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HTW property clock shows general stability, but Sydney and Melbourne in decline

This month’s Herron Todd White (HTW) property clock paints a picture of relative stability when it comes to market positioning, but with a few notable exceptions.

Melbourne is officially “starting to decline” in both the housing and apartment markets, while Sydney has ticked over to a declining market in both sectors.

The news hardly comes as a surprise given current Covid-19 conditions, as the report explains.

“We’re now into month eight of this very testing year and as we adopt national and states-based strategies to tackle infections, our economy continues to operate in a push-pull fashion,” HTW CEO Gary Brinkworth said.

“While circumstances can feel overwhelming, these are also the moments when our nation’s mettle comes to the fore. Resilience in the face of challenge is a hallmark of our industry too.”

This month’s report has a focus on investors, with key findings indicating:

  • Affordable housing and granny-flat construction in Western Sydney looks promising
  • Town planning changes in Kyogle and surrounds are opening up small development opportunities
  • Many regional property markets remain resilient due to low/nil infection numbers,
  • CBD accessible lifestyle regions are gaining appeal
  • Multi-residential investments (e.g. flats) hold excellent promise across many markets
  • Queensland property positions itself as an appealing post-pandemic alternative for southern investor
  • New construction is gaining momentum in some centres on the back of government stimulus
  • In Perth, transaction numbers rise, and vacancy rates fall due to low infections

The property clock

As mentioned, this month sees very little movement in the HTW monthly property clock.

Poll position

Houses – Adelaide, Adelaide Hills, Albury, Barossa Valley, Bathurst, Canberra, Dubbo, Geelong, Hobart, and Tamworth remain in peak position in terms of houses

Units – The unit market features the same suburbs but also sees the Central Coast included.

Starting to decline

Houses – In houses, Cairns Karratha, Newcastle, Wodonga continue to be in the ‘starting to decline’ category, with Melbourne now also added to the list.

Units – In terms of units Burnie/Devenport, Launceston, Wodonga remain in ‘starting to decline’ but again Melbourne is a new addition, along with Cairns.

In decline

Houses – Brisbane and Ipswich remain in decline, and Sydney has now been added to this category.

Units – It’s a similar array of regions in the units in decline list with Brisbane, Canberra, Gold Coast, Ipswich, and Perth featuring, along with newly added Sydney.

Nearing the bottom

Houses – Approaching the bottom of the clock in houses are the familiar faces of Ballina/Byron Bay, Broome, Geraldton, Kalgoorlie, and Lismore, with no new additions.

Units – Lismore is a new arrival here, joining Ballina/Byron Bay, Broome, Geraldton, and Kalgoorlie.

Bottom of the clock

Houses – There are a few fresh faces here, with the Central Coast, Coffs Harbour, and South West WA joining Alice Springs, Perth, and the Southern Tablelands.

Units – South West WA now joins Alice Springs, Bundaberg, Coffs Harbour, Darwin, the Southern Tablelands, Toowoomba, and Whitsunday in the regions at the bottom of the clock for units.

Start of recovery

Houses – Enjoying the first signs of recovery are new additions Illawarra, Mildura, and Toowoomba who join the Southern Highlands, Townsville, and Whitsunday.

Units – Illawarra and Mildura also show signs of unit price recovery along with Emerald, Mt Gambier, Shepparton, the Southern Highlands, and Townsville.

Rising market

Houses – The Gold Coast joins Burnie/Devenport, Emerald, Gladstone, Hervey Bay, Launceston, Mackay, Mount Gambier, Port Hedland, Rockhampton, and Shepparton.

Units – Dubbo, Gladstone, Hervey Bay, Mount Gambier, Port Hedland, and Rockhampton units remain in a rising market with Mackay now added to this field.

Approaching top of the market

Houses – The Sunshine Coast continues to near the peak.

Units – Again the Sunshine Coast continues to make a cameo, accompanied by Karratha.

New South Wales

HTW notes although Sydney property prices have fallen 0.9 per cent over the past month, they still remain 2.8 per cent higher than the beginning of the year.

“The residential property investor market has had some significant hurdles placed in front of it in recent years,” they reflect.

“Tougher lender and regulatory requirements around investor loans, and the threat of removal of negative gearing and capital gains tax allowances prior to the federal election in May last year, significantly reduced the number of investors looking to get into the market.

“As these lending restrictions eased and the threat to tax allowances was extinguished, the investor market began to recover along with the wider market as prices started to rise.

“That recovery has now come to an abrupt halt as a result of COVID-19, as asking rents have fallen sharply, while vacancy rates have climbed, across many parts of Sydney.”

Victoria

With Melbourne currently subject to a Stage 4 lockdown, Victoria continues to feel the property impact of the ongoing coronavirus crisis.

HTW states while demand has remained fairly steady for properties in some areas of Melbourne, rental property markets have felt the pinch in the past few months.

“Latest statistics show that Melbourne housing values have dropped 1.1 per cent, the numbers of owner/occupiers had increased in demand by 0.5 percent and demand from investors has dropped by 0.3 per cent,” they note.

Queensland

HTW reports confidence appears to be retrning to the Queensland market, although activity remained slow throughout April and May “with a reduction in both properties for sale (supply) and buyers (demand)”.

“As a general observation, investors have remained relatively inactive in our market, but that doesn’t mean South East Queensland isn’t offering excellent potential for those looking to build their portfolio of assets,” they state.

South Australia

In South Australia, home values remained 2.04 per cent higher on June 30 than they were the year prior, but the state could soon follow the eastern seaboard lead, according to HTW.

“Considering the most recent market data and east coast market direction, it appears that the South Australian market could be entering the initial stages of a downward cycle,” they reflect.

“At this stage the decline has only been slight and will be monitored closely in the short to medium term.

“Broadly, national investor activity has been in decline throughout 2020. May data released by the Australian Bureau of Statistics indicates that investor loan commitments nationally are 11.9 per cent down year on year and 15.6 per cent down month on month.

“The level of uncertainty surrounding COVID-19 has been a major deterrent to investors entering the market.”

Western Australia

WA continues to buck the national trend, with HTW noting the Real Estate Institute of WA (REIWA) confirmed that June recorded the highest amount of sales recorded in a month in Perth since 2015, with transactions increasing 55.1 per cent compared to May and also 45 per cent higher compared to June 2019.

“This was supported mainly by the 289 per cent increase in land sales for the month with 1471 sales recorded, as competition for land increased in line with government incentives.

“Over the first week of July, sales activity within Perth increased by 35 per cent from the previous week, with a reported 1318 transactions recorded during that period.

“These figures are vastly different to figures recorded at the end of March, which recorded just 426 transactions.”

Northern Territory

The NT also recorded positive movement in recent months, with HTW reporting “despite the poor economic conditions, recent market sentiment in the residential sector has actually shown a positive direction, with agents advising strong interest for potential purchasers coupled with a lack of supply for new stock”.

“The volume of sales appears to be increasing, although pricing remains static,” they note.

“This can be attributed to several factors, one being Darwin is considered quite close if not at the bottom of the property price cycle.

“Additionally, locals looking to possibly travel over-seas or relocate interstate have decided to settle down and purchase a home in Darwin.”

Australian Capital Territory

The property market in the ACT has seen little impact of Covid-19, but according to HTW it could be yet to come.

“The latest figures from Core Logic show that average Canberra house prices rose 0.1 per cent last month (June) which is a contrast with Sydney and Melbourne which have seen a 1.1 per cent decline over the same period,” HTW stated.

“Only Darwin and Hobart have performed better with a monthly increase of 0.3 per cent reported. However, Canberra proudly sits third on the ladder when it comes to annual house price increases (6.3 per cent) behind both Sydney (13.3 per cent) and Melbourne (10.2 per cent).”

Tasmania

Tasmania also appears to have enjoyed relative stability, with HTW explaining recent conditions have allowed “local residents the ability to purchase their first home without interstate competition”.

“In saying that, there are still many properties receiving multiple offers,” HTW continues.

“Local real estate agents have indicated there is a plethora of interstate purchasers waiting for the Tasmanian border restrictions to be lifted to purchase residential property for short to medium term investment with the option to move to the Island State later on down the track.”

The full Herron Todd White August Month in Review can be accessed here.

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