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The market continues to cool in July as affordability issues peak

property

After a scorching first six months of the year, the Australian property boom has once again eased off the gas slightly in July, recording an increase in median property values of +1.6 per cent nationally, according to CoreLogic’s latest Home Value Index report.

That’s down from a monthly high of +2.8 per cent in March, suggesting a trend towards milder growth in the second half of 2021.

While interest rates remain at record lows, affordability (or the unaffordability of real estate, to be more direct) is beginning to price more buyers—first home buyers especially—out of the market.

It’s far from the end of the growth cycle, though, with plenty more steady gains forecast over the next 18 months.

National property values: July 2021

HousesUnits
$695,800
Monthly change: +1.8%
$576,063
Monthly change: +1.2%

Although the rise in property prices was slightly more subdued in July, the +1.6 per cent national increase still means the Australian median dwelling value jumped up more than $11,000 to $656,694.

market

Monthly gains have taken a slight dip in July, though annual growth is still in the double digits all over Australia. Source: CoreLogic 

Tim Lawless, CoreLogic’s research director, notes that “the +16.1 per cent lift in national housing values over the past year is the fastest pace of annual growth since February 2004, however the monthly growth rate has been trending lower since March this year.”

Canberra continued its blinding run with a +2.6 per cent uptick for the month, making it the fastest-growing capital city in July.

A +2.0 per cent increase in Sydney well and truly nudged the locked-down Harbour City above the fabled $1 million high water mark, where the median home price now sits at $1,017,692.

Brisbane homes also jumped up by +2.0 per cent, while Adelaide, Hobart and Darwin all delivered above-average bumps of +1.7 per cent.

Melbourne, also dealing with its own lockdown, saw a +1.3 per cent boost to its home values, while Perth continued its sluggish run, turning in +0.3 per cent growth for the month.

market

Both capital cities and regional markets have dropped from their growth peaks of a few months ago. Source: CoreLogic 

Looking outside the capitals, regional markets closely mirrored their metropolitan counterparts.

Regional NSW had the biggest jump for the month at +2.0 per cent, while Tasmania, Queensland and Victoria all followed close behind with +1.8 per cent, +1.7 per cent and +1.5 per cent respectively.

CoreLogic’s report points out that, while regional markets were outpacing capital cities in the second half of 2020, that gap has now shrunk and the conditions in regional and metro markets are now evenly matched.

Affordability constraints are at the heart of the cooldown

With some cities surging more than +17 per cent in 2021 alone, buyers are experiencing pressures they never could have imagined during last year’s downturn.

“With dwelling values rising more in a month than incomes are rising in a year, housing is moving out of reach for many members of the community,” Mr Lawless explains.

He points out that a number of pandemic-related Government support schemes have expired, making that pressure even greater, although new assistance is being introduced as a result of the latest outbreak.

“Sydney is the most expensive capital city by some margin and it has also been the city where values have risen the most over the first seven months of the year,” he says.

Listings remain low due to lockdowns, while sales are still well above average

It’s become a bit of a cliché to point out the imbalance between low stock on the market and the ravenous buyer appetite, but the data continue to show that that dynamic is largely unchanging.

“Demand is being stoked by record-low mortgage rates and the prospect that interest rates will remain low for an extended period of time,” Mr Lawless says.

“Dwelling sales are tracking approximately +40 per cent above the five-year average while active listings remain about -26 per cent below the five-year average.

“The mismatch between demand and advertised supply remains a key factor placing upwards pressure on housing prices.”

market

New listings have dropped in July, while total stock on the market stays well below normal levels. Source: CoreLogic

As a result of lockdowns, Sydney listings have plummeted -30 per cent since the end of June, with Melbourne not far behind on -27 per cent.

“With stock levels remaining tight, selling conditions have been skewed towards vendors,” Mr Lawless explains.

“Auction clearance rates have remained in the low-to-mid 70 per cent range across the major auction markets through July and private treaty sales continue to record rapid selling times and low discounting rates.”

“Worsening affordability is likely a key contributing factor in the slowdown here, along with the negative impact on consumer sentiment as the city moves through an extended lockdown period.”

Houses are still substantially outperforming units

Another recurring feature of the monthly updates is the disparity between house and unit prices, with houses growing at more than twice the rate of units on the national level.

Detached homes have recorded an +18.4 increase in the 12 months to now, compared to just +8.7 per cent for units, with Hobart being the only exception to the outpacing.

“Potentially the slightly stronger conditions across Hobart’s unit sector reflects greater demand from downsizers and empty nesters, or it could be attributed to worsening affordability constraints, diverting demand into the more affordable unit sector where median values are around $156,000 lower than houses,” Mr Lawless says.

It’s a very different story in every other city. In Adelaide, houses are up +12.0 per cent for the year so far, while units have managed to increase by only +2.9 per cent.

Buyers continue to look to upgrade and move into more spacious properties as the pandemic means people are spending more time at home and, often, working remotely.

Rental markets around the country are in varying states of recovery

While it’s been nothing but upwards for most residential sale markets this year, the situation with rentals in Australia is still more of a mixed bag.

Nationally, rents are up +7.7 per cent annually, the highest rate of increase seen since 2008.

Mr Lawless explains that “rental conditions across Darwin and Perth are the tightest amongst the capitals reflecting low vacancy rates and high rental demand.

“At the other end of the spectrum are the apartment sectors of Melbourne and Sydney, where rental conditions have been substantially looser,” he says, although rents are now stabilising in both cities.

market

Rental yields have soared in Darwin while Sydney and Melbourne continue to creep back up. Source: CoreLogic

Capital gains, along with those improving rental returns, are continuing to entice investors in both cities.

“Considering yields outside of Sydney and Melbourne are high relative to mortgage rates, and housing values are expected to rise further, we are likely to see investment activity continue to lift,” Mr Lawless adds.

What comes next for the Australian property market?

Even though there looks to be an overall easing of growth, CoreLogic still asserts the property market has a strong outlook.

The report notes that the average monthly increase in dwelling values over the past ten years is +0.4 per cent, so the current level of growth is still far beyond the norm.

Still, affordability constraints, along with an expected increase in listings later in the year, should serve to temper the historic boom.

Sydney’s extended lockdown in particular is expected to cause a lasting disruption, and it’s widely predicted that the Reserve Bank of Australia will have to raise the cash rate earlier than their previously announced 2024 target, meaning mortgage rate climbs could be on the horizon.

AMP’s chief economist Shane Oliver doesn’t see things changing drastically in the shorter term, though, suggesting that the current low-interest rate environment and FOMO frenzy aren’t going to vanish overnight.

“None of these factors look likely to change over the rest of 2021, and we expect that house prices will rise by another 10 to 15 per cent out to the end of next year,” he says.

“But house prices can’t increase at this rate indefinitely and history shows they sometimes go down—just ask anyone who bought into the Perth market at the top of the mining construction boom.”

Article Source: www.openagent.com.au

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Brisbane

Brisbane’s Office Market Greenlit for Business

Brisbane’s Office Market

Brisbane’s office market continues to shake off the pandemic doldrums with two new commercial towers approved in the CBD and fringe suburbs.

Property owner PGIM and development partner Indema’s plan for a bold adaptive reuse of a 1970s commercial building at 444 Queen Street has won approval.

The bronze 22-storey tower opposite Customs House will be stripped back to its core structure and completely remodelled with a new podium, curtain wall facade and an additional two-storey sculptural canopy.

Indema director Michael Bruderlin said they would be targeting a net zero certification for the building upon completion in the first quarter of 2024.

Bruderlin said Hutchies had been engaged in an early contractor design and construct contract to help de-risk the project and better understand the technical requirements.

The Fender Katsalidis-designed tower follows in the footsteps of another of its commercial adaptive reuse projects in Brisbane, Ashe Morgan’s Midtown, now the headquarters for Rio Tinto.

Bruderlin said retaining and repurposing the existing building is 400 per cent more environmentally friendly. Retaining the existing concrete structure provides a 70 per cent saving in embodied carbon.

The project will rejuvenate a 48-year-old building at the end of life into an A-grade commercial office asset and increase the net leasable area 40 per cent.

Bruderlin said the project would have a quicker turnaround than a normal demolish and build project and it would use clever design initiatives to increase floor plates and create a better value proposition for the asset.

PGIM purchased 444 Queen Street for $54.4 million from the Public Trustee of Queensland and Abacus Property Group in October last year.

Cornerstone has also won approval for a commercial development in the city fringe suburb of Fortitude Valley.

The Bureau Proberts-designed tower will capture the heritage brick character of the Fortitude Valley centre “borrowing from the intent of these buildings but with a stridently different and contemporary expression”, planning documents said.

“This approach is a deliberate counterpoint to the strong and solid brick structures of the immediately adjacent 47 Warner Street and McWhirters buildings.

“Brickwork or masonry is not used as a material in deference to these neighbouring buildings allowing them to become more evident and make a clear statement about the era of their inception.”

The 28-storey commercial tower at 251 Wickham Street features a stepped slanting facade fronting Warner Street, with a four-storey lobby, and an inverted podium.

There will also be a rooftop terrace, 20m pool and open-plan gym in the commercial tower, with retail offerings at the base of the building.

Brisbane’s metropolitan office market vacancy was at 16.3 per cent at the end of March and there were few transactions across the quarter, according to Colliers research.

But yields remained steady, and well above other capital cities, while incentives remained stagnant at 40 per cent.

 

 

Article source: www.theurbandeveloper.com

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Brisbane

Developer Pitches for $130m Shop-Top Housing on Bayside

$130m Shop-Top Housing on Bayside

Brisbane’s bayside could be going up in the world with plans for $130-million highrise shop-top housing in the heart of the seaside suburb of Wynnum.

Brisbane-based developer Hambros has lodged plans for a 21-storey apartment tower on the vacant lot neighbouring the Wynnum Central Shopping Centre, after winning approval for an small extension to the retail centre late last year.

The development comprises a 6-storey retail and commercial podium, with a 275-apartment tower above, backing on to Wynnum Central Park.

Hambros has reportedly spent about $14 million on revamping the Wynnum Central Shopping Centre on Bay Terrace, as part of a $74-million plan to rejuvenate Wynnum, including cinemas.

According to planning documents lodged with the Brisbane City Council, the tower will be made up of 54 one-bedroom apartments, 148 two-bedroom apartments, and 67 three-bedroom apartments, with six penthouses, which will have private rooftop space and their own pools.

The building height is well in excess of the allowable five to eight storeys in the Wynnum Manly Neighbourhood Plan, but town planners Gateway Survey and Planning argued the plan was “outdated” and should be overhauled.

The six-storey podium would contain two levels of parking, a retail tenancy at ground level, a floor of retail, with two storeys of commercial space for office, healthcare and events space on levels 5 and 6.

Developer Pitches for Shop-Top Housing on Bayside Brisbane

▲ Shayher Group won approval for its redevelopment of Wynnum Plaza last year, which included 184 apartments across eight residential buildings.

In a statement to the council Hambros director Justin Ham said the Wynnum CBD had been left behind “with no development occurring in the last 20 years”.

“Our project is designed to put Wynnum CBD on the ‘open for business’ map,” Ham said.

“This landmark development, with a construction cost estimated at $130 million will have a huge financial and community positive impact on the Wynnum CBD and surrounding areas.

“It’s a once-in-a-lifestime opportunity to create a beautiful space overlooking the best bay in the world.”

Ham said the development would bring much-needed foot traffic to the heart of the Wynnum CBD and help bolster businesses and landowners he said were struggling to remain profitable.

Taiwanese developer Shayher Group won approval for a masterplanned retail precinct at Wynnum Plaza with plans for 184 apartments across eight residential buildings as well as boutique cinemas and increased retail space, reportedly worth more than $100 million.

Work on the Wynnum Plaza redevelopment was due to commence later this year with a completion date hedged for 2024.

 

 

Article source: www.theurbandeveloper.com

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Brisbane

More room in the Brisbane property price bubble but get ready for a reckoning, says bank

Brisbane property price bubble but get ready for a reckoning

Brisbane’s house prices would continue to outpace the nation this year but a significant slump was near, according to the ANZ.

The bank’s economics team has revised its outlook for house prices and now tips a fall of about 3 per cent nationally this year followed by an 8 per cent fall next year. It had previously tipped a rise of 8 per cent this year and a fall of 6 per cent next year.

In Brisbane, the monthly growth rate has slipped down to about 2.5 per cent and ANZ expects a yearly rate this year of about 6 per cent with a fall of about 9 per cent next year.

The higher end of the market in Brisbane was also continuing to outpace the middle and lower price bracket in growth rates.

The downturn was being caused by higher interest rates and affordability issues and ANZ said the “wealth effect” would come into play which would spread the housing downturn to other areas of the economy.

“Falling house prices will weigh on consumer spending through the wealth effect, but high savings will provide a solid buffer,” ANZ said.

It expects the RBA cash rate to get to 2.35 per cent by mid-2023 while the market is tipping a 3.25 per cent. A cash rate of 2.35 per cent meant a variable rate mortgage of 4.75 per cent and a 3.25 per cent rate would increase variable loans to 5.65 per cent.

It said some people may struggle but forced selling because of higher interest rates was a low risk.

Meanwhile, CoreLogic said the Coalition’s plan to allow first home buyers to access their superannuation accounts to help pay for a house had some merit but there were downsides, including the possibility that it would only stimulate demand for housing and increase the cost “eroding some of the benefit of dipping into their super”.
CoreLogic worked out that under the scheme the median amount that could be accessed would be about $10,000, the equivalent of state-based first home buyer grants.
“CoreLogic data shows the current median dwelling value in Australia is $748,635, meaning the scheme could help increase the size of a standard deposit by around 1 per cent,” the company said.
Article source: inqld.com.au
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