Red23 Research Bulletin | Sept.’19
- Melbourne returned a final auction clearance rate above 70 per cent for the sixth consecutive week last week, while Sydney held above 70 per cent for the ninth consecutive week.
- The Melbourne median dwelling price rose to $626,703, up 1.4% in the 30 days to August.
- 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%.
- Casey now the most expensive growth area with a median price of $351,000, surpassing Hume ($342,000).
- Growth area land prices stablished in July, with no change in price at $333,000 (net), followed by a fall in August, now sitting at $330,000.
It is now September 2019 and spring has arrived. It is fair to say that this is the time where the market will be tested as more homes are expected to come onto the market and predictions of a long-term slow market recovery, hopefully becoming factual.
Within the established market, auction clearance rates have been the talk of the month, peaking at low 80% rate in late August (before adjustment) and Melbourne returned a final auction clearance rate above 70 per cent for the sixth consecutive week last week, while Sydney held above 70 per cent for the ninth consecutive week.
Melbourne, traditionally a strong auction market had 768 auctions, making up 47% of total auctions held in Australia. This indicates continued strong demand for housing due to liveability and robust population growth.
Looking into the Melbourne suburbs, Eastern suburbs continue to dominate the auction clearance rate, reaching mid to high 80% clearance rates. For sale via auction is less common in the north west and west with auction rates in the north west ~71.2% and west is ~61.5% at the end of August.
The recovery in housing values accelerated in August 2019 with national dwelling values increasing by 0.8% over the month. The Melbourne median dwelling price rose to $626,703, up 1.4% in the 30 days to August. August witnessed its third successive month of capital gain in Sydney, Melbourne and Hobart and the second successive month of increases in Brisbane. However, Melbourne is still down 9.5% since its peak. Some positive news comes out of Tasmania where it is the only major region where values are currently at an historic high. Darwin and Perth continue to have weak market conditions however the rate of decline has decreased.
What is the short term outlook?
The ‘housing price correction’ period of end of 2018 and early 2019 will be long forgotten, particularly for home buyers now that the government has stabilised and there is more confidence and certainty. Interest rate cuts and APRA’s lift on lending criteria has seen a significant increase in activity in the residential property sector and the spring selling season will test the longevity of this sentiment and will likely set the mood for 2020.
In saying that, the RBA is ready to consider further measures to curb risks on residential mortgage lending and high household debt if circumstances require it. There has been talks of pulling forward the anticipated November interest rate cut to October depending on the spring outcome.
Albeit property prices are on the rise again in Melbourne and Sydney, it will not return to boom times again soon.
Phillip Lowe, RBA governor has commented that federal and state governments could so more to prime the economy. Governments can do more such as tax reforms and cutting red tape.
The unit sector and small lot housing will still perform strongly due to ongoing affordability challenges.
Now to the growth area specifics:
Growth area land prices stablished in July, with no change in price at $333,000 (net), followed by a fall in August, now sitting at $330,000. It reached its peak ~15 months ago when land prices reached $355,000. At the time, recording a year on year growth of around 40%. This equates to a rate of around $900 per square meter. At the moment, the rate per square meter is ~$833.
There has been a change in position with Casey now the most expensive growth area with a median price of $351,000, surpassing Hume ($342,000) who held the top spot for a few months now. Cardinia saw the biggest dip in YOY median land price, or only a slight fall in its 30 day movement of -0.90%.
Median lot sizes have remained at 400sqm for some time now. The City of Melton have the smallest lot size at 392sqm and a median price of $300,000. Greater Geelong continues to have the largest median lot size of 476sqm followed by Hume and Cardinia.
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%. Gr. Geelong has lagged in feeling the effects of the softening market, however it is not immune. According to The QBE Australian Housing Outlook (2018-2021), they have stated:
‘The outlook for the local economy is positive. In the short term, construction activity in Geelong will be strong, benefitting from a high level of new dwelling activity and the commencement of the $500 million New Lara Maximum Security Prison in 2019/2020. Geelong will also continue to benefit from an affordability advantage over Melbourne, and it is likely that first home buyers will continue taking advantage of the stamp duty concessions that have been a contributor to demand in 2017/2018. The recent robust price growth in Geelong and competition from Melbourne’s outer western suburbs is expected to limit stronger price growth over the forecast horizon. Geelong’s median house price is forecast to grow 2.6% in 2018/2019 before flattening out over the following two years’.