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Performance of the Australian Property Market in 2017 – Year in Review

performance of the australian property market in 2017

Property (yet again) has been a huge topic in Australia this past year, we are obsessed with it – from the floors of state and federal parliament, to the nightly news and backyard barbecues.  Lets look closer at the performance of the Australian property market in 2017.

Conversation and debate have ranged from housing affordability, the property bubble, foreign investment, negative gearing and lending. Millennials are even being told to give up their Saturday morning smashed avocado if they are ever going to afford a property. Domain.com.au one of Australia’s largest real estate websites recently ran the headline “Australia’s housing boom almost over”. What great click bait….

You need to remember; Australia is a large diverse country with each capital city and regional centre at different stages of the property cycle. There is no denying that Sydney and Melbourne are certainly peaking and expensive cities to live and buy property in, particularly as you get closer to the CBD. However, in 2017 we have seen great investment opportunities throughout Australia, below we take a look at how each capital performed over the past 12 months (November ’16 – November ’17).

Performance of the Sydney Property Market in 2017

Annual Capital Growth, Houses: 4.4%
Annual Capital Growth, Units: 6.5%
Median Value, Houses: $1,068,077
Median Value, Units: $781,528
Gross Rental Yield, Houses: 2.9%
Gross Rental Yield, Units: 3.6%
Property Cycle, Houses: Starting to decline
Property Cycle, Units: Starting to decline

After a sustained period of growth the Sydney market is cooling and has been since midyear. The growth for the same period last year was 13.5% for houses and 10.8% for units. Although we have seen double digit growth turn into single digit, it’s still very respectable, especially as a percentage of the median value prices. We started to see the market cooling in late May, with once frenzied auctions move to only a few parties bidding or properties passing in. The fear of missing out (FOMO) is certainly no longer present – at the back-end of 2017 Sydney has firmly moved from a sellers market to a buyers market.

Why has this happened? The federal government introduced new foreign ownership laws and a change in investment property tax deductions. Combined with APRA tightened regulations on lending – particularly to interest only investor loans – a segment of the market that was fuelling property investment and heightened property prices as investors were cashing in on their property windfalls and buying up.

Performance of the Melbourne Property Market in 2017

Capital Growth, Houses: 10.6%
Capital Growth, Units: 8.7%
Median Value, Houses: $832,448
Median Value, Units: $572,728
Gross Rental Yield, Houses: 2.6%
Gross Rental Yield, Units: 3.9%
Property Cycle, Houses: Approaching peak of market
Property Cycle, Units: Peak of market

The Melbourne market has continued to remain strong throughout 2017, albeit at a slower rate of growth. 2016 recorded growth of 12.2% in 2016 for houses, which is slightly up on 2017. However, we are now only just starting to see signs that the market is cooling with reduced bidders at auctions and a leniency from agents to sell prior to auction. Signs that the market will move to a buyers market in 2018.

Why has Melbourne remained strong? Population numbers are continuing to increase, recording the highest population growth in the last census. The economy is strong with corporate head offices relocating from Sydney to Melbourne and housing is still considered affordable compared to Sydney. The fear of apartment oversupply has somewhat subsided, although we have seen a slow down in the investor off-market apartment market.

Performance of the Australian Property Market in 2017

Performance of the Australian Property Market in 2017 – brought to you by Milk Chocolate Property Concierge

Performance of the Brisbane Property Market in 2017

Capital Growth, Houses: 3.2%
Capital Growth, Units: -1.2%
Median Value, Houses: $529,633
Median Value, Units: $385,238
Gross Rental Yield, Houses: 4.1%
Gross Rental Yield, Units: 5.2%
Property Cycle, Houses: Rising market
Property Cycle, Units: Declining market

In 2017, Brisbane has seen slow and steady growth, however for the smart investor undertaking thorough research and using key investment criteria there are submarkets that have outperformed the city detached housing average of 3.2%. This year a huge slate of infrastructure projects were given the green light or started the development application process. In December the Palaszczuk Labor government was also re-elected for another term.

2017 saw the unit market dip with an oversupply of investor units, as many developments settled or are close to. Unfortunately the horror stories are a plenty with properties not being valued as per the agreed contract price and taking months to rent at prices lower than the forecasted rental valuations originally advised when purchasing.

Performance of the Australian Property Market in 2017

Performance of the Adelaide Property Market in 2017

Capital Growth, Houses: 3.7%
Capital Growth, Units: 0.9%
Median Dwelling Price, Houses: $457,965
Median Dwelling Price, Units: $329,882
Gross Rental Yield, Houses: 4.1%
Gross Rental Yield, Units: 5.0%
Property Cycle, Houses: Rising market
Property Cycle, Units: Bottom of market

Adelaide is now home to the largest lithium ion battery to provide more stable electricity services to the state. Much like Brisbane this market continued to see slow growth through out the year with the number of listings being equal to buyer demand. Again there are submarkets within markets, it’s about knowing all the data and investing correctly.

There are positive signs from the federal government with their proposed infrastructure and big business incentives. State governments are using grants to incentivise SME’s and startups to conduct business in the state. The return on this is more jobs and less stress on the social welfare system – which currently, is a substantial issue.

Performance of the Canberra Property Market in 2017

Capital Growth, Houses: 6.8%
Capital Growth, Units: 2.9%
Median Value, Houses: $667,430
Median Value, Units: $431,354
Gross Rental Yield, Houses: 4.1%
Gross Rental Yield, Units: 5.3%
Property Cycle, Houses: Rising market
Property Cycle, Units: Declining market

Canberra has had a very positive year in a number of areas, which has driven up real estate values. Infrastructure projects such as the new light rail are currently under construction, a positive boost in tourism numbers, with the city being named by Lonely Planet as one of the world’s top 10 cities to visit in 2018 and a strong economy bolstered by the professional services sector. The city has consistently seen extremely tight vacancy rates of 1% across the year. There are concerns with an oversupply in the unit market, however, as above there has been subtle growth still alleviating any fears.

Performance of the Hobart Property Market in 2017

Capital Growth, Houses: 12%
Capital Growth, Units: 8.8%
Median Value, Houses: $418,945
Median Value Price, Units: $329,021
Gross Rental Yield, Houses: 5.0%
Gross Rental Yield, Units: 5.0%
Property Cycle, Houses: Rising market
Property Cycle, Units: Rising market

The standout performer and best performing capital in 2017 has certainly been Hobart, with annual growth of 12% in the detached housing market. Combine that with 8.3% in 2016 and this capital city has had an impressive 24 months. We are seeing the price increases fuelled by interstate investors who have used their Sydney and Melbourne property windfalls to purchase investment properties. The city is also suffering from a lack of hotel accommodation; with properties being purchased put on short term rental sites like Airbnb. In 2017 a number of new hotels got the green light for construction and the airport’s 25M upgrade to allow for direct flights to Asia commenced. Our greatest concern with Hobart has always been the reliance on one sector driving growth; Tourism. Whist millennia’s are moving interstate after they graduate and baby boomers move to the apple isle for a peaceful retirement, long term growth and stability is still a concern in our eyes.

Performance of the Perth Property Market in 2017

Capital Growth, Houses: -3%
Capital Growth, Units: -1.1%
Median Value, Houses: $485,155
Median Value Price, Units: $406,470
Gross Rental Yield, Houses: 3.8%
Gross Rental Yield, Units: 4.3%
Property Cycle, Houses: Bottom of market
Property Cycle, Units: Bottom of market

Perth has seen another year of consistent losses of -3%, slightly better than the 2016 figure of -3.5% for detached housing and -2.3% for units. The Perth economy is starting to improve and so is the real estate market, property listings have dropped by 12.7%, showing the supply vs. demand ratios are starting to shift. The average time to sell a property has also dropped to 59 days from 68. Whilst these are good signs, it’s still too early to call as to when the bottom will actually arrive. We will commence our 6-month on the ground research next year to ascertain the best suburbs/regions for growth. However, we don’t anticipate purchasing here until late 2018 at the very earliest. Watch this space.

Performance of the Darwin Property Market in 2017

Capital Growth, Houses: -3.7%
Capital Growth, Units: -8.8%
Median Value, Houses: $471,687
Median Value, Units: $365,083
Gross Rental Yield, Houses: 5.7%
Gross Rental Yield, Units: 5.9%
Property Cycle, Houses: Bottom of market
Property Cycle, Units: Bottom of market

Unfortunately there has been no positive news for the Darwin property market in 2017; the capital does hold the highest rental yield for houses and units at 5.7% and 5.9% respectively. This is due to the rents not reducing at the same rate as property prices. A definite long-term sit and watch approach here.

Sources: CoreLogic/Herron Todd White/Australian Bureau of Statistics/The Urban Developer  

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