Property Market
With Adelaide housing prices trended lower for much of 2019, its overall housing downturn has been comparatively mild compared to other capital cities. House prices in Adelaide rose +0.1 per cent over the last quarter with unit prices steady at 0 per cent growth.
Short term, Adelaide property’s looks stable, however, population growth, economic growth and long-term jobs growth, will predominantly surface in the eastern capital cities. Hence long term wealth creation opportunities reside outside Adelaide.
Perth house prices declined -1.8 per cent over the last quarter with unit prices falling -1.1 per cent over the last quarter. The Western Australian housing market’s ongoing weakness may be attributable to a combination of desultory demographic and economic factors set against an absence of consumer confidence.
Perth may be Australia’s most affordable capital city, but its unlikely prices will rise significantly for several years.
Hobart’s Property Market
Although Hobart has outperformed Australia’s property market over the past three years, its boom appears to be losing momentum. Hobart house prices rose 1.2 per cent over the last quarter with unit prices rising 0.2 per cent.
Past growth appears to have been investor-driven when Hobart displayed lagging population growth, an absence of employment drivers and insufficient infrastructure expenditure. Hobart with its small base of homebuyers will struggle to achieve an “investment grade” rating.
Canberra’s property market has enjoyed 2 per cent growth during the past year in home values reaching a fresh summit. House prices grew 2.9% over the last quarter and unit prices grew 0.4%.
Darwin’s Property Market
The Darwin property market’s small size leaves it highly susceptible economic factors. Darwin lacks significant growth drivers and investors would best avoid it.
It peaked in August 2010 is in the doldrums thanks to a soft employment market and the after-effects of the end of the mining boom.
Presently values sit 30.8 per cent below their historic apogee and a return to these prices is unlikely during the next decade.
Overall, Australia’s major housing markets appear to be on the mend. Vendor indicators strengthened over recent months with the average number of days required to sell a property dropping, indicating supply is tighter. Vendor discounting also decreased and auction clearance rates remained firm despite a greater volume of properties being put up for auction.
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