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Australian housing markets have always shown a diverse
performance, and the most recent trend is no exception. While
the Sydney and Melbourne housing markets have recorded
a solid capital gain performance over the current cycle,
the Perth and Darwin markets have entered a down phase.
The remaining capital cities are generally showing a mixed
result of slight upwards or downwards movement across the
different product types.
Detached housing has generally outperformed apartments for capital
gain, but conversely, apartments are typically showing a healthier
yield profile compared with houses.
More recently though we have started to see some signs that
the housing market in Sydney, and to a lesser extent, Melbourne,
may be starting to move back towards a more sustainable pace
of growth. Dwelling values in Sydney have risen by close to 80%
since the beginning of 2009 and Melbourne values are almost 70%
higher. As such, a slowdown in the pace of capital gains shouldn’t
be a surprise. Auction clearance rates have fallen below 70%, on
high volumes across both cities. Sydney recently breached the 60%
clearance rate mark, as buyers start to regain some balance in the
market.
Rental rates are also recording relatively mild growth. Each of the
capital cities achieved only small rental increases or falling rents over
the past year. The highest rental growth has been in Sydney where
dwelling rents are up by 2.1%, while the most substantial falls were
are in Darwin, where the typical rent has fallen by 12.7% over the
year. The effect of soft to negative rental growth has seen lower rental
yields across each of the capital cities.
Housing market conditions are also being affected by changes in
the lending environment. In response to higher capital requirements
implemented by the prudential regulator, APRA, banks have lifted
mortgage rates by between 15 to 20 basis points across both owner-
occupier and investment. Mortgage rates for investment purposes
have seen an additional premium of approximately 30 basis points on
average.
The higher borrowing costs will be a disincentive to many prospective
buyers, particularly investors. However, despite this hike, mortgage
rates remain close to historic lows which should continue to support
housing demand.
Additionally, new housing supply has substantially increased over
the past three years, with the number of dwelling approvals recently
moving through a record high. The increased level of approved
housing supply is evident across both detached housing and
apartments. The substantial increase in dwelling approvals will carry
through to high levels of housing construction activity during 2016,
which in turn will provide a substantial boost to local economic
conditions.
Tighter lending conditions, more expensive mortgage rates for
investors and lower yields, together with natural affordability
constraints and higher levels of new housing supply is having a
culminating effect and moderating the pace of capital gains.
A tale of two markets
Note: ‘this year’ = September 2015, ‘last year’ = September 2014
* Based on postcode median house sale prices for 12 months to end September 2015.
Adelaide
Darwin
Houses
Units
Median Price
$430,000
$340,000
Growth
0.3%
-6.9%
Days on Market
48
this year
55
this year
56
last year
54
last year
Discounting
-5.6%
this year
-6.6%
this year
-5.7%
last year
-6.1%
last year
Houses
Units
Median Price
$590,000 $480,000
Growth
-3.1% -7.4%
Days on Market
81
this year
83
this year
55
last year
51
last year
Discounting
-8.3%
this year
-7.9%
this year
-4.7%
last year
-5.4%
last year
Perth
Houses
Units
Median Price
$520,000
$419,100
Growth
-0.7% -4.0%
Days on Market
72
this year
62
this year
46
last year
45
last year
Discounting
-7.3%
this year
-7.1%
this year
-5.0%
last year
-5.3%
last year
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