I discuss recent events in the NSW Real Estate Industry with property insider Edwin Almedia. Is it time for a reboot?
Tag: REIA
Property prices down across Australia: REIA
From The Real Estate Conversation.
The median house price for Australia’s combined capital cities fell 0.8 per cent during the September quarter, according to the latest REIA Real Estate Market Facts report.
Only Melbourne, Brisbane and Hobart recorded higher property prices during the September quarter, according to the latest REIA Real Estate Market Facts report.
With weaker markets in the remaining capitals, country-wide median averages were dragged into negative territory.
The weighted average median price for ‘other dwellings’, which includes apartments and townhouses, declined 2.6 per cent, according to the REIA data.
The weighted average median price for houses across the eight capitals dropped to $762,000, as median prices in five of the eight capitals – Sydney, Adelaide, Perth, Canberra and Darwin – decreased during the quarter. Darwin house prices fell the most sharply, falling 8.3 per cent during the September quarter.
The weighted average median price for other dwellings fell to $588,400, with median prices decreasing in the same five cities – Sydney, Adelaide, Perth, Canberra and Darwin.
Over the quarter, again Darwin prices fell the most sharply, dropping 13.8 per cent.
REIA President Malcolm Gunning said, “It is usual for the September quarter to show a slight dip or at least a slowdown in the rate of change in prices, as buyers and sellers alike gear up for the traditional spring sales season.
“The September quarter figures also need to be interpreted against a background of sustained growth over a number of years, particularly in Melbourne and Sydney, and can be seen as an extremely active market ‘catching its breath’.”
Gunning pointed out that, over the quarter, median rents for three-bedroom houses increased or remained steady in all capital cities except for decreases in Perth and Darwin.
Hobart had the largest increase in median rents for three-bedroom house at 2.8 per cent.
Median rents for two-bedroom other dwellings also increased or remained steady in all capital cities, except for a decrease in Perth. Melbourne had the largest increase at 2.4 per cent.
“Vacancy rates declined in all capital cities except for Perth. Darwin had the largest decrease of 0.6 percentage points. Both Perth and Darwin continue to have high vacancy rates at 6.9 per cent and 5.9 per cent respectively.
“The weighted average vacancy rate for the eight capital cities remained steady on 2.8 per cent during the September quarter,” Gunning said.
REIA Real Estate Market Facts: State by State
Australian Capital Territory
Over the September quarter, the median house price for Canberra decreased to $640,000, a fall of 1.5 per cent over the quarter but an increase of 7.9 per cent over the previous year.
The median rent for three-bedroom houses in Canberra increased to $480 per week, an increase of 2.1 per cent over the September quarter and an increase 6.7 per cent over the previous year. The vacancy rate in Canberra decreased to 0.7 per cent, a decrease of 0.4 percentage points, over the September quarter.
New South Wales
Over the September quarter, the median house price in Sydney decreased to $1,176,567, a decrease of 2.0 per cent over the quarter but an increase of 9.0 per cent over the previous year.
The median rent for three-bedroom houses in Sydney increased to $510 per week, a rise of 2.0 per cent over the September quarter and an increase of 8.5 per cent over the past year. The vacancy rate in Sydney decreased to 2.0 per cent, a decrease of 0.1 percentage points over the quarter.
Northern Territory
Over the September quarter, the median house price in Darwin decreased to $495,000, a decrease of 8.3 per cent over the quarter and a decrease of 10.0 per cent over the previous year.
The median rent for three-bedroom houses in Darwin decreased to $478 per week, a fall of 1.2 per cent over the September quarter and a decrease of 6.5 per cent over the previous year. The vacancy rate in Darwin decreased to 5.9 per cent over the September quarter 2017, a decrease of 0.6 percentage points.
Queensland
The median house price for Brisbane increased to $516,900, an increase of 0.4 per cent over the September quarter and an increase of 3.4 per cent over the previous year.
Over the September quarter and over the previous year, the median rent for three-bedroom houses in Brisbane remained steady at $380 per week. The vacancy rate in Brisbane decreased to 2.9 per cent during the September quarter, a decrease of 0.2 percentage points
South Australia
Over the September quarter, Adelaide’s median house price decreased to $450,000, a fall of 2.1 per cent over the quarter but an increase of 2.3 per cent over the previous year.
Over the September quarter and over the previous year, the median rent for three-bedroom houses in Adelaide remained steady at $340 per week.
Tasmania
Over the September quarter, the median house price in Hobart increased to $436,300, an increase of 1.5 per cent over the quarter and an increase of 13.3 per cent over the previous year.
The median rent for three-bedroom houses in Hobart increased to $370 per week, an increase of 2.8 per cent over the September quarter and an increase of 12.1 per cent over the previous year. The vacancy rate in Hobart decreased to 1.7 per cent during the September quarter, a fall of 0.3 percentage points.
Victoria
Over the September quarter, the median house price in Melbourne increased to $817,000, a rise of 0.7 per cent over the quarter and an increase of 12.7 per cent over the previous year.
The median rent for three-bedroom houses in Melbourne increased to $385 per week, an increase of 1.3 per cent over the September quarter and an increase of 2.7 per cent over the previous year. The rental vacancy rate in Melbourne decreased to 2.1 per cent over the September quarter, a decrease of 0.1 percentage points.
A House Divided
From The Real Estate Conversation.
The Bank of mum and dad is growing the divide between those who can and those who can’t buy property. The latest Adelaide Bank/REIA Housing Affordability Report shows affordability is worsening, just as new research from Mozo shows increasing numbers of parents are stepping in to help their children get a foot on the property ladder. This chimes well with our own Bank of Mum and Dad research published recently.
The latest Adelaide Bank/REIA Housing Affordability Report shows affordability is worsening in Australia, just as new research from Mozo shows growing numbers of parents are stepping in to help their children get a foot on the property ladder. The trend is causing “a growing divide between the younger generation who have had assistance and those who have not,” Kirsty Lamont, Mozo Director, told SCHWARTZWILLIAMS.
The latest Adelaide Bank/REIA Housing Affordability Report shows that buying a house became even less affordable during the June quarter.
The deterioration in affordability comes as research from Mozo.com.au shows almost a third of all parents are helping their children to buy their first home.
The Adelaide Bank/REIA Housing Affordability Report shows the proportion of median family income required to meet average home loan repayments increased by 0.2 percentage points to 31.4 per cent.
The share of first-home buyers in the market is at its highest level since 2010
There is a bright spot in the data though. The number of loans to first-home buyers increased by 14.0 per cent, with increases in all states and territories except Tasmania.
“First home buyers now make up 14.3 per cent of total owner occupied housing,” said REIA President Malcolm Gunning.
Darren Kasehagen, Head of Business Development at Adelaide Bank, said, “A slight increase in housing affordability shouldn’t overshadow the welcome news that the number of first home buyers increased by 14.0 per cent during the quarter.”
The rate of first-home buyers has been dropping steadily over the last five years, but appears to have stabilised over the past 18 months, said Gunning.
Rental affordability improved
In the June quarter, the proportion of median family income required to meet rent payments declined by 0.6 percentage points to 24.3 per cent. The improvement was recorded across all states and territories except in Tasmania and the Australian Capital Territory, said Gunning.
Rental affordability is the best it has been since the March quarter 2010, according to Gunning.
The bank of mum and dad is stepping in, expanding the divide between those who can afford to get into the market and those who can not
With it getting harder for first-home buyers to get into the property market independently, the ‘bank of mum and dad’, as lending from parents has become known, has ballooned to being the fifth largest home lender in Australia, sitting behind, ANZ, the Commonwealth Bank, NAB and Westpac.
New research from financial comparison site, Mozo.com.au, shows 29 per cent of parents, or more than 1 million families, help their children purchase a home. Around $65.3 billion has been lent to children, with 67 per cent of parents not expecting any repayment.
The average amount lent to children is $64,206.
“For many first homebuyers, it takes years to scrimp and save for a home deposit and all the while house prices are continuing to skyrocket, making the great Australian dream exactly that – a dream,” said Lamont.
Australian property prices have risen 618 per cent in the last 30 years; wages growth hasn’t kept pace
“With Australian property prices rising by a staggering 618 per cent over the past 30 years and wages failing to keep up, many mums and dads across the country feel they have no choice but to dip into their own savings to help their children get a foot on the property ladder.”
Lamont said by dipping into their own savings and helping out their children, parents are actually shaping the property market.
“We knew that mums and dads were helping their children out, but the reality is they are actually changing the face of the Australian property market,” she said.
“We expect the Bank of Mum and Dad to remain a major player in the property market for years to come, and it’s likely to cause a growing divide between the younger generation who have had assistance and those who have not.”
“Those young Australians who don’t have access to parental assistance may have to shelve the property dream and consider other ways to invest their money and build wealth,” said Lamont.
“The bank of mum and dad is proof of family generosity, but also points to a broken property market for younger generations.”
- NSW is the most generous state for parental lending with an average lend of $88,250 per family, totalling $32.7 billion.
- VIC and SA rank second equal, lending around $63,000 per family.
- ACT and NT are the least generous, lending $20,083 and $15,000 per family respectively.
The most popular ways for parents to help their kids get a foot on the property ladder is by allowing their children to live at home rent free. Other ways parents help is by acting as a guarantor, helping with repayments, or buying property on behalf of or as a partner with the child.
How Australian parents are helping their kids onto the property ladder
How Australian parents are financing their contribution to their children
Data from the Adelaide Bank/REIA Housing Affordability Report from across the nation
Victoria
The number of loans to first home buyers in Victoria increased by 10.0 per cent in the June quarter. In Victoria, first home buyers now make up 21.1 per cent of the state’s owner-occupier market. Rental affordability improved for the quarter with a decrease of 0.7 per cent of income required to meet median rents.
New South Wales
The proportion of family income required to meet loan repayments is 6.6 per cent higher than the nation’s average. New South Wales remains the least affordable state or territory in which to buy a home. Of the total number of Australian first home buyers that purchased during the June quarter, 18.2 per cent were from New South Wales. First home buyers now make up only 13.0 per cent of the state’s owner-occupier market – the lowest level across the nation. Rental affordability improved for the quarter with a decrease of 0.4 per cent of income required to meet median rents.
Queensland
The proportion of income required to meet home loan repayments increased to 27.2 per cent, a 0.5 percentage point increase over the quarter. Of all Australian first home buyers over the quarter, 25.4 per cent or 6003 were from Queensland while the proportion of first home buyers in the State’s owner-occupier market was 25.3 per cent. Rental affordability improved slightly for the quarter with a decrease of 0.7 per cent to 23.0 per cent of income required to meet median rents.
South Australia
South Australia recorded a decline in housing affordability with the proportion of income required to meet monthly loan repayments increasing to 26.8 per cent, an increase of 0.6 percentage points over the quarter but a decrease of 0.1 percentage points compared to the June quarter 2016. In the national breakdown, 5.8 per cent of first home buyers were from South Australia while the proportion of first home buyers in the State’s owner-occupier market recorded an increase of 12.6 per cent. Rental affordability improved by 0.7 percentage points.
Western Australia
The number of first home buyers in Western Australia increased by 16.0 per cent over the quarter and by 3.8 per cent compared to the same time last year. 17.5 per cent of all Australian first home buyers were from Western Australia. Housing affordability declined with the proportion of income required to meet loan repayments increasing to 23.6 per cent or 0.2 percentage points over the quarter but a decrease of 0.3 percentage points year on year.
Tasmania
Housing affordability in Tasmania declined with the proportion of income required to meet home loan repayments increasing to 23.9 per cent, an increase of 0.3 percentage points over the quarter and an increase of 0.2 percentage points year on year. Rental affordability in Tasmania improved with the proportion of income required to meet median rents decreasing to 25.8 per cent, a 0.8 percentage point drop over the quarter but an increase of 0.8 percentage points year on year. First home buyers in Tasmania decreased by 3.3 per cent over the quarter and by 17.6 per cent compared to the same quarter last year.
Australian Capital Territory
The number of loans to first home buyers in the Australian Capital Territory increased to 570, an increase of 49.6 per cent over the quarter and an increase of 21.8 per cent compared to the June quarter 2016. Housing affordability in the Australian Capital Territory improved with the proportion of income required to meet home loan repayments decreasing to 19.8 per cent, a 0.3 percentage point drop over the quarter and a decrease of 0.7 percentage points compared to the same quarter last year. Rental affordability remained stable. The proportion of income required to meet the median rent remained at 17.9 per cent.
Northern Territory
Housing affordability in the Northern Territory improved with the proportion of income required to meet loan repayments decreasing to 20.3 per cent in the June quarter or 0.8 percentage points. This was a decrease of 1.8 percentage points year on year. Rental affordability in the Northern Territory also improved with the proportion of income required to meet the median rent decreasing to 23.1 per cent or 0.6 percentage points over the quarter or a decrease of 2.0 percentage points compared to the June quarter 2016.
‘Sledgehammer’ approach to risky lending could hurt economy: REIA
Interesting statements from the REIA today, highlighting the risks, in their eyes, to the economy if regulators tighten credit on home lending.
Here is the problem, do nothing, and home prices will continue to spiral higher with households ever more exposed, leading to a bigger future correction, and so economic damage, as rates rise or other events wash over us; or tighten investment lending controls now to cool the market, perhaps leading to reduced demand, home price correction, and so economic damage.
I am not sure there is now a middle way – all roads take us to a crunch, its just a matter of timing – a correction we have to have?
From The Real Estate Conversation.
Malcolm Gunning, president of the REIA, has warned that the combined actions of APRA, ASIC and the banks could decrease demand for new properties to such an extent that housing supply dwindles and the construction sector weakens.
The Real Estate Institute of Australia has urged regulators and banks to take caution when restricting bank lending to dampen investor demand for property in Sydney and Melbourne.
“Whilst warnings about interest-only loans and over committed borrowers might be justified in some circumstances, it does not mean all interest only loan borrowers should be penalised and outlawed,” REIA president Malcolm Gunning said.
He warned that the combined actions of APRA, ASIC and the banks could decrease demand for new properties to such an extent that supply dwindles, worsening housing affordability, and the construction sector weakens, damaging the overall strength of the economy.
“The cumulative impact of the collective action of APRA, ASIC and individual banks could well be sledgehammer, when only some fine tuning was required,” he said.
“We need to be careful that we don’t constrain the building and construction sector that has kept the Australian economy growing following the decline in the mining sector.”
Gunning said that talk of weakness and lack of confidence on the future strength of the economy, can become a self-fulfilling prophecy.
Being exposed to negative “expert opinions” daily can quickly become a “doomsday prophecy”, warned Gunning.
Gunning said agents working at the coal face are already seeing signs of a slow down.
“Market information from our Sydney and Melbourne member agents suggests that there are signs of a slow down. The leading indicators tell a very different story to the lagged historical data,” cautioned Gunning.
“We need to be careful that an overreaction to the investor led Sydney and Melbourne property markets doesn’t threaten the health of the national economy”, he concluded.