Australian Economic Property Report 2018 - The Property Winds of Change
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Australian Economic Property Report 2018 The Property Winds of Change
FOREWORD
We are proud to present our Australian Economic and Property Report which is
now in its eleventh year. You will see in this report that although the economy is
in a relatively good state, the property market in Australia is changing and market
dynamics are rapidly shifting and evolving.
This report release signals a significant change in the property market generally and
particularly within the housing affordability landscape. Following sustained growth in
residential values in major city markets over the past 3 years, we have seen a number
of factors contributing to a slowdown in many markets. A tightening of lending
policies, increased costs for offshore buyers and a general perception of peaked
prices have contributed to these changes.
For the first time in the past 24 months we are seeing capital cities decline in the
average annual median price growth and metropolitan markets experiencing a slower
decrease, whilst their regional counterparts are standing out with local markets
recording a positive growth - key indicators that market dynamics are on the move.
The winds of change are upon us. Tony Brasier
Chairman and Managing Director,
Although the Federal Budget 2018 was noticeably silent on housing and affordability PRDnationwide
measures, the Federal and State Government Budgets of 2017 were extremely
focused on first home buyers. This focus resulted in a positive flow on effect, with
first home buyer loans reporting strong growth overall in the 2018 March quarter
including impressive growth results in New South Wales (NSW) and Victoria (VIC) for
the same quarter. However, the current market dynamics have created opportunities
for affordability in general and for first home buyers specifically.
This report gives a good overview of the key economic drivers and their impact on
the property market thereby assisting you in making fact based property decisions.
WELCOME
I can feel a change in the air. The differential between the median buyer loans growth at 4.0% and
prices and growth rates of Sydney and 6.9% respectively.
Last year I reflected on the roller coaster
Melbourne compared to Brisbane and
journey in which the Australian There’s no doubt about it that
Hobart, together with the growth rate
consumer sentiment has travelled, housing affordability is still an issue.
of metropolitan versus regional markets
with an index reading of 98.6 – just The utopia of equal home ownership
left me wondering how much longer can
below the positive line. In this edition opportunity continues to be a
we really have such significant disparity
I am excited to report that consumer challenge that we all slowly chip at,
sentiment has improved over the past between markets. however there is definitely a dynamic
12 months by 3.4% and now sits over Finally we are seeing a shift in the shift in both economic and property
the positive line at 102.4 index points. A property trends. It’s about time too, key indicators. It will be interesting to
positive index reading has been evident as we need our explosive capital city see where the wind blows over the
since late 2017 and has continued past markets to return to a more sustainable next 12 months.
the first quarter in 2018. What’s more, level of growth. Australian dwelling
the timing of this report has stayed values held relatively firm in May 2018,
the same – just after the release of the and over the first half of the year capital
Federal and State Budgets. city values were down by an annual
This is without a doubt an overall growth average of -3.4%, compared
testament to a change in sentiment with a 2.6% lift in regional values.
within the Australian society, and how These figures alone should give a good
much more confident we are in the indication of the winds changing.
economy. This also underpins why you There has also been significant
will see many ‘green’ traffic lights, as changes in who has the highest
opposed to the ‘orange’ from last year’s housing affordability. In 2018 NSW has
report. consecutively had the most improved
Over the past 3 Australian Economic number of first home buyer loans,
and Property Reports I have reported increasing by 74.9% (12 months
and discussed the exploding property to December 2017) and 80.8% (12
market in Sydney and Melbourne, months to March 2018). Shockingly,
increasing affordability issues and first Tasmania (TAS) historically known as the Dr Diaswati Mardiasmo
home buyer’s cries of help in both more affordable option when compared National Research Manager,
capital cities as well as NSW and VIC. to NSW, recorded a lower first home PRDnationwide
1 © PRDnationwide 2018
CONTENTS
Overview 6
Property Growth 8
Confidence 12
Macroeconomic Climate 13
Foreign Exchange and Commodity Price 14
Labour Market 15
Construction Market 16
House Finance 17
Home Affordability 18
Dwelling Market 20
Rental Market 21
Demographics 22
The key guidance point throughout this document is the traffic light. The traffic light colour
indicates the health of market conditions and highlights what each economic and/or
property graph could mean for you.
Health of the Market Indicator:
Red: Cautious Yellow: Somewhat stable Green: Go!
Need to pay Needs to be carefully Healthy market
increased monitored. conditions.
attention.
PRDnationwide Research Team Key Contributors:
National Research Manager Research Analysts
Dr Diaswati (Asti) Mardiasmo Dr Ava Simms
Harrison French
Josh Mangleson
Christine Junidar
© PRDnationwide 2018 2
ABOUT PRDnationwide
PRDnationwide is an acknowledged industry
real estate leader. We’ve been in the business
of selling and managing properties since 1976
and have a network of over 80 franchise offices
spanning nationally and internationally (and still
counting).
PRDnationwide Research is home to the
latest and most in-depth property knowledge
in Australia and beyond, establishing us as
the leading property and real estate research
provider. Through a series of research products
we provide a wide range of direct and indirect
stakeholders with the most up-to-date data and
analysis, monetary and fiscal policy movements,
Local Government initiatives; and relevant
residential, commercial, and infrastructure
project developments.
PRDnationwide are innovators in research. Our
team of Research Analysts are key contributors
to topical discussions relevant to local, regional,
and national interests through a series of
reports, conference papers, and regular media
commentary. As a leader in research we work in
collaboration with multiple stakeholders across
a range of academic expertise, working with
multinational organisations, local communities,
and State Government Departments.
How we can help you: Partner with us:
If you would like to know more about key trends and the There is nothing worse than attempting to navigate your way
impacts of what’s happening in your market,contact our without a clear direction. Our team of highly experienced research
dedicated research team today at research@prd.com.au. analysts strive to deliver strategic advice enabling you to make
fully informed decisions and ensure your next project has a
We can provide you with secure access to all of our positive outcome.
research and the privilege of receiving our latest market
commentary, in-depth analysis, upcoming trends, If you would like to access our range of in-depth Research
up-to-date data and research forecasts. Consultancy Services, contact us at research@prd.com.au.
3 © PRDnationwide 2018 PRDnationwide Australian Economic and Property Report 2018
PRDnationwide RESEARCH:
PRDnationwide’s research division provides reliable, unbiased and authoritative property
research and consultancy to clients in metro and regional locations across Australia.
Our extensive research capability and specialised approach ensures our clients can make the most
informed and financially sound decisions about residential and commercial properties.
Our Knowledge Our People Our Services
Access to accurate and Our research team is made PRDnationwide provides
objective research is the up of highly qualified a full range of property
foundation of all good researchers who focus solely research services across all
property decisions. on property analysis. sectors and markets within
Australia.
As the first and only Skilled in deriving macro
truly knowledge-based and micro quantitative and We have the ability and
property services company, qualitative information from systems to monitor market
PRDnationwide shares multiple credible sources, we movements, demographic
experience and knowledge to partner with clients to provide changes and property trends.
deliver innovative and effective strategic advice and direction
We use our knowledge of
solutions to our clients and regarding property and market
market sizes, price structure
stakeholders. performance.
and buyer profiles to identify
We have a unique approach We have the added advantage opportunities for clients and
that integrates people, of sourcing valuable and factual provide market knowledge
experience, systems qualitative market research in that is unbiased, thorough and
and technology to create order to ensure our solutions reliable.
meaningful business are the best considered.
connections and strategic
Our experts are highly sought Our services include:
research collaborations.
after consultants for corporate, • Advisory and consultancy
We focus on understanding communities, and Government • Market analysis including profiling
new issues impacting the bodies; their advice has helped and trends
property industry such steer the direction of a number • Primary qualitative and quantitative
research
as the environment and of property developments
• Demographic and target market
sustainability, Government and secured successful analysis
policy and initiatives, the outcomes for our clients and • Geographic information mapping
economy, demographic stakeholders. • Project analysis including product
and psychographic shifts, and pricing recommendations
commercial and residential • Rental and investment return analysis
design and forecast future • Competitive project activity analysis
implications around such • Economic indicators
issues based on historical data • Social science research, including
and fact. empirical data collection methods
PRDnationwide Australian Economic and Property Report 2018 © PRDnationwide 2018 4
OVERVIEW
KEY FACTS The Federal Budget 2018 was eerily silent on the housing front,
Consumer Price Index: 1.9 % particularly when concerning first home buyers. There seems
Standard Variable 5.3% to be a more indirect approach to assisting home owners and
Home Loan Rate: those wanting to enter the market, through the three-stage
Unemployment Rate: 5.5% personal income tax proposal for 2018-2024 and the $24.5B
Average Australia $1.5/L of new major transport projects, as part of a $75.0B ten year
Fuel Price: infrastructure commitment. Personal income tax is related to
household budget and dispensable income, with any tax cuts
benefitting families and their ability to save for a home deposit.
Meanwhile, investments in infrastructure, particularly better
transport, will provide higher connectivity between outer ring
suburbs and business district hubs.
Although the Federal Budget 2018 was noticeably silent on
housing and affordability measures, interestingly it fared better
than the Federal Budget 2017 in terms of consumer confidence.
After the release of the Federal Budget 2017, the Australian
consumer sentiment remained under the positive line at 98.0
index points. However, after the release of the Federal Budget
2018 consumers are now reporting higher confidence (over the
positive line at 102.4 index points). This is potentially due to:
the targeted focus on personal income tax cuts, the promise of
better infrastructure and transport links, the impressive amount
dedicated to supplying remote housing ($550M over 5 years in
the Northern Territory (NT)), the established City Deals to create
world-class cities, or policies targeted towards the baby boomer
generation and its aging population.
It is extremely refreshing to see that policies implemented by a
variety of institutions are having their desired impact, although
at various levels of success. The Federal Budget 2017 was
extremely focused on first home buyers and rightly so. The
schemes introduced such as: the First Home Buyer Super
Savers Scheme in the Budget 2017, the First Home Buyer super
savings accounts in banks, the continuation of first home buyer
grants in most states, and the increased price range for stamp
duty exemptions; all have had their desired effect. As of the
March quarter of 2018 the number of first home buyer loans gre
by 28.0% over the past 12 months. This is something that we
should be proud of.
In the State Budget 2017, the state governments took the focus
on first home buyers even further, through state-level first home
buyer grants, stamp duty exemptions, and releasing more land
for housing development. Impressive results can be seen in NSW
and VIC, recording 80.8% and 35.3% growth in first home buyer
loans over the past 12 months to the March quarter of 2018.
5 © PRDnationwide 2018 PRDnationwide Australian Economic and Property Report 2018
Lenders have overachieved the Australasian It is not surprising to see this, as whilst NSW
Performing Right Association’s (APRA) enjoyed double digit price growth its affordability
macroprudential guidelines, with annual credit lessened making many look for alternative
growth for investment purposes tracking at just investment strategies, relocating their choices
2.8% per annum, which is well below the limit of to more affordable states such as TAS or
10%. Additionally, lending on interest only terms Queensland (QLD). Demand in these two states
comprised only 15.2% of mortgage originations then increases dramatically, outstripping the
in December 2017, which is tracking at roughly states’ ability to produce housing supply, and
half the APRA limit of 30.0%. Data from the causing price hikes. As a result, the cries of first
Reserve Bank of Australia (RBA) to the end of home buyers in NSW have quietened and have
March 2018 shows the average mortgage rate relocated to QLD and TAS.
on a 3 year fixed rate investment loan fell by 5
The word ‘change’ can be daunting to some. It
basis points over the month to 4.4%.
can present the unknown and demand out of the
There has been a real shift in affordability across box thinking. Thankfully with change sometimes
states; as well as within a state. This shift is there is a precedent, one that can be learned
not unexpected, and it is part of a natural and perhaps applied. The property landscape
progression in a country’s property cycle. Capital in Australia is changing. Market dynamics
city markets recorded a decline in the average are shifting rapidly. The once affordable is no
annual median price growth (-3.4% over the longer, the states once experiencing double
past 12 months to the 1st half of 2018). Metro digit annual median price growth are no longer,
markets experienced the same pattern, although the once investor haven is no longer, and the
at a gentler slope of -0.9%. Regional markets once that was unthinkable to first home buyers
recorded a positive growth of 2.6% over this is no longer. Thankfully the key words here are
period, which confirms the shift in market ‘no longer’, meaning that for those who are
dynamics. currently experiencing change can learn from their
predecessors. Now is the time for TAS and QLD
It seems that buyer demand has rippled away
to learn from NSW and VIC.
from the capital city areas where housing is more
affordable, as well as where jobs, amenities, Australian home loan affordability has decreased
and transport options are reasonably plentiful. by -3.3% over the past 12 months to the March
Regional markets are moving up in the property quarter of 2018. The winds of unaffordability are
cycle, whereas capital cities and metro markets blowing south, with NSW recording a growth
are heading towards a more sustainable rate of of 80.8% in first home buyers loans, whilst TAS
price growth. recorded 6.9%. An evident change in Australia’s
property landscape will create an overall balance
This pattern can also be seen between
in the medium term.
states. NSW, once considered to be the more
unaffordable market, experienced negative
median price growth in both its capital city and
metro markets (-11.1% and -8.7% respectively)
over the past 12 months to 1st half 2018. In
contrast, TAS is experiencing double digit price
growth in both its capital city and metro markets
of 13.2% and 12.6% respectively. These rates of
price growth were previously enjoyed by NSW
during the past 24 months.
PRDnationwide Australian Economic and Property Report 2018 © PRDnationwide 2018 6
MARKET CONDITIONS
PROPERTY GROWTH
Regionals Roar
AVERAGE GROWTH IN MEDIAN HOUSE PRICE
1st half 2nd half 1st half 2nd half 1st half 1st half 2nd half 1st half 2nd half 1st half 1st half 2nd half 1st half 2nd half 1st half
2016 2016 2017 2017 2018 2016 2016 2017 2017 2018 2016 2016 2017 2017 2018
NSW 12.1% 14.1% 15.6% 0.4% -11.1% 5.9% 6.0% 14.7% 6.1% -8.7% 4.1% 6.8% 9.9% 5.2% 4.0%
QLD 7.0% 3.1% 3.7% 4.6% 0.1% 3.7% 2.3% 4.4% 4.9% 1.7% 6.8% -2.7% 1.5% 1.1% -2.5%
VIC 10.0% 20.0% 33.3% 23.7% -1.6% 11.8% 10.2% 15.7% 11.2% -0.5% 8.6% 10.4% 8.1% 8.5% 6.5%
WA -11.1% -13.3% 12.0% -8.2% -17.2% -6.8% -2.3% 7.6% 2.2% -7.2% -30.2% -6.4% -11.8% -0.6% 3.9%
TAS 6.1% 11.0% 13.5% 14.4% 13.2% 5.6% 11.3% 10.2% 12.1% 12.6% 3.8% 4.6% 6.8% 4.6% 7.2%
NT -8.8% -7.9% 8.7% 0.0% -8.8% -3.8% -7.0% 1.1% 1.9% 2.4% 41.5% 14.5% -23.6% -11.0% -44.0%
SA 3.8% 13.2% -0.6% -2.0% -4.1% 5.1% 8.2% 3.2% 2.5% -2.9% -5.6% 0.2% 8.0% 0.1% -3.8%
ACT 5.6% 11.9% 13.0% 5.8% -1.3%
Capital markets are returning towards a more The regional property market has fared the best in
sustainable level of price growth in the 1st half the 1st half of 2018, recording an average annual
of 2018, recording an average negative growth price growth of 2.6% over the past 12 months.
figure for the first time in the past 24 months. The winds are definitely blowing towards regional
This marks a significant change in the Australian markets, with many in the metro and capital cities
property market, particularly as affordability looking at investment alternatives in the regional
issues in the capital cities have been front and areas. This is no surprise considering affordability
centre of national debate for quite some time. discrepancies (one can almost find a property at
There are capital cities that recorded positive half the price), but it is also due to the increase in
growth, with QLD at 0.1% and TAS at 13.2%. infrastructure and commercial commitments of
That said, Brisbane and Hobart have been local, state, and national government in regional
traditionally known as the more affordable areas. In contrast to its capital city and metro
capital cities, which attracted heightened markets, the regional markets in NSW and VIC
interest during Sydney and Melbourne’s peak are recording positive growths of 4.0% and 6.5%
cycles. This does pose a concern for Brisbane respectively. The only states to record negative
and Hobart locals of course, thus relocating growth were QLD and South Australia (SA) at
the outcry of first home buyers to these capital -2.5% and -3.8% potentially due to a downturn
cities. in their mining industries and slow employment
growth in regional areas.
Metropolitan markets are experiencing similar
trends, however at a gentler rate. Average The winds of price growth changing course.
annual price growth decreased by -0.9% over The average annual price growth for capital cities
the past 12 months to the 1st half of 2018, and metro areas are declining (-3.4% and -0.9%
which has provided more hope to first home respectively). Regionals roar with 2.6% in the
buyers waiting to enter the highly competitive 1st half of 2018, a trend that will likely continue
market. This is particularly true for those in NSW, for the rest of the year.
with a -8.7% decline. Similar to capital city
markets QLD and TAS are the only two states
with positive growth in their metro markets,
recording 1.7% and 12.6% respectively. This
further confirms the shift in property market
dynamics, from NSW-centric to TAS-centric.
7 © PRDnationwide 2018 PRDnationwide Australian Economic and Property Report 2018
AUSTRALIA PROPERTY GROWTH MAP
Darwin
NT
WA
Peak
10
11 12 1
2
QLD
Upswing 9 3 Downswing
8 4 Peak
7 6 5
Peak
11 12 1
Bottom 10 2
9 3
11 12 1 Upswing Downswing
10 2 8 4
7 6 5
Upswing 9 3 Downswing
SA
Peak
8 4
Bottom
7 6 5
11 12 1
10 2 Brisbane
Bottom
Upswing 9 3 Downswing
8 4 Peak
7 6 5
Bottom 10
11 12 1
2 NSW
Perth Upswing 9 3 Downswing
8 4
7 5
Adelaide 6
Bottom
Sydney
Capital Metropolitan Regional
VIC
Peak
Melbourne Peak
11 12 1 11 12 1
10 2 2
10
Upswing 9 3 Downswing 9 3
Upswing Downswing
8 4 8 4
7 6 5
TAS 7 6 5
Hobart
Bottom
Bottom
PRDnationwide Australian Economic and Property Report 2018 © PRDnationwide 2018 8
PROPERTY GROWTH (CONT’D)
MEDIAN HOUSE PRICE CAPITAL CITY
1st half 2nd half 1st half 2nd half 1st half
2016 2016 2017 2017 2018
NSW $1,557,500 $1,643,500 $1,800,000 $1,650,000 $1,600,000
QLD $645,000 $655,000 $669,000 $685,000 $670,000
VIC $968,000 $1,140,000 $1,290,000 $1,410,000 $1,270,000
WA $948,750 $1,015,250 $1,062,500 $932,500 $880,000
TAS $401,667 $430,000 $456,000 $492,000 $516,313
NT $520,000 $550,000 $565,000 $550,000 $515,000
SA $716,500 $727,000 $712,500 $712,500 $683,500
MEDIAN HOUSE PRICE METRO
1st half 2nd half 1st half 2nd half 1st half
2016 2016 2017 2017 2018
NSW $1,459,417 $1,559,097 $1,673,407 $1,654,296 $1,528,513
QLD $459,500 $468,600 $479,800 $491,400 $488,090
VIC $855,216 $912,516 $989,067 $1,014,911 $983,984
WA $812,048 $886,207 $873,643 $906,000 $811,098
TAS $371,000 $394,167 $408,667 $441,833 $459,990
NT $495,450 $490,600 $500,667 $500,000 $512,667
SA $578,789 $586,737 $597,368 $601,368 $580,134
ACT $1,026,738 $1,121,900 $1,159,810 $1,187,429 $1,144,886
MEDIAN HOUSE PRICE REGIONAL
1st half 2nd half 1st half 2nd half 1st half
2016 2016 2017 2017 2018
NSW $294,342 $311,951 $323,516 $328,043 $336,591
QLD $264,711 $262,538 $268,590 $265,375 $261,912
VIC $291,351 $302,810 $314,807 $328,583 $335,227
WA $245,196 $226,449 $216,202 $225,163 $224,692
TAS $238,522 $249,087 $254,826 $260,565 $273,076
NT $336,500 $300,000 $257,000 $267,000 $143,833
SA $222,521 $220,375 $240,306 $220,667 $231,257
Stop Press: The median price for the 1st half of 2018 reflects sales up to and inclusive of 30 June 2018. Average
annual growth percentage quoted does not include NT due to low number of sales transactions in the regional area.
9 © PRDnationwide 2018 PRDnationwide Australian Economic and Property Report 2018MARKET CONDITIONS
AVERAGE TIME ON MARKET AND VENDOR DISCOUNT
Average Days on Market Average Vendor Discount
Nov 2017 May 2018 Nov 2017 May 2018 WHAT DOES THIS MEAN
Sydney 36 36 -4.9% -5.6%
FOR YOU?
Melbourne 31 29 -4.1% -4.7% ✓ Capital city markets, particularly
Brisbane 61 53 -5.8% -5.6% Sydney and Melbourne, are
returning to a more sustainable
Adelaide 50 56 -6.2% -5.9% rate of price growth. Regional
Perth 69 55 -8.1% -8.1% market price growth is slowly
Hobart 31 26 -4.4% -4.8%
outpacing both capital and
metro markets, suggesting now
Darwin 76 89 -10.1% -10.8% is the time to look into regional
Canberra 43 46 -3.6% -3.8% property investment.
Combined Capital 41 37 -5.8% -5.8% ✓ Regional listings are seeing
a boost in activity, increasing
by 12.8% over the past 12
months. This surpasses the
capital city new listings growth
of 10.0%, confirming a change
STATE AND TERRITORY PROPERTIES in listing activity dynamics.
Furthermore, Sydney new
LISTED FOR SALE MAY 2018 listings only grew by 3.8%, well
below Brisbane (14.2%) and
No. of new 12 month change No. of total 12 month change
State
listings (%) listings (%)
Adelaide (19.5%) – a change in
the air is highly evident.
NSW 12,620 9.4% 51,559 12.9%
VIC 12,171 14.5% 50,388 -2.8% ✓ Average days on the market
QLD 10,984 18.0% 64,899 -0.6% for Australia’s combined capital
SA 3,371 23.8% 18,466 -1.7% cities was 37 days in May
WA 5,045 3.6% 34,840 -3.9% 2018, which is a -9.8% decline
TAS 989 -1.1% 5,318 -26.8% over the past 6 months. Perth’s
NT 276 25.5% 2,140 0.8% average days on market has
ACT 781 11.1% 2,204 6.4% declined the most (-20.3%),
National 46,237 12.8% 229,814 0.2% followed by Hobart (-16.3%).
Properties are selling the
quickest in Hobart at 26 days,
which is half the amount of time
than Brisbane (53), Perth (55),
CAPITAL CITY PROPERTIES and Adelaide (56).
LISTED FOR SALE MAY 2018 ✓ The average vendor discount
No. of new 12 month change No. of total 12 month change
is the lowest in Canberra
Capital City (-3.8%), suggesting sellers
listings (%) listings (%)
in the area are achieving
Sydney 7,106 3.8% 26,879 28.2%
the closest to their first list
Melbourne 8,740 14.2% 31,195 11.4%
asking price. Interestingly, the
Brisbane 4,527 14.9% 20,403 1.4% average vendor discount has
Adelaide 2,283 19.5% 4,707 1.7% widened in both Sydney and
Perth 3,599 2.5% 21,069 -3.7% Melbourne over the past 6
Hobart 375 -3.1% 1,100 -30.7% months, suggesting increased
Darwin 203 31.8% 1,523 -0.6% affordability for buyers – now
Canberra 760 11.1% 2,117 6.1% is the time to buy. The average
Combined capitals 27,593 10.0% 112,994 8.0% vendor discount has tightened
in Brisbane and Adelaide,
making now the time for sellers
to act.
PRDnationwide Australian Economic and Property Report 2018 © PRDnationwide 2018 10MARKET CONDITIONS
CONFIDENCE
Confidence has lifted
Australian consumer sentiment was
recorded at 102.4 index points in April BUSINESS CONFIDENCE
2018, which is above the positive line. This 25
represents a 3.4% increase in confidence 20
15
over the past 12 months and for the first
Improving
Confidence
10
time in 24 months consumer confidence 5
0
has been above 100 index points (positive -5
line) for 4 consecutive months. Furthermore, -10
in last years’ report (also released after -15
-20
the announcement of the Federal Budget -25
2017), the consumer sentiment index -30
-35
was 98.0 points (below the positive line). Sep-96
Sep-97
Sep-98
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Sep-96
Sep-97
Sep-98
Sep-99
Sep-00
Sep-01
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Families are more confident about how the Prepared by PRDnationwide Research
Source: National
Prepared Australia Bank (NAB),
by PRDnationwide last updated May-2018
Research
Australian Consumer Sentiment Six Month Moving Aver
Source: National Australia Bank (NAB), last updated May-2018
Federal Budget 2018 will impact their family
income, potentially due to the planned
reform surrounding personal income tax.
From 1 July 2018 a new tax offset of up to
$530 will be provided to middle and lower CONSUMER SENTIMENT
income earners, and the top threshold for Australian Consumer Sentiment Six Month Moving Average
130.0
the 32.5% tax bracket will be increased to 120.0
$90,000. Although the immediate effect of Increasing
Confidence
110.0
this may be modest, it seems that families
Consumer Sentiment Index
100.0
are welcoming of any forms of tax relief.
90.0
Australian business confidence has slightly 80.0
fluctuated on a quarterly basis over the past 70.0
12 months, however overall there has been
Apr-2008
Oct-2008
Apr-2009
Oct-2009
Apr-2010
Oct-2010
Apr-2011
Oct-2011
Apr-2012
Oct-2012
Apr-2013
Oct-2013
Apr-2014
Oct-2014
Apr-2015
60.0
Apr-2008
Oct-2008
Apr-2009
Oct-2009
Apr-2010
Oct-2010
Apr-2011
Oct-2011
Apr-2012
Oct-2012
Apr-2013
Oct-2013
Apr-2014
Oct-2014
Apr-2015
Oct-2015
Apr-2016
Oct-2016
Apr-2017
Oct-2017
Apr-2018
an improvement of 33.3% between March Month
Prepared by PRDnationwide Research
2017-2018. This is good news as in last Month
Source: Westpac/Melbourne Institute, last updated May-2018
Prepared by PRDnationwide Research
Source: Westpac/Melbourne Institute, last updated May-2018
year’s report we also saw stable growth.
The latest ANZ/Property Council of Australia
survey published in April 2018 found WHAT DOES THIS MEAN FOR YOU?
confidence in the property and construction
✓ Consumers are feeling more confident with the
industry was at its highest level in 5 years. current economic climate, however with the Australian
The Federal Budget 2018 will continue to Consumer Index only 2 points above positive levels,
there is still a degree of cautiousness in spending.
extend the $20,000 instant asset tax write-
off, with plans to increase the small business ✓ Business confidence is at the highest level since the
Global Financial Crisis (GFC), which will continue to
tax discount rate from 5.0% to 8.0%. This grow with the government’s plans to further reduce tax
is consistent with their commitment to drive burdens for small and medium businesses.
growth by prioritising small to medium
✓ The Federal Budget’s 2018 initiatives for both personal
businesses, which is welcome news by income and business taxes may see an increase in
many Australian entrepreneurs. commercial (including property-related) and retail
spending over the next 12 months.
11 © PRDnationwide 2018 PRDnationwide Australian Economic and Property Report 2018MARKET CONDITIONS
MACROECONOMIC CLIMATE
Low level interest rates are continuing to
support the Australian economy
INFLATION In June 2018 the RBA decided to
8% leave the cash rate at 1.5 points,
Excluding volatile items All groups
7%
which was a historical low for the past
20 consecutive months. The Board
6%
judged that holding the stance of
Annual Change in CPI
5% monetary policy unchanged at this
4%
meeting would be consistent with
Reserve Bank's Target Range
sustainable growth in the economy
3%
and achieving the inflation target
2% over time.
1%
The Australian government plans
0% to return the Federal Budget to a
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
balanced point, whereby the budget
Prepared by PRDnationwide Research
Source: RBA Table G1 Consumer Price Index, last updated May-2018 Month
deficit is forecasted to improve from
3.0% of Gross Domestic Product
(GDP) in 2013-2014 to 0.8% of GDP
HOUSING LOAN INTEREST RATE in 2018-2019. Nett debt is currently
12%
Standard Variable Bank Loan
18.6% of GDP and is projected
Average 3yr Fixed Rate to fall to 14.7% by 2021–2022.
10% Many celebrated the news that the
Standard Bank Variable Housing Loan Rate
government is no longer borrowing
8% money to meet everyday expenses,
as this is the first time since the GFC.
6%
Inflation (consumer price index) for
4%
all groups was recorded at 1.9% in
March 2018, which is just below the
2%
RBA’s inflation target rate of 2.0%.
That said, this is the closest the
inflation rate has travelled towards the
0%
RBA target range over the past 36
Nov-08
Nov-09
May-08
May-09
Nov-10
May-10
May-11
Nov-11
Nov-12
May-12
Nov-13
May-13
May-14
Nov-14
Nov-15
May-15
Nov-16
May-16
Nov-17
May-17
May-18
Month
months, in which the 1.9% inflation
Prepared by PRDnationwide Research
Source: RBA Table F5 Indicator Lending Rates, last updated May-2018
rate has remained steady for the past
4 quarters. Stability in the inflation
index suggests relatively unchanged
prices for goods and services. This
WHAT DOES THIS MEAN FOR YOU? is good news for families preparing
✓ The standard variable bank loan has remained at 5.2% over the past 11 their budgets at a time when wage
months, providing home mortgage owners prolonged opportunity to service growth has been subdued. This may
their loans at a stable rate. have contributed to stable positive
✓ The March 2018 inflation rate is one of the closest inflation rate to enter the consumer confidence over the past
RBA’s target range, indicating healthier economic conditions. consecutive 4 months in early 2018,
✓ Progress in reducing unemployment and having inflation return to target is which was a refreshing change to
expected. fluctuating levels experienced over
the past 24 months.
PRDnationwide Australian Economic and Property Report 2018 © PRDnationwide 2018 12MARKET CONDITIONS
FOREIGN EXCHANGE & COMMODITY PRICE
The Australian Dollar is where it needs to be
250
200
RBA COMMODITY PRICE INDEX
RBA Commodity Price Index Value
250
150
The Australian Dollar is performing at a rate that is
200 needed to further stimulate economic growth, ensuring
the outflow of Australian products into the world
RBA Commodity Price Index Value
100
150
economy. Over the past 12 months to June 2018
the Australian Dollar has strengthened against the
100
50 United States Dollar (by 2.6%), New Zealand Dollar (by
50
2.9%), and Hong Kong Dollar (by 1.7%). However, the
Australian Dollar has depreciated the most against the
0
Malaysian Ringgit over this time frame (by -5.7%).
May-1988
May-1989
May-1990
May-1991
May-1992
May-1993
May-1994
May-1995
May-1996
May-1997
May-1998
May-1999
May-2000
May-2001
May-2002
May-2003
May-2004
May-2005
May-2006
May-2007
May-2008
May-2009
May-2010
May-2011
May-2012
May-2013
May-2014
May-2015
May-2016
May-2017
May-2018
0
May-1988
May-1989
May-1990
May-1991
May-1992
May-1993
May-1994
May-1995
May-1996
May-1997
May-1998
May-1999
May-2000
May-2001
May-2002
May-2003
May-2004
May-2005
May-2006
May-2007
May-2008
May-2009
May-2010
May-2011
May-2012
May-2013
May-2014
May-2015
May-2016
May-2017
May-2018
250
Month
Prepared by PRDnationwide Research
Source: RBA Table I2 Commodity Prices, last updated May-2018
Prepared by PRDnationwide Research
Month
Source: RBA Table I2 Commodity Prices, last updated May-2018
The RBA Commodity Price Index has declined over
200 TRADE WEIGHTED
EXCHANGE RATE INDEX
RBA Commodity Price Index Value
the past 12 months to May 2018, by -14.9% to a 250
109.3 index in Australian Dollar terms. That said, 150
this represents an increase of 0.3% on a monthly 200
RBA Commodity Price Index Value
average basis. The rural and base metals subindices
100
increased in the month, while the non-rural index was 150
unchanged. Over the past year the index has been led 100
by higher Liquified Natural Gas (LNG), thermal coal, 50
and oil prices. 50
The Trade Weighted Exchange Rate Index has 0
0
May-1988
May-1989
May-1990
May-1991
May-1992
May-1993
May-1994
May-1995
May-1996
May-1997
May-1998
May-1999
May-2000
May-2001
May-2002
May-2003
May-2004
May-2005
May-2006
May-2007
May-2008
May-2009
May-2010
May-2011
May-2012
May-2013
May-2014
trended relatively stable over the past 12 months to
May-1988
May-1989
May-1990
May-1991
May-1992
May-1993
May-1994
May-1995
May-1996
May-1997
May-1998
May-1999
May-2000
May-2001
May-2002
May-2003
May-2004
May-2005
May-2006
May-2007
May-2008
May-2009
May-2010
May-2011
May-2012
May-2013
May-2014
May-2015
May-2016
May-2017
May-2018
May 2018. The index was at 63.4 index points in Prepared by PRDnationwide Research
Month
Source: RBA Table I2 Commodity Prices, last updated May-2018 Month
June 2018, reflecting a -3.2% decrease over the past Prepared by PRDnationwide Research
Source: RBA Table I2 Commodity Prices, last updated May-2018
12 months. That said, this is an improvement when
compared to the March-May 2018 index reading,
which suggests a return towards higher purchasing
parity power. As the index is weighted against 24 WHAT DOES THIS MEAN FOR YOU?
other currencies (at present), it is important to treat The Australian economy continues to strengthen,
✓
any improvement with caution as many of Australia’s and is shaking off the downturn in mining investment.
trading partner currencies have experienced a That said higher oil and LNG prices continue to
create a dent in household budgets.
devaluation.
Exchange Rates The Federal Budget 2018 plans to support overseas
✓
investment by reinstating stamp duty concessions
for off-the-plan apartment purchases in CBD’s and
JPY USD EUR NZD GBP
a review of the impact of the absentee owner’s land
Jun-2016 78.4200 0.7331 0.6463 1.0600 0.5098 tax surcharge. This is to further stimulate inner-city
Jun-2017 82.5700 0.7464 0.6626 1.0477 0.5798 housing supply.
Jun-2018 82.2600 0.7659 0.6459 1.0784 0.5681
% Annual Change -0.4% 2.6% -2.5% 2.9% -2.0%
The Australian Dollar remains within the range that
✓
it has been in over the past 2 years, which creates a
HKD MYR CNY SGD stable platform for import/export into Australia.
Jun-2016 5.6946 3.0061 4.8125 0.9985 An appreciating exchange rate is expected to result
Jun-2017 5.8155 3.1849 5.0784 1.0312
Jun-2018 5.9161 3.0036 4.8391 1.0097 in a lower pick-up in economic activity.
% Annual Change 1.7% -5.7% -4.7% -2.1%
13 © PRDnationwide 2018 PRDnationwide Australian Economic and Property Report 2018MARKET CONDITIONS
LABOUR MARKET
Unemployment rate is on the mend
The unemployment rate was recorded at 5.5% confidence in the NT after the state government’s
in April 2018, which was a 2.9% improvement announcement of no Land Tax, exemption of payroll
compared to 12 months prior. The trend tax for locals, and infrastructure spending in the
participation rate increased to 65.7% in April State Budget 2018.
2018, which is the highest it has been since 1978.
Local job creation and growth in areas outside of
Employment increased by around 14,000 persons
the CBD and its immediate ring need to continue
(8,000 part-time and 6,000 full-time capacity).
being a focus to improve liveability conditions.
The unemployment rate has hovered within the
Choosing affordable suburbs (i.e state average loan
5.7-5.5% band over the past 12 months, which
+ 20% premium) within 20km from the CBD with
is the lowest unemployment rate band Australia
an unemployment rate below the state’s average is
has seen since the 2011 GFC. SA and VIC have
no easy task. First home buyers must be prepared
improved the most over the past 12 months,
to pay a hefty premium of up to 88% in Sydney and
declining by -21.1% and -16.1% respectively. The
30% in Melbourne, or settle for a long commute in a
NT experienced an increase in unemployment rate
more affordable suburb.
by 2.6%. However, there is increasing business
UNEMPLOYMENT RATE
9.0%
Australian Unemployment Rate
8.0%
7.0%
6.0%
Unemployment Rate
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Oct-1998
Oct-1999
Oct-2000
Oct-2001
Oct-2002
Oct-2003
Oct-2004
Oct-2005
Oct-2006
Oct-2007
Oct-2008
Oct-2009
Oct-2010
Oct-2011
Oct-2012
Oct-2013
Oct-2014
Oct-2015
Apr-1998
Apr-1999
Apr-2000
Apr-2001
Apr-2002
Apr-2003
Apr-2004
Apr-2005
Apr-2006
Apr-2007
Apr-2008
Apr-2009
Apr-2010
Apr-2011
Apr-2012
Apr-2013
Apr-2014
Apr-2015
Apr-2016
Oct-2016
Oct-2017
Apr-2017
Apr-2018
Prepared by PRDnationwide Research
Source: ABS Cat 6202 Table 1 Col BM. Last updated June-2018
WHAT DOES THIS MEAN FOR YOU?
✓ U
nemployment levels have improved over the past 12 months, yet the inflation rate has remained stable. This should
improve the society’s purchasing power in general. This will have a positive spill-over effect on the property market and
we should see an increase in sale transactions in the 2nd half of 2018.
✓ T
he premium cost of living in a suburb with a low local unemployment rate is extremely high, suggesting the need to
establish job creation policies within 20km from the CBD.
PRDnationwide Australian Economic and Property Report 2018 © PRDnationwide 2018 14MARKET CONDITIONS
CONSTRUCTION MARKET
Residential construction strategically assists
a return to more sustainable price growth
Residential construction in Australia amounted Foreign investor interest in residential construction
to $15.7B in March 2018, a -10.2% decline over has slightly subdued over the past 12 months. This
the past 6 months. Some may be concerned was partly due to stricter regulations regarding
that this will result in an undersupply and more ownership in newly built residential development
price hikes, particularly in capital cities, however from the Federal Budget 2017 initiatives, but
annually this is a 4.7% increase. Furthermore, also due to stricter lending policies from banks.
$15.7B is above the 10 year average of $12.2B, The Federal Budget 2018 plans to tighten tax
suggesting the residential construction market concessions including through stapled structures,
continues to thrive, and with the potential of which will ensure that foreign investors pay their
an oversupply in some areas, will assist in the fair share of tax. This will allow Australian investors
return to a more sustainable price growth. Over to compete on fairer terms with foreign investors;
the past 12 months residential construction has particularly when investing in land-rich investments.
increased in NSW and VIC by 8.8% and 7.0% The Property Council of Australia acknowledges
respectively, resulting in increased affordability that overseas investment is often essential to
and more first home buyer loans in both states. getting bank approval for office developments and
SA and TAS also experienced an increase by inner-city housing supply. They have advocated
12.1% and 29.8% respectively, which although towards the VIC state government for reinstating
is having a reverse effect in NSW and VIC, it stamp duty concessions for off-the-plan apartment
is much needed to satisfy interstate investor purchases in the Melbourne CBD and a review
demand and allow local first home buyers the of the impact of the absentee owner’s land tax
chance to enter the market in the near future. surcharge in the VIC State Budget 2018.
RESIDENTIAL CONSTRUCTION MARKET
$20
Residential building work done
$18
$16
$14
Total value ($billions)
$12
10-year avg: 12.1
$10
$8
$6
$4
$2
$0
Mar-2007
Sep-2007
Dec-2007
Mar-2008
Sep-2008
Dec-2008
Mar-2009
Sep-2009
Dec-2009
Mar-2010
Sep-2010
Dec-2010
Jun-2007
Mar-2011
Sep-2011
Jun-2008
Dec-2011
Mar-2012
Sep-2012
Dec-2012
Jun-2009
Mar-2013
Sep-2013
Dec-2013
Jun-2010
Mar-2014
Sep-2014
Dec-2014
Jun-2011
Mar-2015
Sep-2015
Dec-2015
Jun-2012
Jun-2013
Mar-2016
Sep-2016
Dec-2016
Mar-2017
Sep-2017
Jun-2014
Dec-2017
Mar-2018
Jun-2015
Jun-2016
Jun-2017
Prepared by PRDnationwide Research
Source: ABS Cat 8755. Last updated June 2018
WHAT DOES THIS MEAN FOR YOU?
The increasing amount of residential construction will create a housing oversupply in some parts of Australia, however
✓
this is needed to bring back price growth into more sustainable levels.
Tighter tax laws for foreign investors will allow Australian investors to compete on fairer terms, however this may have
✓
a negative effect in regional areas.
15 © PRDnationwide 2018 PRDnationwide Australian Economic and Property Report 2018MARKET CONDITIONS
HOUSE FINANCE
The balance between owner-occupiers and investors
has shifted to normal levels
The gross value of housing finance commitments has totalled $428.2B over the past 12 months
to March 2018, an increase of 1.8%. This is an increase in housing finance commitment overall, as
the previous year’s growth (March 2016-2017) was recorded at 1.3%. The Budget’s 2017 property
investment tax policies were designed to dampen investor activity, so as to give owner-occupiers
(particularly first home buyers) a fairer chance. This has been successful considering that investment
finance decreased by -2.0% over the past 12 months to March 2018, and in contrast, owner-occupiers
increased by 4.1%.
HOUSING FINANCE COMMITMENTS
Owner Occupied Investment
25
20
Value of Commitments ($billion)
15
10
5
0
Sep-08
Sep-09
Sep-10
Mar-08
Mar-09
Mar-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Sep-16
Sep-17
Mar-16
Mar-17
Mar-18
Month
Prepared by PRDnationwide Research
Source: ABS Cat. No. 5609, last updated June-2018
The balance between owner-occupier and 2018, meaning that the proportion of investor
investment finance have stood comfortably finance was a low 34.1% - one of the lowest
around the 65%-35% split over the past 8 to figures since 2014/2015. This confirms a shift
10 years. The balance shifted towards a 60%- in market dynamic, with the wind blowing
40% split in 2013 and tipped to 55%-45% in towards owner occupiers and returning to its
2014/2015. These were the key years in which previous comfortable balance.
Sydney and Melbourne prices skyrocketed
and cries for inequity in the balance between WHAT DOES THIS MEAN FOR YOU?
investors and owner-occupiers were voiced by
Owner-occupier spending has ramped up over the
✓
many. past 12 months, taking over investor spending. This
brings more confidence into the market, particularly
Owner-occupiers committed $271.1B over the for the first home buyers.
past 12 months to March 2018, which brings
Moving into the income growth cycle of real estate,
✓
the proportion of owner occupiers finance to key measures announced in the Federal Budget
65.9%. This is the highest figure since August 2018 point to a strong upside for investors over
the medium term. There is a need to continuously
2012 and just above figures in November/ monitor the current balance between owner-
December 2015. Investment finance was occupiers and investor finance.
$157.1B over the past 12 months to March
PRDnationwide Australian Economic and Property Report 2018 © PRDnationwide 2018 16HOME AFFORDABILITY
A change in which is the most affordable state
Home
Home Loan
Loan Affordability
Affordability
HOME LOAN AFFORDABILITY INDEX
New South Wales Victoria Queensland
New South Wales Victoria Queensland
South Australia Western Australia Tasmania
South Australia Western Australia Tasmania
Northern Territory Australian Capital Territory Australia
Northern Territory Australian Capital Territory Australia
90.0
90.0
80.0
80.0
70.0
70.0
60.0
60.0
50.0
50.0
40.0
40.0
30.0
30.0
20.0
20.0
10.0
10.0
0.0
0.0
Prepared by PRDnationwide Research Last updated: June 2018
Prepared by PRDnationwide Research Yearly Last updated: June 2018
Source: Real Estate Institute of Australia
Source: Real Estate Institute of Australia Yearly
WHAT DOES THIS MEAN FOR YOU?
Australia’s home loan affordability decreased by -3.3% over the past 12 months to March 2018, suggesting that the
✓
increase in dwelling supply is severely needed to meet demand and balance the market in the near future.
The once most unaffordable state, NSW, only decreased by -0.7% in the home loan affordability index. TAS, the once
✓
more affordable state, decreased by more than fivefold at -3.8%. This is a real shift in home loan affordability, with the
wind blowing south.
ACT continues to be the most affordable state to live in, with its home loan affordability index of 50.8 in March 2018.
✓
This is closely followed by the NT at 50.4 index points.
QLD and SA are now neck and neck in home loan affordability, at 36.4 and 36.8 index points respectively. Once again
✓
the wind is blowing south, as historically SA has been the more affordable option compared to QLD.
Families in the NT will see the most improvements in household income budget as it is the only state whose
✓
proportion of income required to meet home loan and rent payments decreased (by -6.2% and -5.1% respectively).
VIC leads in the number of first home buyers approved, recording 8,169 loans. That said, NSW leads in first home
✓
buyer loans growth at 80.8%, which eclipses historically more affordable states such as QLD (5.0%), SA (7.5%), and
TAS (6.9%).
17 © PRDnationwide 2018 PRDnationwide Australian Economic and Property Report 2018MARKET CONDITIONS
NUMBER OF FIRST HOME BUYER LOANS
March Q March Q The number of first home buyer loans
State Growth
2018 2017 approved in Australia has increased
NSW 6501 3596 80.8% by 28.0% over the past 12 months to
VIC 8169 6036 35.3%
the March quarter of 2018. This brings
QLD 5639 5371 5.0%
SA 1297 1206 7.5% us to 26,458 first home buyer loans
WA 3578 3559 0.5% approved in the March quarter of
TAS 420 393 6.9%
2018. Although this is not the highest
NT 166 128 29.7%
ACT 688 381 80.6%
number of loans (it was at 30,932 in
National 26458 20670 28.0% the December quarter of 2017), it is
Source: Real Estate Institute of Australia, Housing Affordability Report, March Quarter 2018 one of the highest annual percentage
increases over the past 36 months.
Higher first home buyer activity brings
good news, particularly as the Federal
Budget’s 2017 initiatives honed in
PROPORTION OF FAMILY INCOME REQUIRED on policies that were designed to
TO MEET HOME LOAN REPAYMENTS encourage first home buyer activity
growth. Interestingly, the Federal
March Q March Q
State
2018 2017
Growth Budget 2018 was silent on the matter,
NSW 36.50% 36.20% 0.8%
with the government believing that first
VIC 34.10% 32.50% 4.9% home buyers can capitalise on policies
QLD 27.50% 26.70% 3.0% put in place by the Federal Budget
SA 27.20% 26.20% 3.8%
2017.
WA 23.60% 23.40% 0.9%
TAS 24.50% 23.60% 3.8%
The proportion of family income
NT 19.80% 21.10% -6.2%
ACT 19.70% 20.10% -2.0% required to meet home loan
National 31.30% 30.40% 3.0% repayments increased by 3.0% over
Source: Real Estate Institute of Australia, Housing Affordability Report, March Quarter 2018 the past 12 months to the March
quarter of 2018, coinciding with a
-3.3% decrease in the home loan
affordability index. The wind continues
to blow south as families in NSW
PROPORTION OF FAMILY INCOME REQUIRED only need to spend an extra 0.8%
TO MEET RENT PAYMENTS of their income to meet home loan
State
March Q March Q
Growth
repayments, whilst those in TAS need
2018 2017
to spend 3.8%. Families renting need
NSW 30.10% 29.00% 3.8%
to spend an extra 0.4% in March
VIC 23.80% 23.80% 0.0%
QLD 23.10% 23.70% -2.5%
2018 to meet rental payments,
SA 22.40% 22.60% -0.9% however those renting in QLD, WA
WA 16.30% 17.60% -7.4% and the NT can expect an increase in
TAS 28.10% 26.60% 5.6%
NT 22.50% 23.70% -5.1%
their disposable household budget, as
ACT 18.50% 17.90% 3.4% the proportion needed to meet rental
National 24.80% 24.70% 0.4% payments decrease by -2.5%, -7.4%
Source: Real Estate Institute of Australia, Housing Affordability Report, March Quarter 2018 and -5.1% respectively.
PRDnationwide Australian Economic and Property Report 2018 © PRDnationwide 2018 18MARKET CONDITIONS
DWELLING MARKET
First home buyers rejoice as dwelling supply increases
23,000
Total Dwelling Approvals Annual Average
21,000
Total number of dwelling units approved
19,000
Dwelling approvals have increased by 8.5% over 17,000 DWELLING APPROVALS
the past 12 months to April 2018, clocking 17,320 23,000
Total Dwelling Approvals Annual Average
15,000
approvals. This is just under the 10 years moving 21,000
Total number of dwelling units approved
average of 18,992 in April 2018, suggesting that 13,000
19,000
17,000
overall there is a good chance for a balanced market 11,000
15,000
between demand and supply in the near future. This 13,000
9,000
further allows for more first home buyers to take 11,000
advantage of associated grants and stamp duty 7,000
9,000
exemptions provided by the state government. 5,000
7,000
Jun-1984
Jun-1985
Jun-1986
Jun-1987
Jun-1988
Jun-1989
Jun-1990
Jun-1991
Jun-1992
Jun-1993
Jun-1994
Jun-1995
Jun-1996
Jun-1997
Jun-1998
Jun-1999
Jun-2000
Jun-2001
Jun-2002
Jun-2003
Jun-2004
Jun-2005
Jun-2006
Jun-2007
Jun-2008
Jun-2009
Jun-2010
Jun-2011
5,000
Jun-1984
Jun-1985
Jun-1986
Jun-1987
Jun-1988
Jun-1989
Jun-1990
Although there are increasing vacancy rates in some
Jun-1991
Jun-1992
Jun-1993
Jun-1994
Jun-1995
Jun-1996
Jun-1997
Jun-1998
Jun-1999
Jun-2000
Jun-2001
Jun-2002
Jun-2003
Jun-2004
Jun-2005
Jun-2006
Jun-2007
Jun-2008
Jun-2009
Jun-2010
Jun-2011
Jun-2012
Jun-2013
Jun-2014
Jun-2015
Jun-2016
Jun-2017
NSW VIC QLD WA SA TAS
capital cities, this is mostly contained within the Prepared by PRDnationwide Research
Prepared
180 ABS
Source:
by Cat.
PRDnationwide Research
No. 8731, last updated June-2018
Source: ABS Cat. No. 8731, last updated June-2018
inner-CBD areas and units/apartments of a particular
type (usually 2 bedrooms 2 bathrooms). Vacancy 160
Moving Annual Average Time to Buy a Dwelling Index
rates in the outer-CBD ring suburbs, particularly TIME TO BUY A DWELLING INDEX
140
for townhouses and houses, are still quite low. 180
NSW VIC QLD WA SA TAS
The vacancy rate in metro and regional areas are 160
120
typically below that of the inner-CBD and trending
Moving Annual Average Time to Buy a Dwelling Index
140
downwards, suggesting that the increase in dwelling 100
approvals is warranted to answer rental demand.
120
80
Dwelling approvals increased the most in ACT and 100
VIC by 22.7% and 58.2% respectively, and rightly 80
60
so to ensure demand is met and affordability is not 60
compromised. 40
Jun-08
Jun-09
Sep-08
Dec-08
Mar-09
Mar-10
Jun-10
Sep-09
Dec-09
Mar-11
Jun-11
Sep-10
Dec-10
Mar-12
Jun-12
Sep-11
Dec-11
Mar-13
Jun-13
Sep-12
Dec-12
Mar-14
Jun-14
Sep-13
Dec-13
Mar-15
Jun-15
Mar-16
Jun-16
Sep-14
Dec-14
Sep-15
Dec-15
40
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Jun-10
Sep-09
Dec-09
Mar-10
Jun-11
Jun-12
Sep-10
Dec-10
Mar-11
Sep-11
Dec-11
Mar-12
Jun-13
Sep-12
Dec-12
Mar-13
Jun-14
Sep-13
Dec-13
Mar-14
Jun-15
Sep-14
Dec-14
Mar-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Jun-18
Sep-17
Dec-17
Mar-18
The time to buy a dwelling index has increased by Prepared
Prepared by PRDnationwide
by PRDnationwide Research Research
Source: Westpac/ Melbourne Institute, last updated Jun- 2018
Source: Westpac/ Melbourne Institute, last updated Jun- 2018
an average of 6.5% across the 6 states over the
12 months to Q2 2018. Interestingly, NSW leads in
the time to buy a dwelling index by 26.7%, due to WHAT DOES THIS MEAN FOR YOU?
a combination of many factors such as: increasing
An increase in dwelling approvals may lead to a
✓
level of housing supply, slower price growth in balance in supply and demand, or an oversupply
the capital city, stronger wage growth, and more in some markets. This paves the way for increased
accommodating policies for first home buyers. affordability, which is good news for first home buyers.
This is followed by VIC (17.8%), SA (12.7%) and On average the time to buy a dwelling index has
✓
QLD (5.9%). Perhaps shockingly the time to buy increased by 6.5% over the past 12 months to Q2
2018, bolstered by increased confidence in the
a dwelling index has decreased the most in TAS,
economy. The property market should see increasing
by -15.6%, potentially due to first home buyers transaction activity for the rest of 2018.
feeling priced out by interstate investors. This further
TAS for the first time in 24 months is the least
✓
confirms that there is dynamic shift in the Australian preferred state to purchase a dwelling, with the time
property market, as TAS was favoured over NSW to buy a dwelling index decreasing by -15.6%. In
15-24 months ago. contrast, the time to buy a dwelling index in NSW
increased by 26.7%, confirming the wind is indeed
blowing south.
19 © PRDnationwide 2018 PRDnationwide Australian Economic and Property Report 2018MARKET CONDITIONS
RENTAL MARKET
Declining rental vacancy rate is good news for investors
Over the past year to the March quarter of 2018, (Sydney Melbourne and Brisbane) are no longer
the Australian national residential vacancy rate has the top three for either houses or units. In fact,
decreased by 0.6% and is currently at 2.4%. The both Sydney and Melbourne hold the lowest
Real Estate Institute of Australia (REIA) has put a implied house rental yield of 2.7% and also the
3.0% healthy rental market demand benchmark, lowest implied unit rental yield at 3.7% and 3.9%
which confirms that not only is the Australian respectively. The winds have indeed changed
rental market healthy, its declining trend suggests directions.
6.0%
Vacancy Rate - March qtr 2018
it’s travelling at a healthier rate. Canberra held the Annual Change (points)
tightest vacancy rate in the March quarter of 2018 5.0%
QUARTERLY VACANCY RATE
at 0.5%, whereas Brisbane holds the highest at 6.0% 1.0
Vacancy Rate - March qtr 2018
4.0%
2.7%, which is not surprising due to the oversupply Annual Change (points)
Vacancy Rate
5.0% 0.5
of inner-CBD apartments. Interestingly, in contrast 3.0%
to the rest of the capital cities Sydney’s vacancy
Annual Chane (points)
4.0% 0.0
Vacancy Rate
rate has increased by 0.4 points of the past 12 2.0%
3.0% -0.5
months. This suggests more people are buying 2.0% -1.0
in Sydney, complimenting NSW’s record breaking 1.0%
80.8% increase in first home buyer loans.
1.0% -1.5
0.0%
0.0% -2.0
Sydney Melbourne
Melbourne Brisbane AdelaideHobart Perth Hobart Darwin Canberra Natio
That said, Sydney continues to be the most Sydney Brisbane Adelaide Perth Darwin Canberra National
Prepared by PRDnationwide Research. National rate is the weighted average vacancy rate for the eight capital cities
expensive capital city to rent, at $520 for a 3
Prepared by PRDnationwide
Source: REIA Research.
and SQM Research, last National rate is the weighted average vacancy rate for the eight capital cities
updated June-2018
Source: REIA and SQM Research, last updated June-2018
bedroom house and $560 for a 2 bedroom unit.
ANNUAL MEDIAN RENT PRICES
There was an extremely interesting trend in the MEDIAN RENTAL PRICE
rental market in the March quarter of 2018, with 3 b/r House
Sydney
$520
Melbourne
$400
Brisbane
$390
Adelaide
$355
Perth
$330
Hobart
$400
Darwin
$477
Canberra
$495
many 2 bedroom unit rental prices outpacing 2 b/r Unit $560 $440 $400 $300 $320 $335 $366 $450
3 bedroom houses. This is true for Sydney (as ANNUAL % CHANGE
Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra
above), Melbourne ($400 and $440 respectively), 3 b/r House 4.0% 2.6% 0.0% 1.4% -5.7% 8.1% -3.4% 5.9%
2 b/r Unit 5.7% 10.0% 3.9% 3.4% -3.0% 11.7% -2.4% 7.1%
and Brisbane ($390 and $400 respectively).
Investors will benefit the most in Hobart, as over
the past 12 months median rental price change WHAT DOES THIS MEAN FOR YOU?
was the highest at 8.1% for 3 bedroom houses Vacancy rates have improved the most most in Perth by
✓
and 11.7% for 2 bedroom units. -1.4%, presenting exciting opportunities for the rest of
2018. Canberra holds the tightest vacancy rate at 0.5%.
The implied rental yield for the combined Australian
The implied rental yield for May 2018 is the highest in
✓
capital cities in May 2018 was 2.9% for houses Hobart at 4.4% and 6.0%. Combined with affordable
and 4.0% for units, which shows a relatively stable sale prices this continues to create an investor haven.
trend over the past 12 months. Those looking to
Investment potential dynamics in Sydney, Melbourne,
✓
invest in houses will benefit the most in Hobart and Brisbane are changing, with 2 bedroom unit median
(4.4%), Darwin (4.3%) and Canberra (4.1%). rent prices eclipsing that of 3 bedroom houses.
Whereas those looking to invest in units should Hobart, Canberra and Darwin replace Sydney,
✓
consider Hobart (6.0%), Canberra (5.7%) and Melbourne and Brisbane as capital cities with the
Darwin (5.6%). These figures further confirm highest implied rental yield for houses and units. It is
time for investors to change their property investment
that there is a change in the Australian property direction.
market, as the historical rental yield bread-winners
PRDnationwide Australian Economic and Property Report 2018 © PRDnationwide 2018 20You can also read
