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Domain State of the Market Report - September Quarter 2017

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Domain has released it's State of the Market Report for the September quarter. The report is as follows:

Key findings:

Rentals

  • Relief from the rise and rise for tenants as house rents in Sydney, Melbourne, Brisbane, Adelaide and Darwin hold steady
  • House rents up in Canberra and Hobart
  • Perth house rents down, making it the most affordable capital city to rent in
  • Unit rents up in Adelaide, while all other capital cities remained steady

Sales

  • House prices fall in Sydney for the first time since December 2015 and national median house price is down over the September quarter
  • Melbourne, Canberra, and Hobart house prices up
  • House prices down in Brisbane, Adelaide, Perth, and Darwin
  • Unit prices decline in Sydney, Brisbane, Perth, and Darwin
  • Unit prices up in Melbourne, Adelaide, Canberra, and Hobart

Domain State of the Market Report - Metro

House prices decline as tighter lending conditions take effect

The median house price in most capital cities declined over the September quarter, with the national median house price experiencing its sharpest dip in six years — according to the September quarter Domain State of the Market Report - Metro.

As tighter lending conditions come into play, demand for property in Sydney, Brisbane, Adelaide, Perth, and Darwin decreased over the quarter, with Sydney reporting one of the steepest declines in house prices of the capitals. Hobart, Canberra, and Melbourne were the only cities to record house price growth over the quarter.

Median unit prices across the country varied over the September quarter, with Hobart and Melbourne experiencing surges in unit price growth, while Brisbane, Perth, Sydney, and Darwin recorded declines in unit prices.

Tenants will be relieved to find that unit rents in almost all capital cities remained steady over the quarter, with Adelaide the only city to record any movement. Canberra, and Hobart were the only capital cities to record house rent increases, while Perth was the only capital city to record a drop in house rents.

Despite most capital city markets reporting steady results over the September quarter, the results generally remain higher than those recorded over the same quarter last year.

Domain has also released its Quarterly State of the Market Report - Regional, which revealed that price growth in many regional markets is easing.

Domain Chief Economist, Dr Andrew Wilson, said:

“Capital city housing markets generally tracked backward over the September quarter as the lower interest rate driver of recent years dissipated. Actions by policymakers to restrict residential investor activity through tighter lending conditions to that group have also acted to weaken prices growth over the last three months.”

Overview

The national median house price declined by 0.5 per cent over the September quarter, dropping to $819,455. The decline is the first quarterly fall recorded since December 2015 and the sharpest drop since the September quarter 2011.

Despite the quarterly fall, the national result is still 10.8 per cent higher than the same time last year. Capital city unit markets have reported generally subdued price growth over the September quarter, with national median unit price remaining flat at $570,148. The result shows a 4.2 per cent increase year-on-year.

“Generally weaker capital city house price growth over the September quarter is reflected in the national results. House price growth is expected to continue to ease in most capital cities over the remainder of the year, although the underlying drivers remain positive,” said Domain Chief Economist, Dr Andrew Wilson.

Rental Yields

For investors, Hobart continues to provide the best gross rental yields for houses with 5.29 per cent recorded over the September quarter. Sydney and Melbourne continue to record the lowest gross rental yields for houses of all capital cities, sitting at 3.12 per cent and 3.34 per cent respectively.

Canberra is the top performer for gross rental yields for units recording a result of 5.77 per cent over the quarter, closely followed by Darwin and Hobart at 5.65 per cent and 5.53 per cent respectively.

Rental Vacancy Rates

Home vacancy rates in most capital cities remained tight over the month of September, suggesting that strong competition for available properties will continue to drive rental price upwards. Despite home rents in most capital cities remaining steady over the September quarter, it’s highly likely that rental price increases will resume sooner rather than later in most markets.

With the exception of Brisbane and Perth, all capitals now have vacancy rates (for both houses and units) of less than 2 per cent. These low vacancy rates indicate a chronic shortage of rental accommodation, which is only being exacerbated by the growing conversion of permanent rentals into holiday accommodation.

Capital City Market

Sydney

Sydney’s median house price decreased by 1.9 per cent to $1,167,516 over the September quarter; the steepest decline in house prices of all capital cities (with the exception of the highly volatile Darwin market). It was the first quarterly fall in the local market since December 2015.

Sydney unit prices dropped by 0.8 per cent over the quarter to $732,321, but despite the decrease, remain 4.5 per cent higher than the same time last year.

Median house rents in the Harbour city remained steady at $550 per week, as did median unit rents. While steady over the quarter, the results are up year-on-year by 3.8 per cent and 4.8 per cent respectively.

“The drop in Sydney’s house prices over the September quarter reflects the diminishing impact of the record-low interest rates that have fuelled market recently. While Sydney’s property market has been the star performer nationally – with prices essentially doubling over the last five years – affordability barriers are now acting to slow down demand and moderate price increases.

“The significant decrease in investor activity, as well as tightened lending restrictions for residential investors, has had a clear impact on the Sydney market. We saw a similar house price dip in 2015, when similar policies were introduced. Despite recording a decline in both house and unit prices, Sydney clearly remains the highest priced of all capitals, well ahead of the next-highest, Melbourne,” said Domain Chief Economist, Dr Andrew Wilson.

Melbourne

The median house price in Melbourne increased 1.3 per cent over the September quarter to $880,902 – up 13.9 per cent year-on-year. Despite being one of the few cities to record an increase, the rate of growth was the slowest for Melbourne since the September quarter 2014.

Median unit prices in Melbourne grew significantly, increasing by 3.4 per cent over the September quarter to a new record high of $506,334. This means that year-on-year, unit prices have now increased by an incredible 11.4 per cent. The results suggest that recent record levels of new apartment development have had a negligible impact on price, with demand continuing to absorb higher levels of supply.

While the median rental price for houses in Melbourne remained steady over the September quarter, sitting at $420 per week, prices are up 5 per cent over the last 12 months. Similarly, median unit rents remained steady at $400 per week, up 5.3 per cent year-on-year.

“This period of growth marks the 20th consecutive quarter of house price growth for Melbourne. While house prices continue to grow at a steady rate, unit demand is soaring. The latest growth figures are further indication that demand is significantly ahead of supply.

“In terms of the rental market, despite remaining steady over the September quarter, Melbourne’s rents have increased significantly over the last 12 months – up 5 per cent from the same time last year. With policies in place to further restrict investors, it’s likely that rental prices will continue to rise, with fewer properties available,” said Domain Chief Economist, Dr Andrew Wilson.

Brisbane

Median house prices in Brisbane declined marginally over the quarter, dropping by just 0.2 per cent to $551,840. Despite the drop and a relatively subdued year for the local market, house prices are up 3.8 per cent year-on-year.

Brisbane unit prices dropped by 3.5 per cent over the September quarter to $376,685. Down 6.5 per cent year-on-year the result is reflective of the record levels of new apartment development, which has pushed supply well ahead of demand. The Brisbane median unit price is now its lowest recorded for over three years.

The median house rental price in Brisbane remained steady at $400 per week both over the September quarter and over the last 12 months. Unit rents were also steady over the quarter, sitting at $370 per week. The result is 1.3 per cent lower than the same time last year.

“The slight drop in house prices is in line with Brisbane’s subdued housing market over the last 12 months, while the drop in unit prices is evidence that unit supply in the local market has officially outstripped demand. The median unit price is sitting at the lowest in three years, and it’s expected that unit prices will only continue to decrease. ,” said Domain Chief Economist, Dr Andrew Wilson.

Adelaide

Along with Brisbane, Adelaide also recorded a marginal decline in house prices, down by 0.3 per cent to $519,517. Comparatively, however, the 0.3 per cent drop follows five consecutive months of house price increases and the result is up 4.1 per cent year-on-year.

Adelaide was one of the few capital cities to record an increase in median unit prices over the September quarter, jumping 1.6 per cent to $313,074. The quarterly result is 2.6 per cent higher than the same time last year.

The median house rental price in Adelaide remained steady at $360 per week over the September quarter, up 2.9 per cent year-on-year. However, while house rental prices may have remained flat, Adelaide was the only city to record a positive increase in median unit rental prices – increasing 1.7 per cent over the quarter to $295 per week.

“Second only to Hobart, Adelaide has one of the most affordable median house prices of all capital cities, and the most affordable median unit price. Despite experiencing a drop in median house price over the quarter, the solid local market provides investors with growing confidence as it continues to deliver resilient results,” said Domain Chief Economist, Dr Andrew Wilson.

Perth

The median house price in Perth dropped a further 1.3 per cent over the September quarter, to a five year low of $554,095. Perth is one of the only capital cities (along with Darwin) to record a decrease in house prices year-on-year, down 2.3 per cent. The median unit price in Perth is dropped significantly over the September quarter, down 6.7 per cent to $351,875.

The result 7.7 per cent lower than the median unit price 12 months ago. The median rental price for houses dropped 2.8 per cent over the September quarter to $350 per week; 7.9 per cent lower year-on-year. While the median unit rental price remained steady over the quarter, the result is still 6.3 per cent lower than at the same time last year.

“After dropping consecutively for three quarters, the median house price in Perth has now reached the lowest recorded by the local market in five years. As the market continues to weaken, house rents in Perth are now the most affordable of all capital cities,” said Domain Chief Economist, Dr Andrew Wilson.

Canberra

The median house price in Canberra has increased an impressive 4.3 per cent over the September quarter, to reach $723,980. The result is 10.5 per cent higher than the same time last year. While median unit prices in the capital city have also increased, they jumped a smaller 1.9 per cent over the September quarter to reach $427,391; 0.5 per cent lower than the same time last year. Canberra was one of only two capital cities to record a quarterly increase in median house rents, jumping 1 per cent to $505 per week.

Unit rents remained steady at $420 per week, up 5.0 per cent year-on-year. Canberra was the top performer of all capitals for gross rental yields for units, recording 5.77 per cent over the quarter.

“After relatively subdued periods of activity in recent months, Canberra is in catchup mode – bucking the trend of most capital cities and recording increases in rents and house prices. House price growth in the city is expected to continue, given the strong migration to the area and the undersupply of houses,” said Domain Chief Economist, Dr Andrew Wilson.

Hobart

Hobart was one of only three capital cities to record an increase in median house price over the September quarter, up 4.4 per cent to $409,592. With the highest annual growth in house prices of all the capitals, the city has seen an increase of a whopping 14.8 per cent year-on-year.

Despite the significant growth, the median house price is also the most affordable of all capital cities. As well as median house price growth, Hobart also recorded the highest median unit price growth of all cities both over the quarter – up 6.3 per cent to $323,174. More impressive, however, is the annual increase, with unit prices up 25.6 per cent over the last 12 months.

The growth suggests that recent record levels of new apartment development have had a negligible impact on price, with demand continuing to absorb higher levels of supply.

Hobart’s median house rental price was one of two that increased over the quarter, up 4.2 per cent to $375 per week. Year-on-year the weekly house rents have skyrocketed, up 13.6 per cent. “Strong migration and undersupply in the property market is driving strong price growth in Hobart. For investors, Hobart is currently providing the best gross rental yields of all capital cities, with 5.29 per cent recorded in the September quarter. The local market is confident and the boom-time results are showing no sign of slowing down,” said Domain Chief Economist, Dr Andrew Wilson.

Darwin

After recording strong growth last quarter, Darwin’s median house price dropped by 3.6 per cent over the September quarter, to $593,329. The result is 2.8 per cent lower than the same time last year. The median unit price is Darwin also decreased, dropping by 6.8 per cent to $330,354. The result is 30.5 per cent lower year-on-year.

Rental prices for both houses and units in Darwin have remained steady over the quarter, sitting at $520 and $400 per week, respectively. While both the houses and unit figures remained steady over the last three months, the results do indicate a drop year-on-year – by 5.5 per cent and 5.9 per cent respectively. “The drop of 30.5 per cent in median unit prices year-on-year is indicative of the oversupply of apartments in the city.

This same oversupply is highlighted by the annual decrease in median rental prices and is expected to continue until demand and supply are rebalanced. “Unfortunately, policies that are designed to restrict investor lending, are also impacting those apartment markets where supply is already well ahead of demand,” said Domain Chief Economist, Dr Andrew Wilson.


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