Spring Market Review
Despite a combination of uncertainty, lack of confidence and investor fatigue, Australian property markets have remained relatively stable in 2012. Supported by strong economic conditions including low unemployment, strong immigration and improved lending affordability, property values have been relatively well insulated from global events.
However, property market performance is an individual prospect and varies from state to state, suburb to suburb and even property to property. Nonetheless state-level analysis can be of benefit in understanding the factors that drive or inhibit the performance of the local market as spring unfolds.
Housing statistics for June and July demonstrate that Melbourne prices are levelling, creating greater certainty for buyers and sellers.
As spring unfolds the listings of new stock have slowly risen, but not to traditionally high spring levels - although volumes of new stock may increase later in the season.
Properties located close to shopping and social amenities, particularly local villages, are expected to perform well this spring.
Buyers are still paying well for good quality assets in some of Melbourne’s best performing streets, while avoiding poorer performing assets and streets. The new savvy buyer behaviour may impact the performance of properties located in Melbourne’s fringe areas.
Melbourne has shown modest price rises in inner ring suburbs such as South Yarra,Richmond, Prahran, North Melbourne,Brunswick, Ascot Vale, Kensington, Elwood and St Kilda. However, a notable upswing in overall prices is unlikely in 2012. Greater involvement from investors and an injection of quality property in the market will be the key driver of price growth in 2013.
With increased interest from buyers and newfound price stability, auction clearance rates should remain above 60 per cent throughout spring.
The housing market in Brisbane is considered to be nearing the bottom of its current cycle with no obvious signs of recovery at this point. Recent changes in State Government legislation, in particular stamp duty concessions, have improved sales activity and enquiry. Market conditions are likely to remain as they are until the end of the year.
Potential buyers and investors are keeping an eye on the effects of the mining boom, which continues to fuel growth and also public sector job cuts announced by the Newman Government.
Future market factors to watch out for include changes in pricing in the commodities sector and cost cutting within the government.
There are a number of new unit developments in Brisbane nearing completion and due to settle. Many purchasers that have bought off-the-plan have seen prices fall from original date of contract. Investors remain vigilant of securing a bargain and wary of purchasing before the market has reached its trough.
Current market trends are likely to continue until the end of the year and perhaps into 2013. The Queensland Government has introduced a $15,000 concession for first home buyers looking to buy a new property. The unit market in the sub $400,000 range remains in demand among professionals looking for inner-city lifestyle locations.
The Adelaide residential market is showing mild signs of recovery, particular for well-located stock with realistic market expectations.
Recent announcements regarding the shelving of the Olympic Dam expansion may have a negative effect on the state economy and local confidence. Property values appear to have stabilised in most parts of metropolitan Adelaide.
The Adelaide unit market is relatively flat with a number of new unit apartment projects struggling to get off the ground due to lack of pre sales and funding issues.
The city will see a new a multi-level mixed use site on Sturt Street, with development to commence in coming months. Stamp duty incentives will assist projects like this to succeed while some established stock will continue to suffer poor demand and significant price reductions.
The Australian Property Institute’s (API) September Property Directions Survey found that pundits consider Sydney residential property to be in an upswing. It is reasonable to expect Sydney to experience steady but modest growth of around five per cent on good quality stock throughout the coming year.
The prestige market demonstrates segmented performance, with some areas expected to fall further. Activity in Sydney’s Northern Beaches remains low with notable discounting on some properties. The oversupply of property in these areas relative to the reduced demand is dragging down the prices.
The unit market has seen some positive signs but mainly due to recent high prices on new units being sold off-the-plan. This activity is skewing the market data and is not a true reflection of the overall performance of units. The unit market will continue to stay fairly consistent until more confidence creeps back into the market.
Well-serviced established housing stock at the lower end of the market remains in good demand. In this segment stock levels are falling away fairly quickly with clearance rates stronger than expected, vacancy rates low and rents growing at six to seven per cent compounded annually.
The supply of residential properties for sale in Perth has decreased and there is a significant increase in buyer activity in the sub $500,000 market.
Yields are continuing to rise as rental levels increase, which is resulting in investors returning to the market. With supply issues now coming into effect and the housing shortage becoming more evident it is believed that the current cyclical performance will continue for the medium term.
Strong rental demand and an increase in median rental has resulted in higher yields. Investors seeking neutrally to positively geared properties are active in the sector.
Nicholas Brittan, WBP Property