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HTW monthly update – Property prices deliver strong end to 2019

As 2019 draws to a close Herron Todd White have assessed where the nation’s property markets currently sit and how their predictions stacked up over the course of the year.

We saw a slow start for property in 2019 thanks to an uncertain regulatory environment and the federal election which had big implications for property investors.

Since that point, market sentiment has started to turn and across the country, property prices have started to recover on the back of three interest cuts from the Reserve Bank of Australia (RBA).

Sydney property prices have jumped 5.71 per cent in the most recent quarter across the metro area. However, it is important to note that year-on-year, RP Data is still recording a 1.58 per cent loss to the median value. Interestingly, on a year-on-year basis (across the Sydney metro area) units are outperforming houses at +1.29 per cent and -2.45 per cent respectively.

Investor demand still appears to be holding at weaker levels, having decreased from its peak of 43 per cent in 2015 to 26 per cent in August 2019, well below the long term average of 34 per cent. Generally, the surprise this year has been the resurgence of interest in the inner-city markets. This appears to be largely driven by lower interest rates and post-election confidence.

The new unit market is probably seeing more of a mixed recovery with pockets of oversupply along New South Wales with well-publicised issues around significant building defects and flammable cladding concerns. It is almost 12 months since the Opal Tower was evacuated due to significant building issues.

The Northern Beaches market played out reasonably as predicted and consistent with the wider Sydney market. In the South, the market has started its recovery. And after a long period of strength and buoyancy in the Sydney prestige residential market (above $5 million), we finally experienced some stabilisation, as predicted at the beginning of the year.

For Melbourne, the steepest increase in housing prices in over 10 years occurred over the month of October with an increase of 2.3 per cent.

It was originally forecast at the start of the year that the property sector in Melbourne’s CBD would face a decline due to the influx of off-the-plan purchased apartment complexes coming onto the market at settlement due to purchasers being unable to raise finance. Whilst fluctuations remain in some areas, the CBD residential market has surprisingly remained steady and has even taken a turn for the better.

The RBA’s cash rate cut of 5 base points and the previously limited supply of housing options has led to huge demand across many regions of Melbourne, particularly the inner eastern suburbs.

In 2019, Brisbane continued its history of growth by proximity to the CBD. Demand for suburbs closest to the city centre was consistently better than for most of the fringe suburbs. Certainly, demand from cashed-up interstate migrants for high-quality, lifestyle-oriented homes played a role in this.

In addition, near-city suburbs are seen as providing good quality, long-term stock worth holding onto. Middle ring positions also did pretty well and while some of the outer burbs saw price increases, the biggest rises were still within an easy jog of the CBD.

Housing again held its own compared to units. There’s just no denying Brisbane folk love their land, while investor style units continued to see price softening, but price retractions in response to oversupply are slowing.

The South Australian market is renowned for shadowing the major east coast markets; always a step behind. This shadowing has always provided those in South Australia a crystal ball into how our market may track.

The back end of 2018 and beginning of 2019 saw these major markets head into negative territory. After a period of sustained growth dating back to 2017, the South Australian metropolitan market was put to the test.

At the start of 2019, the suburbs of Hope Valley, Dover Gardens and Ingle Farm were the picks to watch from HTW. On the most recent quarterly data, these suburbs achieved year on year median dwelling value growth of 1.45 per cent, 0.21 per cent and 2.62 per cent respectively.

Throughout 2019 the market provided some surprises, however wasn’t able to buck the shadow of the east coast markets and keep on the upward trend. Recent data suggests price growth in a number of the major metropolitan markets, so don’t hit the panic button yet.

In 2019, HTW was concerned about the gap between value growth in the inner versus the outer suburbs and expected greater Perth to continue its downward trend towards the bottom of the market, driven mostly by poor performances of newer land estates on Perth’s urban fringe.

The most positive news was the strength of Perth’s rental market. This has continued throughout the interim, as the median weekly rental has held up at $350 per week.

Though the greater Perth market softened overall, there were some suburbs that bucked the trend and showed strong performances.

These were mostly in affluent locations with median house prices that far surpassed the Perth median. As at August 2019 Swanbourne, Menora, Shelley, Mount Pleasant, Hillarys, Cottesloe, Trigg, Kensington and Waterford all had year-on-year median house price growth rates between 5-20 per cent.

The most recent stat’s to come out of the Real Estate Institute of the Northern Territory (REINT) show that as at September 2019, total sales volumes declined by some $9 million since the same period in 2018, a reduction of over eight per cent. This was mirrored by the reduction in median price from $497,500 in 2018 down 7.5 per cent to $460,000 in 2019. 

Despite the contraction in median value across some asset types, the market remains fluid with agents reporting good demand for reasonably priced good quality property. We would expect that this trend and sentiment will continue throughout the balance of 2019.

Overall the Canberra property market has been in a stable market position from the end of 2018 to early 2019. Most Canberra suburbs have maintained median price points for standard dwellings while medium density and unit stock have seen some small declines.

Active sections of the market include standard housing at the entry-level price points in some of the Canberra fringe and outer suburban locations. Generally, purchasers are looking for large blocks in established suburbs that provide access to good education and employment services.

Hobart has continued to lead the nation in capital growth notwithstanding a levelling off from the double-digit growth of the past few years.

The inner ring suburbs evened off a little but still achieved reasonable growth in the order of five per cent. However, some of the other suburbs such as Oakdowns (western side of the river) achieved an outstanding lift of 22 per cent in median pricing. 

The established suburb of Howrah lifted its median house price to $535,000 (eight per cent increase) and median unit price to $415,000 (12 per cent increase). 

In the north, Launceston has continued in leaps and bounds. The city is up broadly across all price segments, from Ravenswood (lower socioeconomic suburb to the east of the city centre) up 13 per cent to Newstead (higher priced inner suburb) up 11 per cent.

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