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Performance of Australian Housing Market – Second Quarter 2017

australian housing market second quarter 2017 performance

What did the first half of 2017 mean for the performance of Australian housing market?  Property expert, Michael Cleary provides a summary.

Sponsored post by Michael Cleary of Milk Chocolate Property Concierge.  See their special offer at the end of this article.

Performance of the Australian Housing Market – Second Quarter 2017

Keeping up with our regular contributions, we thought it timely to review how the Australian property market has performed over both the last quarter and the 12 months to 30 June 2017.  The performance of Australian house prices remains mixed across the country with house prices in Sydney continuing their growth whilst the Darwin housing market continues to struggle.

Sydney

Capital Growth: 

  • Sydney experienced a pick up in growth in the month of June (2.2% for all dwellings, and 1.8% for houses and 4.5% for apartments).  This resulted in quarterly capital growth of 0.8% for all dwellings in Sydney (0.9% for houses and 0.5% for apartments)
  • For the year ending June 2017, Sydney has recorded a respectable 12.2% annual capital growth for all dwellings (13.0% for houses and 8.6% for apartments).

Gross Rental Yield (Houses): 

  • rental yields have improved from 2.7%pa at the end of the first quarter to 2.8%pa at the end of the first half.

Combined Rental Vacancy Rates:

  • The rental market has tightened slightly from 1.9% at the end of the first quarter compared with 1.8% at the end of the first half.

Median Dwelling Price: 

  • The median house price has increased to $880,000 as at June 30, 2017 (up from $805,000 in the last quarter)

Unemployment Rate (NSW): 

  • Unemployment in NSW is coming down , and has reduced to 4.8% as of May 2017 (from 5.2% in February 2017).

Property Cycle: 

  • Herron Todd White report that Sydney is approaching the peak of the market for both houses and units.

Sydney continues its housing market bull run and continues to exceed market expectations.  There is signs now however, that the Sydney market is beginning to cool – auction clearance rates are dropping off and numbers at home opens appear to be down.  Sydney is now in a transition period of moving from a Seller’s market to a Buyer’s market, and in the coming months we expect the housing market to cool.

Melbourne

Capital Growth:

  • Melbourne, like Sydney, experienced a pick up in the housing market in the month of June.  Melbourne capital growth for the month of June was 2.7% (all dwellings) made up of 2.8% for houses and 2.3% for apartments.  Even with the strong results for June, Melbourne had a mixed quarter with capital growth of 1.5% for all dwellings (1.9% for houses and -2.5% for apartments).
  • For the year ending June 2017, the Melbourne housing market maintained solid capital growth of 13.7% (15% for houses and 1.5% for apartments).

Gross Rental Yield (Houses): 

  • Rental yields drifted slightly to a relatively low yield of 2.6%pa (compared to 2.7%pa in the previous quarter).

Combined Rental Vacancy Rates: 

  • Although rental yields drifted slightly, rental vacancy rates are low, with the vacancy rate dropping to 1.5% (from 1.7% in the previous quarter) indicating strong rental demand.

Median Dwelling Price: 

  • The median dwelling price increased from $605,000 as at March 31, 2017 to $675,000 as at 30th June 2017

Unemployment Rate (VIC): 

  • Unemployment dropped slightly from 6.1% in February 2017 to 6.0% as of May 2017

Property Cycle: 

  • Heron Todd White suggests Melbourne is approaching the peak of the market for houses and is at the peak of the market for units.

Whilst there is still some momentum in the capital growth of the Melbourne housing market, it is unlikely growth of 13%pa can be sustained.  We expect capital growth in Melbourne to revert to a more sustainable growth range of 5-7%pa over the coming years before plateauing for a couple of years..

Canberra

Capital Growth: 

  • Although capital growth in Canberra for the month of June was 2.6% for all dwellings (5% for houses and 3.5% for apartments), for the quarter ending June 2017, capital growth was negative at minus 0.4% (made up of minus 0.6% for houses and a gain of 3.1% for units).
  • For the year ending June 2017, the housing market in Canberra experienced growth of 9.6% (being made up of 9.7% for houses and 7.6% for apartments)

Gross Rental Yield: (Houses): 

  • There was a slight improvement in rental yields for the quarter with rental yields reaching 4.1% (up from 4.0% in the first quarter).

Combined Rental Vacancy Rates: 

  • Most likely due to an increase in stock being released to the market, the rental vacancy rate increased slightly to end up 0.1% at 1.0%.

Median Dwelling Price: 

  • The Canberra housing market’s median house price reached $625,000 as at June 30th, 2017 (up from $586,500 at the end of March)

Unemployment Rate (ACT):

  • A strong and stable market for employment meant the unemployment rate in Canberra fell to 3.5% as at May 2017 compared to 3.8% in February earlier this year.

Property Cycle:

  • Heron Todd White reports that Canberra is currently in a rising market for houses and a declining market for apartments.

With Canberra houses now being in a rising market and looking at our key indicators for a good investment suburb, we believe that the Canberra housing market represents great long-term opportunities.  The key economic indicators, a strong public sector, and above average household incomes point to continued growth in the future.  The BIS Shrapnel recently ranked Canberra No.1 for capital growth through to 2020, with estimates of 16% capital growth increase from 2017 – 2020.

Hobart:

Capital Growth: 

  • The Hobart housing market recorded strong growth in June of 2.8% (all dwellings), comprised of 3.1% for houses and -0.2% for apartments.  Even with the strong growth in June, capital growth for the quarter was negative 1.3% (-1.5% for houses and 0.7% for apartments).
  • For the year to end June 2017, the Hobart housing market recorded annual growth of 6.8% (houses 7.4% and apartments 1.5%)

Gross Rental Yield (Houses):

  • Hobart (along with Darwin) holds the highest rental yield in the country with 5.1%pa (up from 5.0% at the end of the previous quarter).

Combined Rental Vacancy Rates: 

  • Rental vacancy rates remain very tight and finished the quarter steady at 0.6%.

Median Dwelling Price:

  • There was no change for the median price over the quarter which remains at $355,000 as at June 30th, 2017

Unemployment Rate (TAS): 

  • The unemployement rate in Tasmania has been creeping up and is now at 6.1% (as at May 2017) up from 5.8% in February 2017.

Property Cycle: 

  • Heron Todd White reports that Hobart is in a rising market for both houses and units.

Hobart presents fantastic affordability backed by strong data suggesting good growth prospects. However, this is a strong short-term play as the main driver for growth is tourism. Population growth is good and unemployment is just below the national average. Don’t be surprised to see continued growth in the short term, however, the market can fall as quickly as it increases.

Australian housing market review for first half 2017

Adelaide:

Capital Growth:

  • Adelaide house prices struggled in June and ended down for the quarter.  June recorded negative growth of -1.7% for all dwellings (minus 1.6% for houses and minus 3.7% for apartments).  Over the quarter, all dwellings declined by 0.2% comprised of a 0.5% gain for houses and a decline of 6.9% for apartments / units.
  • Over the year ending June 2017, the Adelaide housing market managed a small capital growth of 2.4% (houses 2.7%, and apartments minus 1.3%).

Gross Rental Yield (Houses): 

  • Gross rental yields in Adelaide ended the quarter unchanged at 4.0%.

Combined Rental Vacancy Rates:

  • Vacancy rates in Adelaide tightened over the quarter to now sit at 1.8% (versus 2.0% last quarter).

Median Dwelling Price (All dwellings): 

  • Median dwelling price was largely unchanged at $440,000 as at June 30, 2017 (up $1000 from the previous quarter)

Unemployment Rate (SA):

  • Unemployment increased from 6.6% in February 2017 to 6.9% as at May 2017, and now holds the highest unemployment rate in the nation.  This is clearly a concern, but we expect this may ease moving forward with further government initiatives and the awarding of federal projects in the State.

Property Cycle:

  • Adelaide, as reported by Heron Todd White, is in a rising market for houses and at the bottom of the market for apartments.

Adelaide is a sleeping giant in terms of its property market.  Similarly to Brisbane, it has chipped away with moderate growth over the past decade.  Assuming the government can improve the economic situation with new government initiatives and federal projects, Adelaide is seen as an affordable market with very good prospects for future growth.

Brisbane (Excluding Gold Coast):

Capital Growth:

  • The Brisbane housing market showed negative growth in June but still managed an increase over the June quarter.  In June, capital growth across all dwellings was minus 0.5% (houses minus 0.6% and units a gain of 0.8%).  For the quarter however, all dwellings increased by 0.5% (with a 0.8% increase for houses and a loss of 2.4% for apartments).
  • Over the year ending June 2017, capital growth in Brisbane has been subdue at 2.0% (houses 2.5% and apartments negative 3.2%)

Gross Rental Yields (Houses): 

  • A popular driver for investors, rental yields in Brisbane have remained constant at 4.1%.

Combined Rental Vacancy Rates:

  • There was a slight tightening in the rental market, with vacancy rates ending at 3.1% (versus 3.3% in the previous quarter).

Median Dwelling Price (All Dwellings): 

  • The median price continues to climb slowly to $497,200 as at June 30th, 2017 (up from $480,000 in the previous quarter)

Unemployment Rate (QLD):

  • A strong improvement in unemployment rate was experienced in the quarter with a rate of 6.1% as at May 2017 versus 6.7% in February.

Property Cycle: 

  • Heron Todd White reports the Brisbane housing market is in a state of recovery for houses and a declining market for units.

Brisbane has been ticking along ever so slowly, however, we are concerned by the significant oversupply of apartments in the Brisbane CBD. Although historically this hasn’t been proven to be an issue for stand-alone dwellings in the suburbs, we can’t help but think there will be some sort of flow on effect. Unemployment is still relatively high and population growth is low in comparison to other major cities. In saying all of this, there are regions that we are monitoring recording strong growth or showing signs of strong growth in the near future.

Perth:

Capital Growth: 

  • The Perth housing market recorded a good result for June and a minor capital increase across the quarter.  June recorded an increase of 1.4% (all dwellings) comprised of 1.4% for houses and 0.7% for units and apartments.  The quarter saw a minor increase of 0.1% with houses staying flat and apartments rising by 0.6%.
  • Over the year ending June 2017, Perth recorded a capital loss of 1.7% with houses losing 1.9% and apartments gaining slightly at 0.5%

Gross Rental Yields (Houses):

  • Rental yields remained constant at 3.6%

Combined Rental Vacancy Rates:

  • Rental vacancy rates remain constant, but still at a national high of 4.8%

Median Dwelling Price (All Dwellings): 

  • The median house price is now $484,000 as at June 30th, 2017, compared to $475,000 in the previous quarter.

Unemployment Rate (WA):

  • Unemployment is recovering and is now sitting at 5.5% as of May 2017 (down from 6.0% in February)

Property Cycle:

  • Heron Todd White reports that the Perth housing market is approaching the bottom of the market for houses and remains in a declining market for apartments.

Perth has continued its slide from the mining boom (and minimal to negative population growth) and is recording extremely high vacancy rates and declining housing values.

Darwin:

Capital Growth:

  • The Darwin housing market showed a poor performance in the June quarter.  In the month of June, the Darwin housing market recorded a decrease of -2.2% (all dwellings) comprised of -1.8% for houses and -3.9% for apartments
  • Over the June quarter, there was a 5.2% loss in value across all dwellings (made up of 3.5% loss for houses and 11.7% for apartments and units).
  • The performance over the year wasn’t much more positive, with a capital loss of 7.0% across all dwellings for the year ending June 2017.  This was comprised of a loss of 6.2% for houses and a loss of 10.5% for apartments and units.

Gross Rental Yields (Houses):

  • Rental yields rose slightly from 5.0% to 5.1%

Combined Rental Vacancy Rates: 

  • Rental market tightened during the quarter with a vacancy rate of 3.2% down from 3.8% in the last quarter.

Median Dwelling Price (All Dwellings):

  • The median dwelling price fell for the quarter from $490,000 in March 31, 2017 to $480,000 as at June 30th, 2017

Unemployment Rate (NT):

  • There was an improvement in the unemployment rate from 3.5% to 3.2% over the quarter.

Property Cycle:

  • Heron Todd White suggests the Darwin housing market is at the bottom of the market for both houses and apartments.

Darwin remains unpredictable for the short term. It’s a sit and watch for Darwin, however, we do believe there will be great buying opportunities come 2018 and beyond when we forecast improvement in the economy, population growth and business investment.

Sources – Listed at bottom of page

Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way.  The Australian Expat Investor may receive referral commissions from companies referred in this article.

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Australian property market review for first quarter 2017

Does our Australian Housing Market review for the June 2017 quarter inspire you to further research investing in property whilst living abroad?  Here are some related articles to this story that might be of interest to you :

 

Australian housing market review in 2017

Sources: Australian Government Department of Employment / SQM Research / Herron Todd White / CoreLogic

 

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