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According to CoreLogic RP Data, whilst auction activity has eased slightly this week, with 1,824 capital city auctions held, down from 2,230 last week, preliminary clearance rate across the combined capital cities strengthened slightly this week, from 67.7 per cent the previous week to 68.9 per cent. One year ago, along with the higher volume of auctions, the clearance rate was also stronger at 77.5 per cent.
Of the 2,182 capital city auctions held this week, 1,680 results have been reported so far with a preliminary clearance rate of 65.7 per cent. This week’s preliminary clearance rate is lower than last week’s final results which showed 69.4 per cent of the 2,675 capital city auctions cleared. In terms of auction volumes, in each capital city, excluding Brisbane and Perth, auction volumes are lower this week than they were last week, while all cities excluding Sydney and Brisbane saw a week-on-week fall in clearance rates. Over the corresponding week last year auction activity was stronger with 2,426 auctions held and a 78.2 per cent success rate.
Preliminary results show 71.3 per cent of the 2,231 reported results were successful this week, up marginally from a final auction clearance rate of 69.7 per cent last week and lower when compared to one year ago (78.6 per cent). This week 2,651 capital city auctions were held, much higher than last week when 1,565 were held and comparable with the same time last year (2,540). Each individual capital city market has seen a rise in auction volumes over the week, while clearance rates have been somewhat varied.
The rate of value growth continued to moderate as housing market conditions cool in Sydney and Melbourne, whilst the remaining capital cities recorded a range of outcomes from small value increases to moderate declines according to CoreLogic RP Data.
During March, capital city dwelling values recorded a subtle lift, rising by 0.2 per cent to take capital city home values 1.6 per cent higher over the first quarter of 2016. The quarterly increase in home values was broad based across the nation’s capitals, with Perth (-0.9%) and Brisbane (-0.1%) the only two cities to record negative movements in dwelling values over the past three months.
CoreLogic RP Data Head of Research Tim Lawless said, “The March quarter rise in capital city dwelling values is in stark contrast to the first quarter of 2015, when values increased by 3.0 per cent, which is almost double the current pace of quarterly growth. However, compared with the final quarter of 2015, when capital city dwelling values were down 1.4 per cent, the housing market has shown a modest rebound in growth which is well below the strong capital gains recorded over the first half of 2015.”
“The annual pace of home value appreciation across Australia’s capital cities highlights the slowing growth trend,” he said.
Following the March results, the annual rate of capital growth across the capital cities has now reached its lowest point in 31 months, with dwelling values rising by 6.4 per cent over the past twelve months across the combined capitals. Furthermore, no Australian capital city has recorded an annual growth rate in the double digits over the past twelve months. Melbourne remains the capital city with the strongest annual growth, with dwelling values increasing by 9.8 per cent over the past twelve months.
Mr Lawless said, “The housing market has been losing momentum since July last year, when capital city dwelling values were increasing at the annual rate of 11.1%.”
Index results as at March 31, 2016
Perth and Darwin are the only two capital cities where home values are trending lower on an annual basis, down 2.0 per cent and 1.8 per cent respectively. However, Mr Lawless noted the moderation in the rate of capital growth in the Sydney market has been the most pronounced, with annual dwelling value growth more than halving to 7.4 per cent per annum, from a high of 18.4 per cent per annum in July last year.
The Melbourne market has been much more resilient, with annual growth in dwelling values slipping below the 10 per cent mark for the first time since May last year, to reach 9.8 per cent at the end of March 2016.
The current growth cycle has been running since values troughed in May 2012. Through to March 2016, capital city dwelling values have risen by a cumulative 32.2 per cent. Over the cycle to date, Sydney home values have seen the most significant level of appreciation, with dwelling values 49.2 per cent higher since values started rising, followed by Melbourne at 35.7 per cent cumulative growth.
Darwin and Perth moved through their respective cyclical market peaks more than a year ago, with Darwin home values peaking in May 2014, whilst Perth’s housing market peaked in December 2014. Since then, both Darwin and Perth home values have fallen by a total of 4.6 per cent.
According to the February 2016 CoreLogic RP Data Hedonic Home Value Index results released today, dwelling values across Australia’s combined capital cities showed a 0.5% rise in February, pushing dwelling values 1.4% higher over the past three months.
In February, home values rose across each capital city with the exclusion of Perth and Canberra. Over the past three months, dwelling values have increased across all capitals except Sydney (-0.2%). The largest monthly increases in home values were recorded in the cities that have been underperforming over the growth cycle to date; Hobart dwelling values were 2.9% higher, Adelaide showed a 1.9% rise, and Brisbane home values increased by 1.8%. Perth and Canberra were the only cities to record a monthly fall in values, down -1.1% and -0.2% respectively.
Sydney was the only capital city to have recorded a fall in dwelling values over the past three months, down -0.2%. The cities to record the greatest value rises over the past three months have been: Hobart (8.5%), Melbourne (3.8%) and Brisbane (2.0%). According to CoreLogic RP Data head of research Tim Lawless, “Even though home values have trended lower over the year in Perth and Darwin, they have recorded value rises of 0.2% and 0.3% respectively over the past three months.”
Dwelling values are still increasing across most capital cities however, the results remain diverse. Sydney and Melbourne remain the strongest markets in trend terms, however, the gap is widening between the performances of Melbourne relative to Sydney.
Over the past 12 months, combined capital city home values have increased by 7.6%, with the annual rate of growth down from a recent peak of 11.1% recorded in July last year. Melbourne has maintained its number one growth position, with annual capital gains of 11.1%. Mr Lawless said, “Melbourne values appear to be holding reasonably firm since December last year with the annual rate of capital gain virtually level over the past three months.”
Sydney’s annual rate of growth has continued to moderate, having almost halved from its cyclical peak of 18.4% recorded in July last year to reach 9.5% growth over the past twelve months. Despite the slowing trend, Sydney remains the second best performing capital city over the past twelve months, however, Mr Lawless said, “a few of the smaller cities, where growth rates have recently accelerated, may start to rival Sydney’s position over the coming months.”
“The trend in home value growth is showing signs of increasing in those markets that have previously underperformed. These include Brisbane, Adelaide, Hobart and Canberra. Affordability constraints aren’t as apparent in these cities and rental yields haven’t been compressed to the same extent as what they have in Melbourne or Sydney. Home values increased in Brisbane by 5.5% over the past year, which is the fastest annual rate of value growth in a year. In Hobart, home values are 6.2% higher over the year, which is its fastest annual rate of home value growth since July 2010,” Mr Lawless said.
Dwelling values across Australia’s capital cities were 0.9% higher in January driven partially by a rebound in Sydney and Melbourne. The recent growth conditions have pushed the Melbourne market into first place for annual growth in dwelling values with an 11.0% rise compared with Sydney where values are 10.5% higher over the past twelve months.
According to the January 2016 CoreLogic RP Data Hedonic Home Value Index results released today, dwelling values across Australia’s combined capital cities showed a 0.9 per cent rise in January after recording no change in December and a 1.5 per cent drop in November.
According to CoreLogic RP Data head of research Tim Lawless, this month on month rise wasn’t quite enough to pull the rolling quarterly rate of growth back into the black, with capital city dwelling values remaining 0.6% lower over the past three months. Hobart led the monthly figures with a 4.7% jump in values, followed by Melbourne where values were 2.5% higher and Canberra with a 2.8% lift. Sydney values also showed a rise of 0.5%, while the remaining four capital cities showed dwelling values to be either flat or down.
Index results as at January 31, 2016
The rolling quarterly trend was looking similarly diverse, with four of Australia’s eight capital cities recording negative dwelling value movements over the past three months, with Sydney dwelling values showing the largest fall, down 2.1 per cent. Values are down over the rolling quarter in Darwin (-1.4%), Adelaide (-0.9%) and Melbourne (-0.1%) as well. The strongest growth in home values over the quarter across the capital cities was found in Hobart with a 3.0% capital gain.
Despite recording the largest annual decline in home values (-4.1%), Perth dwelling values posted a 1.7 per cent rise over the three months to the end of January. Other capital cities to record a rise over the rolling quarter were Brisbane (+0.8%) and Canberra (+1.2%).
Over the past twelve months, capital city dwelling values have risen by 7.4% with Sydney’s capital gains of 10.5% no longer the highest annual rate across the capitals. “While still a high rate of annual growth, Sydney’s annual rate of capital gain is now at a 29 month low and has been progressively softening since peaking at 18.4% in July last year,” Mr Lawless said.“Melbourne’s housing market has been more resilient to slowing growth conditions which has propelled the annual growth rate to the highest of any capital city, with dwelling values 11.0% higher over the past twelve months. Previously, during the height of the growth phase, there was a large separation between Sydney’s housing market, which was streaking ahead, and Melbourne’s, where the rate of capital gain was substantial but still well below the heights being recorded in Sydney. The latest data reveals Sydney’s housing market is now playing second fiddle to Melbourne’s, at least in annual growth terms.”
“In fact, over the past six months, the performance gap between Sydney and Melbourne is stark. Sydney dwelling values have reduced by 0.6 per cent between July last year and the end of January 2016, compared with a 3.0 per cent rise across Melbourne dwelling values. The last six months have also seen both Brisbane and Canberra dwelling values rise by 2.0 per cent while Hobart values are 1.3 per cent higher and Adelaide dwelling values have been virtually flat with a 0.1 per cent rise,” Mr Lawless said.
The annual pace of growth across the Canberra market has been progressively improving, with values up 6.0% over the past twelve months; the strongest annual gain since November 2010. The nation’s capital has benefitted from improved buyer confidence while rising demand has seen much of the housing oversupply absorbed, particularly across the detached housing market where gains have been the highest.
While the pace of growth in dwelling values across the combined capitals has eased from the heights of mid last year, rental growth across the capital cities over the past twelve months has reduced further, with dwelling rents unchanged over the year.
According to Mr Lawless, with a rental series that extends back to 1996, these are the weakest rental markets conditions ever seen. “In fact there hasn’t previously been a twelve month period when rents didn’t rise across our combined capitals index.” he says.
Darwin and Perth are dragging the broader capital cities’ rental indicators down with weekly rents down 13.4% over the past year in Darwin and 8.6% lower in Perth. Dwelling rents were also down in Brisbane (-0.7%) and Adelaide (-0.4%). The largest rental increases were in Sydney and Melbourne where weekly rents rose 1.4% higher, and 2.1% higher respectively over the past twelve months.
Mr Lawless said, “With dwelling values rising substantially more than rents in Sydney and Melbourne, this ongoing effect has created a compression in gross rental yields to the extent that gross yields in these cities are now only marginally higher than record lows.”
According to the most recent Reserve Bank’s private sector housing credit data, the pace of investment-related credit growth has fallen well below the 10% speed limit implemented by APRA in December 2014.
Mr Lawless said, “The slower pace of investment credit is likely to be due to more than just higher mortgage rates for investment loans and stricter lending policies, but also due to investors becoming wary of the low rental yield scenario while also anticipating lower capital gains than what was recorded last year.”
“As housing market activity moves out of its seasonally slow festive period, we are likely to have a much better gauge on how the overall housing market is performing in the New Year.
“January tends to be a relatively quiet month across the housing market, however across the capital cities we estimate that there were approximately 16,500 dwelling sales contracted in January.
“Additionally, while the number of auctions won’t return to normal until early February, the weighted average auction clearance rate across the capital cities over the final weekend of January was 61.6%; higher than what was recorded during December when the weighted average clearance rate was between 57% and 59% from week to week.
“The bounce in dwelling values in January may provide an early sign that housing values across the combined capital cities are not likely to experience material decreases in 2016. We believe that the rate of capital gain across the combined capitals in 2016 is likely to be less than the 7.8% experienced in 2015, driven by a slowdown in Sydney and Melbourne and continued softness in the Perth and Darwin markets,” Mr Lawless said.
According to the CoreLogic RP Data Home Value Index, dwelling values were absolutely flat across the combined capitals during December, with negative movements in Sydney, Adelaide and Canberra being offset by a rise in dwelling values across the remaining five capital cities. The Sydney housing market was the main drag on the December results, with dwelling values down 1.2%, while values were down 1.5% in Adelaide and 1.1% in Canberra. The remaining capitals saw a rise in dwelling values, led by a 2.3% bounce in Perth values and a 1.0% rise in Melbourne values over the month.
After dwelling values had been broadly rising since June 2012, the December quarter results revealed a 1.4% fall in dwelling values across the combined capitals, the largest quarter on quarter fall since December 2011. Six of the eight capital cities recorded a negative result over the December quarter, with weaker conditions in Sydney and Melbourne acting as the greatest drag on capital city performance, according to CoreLogic RP Data head of research Tim Lawless.
The largest quarterly fall was recorded in Sydney, where dwelling values were down 2.3% over the final three months of the year, followed by Melbourne, where dwelling values were 1.9% lower. The only capital cities to show a rise in dwelling values over the December quarter were Brisbane (+1.3%) and Adelaide (+0.6%).
This was in contrast to the first three quarters of 2015, where capital city dwelling values rose by 9.3%, largely driven by a 14.1% surge in Sydney values and a 13.3% increase in Melbourne. In stark contrast, the final quarter of 2015 showed Sydney as the weakest performer of any capital city, with dwelling values down by -2.3% while Melbourne recorded the second weakest result of -1.9%.
The complete 2015 calendar year results reveal a 7.8% increase in capital city dwelling values which is the lowest rate of capital gain over a calendar year since 2012 when values slipped 0.4% lower over the full year. Highlighting the diversity in the capital city housing markets, dwelling values fell across four of the eight capitals in the 2015 calendar year. The largest of these falls were recorded in Perth, down by 3.7%, and Darwin down by 3.6%. Hobart and Adelaide also showed subtle falls of 0.7% and 0.1%.
Despite the recent weakening of housing market conditions in Sydney and Melbourne, the two largest capital city housing markets still recorded much stronger annual gains than all other capital cities, 11.5% in Sydney and 11.2% in Melbourne. Dwelling values in Brisbane and Canberra were up a more sustainable 4.1% over the year.
Mr Lawless said, “The wealth created from housing in Sydney and Melbourne has been exceptional over the past twelve months.”
“In dollar terms, Sydney home owners have seen approximately $82,000 added to their wealth thanks to the strong capital gains over the year while home owners in Melbourne have seen the value of their dwelling grow by approximately $60,400. Brisbane home owners are $18,560 better off while Canberra owners have seen the value of their homes increase by approximately $21,900.”
“Home owners in the remaining capital cities have seen some erosion of their wealth via falls in the value of their dwelling. The largest losses have occurred in Perth where the average dwelling is now worth approximately $19,970 less than it was 12 months ago, while Darwin home owners have seen the value of their home shrink by a similar $18,150. The annual decline has been milder in Adelaide and Hobart, however dwelling values are still $515 lower in Adelaide over the year and down $2,430 in Hobart.”
“The slowdown in housing market conditions across Sydney and Melbourne in the last half of 2015 is being driven by a range of factors that can best be described as both organic and externally influenced. Organic market conditions have been derived from affordability pressures, rental yield compression and cyclical factors, while factors from external influences largely stem from a change in the regulatory framework introduced by APRA which has made it more expensive and difficult for investors to access housing finance. Added to this is higher mortgage rates and more restrictive credit policies and loan servicing requirements.”
The CoreLogic November Home Value Index out today confirmed dwelling values fell across five of the eight capital cities in Australia over the month, taking the combined capitals index 1.5% lower.
According to CoreLogic RP Data head of research Tim Lawless, slower housing market conditions for Sydney and Melbourne became evident earlier in the year and continued throughout November. Over the month, Melbourne values fell by 3.5 per cent, while Sydney values were down 1.4 per cent. Hobart dwelling values dropped by 2.4 per cent, Darwin values were down 1.3 per cent and dwelling values moved 0.5 per cent lower in Canberra. Overall the combined capitals housing index has seen dwelling values drop by 1.5 per cent over November, taking the rolling quarterly rate of change to -0.5 per cent.
Values rose in the remaining three capital cities, with Adelaide showing the highest month-on-month growth rate (0.7 per cent), followed by Brisbane (0.6 per cent) and Perth (0.3 per cent).
Mr Lawless said, “The latest results are now placing downwards pressure on the annual change in dwelling values. The annual rate of growth across the combined capitals index peaked at 11.5 per cent back in April 2014, and has since reduced to 8.7 per cent.”
Sydney maintained the highest annual growth rate at 12.8 per cent, which is down from a peak rate of annual growth of 18.4 per cent in July earlier this year, while Melbourne’s annual growth rate has reduced from a recent peak of 14.2 per cent to 11.8 per cent over the 12 months ending November this year.
The only capital cities where values have declined over the past year are Darwin (-4.2 per cent) and Perth (-4.1 per cent), where weaker economic conditions and a slowdown in population growth contributed to an early peak in housing market conditions in December last year. The equivalent peak in the cycle for Darwin was May 2014. Since that time, Perth values are down a cumulative 5.9 per cent and Darwin values have fallen by a larger 6.8 per cent.
“The fact that mortgage rates have risen independently of the cash rate has, in all likelihood, become a contributor to the slowdown in housing market conditions, as well as tighter lending practices evidenced by a recent reduction in lender risk appetite for investment loans and high loan to valuation ratio mortgages. Tighter mortgage servicing criteria across the board and affordability constraints in the Sydney and Melbourne markets are also having an impact on market demand.” Mr Lawless said.
As a consequence of the tighter lending environment for investors, as well as gross rental yields being at near record lows, participation in the housing market from investors has reduced from 54.1 per cent of all new mortgages in May 2015 to 45.4 per cent at the end of September, which is the lowest level since July 2013. Data released by APRA at the end of last month showed the pace of investment related housing credit growth fell below the APRA 10 per cent speed limit for the first time since September last year, with the monthly change in investment credit growth the lowest since October 2011.
According to today’s results, the slowdown comes after auction clearance rates have moderated back to the low 60 per cent range since the last week of October, whilst average selling time and vendor discounting rates also continue to rise from their record lows.
The 1.5 per cent decline in capital city dwelling values over the month, coupled with a 0.3 per cent rise in weekly rents, has seen the average gross yield record a subtle improvement over the month. This follows a trend towards lower rental yields which commenced in May 2013. Gross yields remain close to record lows for houses in Melbourne at an average of 3.0 per cent, while Sydney has overtaken Melbourne to show the lowest yield profile across the capital city unit markets, with an average gross rental yield of 4.1 per cent.
Mr Lawless said, “Slower housing market conditions will likely be a topic of conversation when the Reserve Bank board meets today to deliberate on the cash rate setting. A less buoyant housing market is likely to provide the Reserve Bank with a greater degree of flexibility in adjusting interest rates without as much risk of overstimulating the housing market.”
“While the Reserve Bank is likely to welcome a slowdown in the rate of home value appreciation, the overriding objective would be to avoid a significant downturn in the housing market, which would act as a weight on economic growth and potentially impact financial system stability.”
“With the housing market moving through the peak of the cycle at a time when there is a large number of new dwellings commencing construction, there is likely to be a heightened level of settlement risk for off the plan purchases.”
“Those purchasers who have recently purchased off-the-plan may face challenges at the time of settlement if the valuation of the property is lower than the contracted price, or if mortgage finance is less freely available, or on more expensive terms. This would imply that some buyers may have a higher loan to valuation ratio than anticipated, which could require additional funds to bring the LVR down to a level the lender is comfortable with.”
“As a result of slowing housing market conditions, an additional risk for policymakers is where a large number of dwellings approved for construction are postponed or withdrawn as developers face fewer presales or lose confidence in their ability to deliver a profitable project to market,” Mr Lawless said.
The latest HIA-CoreLogic RP Data Residential Land Report provided by the Housing Industry Association, and CoreLogic RP Data, shows there was some relief from the tight conditions in Australia’s residential land market in the June 2015 quarter.
In the June 2015 quarter, national residential land sales increased by 17.6 per cent, while the weighted median residential lot price increased by 0.6 per cent over the quarter to be 5.2 per cent higher than 12 months earlier.
“Today’s update shows that a rise in land sales was accompanied by an easing off in the pace of price increase in Australia’s residential land market,” said HIA economist, Diwa Hopkins. “This compares with previous quarters which saw strong price increases amid declining land sales.”
“While the June quarter result is an encouraging development, what needs to occur is similar results being sustained over the longer run. That is, a larger and more consistent flow of shovel-ready land needs to be brought online.”
“For this to happen, policy reform needs to address the key land supply bottlenecks including unnecessarily long planning delays; slow and insufficient release of residential land; excessive and inappropriate infrastructure funding arrangements, and; excessive zoning restrictions,” added Ms Hopkins.
According to CoreLogic RP Data research director, Tim Lawless, the break in the trend of declining land sales is a positive outcome after three consecutive quarters of declining sales.
“A 17 per cent jump in vacant land sales is impressive, but land sales remain lower than the June quarter of last year and comes after three quarters where volumes consistently fell and prices rose. The most encouraging sign is that this quarterly rise in vacant land sales is broad based with five of the six states showing a substantial boost in sales.”
“With detached housing approvals remaining relatively flat since early 2014, the likelihood of this recent surge in vacant land sales developing into a stronger trend is unlikely.”
CoreLogic RP Data’s Pain and Gain Report for the June 2015 quarter shows that 9.1% of all homes resold recorded a gross loss when compared to their previous purchase price. However, vast majority (90.9%) of properties resold over the quarter did so at a profit. In fact, 30.8% of homes resold for more than double their previous purchase price.
The vast majority (90.9%) of properties resold over the quarter did so at a profit. In fact, 30.8% of homes resold for more than double their previous purchase price. Across those homes which resold at a profit, the total value of this profit was recorded at $16.1 billion with the average gross profit recorded at $259,174.
Those recording a loss over the March 2015 quarter was (8.9%) and slightly higher than the 8.6% recorded over the June 2014 quarter. Although the proportion of loss-making resales rose, the figure has been fairly steady over the past 12 months. Across those dwellings which resold at a loss over the quarter, the total value of loss was $411.3 million with an average loss of $65,585.
The data also highlights the fact that ownership of property, whether for investment or owner occupier purposes, should be seen as a long-term investment. Across the country, those homes that resold at a loss had an average length of ownership of 5.3 years. Across all sales recording a gross profit the average length of ownership was recorded at 9.9 years, while homes which sold for more than double their previous purchase price were owned for an average of 16.4 years.
Sydney remains the only capital city housing market in which units had a lower proportion of resales at a loss (1.8%) than houses (2.2%) over the quarter. The differential in loss-making resales between houses and units was quite substantial across most capital cities and reflects the fact that house values tend to increase at a more rapid pace than units.
Trends across some of the major regions of the country which are intrinsically linked with the resources sector have been analysed and in most instances a heightened level of loss-making sales is evident as the mining investment boom slows. Over the June 2015 quarter, 47.6% of resold properties in Mackay sold at a loss. Across the other regions analysed the figures were recorded at: 35.6% in Fitzroy, 10.9% in the Hunter Valley (excluding Newcastle), 19.3% in Outback SA and 32.6% in Outback WA.
