The Property Report AUTUMN 2019 - The Agency
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AUTUMN 2019 The Property Report
PROPERTY REPORT
In good news though, we have seen a strong start to the year in
terms of the volume of sales, and homes selling that remained on
the market from late last year. There has also been considerable
buyer activity, with a re-calibration between seller’s price
expectations and that of home buyers.
As reported by CoreLogic, national dwelling values dropped by
0.6 per cent in March, which is a 7.4 per cent decline since the
property market’s peak in October 2017. To put this in perspective
though, most home owners are still in a strong equity position.
Despite the decline over the last year and a half, national dwelling
values still sit 15.9 per cent higher than they did five years ago.
The property market has always been cyclical and should never be
viewed as a short-term investment.
CoreLogic’s Head of Research, Tim Lawless, has also noted that
the rate of property value decline has slowed in 2019 from its
height in December 2018, when home prices fell by 1.3 per cent
across the capital cities**. In fact, the rate of home value decline
across the nation has slowed again in March, 0.6 per cent is the
smallest decline since October 2018 when values fell by 0.5 per cent.
Across Australia it continues to be a market of highs and lows.
We are still seeing suburb records broken in some postcodes and
reserves blown away at competitive auctions, while in others,
values have been harder hit. In this report we take you through our
Welcome to The Agency’s autumn 2019 property report. Over core markets of Sydney, Perth, Melbourne and the Gold Coast,
my 30 years in real estate the two key levers I have observed providing key property insights and investor advice.
affect property prices have been the rate of employment and
Please contact our team with any property questions you may
interest rate levels, but today we are seeing a third lever, that
have, our agents are here to help. We hope you enjoy this update.
of tighter lending criteria.
Interest rates are at record lows and unemployment is at the Matt Lahood,
lowest rate since June 2011, at 4.9 per cent February this year, CEO The Agency
according to the Australian Bureau of Statistics. But it is the
buyer’s ability to obtain finance and uncertainty around property
valuations in the current market, that we are seeing impact prices.
Post the Financial Services Royal Commission the big four banks
have cited the Commission’s recommendations as a contributing
factor in the credit squeeze, in particular ANZ CEO Shayne Elliott
and NAB’s incoming chairman Philip Chronican. In response,
ASIC Chairman James Shipton refuted these claims, stating the
responsible lending laws have been in place for more than a decade*.
While the financial services regulatory bodies, ASIC and APRA,
and the major banks work their way through to a balanced lending
approach, the property market will continue to feel the effects *The Australian Financial Review 28.3.19
of this process. **The Australian 29.3.19
Capital city auction statistics CoreLogic data week ending 4th April
Cover Photo - 27 Ashton Street, Queens Park
City Clearance Rate Total Auctions CoreLogic Auctions Cleared Auctions Uncleared Auctions
Sydney 54.3% 801 685 372 313
Melbourne 52.1% 978 851 443 408
Brisbane 33.5% 195 161 54 107
Adelaide 53.9% 106 89 48 41
Perth 40.9% 24 22 9 13
Tasmania n.a. 3 1 1 0
Canberra 39.6% 57 48 19 29
Weighted Average 50.9% 2,164 1,857 946 911
Regional
Gold Coast 21.3% 52 47 10 37
SYDNEY
In positive news for the Sydney market
the auction clearance rates have lifted.
At the end of 2018, we saw the clearance
rate fall well below 50 per cent. In
fact, CoreLogic reported that it had
plummeted to as low as 38.8 per cent in
the lead up to Christmas. However, for
the past few months, it has consistently
reached over 60 per cent and has even
touched 70 per cent some weekends
during March 2019. 3 Balmoral Avenue, Mosman
In blue chip areas such as Sydney’s Lower
North Shore and Eastern Suburbs, we’re 50 groups throughout the course of each McGlynn’s advice to any buyer in today’s
seeing even higher rates being recorded. campaign. This tends to show there is still market is that they shouldn’t hold off in
On March 20, the Wentworth Courier genuine buyer interest in the market. By the hope prices will fall further. “Not only
reported that 75 per cent of the homes way of comparison, during the property is it unclear that this will happen, the risk
listed for auction that week were sold at, or slump in the Global Financial Crisis we of losing money is minimal if you intend to
prior to auction. One day later, the Mosman were lucky to have 15 groups through an hold the property for at least five years and
Daily reported a figure of 88 per cent. open home. through another market cycle.”
These kinds of numbers are usually “On the other hand, with the odd suburb For potential sellers, now is a great time to
indicative of a strong – or even hot – exception, there has been no corresponding either upsize or downsize. There are still
property market, where demand far lift in median property values,” Thomas strong prices being achieved across all
outstrips supply and prices begin to rise. McGlynn explains. “What this shows is segments of the market and suburb records
But that’s not necessarily what’s happening that sellers have recalibrated their price being broken.
now, says The Agency’s National Director expectations and are willing to accept an
of Sales, Thomas McGlynn. offer on their property they would not have
“This year, we have been averaging around accepted in 2018.”
“This is the light at the end of the tunnel,”
Stuart Cox says. “Due to the population
starting to grow again, people are now
looking to rent. The vacancy rate in Perth
is 2.9 per cent and our vacancy rate [at The
Agency] is two per cent. We expect rental
prices to increase as a result of this.”
When rents rise, it tends to make buying
property a more attractive option for
tenants, eventually pushing up property
prices in the first home buyer bracket. It
also means more investors enter the market
Le Fanu, Cottesloe Beach in order to take advantage of stronger
returns, which also encourages price growth.
A slower economy over the past five CoreLogic. The city’s median dwelling price For buyers looking to the long term,
years has meant fewer migrants have now sits around $475,000, and as a result, conditions like these can be an excellent
been heading to the west coast. This in housing affordability has not posed the same time to enter the market or to upsize
turn has impacted housing demand in problems as it has on the east coast, with into something larger. Less competition
Perth, with certain property segments first home buyers a key market segment. provides the opportunity to find a decent
affected more than others. property without having to compromise too
In good news, some green shoots seem to
much. And, when the Western Australian
“There has been an oversupply of be emerging in the Perth property market.
economy clicks back into gear, property
apartments in WA for a few years now,” Commodity prices – such as iron ore and
prices will no doubt rise again.
says Stuart Cox, The Agency’s General gold – have been on the rise. Australian
Manager in Perth. “There was a significant Bureau of Statistics figures show the city’s
downturn in population a few years ago and population is growing again, with overseas
this has had a flow-on effect to the market.” immigration a key factor. And, as The
Agency’s National Director of Property
In fact, since the market peaked in 2014, Management, Maria Carlino, confirms in
property prices in the western capital Investor’s Corner, the rental market is
have fallen about 18 per cent, according to tightening.
PERTH
MELBOURNE
Similar to its northern counterpart,
Melbourne’s property market has slowed,
and we are witnessing a transfer in power
from sellers to buyers. Vendors who are
prepared to make the necessary price
adjustments are seeing prompt sale
results and fair prices.
135 Clark Street, Port Melbourne
The southern capital’s property market has
been shifting a few months behind Sydney’s
General Manager, Peter Kakos, there are about pricing. If you are not, your property
movements. For example, Sydney’s market
some great opportunities for Melbourne is likely to remain on the market for some
peaked in July 2017, while Melbourne’s peak
buyers in the market, but he cautions time, which is evident by days on market
occurred four months later in November
buyers from holding off too long in the hope increasing, and when this happens, it can
2017. The auction clearance rates are also
prices will continue to fall further. often impact the final sale price.
lagging. Sydney’s clearance rates lifted to
between 60 and 70 per cent in March, while “The best advice I can give, having seen We have seen some very strong results
Melbourne’s have been slightly behind at 50 many up and down markets, is don’t try for vendors who have approached their
to 60 per cent. to time the market. If it’s right for the sale with realistic price expectations. For
long term, then buy it,” Peter Kakos says. example, in early March 2019, our agents
We’re seeing greater buyer numbers at
“The current market will present great Mark Sproule and Peter Kakos achieved
nearly every open home in comparison
opportunities to upgrade. Percentage-wise, an above market result for 52 Clyde Street
to Spring 2018 when prices were falling.
the upper end of the market will require Kew East at $2.9 million. And after two
There is a greater degree of confidence
more of an adjustment to provide these unsuccessful campaigns, Michael Paproth
in the market and, as long as vendors
same opportunities.” picked up 67 York Street St Kilda West and
remain realistic, properties are selling. In
sold it within 24 hours for $3.2 million off-
fact, this year we have had great success For vendors, the key to the current
market.
moving listings that remained unsold during Melbourne market is to accept that buyers
November and December 2018. are wary of overpaying. This means it’s
more important than ever to be realistic
According to The Agency’s Victorian
Compared to most of Australia, the internal migration of any region in the in the area when compared to other states.
Gold Coast has been something of a country, as recorded over 2016 to 2017.
The top end of the Gold Coast market is
recent property success story. After
A growing population is often a key factor as strong as it has been in some time. In
all, property prices stayed relatively
in helping lift property prices. Importantly, January 2019, The Agency’s Gold Coast
stable over 2018, even as the Sydney
the Gold Coast is still relatively affordable office sold two properties for an average
and Melbourne markets suffered
compared to major metropolitan markets, sale price of $8,675,000, an outstanding
decline, -10.9 per cent and -9.8 per cent
meaning lending restrictions may not figure for a region with a median sales
respectively, as at the 1st of April 2019
impact prices quite as much as in other price of around $655,000.
according to CoreLogic data. Predictions
areas. The Gold Coast is also popular with
are it could well continue to defy the At the other end of the market, property
retirees, who are often cash buyers and
market and post strong gains, especially in the sub-$750,000 category is currently
therefore relatively unaffected by changes
over the medium term. in demand right across the Gold Coast. It
to borrowing criteria.
is the middle of the market where lending
This is partly because Queensland is
On top of this, we are noticing an increase restrictions have had the biggest impact.
currently attracting more migrants from
in the number of foreign buyers and expats
south of the border than at any time in The Agency’s John Natoli has noted a
coming into the market, particularly for
the past 14 years. Australian Bureau of prolific level of building and construction
prestige properties. These buyers have
Statistics data also shows the Gold Coast work being undertaken on the Gold Coast,
been attracted by a lower Australian dollar
has been attracting the highest level of this is usually a sign of confidence in the
and the relative value of prestige property
property market.
“Particularly, we’re seeing new homes
being built in areas such as the Isle of
Capri, Broadbeach Waters, Mermaid
Waters, Mermaid Beach and Palm Beach,”
John Natoli says. “Some of these will be
the biggest residential homes ever built
in these areas. A lot of people are also
undertaking major renovations.”
42/11 Peak Avenue, Main Beach
GOLD COAST
FINANCE WITH JOHN KOLENDA
Official interest rates have been kept highly restrictive and confusing since the
at a record low of 1.5 per cent by the Hayne Royal Commission, with tighter
Reserve Bank of Australia (RBA) since lending regimes and forensic examination
August 2016, but there is continued of borrower expenses, significantly
pressure on the central bank to lower reducing borrowing power for consumers.
its cash rate further due to a range
Among the Hayne Royal Commission
of negative factors weighing down
recommendations was the removal of
economic activity and consumer
trail commissions for mortgage brokers.
confidence.
I believe, if implemented, this would
These negative factors include a correction set the Australian home loan market
in the property market, the impact of the back 30 years and actually enhance the
Hayne Royal Commission into the banking major banks control at the expense of
and financial services sector, and reaction consumers.
to political upheaval locally and abroad.
Brokers account for almost 60 per cent
This includes the US-China trade war,
of all home loans, this shows consumers
the Brexit uncertainty and, of course, the
have favoured dealing with brokers rather
upcoming Australian federal election.
than dealing directly with the banks. Our
Some economists are forecasting at least industry has spoken out against this
two RBA cuts over the next 12 months due recommendation and the nation’s political
to the uncertain economic outlook. It’s leaders appear to be listening. In the
expected the RBA could make a move in industry’s view, the trailing commission
the months following the election, which structure paid to brokers protects healthy John Kolenda,
is due in May. competition within the home loan market, Managing Director
levelling out the big four banks’ control 1300HomeLoan
The lending landscape has also been
over lending.
INVESTOR’S CORNER WITH MARIA CARLINO
The challenge for investors, however, is But it’s a different story on the west coast.
that this increase in demand has been According to SQM Research figures as
exceeded by an increase in supply. In at March 28, the average yield on Perth
some parts of the country, especially in apartments has lifted an impressive 3.9
metropolitan Sydney and Melbourne, per cent this quarter. Houses have also
new developments are coming onto the experienced an increased yield of 1.6 per
market almost constantly. This has led to cent over the same period. We’re noticing
greater competition for tenants. But, more a reduced amount of rentals on the Perth
importantly, because new developments market (there were 6,718 properties
come newly furnished it has raised available for rent in Perth in late March
tenants’ expectations on what their money 2019 compared to 8,938 a year ago), as
should buy. well as an increase in the number of people
attending open homes. This is leading to
In light of this, we’re advising investors to
more properties being leased directly after
make sure their properties are as attractive
the first open home.
and inviting as they can be. This could
mean renovating outdated kitchens and Maria Carlino,
bathrooms, as well as applying a new National Director of
coat of paint or replacing the carpet. Also, Property Management
because it’s important in today’s market
The first few months of the year are
to be able to approve tenants quickly, we
traditionally a busy time in the rental
recommend giving your managing agents
market and 2019 has been no different.
guidelines that allow them to do this.
There was an increase in activity as
tenants looked for new homes, whether Remember, in today’s market a tenant is
that was to be settled at the start of the unlikely to be choosing between one or two
new school year, before beginning a new properties; they are likely to be weighing
job or just because it was part of a new up several. With this in mind, we don’t
year plan. There is also an increasing expect that either yields or vacancy rates
number of tenants looking to upgrade will move in favour of investors anytime
the property they rent. soon – at least not on the east coast.
NEW PROJECTS WITH STEVEN CHEN
The first quarter of 2019 has been some buyers won’t be able to finance Our clients have seen immense value in
one of uncertainty and caution in the their purchase. St Moritz’s location, stunning architecture
project marketing space as buyers and and design. They have also been extremely
There are thousands of apartments
developers come to terms with a new impressed by the development’s bespoke
scheduled to settle in the second and third
lending environment. However, the services, as well as the ability to work with
quarters of 2019 that face these risks.
challenges surrounding funding are also Gurner to customise their own living space.
There are also many developers under
presenting new opportunities, especially
pressure because their sales and marketing Steven Chen,
for those in a strong cash position.
teams have not been able to adjust their Director of Projects
Tighter lending criteria and negative media prices in light of this market shift.
sentiment have been placing downward
For developers with cash reserves though,
pressure on property prices in Sydney
this current landscape is beginning to
and Melbourne and the project space has
present some great buying opportunities.
become one of the main areas in which
Reduced competition for sites means
this is playing out. Buyer enquiries on new
there are attractive long-term development
developments are down around 50 per
prospects available for much less than they
cent from 12 months ago and the number
were a year or two ago.
of people attending inspections is down a
further 10 per cent. One development that has defied the
current off-the-plan challenges is St Kilda’s
The uncertainty surrounding lending
St Moritz in Melbourne, a luxury beachfront
has seen many buyers now preferring to
development by Gurner. The Agency
purchase a finished product rather than
Projects team has been involved with this
buying off the plan. This is because they
$550 million development, which has
can be more certain of their ability to
almost completely sold out this quarter.
borrow and settle on finished stock at the
current market value, than they would be In my 20 years in projects, I have never
on an incomplete build. before seen a project of this scale and
quality sell so well in a challenging market.
Lending restrictions are also affecting
What is even more remarkable is that all
developer sentiment. Many developers have
the apartments have been sold by invitation
become concerned that lower valuations
with no advertising.
and reduced borrowing capacities mean
St Moritz, St Kilda, Melbourne
theagency.com.au
New South Wales Queensland Victoria Western Australia
02 8376 9100 07 2101 2250 03 8578 0388 1300 243 629
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