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A report recently released by CoreLogic provides an in-depth examination of the Australian residential property market and economy for the first quarter of 2017.
With the housing market gaining much media attention in recent months, particularly surrounding a potential “property bubble”, widespread housing affordability concerns, and the Government’s much publicised efforts to address such concerns in the recently released federal budget, the CoreLogic report provides a welcome grounded and numbers-based assessment of the current state-of-play.
In the report, the Sydney market is noted to be showing the highest annual property value growth, at +18.9%, with Sydney dwelling values having increased +109.2% since the end of 2008 (see below graph), far outstripping all other capitals aside from Melbourne in second position (+92.4%). The report notes that unit supply has increased given this significant rise in value, with a surge in unit construction and the popularity of unit ownership by investors signposted as a significant market shift, although this increased supply has already been seen to have slowed unit value increases compared to houses across various cities.
Source: CoreLogic Figure 1: Change in Capital City Home Values 2008-2017
Other takeaway points from the report, particularly for those with an interest in the Sydney market, include:
- 18.9% home value growth in the past year across Sydney leading all capitals for this period, with this growth seen at 19.7% for house values and 15.3% for units;
- In Sydney there is a 23.1% ($165,000) gap between house and unit selling prices. Although this gap is not as large as that seen in some capitals, it shows a continued demand for dwelling houses. Wynne Planning notes that recent Sutherland Shire trends have seen “greyfield” residential lots being purchased based on their redevelopment potential, which might be skewing results towards an apparent preference for houses over units. The report also notes, significantly, that there were more unit completions than houses in the December 2016 quarter;
- Properties are spending an average of 29 days on the market in Sydney, the lowest in the country and down 30 days from this time last year; and
- In the December 2016 quarter 57,043 dwellings were commenced, however dwelling approvals are down substantially since the end of 2016. Nevertheless, the report notes that the number of dwellings currently being constructed and housing in the pipeline (i.e. approved but not yet started) remain higher than usual.
Despite the seemingly optimistic numbers, the report concludes with these precautionary words:
“Although our general forecast is that values will continue to rise over the coming year albeit at probably a slower rate, it doesn’t mean that there aren’t potential headwinds for the market…There is an expectation of further value rises however, there are clearly some potential risks in the market, most of this risk is coming within the unit market. We are expecting the unit market to under perform relative to detached houses and over the coming year the underperformance of units may potentially increase further.” (emphasis added).
You can download the full report by CoreLogic from their website: www.corelogic.com.au