News

Red23 Research Bulletin | Oct.’19

  • Consumer Sentiment falling 5.5% to 92.8 in October from 98.2 in September
  • The war on bank lending continues.. good news for high quality borrowers
  • House prices have risen by 1.9% to $729,052 in Melbourne and Units up 1.4% to $546,203
  • Another rate cut was on the cards at November’s meeting.. to support sustainable growth in the economy.. however now not likely
  • Cardinia now the most expensive growth area with a median price of $349,000
  • Gr. Geelong had a YOY price uplift of 0.7% and a MOM change of 0.94% or $2,750.

Consumer confidence has made headwinds this month, Westpac – Melbourne Institute Index of Consumer Sentiment falling 5.5% to 92.8 in October from 98.2 in September. It is at its lowest levels since July 2015 albeit the 25 basis points cut by the RBA this month ‘to support employment and income growth and to provide greater confidence that inflation will be consistent with the medium – term target’.

The media is causing some angst for consumers, playing on the weak economy and contributing to Australia’s worries of the short and long term outlook of the economy. Based on these stories, consumers are keeping their hands in their pockets and are reluctant to buy a household item, car or a dwelling. There is growing evidence that tax cuts and rate cutes are used to pay down credit card and housing loans.

The war on bank lending continues, with the major 4 banks passing on between 0.13% and 0.15% across its portfolios in October. Borrowing continue to be competitive with traditional bank lenders competing with non-bank lenders. This is good news for high quality borrowers as they can negotiate a lower interest rate, creating large saving for borrowers.

Serviceability of loans have eased, serviceability floors have been dropped.

Westpac eased its serviceability floor for the second time in 10 weeks to 5.35% (effective from September 30) from 5.75% in mid July. The others followed suit with ANZ at 5.75, CBA also at 5.75% and NAB at 5.50%. great news for first home buyers, who make up the majority of lending. Investors are still at 25% of all band lending (down from 37.9% at its peak in November 2016).

According to CoreLogic, house prices have risen by 1.9% to $729,052 in Melbourne and Units up 1.4% to $546,203. Albeit property prices are on the rise again and current stock on the market is getting sold. We will not see a return to boom times again soon.

First home buyers can finally take their time to buy without fear of rising prices and properties selling too quickly. First home buyers are continuing to purchase and are active in the market, taking full advantage of the choice and not having to compete with investors.

In a median release by The Hon Tim Pallas ‘more than 62,000 Victorians have claimed stamp duty concessions and exemption and more than 17,000 took up the First Home Owners Grant’.

Graph 1: Westpac - MI Consumer Sentiment + Melbourne Growth Area Land Price
Graph 1: Westpac – MI Consumer Sentiment + Melbourne Growth Area Land Price

Unemployment rate remains steady with labour force participation rate at a record high. Due to the increase in the cost of living, housing affordability has had an effect on women leaving partnering and children to later in life. More women are coming back to work full time (with children under 5). Good for company stability.

What is the short term outlook?

Another rate cut was on the cards at November’s meeting, brought forward by expectations for it to happen in March 2020, to drive unemployment down to a historic low of 4.5%. of late, this has been revised and is now expected to be put on hold until February 2020 due to the September employment rate at 5.2%, improving Australian Dollar and job growth.

The RBA is ‘prepared to ease monetary policy further if needed to support sustainable growth in the economy, full; employment and the achievement of the inflation target over time.’

Now to the growth area specifics:

Cardinia has taken out first place in the median price land market this month, with a median price of $349,000, up 9.4% YOY. Cardinia and Gr. Geelong were the only 2 municipalities to witness year on year growth, whilst most municipalities witnessed, MOM growth.  

There has been a change in position with Cardinia now the most expensive growth area with a median price of $349,000, surpassing Casey ($347,800) who held the top spot in September. Cardinia saw the biggest increase in YOY median land price and only a slight increase in its 30 day movement of 2.08%.

Mitchell had the greatest MOM growth of $10,000 however, it had 0% change YOY. Mitchell continues to provide the largest lot size of 459sqm as well as the most affordable median house price and median unit price. House and unit prices grew by 2.8% and 2.3% YOY respectively in September indicating some demand for housing in Mitchell due to its affordability.


Table 2 | First home buyers concessions and grants

RankPostcodeSuburbsFHB Concessions and Grants
13064Craigieburn, Donnybrook, Roxburgh Park, Kalkallo, Mickleham3567
23029Hoppers Crossing, Tarneit, Truganina2985
33030Cocoroc, Point Cook, Quandong, Werribee, Werribee South 2944
43978Cardinia, Clyde, Clyde North2595
53977Cranbourne, Cannons Creek, Botanic Ridge, Devon Meadows, Skye Junction Village, Sandhurst2443
63810Pakenham South, Pakenham, Rythdale, Pakenham Upper1218
73338Melton South, Exford, Cobblebank, Eynsbury, Weir Views, Strathtulloh, Brookfield1152
83024Manor Lakes, Mambourin, Wyndham Vale, Mount Cottrell, Fieldstone1141
93350Ballarat, Bakery Hill, Alfredton, Nerrina, Newington, redan, Soldiers Hill, Lucas, Mount Clear, Mount Helen, Mount Pleasant, Eureka, Golden Point, Invermay Park, Lake Wendouree, Black Hill1134
103754Doreen, Mernda1116

Source: Treasury Media (Jul.’19)


Table 3 | Median Prices and Lot Sizes | Sept.’19

RankingLGASize (sqm.)Sept.’19Sept.’18MOM ChangeYoY Change
1Cardinia448$349,000$319,0002.08%9.40%
2Casey404$347,800$370,000-0.91%-6.00%
3Hume420$335,000$375,000-2.05%-10.67%
4Wyndham403$336,900$346,0000.57%-2.63%
5Whittlesea392$331,900$349,000-1.51%-4.90%
6Melton392$302,900$328,0000.97%-7.65%
7Gr. Geelong481$295,000$260,9000.94%0.7%
8Mitchell459$290,000$290,0003.57%0.00%
400$329,000$345,500-0.30%-4.78%

Source: Red23 Research


As mentioned in last month’s newsletter, ‘Gr. Geelong continues to be the biggest winner with and year on year land price increase of 15.06%, a 30 day increase of 1.83%’. This month, Gr. Geelong had a YOY price uplift of 0.7% and a MOM change of 0.94% or $2,750. A steady land price increase is witnessed in Gr. Geelong and the same can be seen in its house and unit prices, increasing by 3.6% and 8.7%. YOY house price increases were the most in Greater Geelong, followed by Mitchell and Melton. Whilst unit prices increase was the most in Greater Geelong, Wyndham and Cardinia.