Regional towns are driving buyer confidence and price growth in the property sector, with 53 locations across the country identified as being on the cusp of stronger market conditions, according to new research.
Propertyology’s latest report analysed the fundamentals of property markets across Australia’s 500-plus municipalities and considered leading indicators such as the average time to sell a dwelling, the volume of dwellings sold, vacancy rates, and a number of employment metrics.
Propertyology Head of Research Simon Pressley said the lag in property data meant prices had yet to officially firm significantly in many of the locations, but positive macro changes meant the signs of improvement were real.
“The analysis found that fundamentals of Hobart and Canberra continue to be the best of all capital cities with recent positive macro changes for their property sectors likely to see their price growth rates accelerate,” Mr Pressley said.
“Perth, Brisbane and Adelaide are all at the right stage of the property cycle with balanced supply and housing affordability.
“While Propertyology believes they will all produce some growth over the next 12 months, it’s unlikely to be anything spectacular until such time as there is tangible proof of a meaningful lift of private-sector job growth.”
Mr Pressley said dwelling values in Sydney and Melbourne are now back to June 2015 and October 2016 levels respectively. While recent auction clearance rates have been strong, the volume of transactions is too small a sample size to be basing bold predictions on.
He said the most likely future for the property market of Australia’s two largest cities is a prolonged period of very little capital growth and low rental yields. If interest rates were to further reduce, property prices would come under more pressure.
Regions outperform
Mr Pressley said a plethora of regional locations held the best prospects for capital growth with affordability only one part of the equation.
“One such example is the New South Wales university city of Armidale in the New England region,” he said.
“It has already seen a significant reduction in real estate selling times, tightening vacancy rates, and has an admirable list of major projects, which is fuelling job growth and community confidence.
“The median house price in Armidale has increased by an impressive annual average of 6.2 per cent over the past 20 years and still sits at an affordable $350,000.”
The research found other regional New South Wales locations with positive trends showing up in a few metrics in Wagga Wagga, Coonamble, Parkes, Murrumbidgee, and Dubbo.
Mr Pressley said the rebound in commodity prices that commenced a few years ago, as well as more recently in jobs growth, was now showing through in other property metrics.
“Regional property markets which support precious metals such as gold and copper are strengthening and include Mount Isa, Charters Towers, Orange, Cobar, Swan Hill, Bendigo, Kalgoorlie, and Roxby Downs,” he said.
The coal sector is currently incredibly strong in locations such as Mackay, Moranbah, and Emerald in Queensland and Musswellbrook in New South Wales, he said, so there was no reason these property markets wouldn’t perform well in future years.
“Likewise, expansion within Western Australia’s iron ore and lithium resources sector is fuelling improved property market performance in Port Hedland, Newman, Karratha and Bunbury,” he said.
The analysis found that Bendigo in Victoria was a standout for its tight vacancy rates, growth in job advertisements, and a reduction in the average number of days for houses to sell from 62 in 2017 to 38 in mid-2019.
“Wangaratta, Shepparton, Bairnsdale, Colac, Benalla, Swan Hill and Latrobe are other Victorian locations displaying some positive signs, while Mildura ticks many of the right boxes, however, the growth cycles in Geelong and Ballarat are nearly over,” Mr Pressley said.
While southeast Queensland’s higher profile draws lots of attention, job creation remains the missing link, which is why the research found that the metrics look better in other Queensland regional locations.
The tsunami of large job-creating projects under way and in the pipeline in Cairns combined with very tight housing supply is one such example, Mr Pressley said.
Property markets are also tightening in Hervey Bay, Gladstone, Rockhampton, Townsville and Mackay while Beaudesert, Lockyer Valley and Warwick definitely warrant consideration.
“Propertyology is surprised that Perth hasn’t seen a return to price growth by now but there are indications of tightening in municipalities such as Armadale, Bayswater, Joondalup, Rockingham and Swan,” he said.
“The near-term outlook for Karratha and Port Hedland seems good, however, positive property market signs are also evident in regional Western Australian cities of Albany, Geraldton, Esperance and Bunbury where the economy is more diverse.”
Best performers over past 12 months
Mr Pressley said a series of policy changes between May and July this year provided some much-needed positive news for Australian property markets and the broader national economy.
“More important than negative gearing surviving the Federal Election chop and interest rate cuts by the RBA, was APRA’s decision to allow banks to reduce loan assessment rates by circa two percentage points,” he said.
“Since 2015, the property sector was whacked with a series of blows that culminated in a spiralling reduction in national transaction volumes and worked directly against the grain of all efforts to improve economic conditions and wage growth.
“In fact, the past 12 months were the worst that Australian real estate has experienced in 30 years.”
However, the Propertyology research found many parts of Australia still performed well over the past 12 months.
“That’s because local factors have a bigger influence on property markets, including local economic conditions, local housing supply volumes, local projects, job creation, local confidence and local affordability,” Mr Pressley said.
Over the past 12 months the best-performing capital city was Hobart. While the headline increase in median house price was 4 per cent the municipalities of Glenorchy (11.3 per cent growth) and Clarence (10.4 per cent) are still enjoying double-digit growth.
Prices in every other capital city either softened, flat-lined, or were mostly benign, he said.
The star performers over the past year were yet again regional locations, according to the research.
“The common denominators among the economic profiles of each of Australia’s strongest property markets right now include regional tourism, agriculture, mining and infrastructure investment,” Mr Pressley said.
“In a lot of cases, local employment growth is drawing internal migration and placing extra pressure in property prices.”
In Queensland, the municipality of Isaac (Moranbah) produced a 34 per cent increase in median house price over the past year while Gympie, Noosa and Scenic Rim also continue to be steady.
In South Australia, Port Augusta (27 per cent) and Roxby Downs (20 per cent) were Australia’s second and third highest ranked locations, while Mount Gambier, Light, Renmark and Whyalla also did well.
The Riverina and Central West regions are the shining lights of New South Wales’ property markets, however, Dubbo, Orange, Parkes, Griffith and Wagga Wagga have a combination of strong rental yields and higher capital growth than most capital cities, Mr Pressley said.
In Victoria, the median house price in Kyabram and Echuca (Campaspe city council) increased by 11 per cent over the past 12 months.
Mildura also (seven per cent) has a good outlook, while Bendigo and Ballarat continue to outperform Melbourne.
In Tasmania, Launceston (5.5 per cent), Burnie (7.1 per cent) and Devonport (5.8 per cent) have been solid and possess the potential to further strengthen, he said.
“Affordable housing and controlled housing supply always go a long way towards underpinning solid property market performance,” Mr Pressley said.
“Strong or improving economies then become the driving force for real estate buyer confidence and price growth.”
