CoreLogic Australia Quarterly Economic Review

Quarterly Economic Review The Australian Residential Property Market and Economy June 2018 quarter Released August 2018

Š Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is permitted. The information is deemed reliable but not guaranteed.

The Australian Residential Property Market and Economy Contents Introduction

3

Housing Market

4

State-by-state breakdown

10

Mortgage Lending

34

Housing Supply

40

Demographic Overview

43

Household Finances

46

National Accounts

48

Inflation

49

Consumer Sentiment

50

Conclusion

51

About CoreLogic

53

Disclaimers

54

The Australian Residential Property Market and Economy Introduction

$7.6 trillion

$2.6 trillion

$1.8 trillion

$0.995 trillion

Value of Residential Property

Value of Australian Superannuation

Value of Listed Equities

Value of Commercial Real Estate

Over the second quarter of 2018, national dwelling values have declined by -0.5%, matching the -0.5% fall in values over the March quarter. Throughout the 12 months to June 2018, national dwelling values have decline by -0.8%. Although a -0.8% fall isn’t overly large, it is the greatest annual fall in values since September 2012 when values had fallen -1.1% over the year.

While the headline figure is recording falls largely due to declines in Sydney and Melbourne dwelling values, housing market conditions have also softened in most other capital cities. In fact, Brisbane, Adelaide and Hobart are the only capital cities where dwelling values remain at peak levels. In Perth and Darwin, values have been below their peak since 2014, while markets such as Sydney, Melbourne and Canberra have also entered a downturn. Even in Brisbane and Adelaide, where the pace of capital gains has been relatively sustainable, the rate of value growth has slowed over the past 12 months.

Weaker housing market conditions at the national level are primarily being influenced by a downturn across the capital city regions; especially the largest housing markets, Sydney and Melbourne. Regional housing markets have seen value growth slow over the past year however, values remain in positive territory, at least at a macro level.

Despite the more resilient conditions across regional markets, CoreLogic indices data has recently indicated a slowing of value growth in most regional NSW housing markets and on the Gold Coast while regional areas of Vic and the Sunshine Coast are seeing the rate of value growth accelerate.

The current decline in values across the Australian housing market is quite different from previous downturn which have typically been triggered by a change in monetary policy (interest rates) or via an economic shock (such as the Global Financial Crisis).

The current downturn has occurred on the back of changed credit regulation which has resulted in much tighter credit conditions.

Since late 2014, the Australian Prudential Regulation Authority (APRA) has implemented a number of measures designed to remove some of the risks in the mortgage market and tighten lending policies. These changes have included, but not been limited to: calculating mortgage serviceability on a mortgage rate in excess of 7%, a 10% speed limit on annual investor credit growth for all lenders, limiting the flow of new lending for interest-only purposes to a maximum of 30%, requiring lenders to more accurately assess income and expenses and a

more detailed understanding of borrower’s existing debts.

The repercussions for borrowers of these changes to lending policies is that the availability of credit has been tightened. Investor and interest-only mortgages have become less readily available and those wanting to take out these types of mortgages are being charged higher mortgage rates. The amount that borrowers are able to borrow for a mortgage has been reduced and more information is required when applying for a mortgage.

An immediate impact of these changes have been a sizeable fall in lending to investors who were, in Sydney and Melbourne in particular, a major source of mortgage demand over recent years. Although new housing finance commitments to investors is still well above long-term averages in NSW and Vic it has declined substantially from the peak levels.

Australia has also seen a boom over recent years in new housing construction, particularly for units in Sydney, Melbourne and Brisbane where the number of apartments built reached unprecedented levels. Many of these new units had been purchased by investors ‘off the plan’ and we are seeing some evidence that more units are settling with a valuation lower than than the contract price and there is a heightened supply of rental accommodation which is leading to a slowing of rental growth. This has been apparent in Brisbane for some time but rental growth is now also slowing in Sydney and Melbourne.

Low mortgage rates have not been enough to avoid recent dwelling value declines.

While housing affordability is stretched in Sydney and Melbourne and falls are somewhat understandable considering the strong run up in prices, tighter new lending policies are likely a key driver of the housing market weakness.

With a Royal Commission into the banking and financial services sector underway, it is reasonable to expect that getting a new mortgage is set to remain more challenging relative to previous years for some time. Given this, it is reasonable to anticipate that dwelling values are likely to continue to decline over the coming quarters, particularly in Sydney and Melbourne where investment demand has been the strongest and where affordability pressures are the most pronounced. it will be important to monitor the extent to which any weakness in Sydney and Melbourne infects other housing markets across the country.

© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is permitted. The information is deemed reliable but not guaranteed.

The Australian Residential Property Market and Economy Housing Market National dwelling values declined by -0.5% over the first quarter of 2018 ►

National dwelling values fell by -0.5% over the second quarter of 2018, with values also falling 0.5% over the first quarter of the year.

(+0.3%), Adelaide (+0.9%), Hobart (+2.3%) and Canberra (+0.2%).

►

Combined capital city dwelling values fell -0.8% over the quarter while combined regional areas saw values increase 0.6%.

►

Both capital city and regional markets are recording slower quarterly growth than they were a year ago.

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Values were lower over the quarter in Sydney (0.9%), Melbourne (-1.4%), Perth (-0.7%) and Darwin (-0.8%) while they increased in Brisbane

►

Over the 2017-18 financial year, national dwelling values fell by -0.8% with combined capital city values -1.6% lower and combined regional market values 2.2% higher.

►

The rate of value growth has slowed substantially over the past financial year, from +10.2% annually a year ago nationally, +11.1% a year ago across the combined capital cities and +6.4% a year ago across the combined regional markets.

Quarterly and annual change in national dwelling values

35%

Quarterly change

30%

Annual change

25% 20% 15% 10%

5% 0% -5% -10%

The annual change in dwelling values is lower than a year ago in all capital cities except for Perth ►

Over the past 12 months, national dwelling values have fallen by -0.8%, their largest fall since September 2012.

►

Across the combined capital cities the -1.6% annual fall is the largest since August 2012 while the 2.2% increase across the combined regional markets is the slowest growth since April 2015.

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Values increased over the past year in Melbourne (+1.0%), Brisbane and Adelaide (both +1.1%), Hobart (+12.7%) and Canberra (+2.3%).

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Dwelling values were lower over the past 12 months in Sydney (-4.5%), Perth (-2.1%) and Darwin (-7.7%).

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The -4.5% fall in Sydney dwelling values over the past year was a substantial slowdown from the +16.4% increase a year earlier. In fact, the -4.5% fall was the largest decline since March 2009 and the largest financial year fall on record. Over the past year, house values have fallen by -6.2% and unit values are -0.7% lower.

►

The +1.0% annual increase in Melbourne dwelling values was the slowest rise since January 2013 and well down on the +13.0% increase a year earlier. Over the past year house values are +0.2% higher and unit values are +3.7% higher.

Change in dwelling values, 12 months to June 2018 15%

12.7%

10% 5% 1.0%

1.1%

2.3%

1.1%

2.2%

0%

-5% -10%

-1.6%

-2.1%

-0.8%

-4.5% -7.7%

© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is permitted. The information is deemed reliable but not guaranteed.

The Australian Residential Property Market and Economy Housing Market ►

►

►

►

►

►

Brisbane’s annual value growth has slowed from +2.8% a year ago to +1.1% over the past year.

House values have risen by +1.2% over the past year and unit values are +0.7% higher.

Total returns from housing are the lowest they’ve been since July 2012

The +1.1% annual increase in Adelaide dwelling values represents a slowdown from the +5.4% increase a year earlier. Over the past year, house values have increased +1.2% and unit values are +0.3% higher.

Perth dwelling values fell by -2.1% over the past year however, this was a more moderate decline than the -2.6% a year ago. House values have fallen by -1.7% over the past year while unit values are -3.8% lower.

The annual change in Hobart dwelling values (+12.7%) is fairly steady compared to last year (+12.8%). House values are +13.8% higher over the year and unit values are up +7.2%.

Darwin dwelling values were -7.7% lower over the past year compared to a -2.6% fall a year earlier.

House values have fallen by -4.9% over the year while unit values are -13.4% lower.

►

The +2.7% total return from housing, which factors in the gross annualized rental yield as well as annual capital gains was the lowest annual return since July 2012.

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Total returns have fallen substantially over the past year; a year ago they were recorded at +14.5%.

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Total returns across the combined capital cities were recorded at +1.6% over the past year, their lowest returns since June 2012.

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Hobart was the only capital city in which double digit returns were generated over the past 12 months.

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Returns across all capital cities were lower over the past year than they were a year ago highlighting the impact of slowing value growth and weakening rental growth.

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Canberra annual dwelling value growth slowed from +7.8% a year ago to +2.3% over the past year. House values have increased +3.3% over the year while unit values are -0.8% lower.

►

Sydney’s total returns have fallen from +20.1% a year ago to just -1.6%, the lowest they’ve been since February 2009.

Over the past five years, total returns nationally have been recorded at 10.1% p.a. while Sydney (12.8% p.a.), Melbourne (11.7% p.a.) and Hobart (12.3% p.a.) have generated much higher returns, while returns in Perth (2.2% p.a.) and Darwin (0.8% p.a.) have been much lower.

Total returns over the 12 months to June 2018 18.3%

20% 15% 10% 3.9%

5%

5.1%

5.3%

7.3%

6.9% 1.9%

1.6%

2.7%

0% -5%

-1.6%

-2.4%

© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is permitted. The information is deemed reliable but not guaranteed.

The Australian Residential Property Market and Economy Housing Market Many capital cities are now seeing values which are below their peak ►

►

Dwelling values nationally are now -1.3% lower than their September 2017 peak.

months.

While combined capital city dwelling values are 2.2% lower than their September 2017 peak, combined regional market values are continuing to rise to new highs.

►

Brisbane, Adelaide and Hobart are the only individual capital cities in which values are currently at historic highs.

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After values peaked in July 2017 in Sydney, they have fallen by -4.8% over the space of 11 months.

►

Melbourne dwelling values peaked in November 2017 and they have since fallen by -2.0% in 7

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Perth dwelling values currently sit -11.4% lower than their peak which occurred all the way back in June 2014.

►

Darwin dwelling values reached an historic-high in May 2014 and they have since fallen by -22.2%.

►

Canberra dwelling values have declined over the past two months and are currently -0.4% lower than their peak.

►

In most of the capital cities where values are falling the declines have started fairly recently however, these declines are anticipated to continue for some time.

Change in dwelling values from market peak to June 2018 5% 0.0%

0% -5%

0.0% 0.0%

-0.4%

-2.0%

0.0% -2.2%

-1.3%

-4.8%

-10% -11.4%

-15% -20%

-22.2%

-25%

Housing market growth conditions have been significantly skewed towards Sydney and Melbourne over the past decade ►

In 2008, during the Global Financial Crisis, capital city dwelling values fell by -7.9% between March 2008 and January 2009, but with stimulus measures such as lower interest rates and a ‘boost’ to first home buyer grants, dwelling values began to rise thereafter.

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As has been the case with the most recent growth phase, since the global financial shock it has been the two largest capital cities that have seen substantial value growth while other capital cities have recorded relatively moderate increases in values.

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economies, strong migration into those cities and a relatively low supply of stock available for sale has supported this growth in dwelling values while these conditions have generally not been apparent in other capital cities. ►

Note that although Sydney and Melbourne have recorded the strongest growth over this period, values are now falling in both of these cities with declines more rapid in Sydney.

►

Outside of Sydney and Melbourne, growth has generally been minimal over the period, except in Hobart where value growth has ramped-up over the past three years.

The relative strength of the Sydney and Melbourne

Change in dwelling values, January 2009 to June 2018 100%

89.4%

86.8%

80%

61.7%

60%

52.6%

42.8%

40% 20%

31.5% 19.7%

22.0%

23.7%

3.8%

0% -20%

-2.4%

© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is permitted. The information is deemed reliable but not guaranteed.

The Australian Residential Property Market and Economy Housing Market Overview Houses continue to show a premium over units across the country ►

At the end of June 2018, the national median value of a house was recorded at $573,216 and the median unit value was $517,988, a gap of 10.7%

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When you split the results individually across the combined capital cities and combined regional markets, the gap between house and unit values is wider in the capital cities (20.7%) and narrower in the regional markets (8.7%).

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Across the individual capital cities, the premium for houses over units is recorded at: 34.5% in Sydney, 43.0% in Melbourne, 39.0% in Brisbane, 41.9% in Adelaide, 21.1% in Perth, 29.5% in Hobart, 53.2% in Darwin and 54.0% in Canberra.

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In dollar terms the gaps between house and unit prices are recorded at: $259,743 in Sydney, $247,159 in Melbourne, $150,962 in Brisbane, $137,727 in Adelaide, $84,534 in Perth, $105,054 in Hobart, $171,728 in Darwin and $236,392 in Canberra.

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Sydney houses are much more expensive than houses elsewhere however, the median value for units in Sydney is more expensive than the median value for houses in all other capital cities except Melbourne.

►

Similarly, based on median values, Melbourne units are more expensive than houses in all other capital cities except for Sydney and Canberra.

Median house and unit values as at June 2018 $517,988 $573,216

National Combined regions Combined capitals Canberra Darwin Hobart Perth Adelaide Brisbane Melbourne Sydney

Units

$343,536 $373,586 $575,685

$437,596

Houses

$694,764

$673,988

$322,988

$494,716 $355,554 $460,609 $400,762 $485,296 $328,842 $466,569 $386,685 $537,647 $574,304

$0

$200,000

$400,000

$600,000

$821,463 $752,625

$800,000

$1,012,368

$1,000,000 $1,200,000

Settled sales transactions have continued to trend lower ►

It is estimated that over the 12 months to June 2018 there were 459,964 settled dwelling sales nationwide.

►

►

►

►

Compared to sales over the 12 months to June 2017, the number of settled transactions was -8.8% lower. Annual sales are tracking -16.2% lower than the recent peak recorded over the twelve months ending September 2015.

Across the individual capital cities, the annual change in settled transactions was recorded at: 14.3% in Sydney, -14.0% in Melbourne, -12.8% in Brisbane, +1.0% in Adelaide, -0.4% in Perth, -9.6% in Hobart, -6.9% in Darwin and -11.5% in Canberra.

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The combined capital cities recorded an estimated 285,416 settled sales over the year which accounted for 62% of total sales nationally.

Note that these figures are estimates for settled sales; off-the-plan sales will typically settle upon completion of the project, at that time these sales will be counted at their contract date.

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Given this, it is expected that recent years of sales activity will be revised higher once these settlements occur.

Capital city transactions were -11.2% lower over the past year than the previous year while regional market transactions were unchanged.

70,000

Monthly number of settled dwelling sales Monthly sales

6 month average

60,000

50,000 40,000 30,000

20,000 10,000 0

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The Australian Residential Property Market and Economy Housing Market Overview Discounting levels are starting to trend a little higher ►

Vendor discounting measures the difference between the initial list price and the ultimate selling price of properties which sell by private treaty for 0% less than their original list price.

-1%

►

Vendors that sold their homes below the initial list price are currently discounting them by 6.0% compared to discounts of 5.8% a year ago.

►

►

The current level of discounting across the individual capital cities is recorded at: 6.5% in Sydney, 4.9% in Melbourne, 5.5% in Brisbane, 5.8% in Adelaide, 8.4% in Perth, 7.2% in Hobart, 10.5% in Darwin and 3.6% in Canberra.

Brisbane, Adelaide and Canberra were the only capital cities in which discounting levels are currently lower than they were a year ago.

Combined capital cities vendor discounting levels

-2% -3% -4% -5% -6% -7% -8%

-9%

Properties are starting to take longer to sell ►

►

►

The days on market figure measures the average time from the first listing date to the contract date for properties sold by private treaty.

Combined capital city homes are currently taking an average of 43 days to sell compared to 40 days at the same time a year ago.

At an individual capital city level, the typical days on market is recorded at 46 days in Sydney, 31 days in Melbourne, 59 days in Brisbane, 46 days in Adelaide, 69 days in Perth, 29 days in Hobart, 65

days in Darwin and 46 days in Canberra. ►

The typical days on market has reduced over the past year in Hobart (-20 days) and Darwin (-2 days) while it is unchanged in Melbourne.

►

Sydney (+12 days), Brisbane (+9 days), Adelaide (+2 days), Perth (+3 days) and Canberra (+3 days) all recorded an increase in days on market over the past year.

Combined capital cities days on market 90 80

70 60 50 40 30 20 10

0

© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is permitted. The information is deemed reliable but not guaranteed.

The Australian Residential Property Market and Economy Housing Market Overview Rental growth has continued to slow over recent months ►

Rental rates increased by 0.3% over the June 2018 quarter and were 1.8% higher over the past year.

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Annual rental growth is the slowest it has been since March 2017 and lower than the 2.4% growth recorded a year ago.

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Combined capital city rents increased by 0.3% over the quarter to be 1.4% higher over the past year.

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Combined regional market rents were 0.4% higher over the quarter and recorded an increase more than double that of the capital cities (3.1%) over the past year.

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Over the quarter, rents fell in Sydney (-0.3%) and Darwin (-1.0%) and increased in Melbourne (+0.9%), Brisbane (+0.3%), Adelaide (+0.4%), Perth (+0.3%), Hobart (+1.9%) and Canberra (+1.3%).

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Over the past 12 months, rental rates fell in Perth (-0.2%) and Darwin (-1.7%) and increased in Sydney (+0.1%), Melbourne (+3.1%), Brisbane (+1.2%), Adelaide (+2.2%), Hobart (+10.7%) and Canberra (+4.5%).

Annual change in national dwelling rents 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

With dwelling values falling and rents continuing to rise, rental yields have started to lift ►

At the end of June 2018, the gross rental yield nationally was recorded at 3.7%; 3.4% across the combined capital cities and 4.9% across the combined regional markets.

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Houses (3.5%) have lower gross yields than units (4.2%) nationally as well as across the combined capital cities (3.2% vs. 4.1%) and combined regional markets (4.8% vs. 5.2%).

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Across Australia, gross rental yields have softened over recent years however, they have started to lift marginally over recent months as values have fallen.

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Throughout the individual capital cities, gross rental yields are currently recorded at: 3.2% in Sydney, 3.0% in Melbourne, 4.4% in Brisbane, 4.2% in Adelaide, 3.9% in Perth, 4.9% in Hobart, 5.7% in Darwin and 4.6% in Canberra.

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Gross rental yields are currently higher than they were a year ago in all capital cities except for Perth and Darwin.

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Although rental growth is slowing in many capital cities, it is expected to remain stronger than value changes and as a result yields are expected to continue to firm over the coming months.

Gross rental yields, National 4.9% 4.7% 4.5% 4.3%

4.1% 3.9% 3.7%

3.5%

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The Australian Residential Property Market and Economy New South Wales Value growth is slowing across NSW •

Over the second quarter of 2018, Sydney dwelling values have fallen by -0.9% and values across regional NSW have increased by 0.8%.

•

Over the past 12 months Sydney values have fallen by -4.5% while regional NSW values have increased by 3.2%. By comparison, 12 months ago Sydney values had increased by 16.4% and regional NSW values had increased by 11.9%.

•

While the Sydney market has been seeing values decline since July last year, values are still broadly rising outside of Sydney however, over recent months many of the regions adjoining Sydney have also started to experience value declines.

40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10%

•

In Sydney, there were 20,601 settlements over the three months to June 2018 which was -12.1% lower than the same period in 2017.

•

There were 14,437 house and unit sales settled in regional NSW over the three months to June 2018 which was -6.6% lower than the number over the second quarter of 2017.

Annual change in dwelling values Sydney

Regional NSW

Rental growth is slowing in Sydney and remains fairly steady in regional NSW •

Over the second quarter of 2018, Sydney rents fell by -0.3% while they increased by 0.2% over the period in regional NSW.

•

Throughout the past year, Sydney rental growth has slowed from 3.9% to 0.1% and in regional NSW annual rental growth was 3.4% a year ago and has slowed marginally to 2.8% over the past year.

•

Rental rates in Sydney are now -0.4% lower than they were at their peak while in regional NSW rents are -0.1% lower than their peak.

While dwelling values fall for the more expensive housing stock, lower valued stock continues to rise •

Over the past year, dwelling values for the most affordable 25% of NSW housing stock has increased by 4.7% while the middle 50% of housing stock has fallen -0.9% and the most expensive 25% has recorded a decline of -6.1%.

•

In Sydney, the most affordable 25% of properties have fallen in value by -1.0% over the past year compared to a -3.0% fall across the middle 50% of the market and a much larger -7.3% fall across the 25% of most expensive properties.

•

Regional NSW dwelling values have increased 4.7% across the most affordable 25% of properties over the past year, are 4.5% higher across the middle 50% of properties and have increased by a lower 2.2% across the most expensive 25% of properties.

With values falling faster than rents, yields are increasing from historic lows •

Gross rental yields in Sydney were recorded at 3.21% in June 2018, up from 3.05% in June 2017.

•

Regional NSW gross rental yields have fallen from 4.61% in June 2017 to 4.50% in June 2018.

Settled transaction volumes in NSW are trending lower •

Over the past three months there was 35,038 house and unit transactions settled in Sydney which was -9.9% lower than over the same three month period last year.

© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is permitted. The information is deemed reliable but not guaranteed.

The Australian Residential Property Market and Economy New South Wales Population growth in NSW remains strong however, it has started to slow •

Over the 12 months to December 2017, the population of NSW increased by 116,823 persons, the lowest it has been since March 2016.

•

Looking at the components, the 116,823 person population increase was comprised of 43,144 from natural increase, 92,978 persons from net overseas migration and there was a loss of 19,299 persons from net interstate migration.

•

Annual natural increase was the highest it has been since September 2016, net overseas migration was the lowest it has been September 2016 and the net outflow of residents was the largest it has been since March 2009.

Growth in NSW state final demand has slowed but remains quite strong •

State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets. It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories. Given it excludes exports and inventories it isn’t directly comparable to GDP.

•

State final demand in NSW increased by 0.7% over the March 2018 quarter and although that was the slowest quarterly growth in a year, it was much higher than the 0.1% increase in March 2017.

•

Over the past 12 months, NSW state final demand has increased by 3.7% which is the fastest annual growth since December 2016.

NSW’s labour force is much stronger than most other states and territories •

The NSW trend unemployment rate was recorded at 4.8% in June 2018 which is the same as it was a year ago.

•

Over the past 12 months, NSW has created 143,912 jobs.

•

Based on the 143,912 jobs created over the past year, total employment has increased by 3.7% and 45.0% of all jobs created nationally last year were in NSW.

Approvals for units are trending lower while house approvals rise •

In May 2018, there were 5,727 dwellings approved for construction in NSW which was 7.3% higher over the month and 6.6% higher year-on-year.

•

Over the month there were 2,862 houses approved for construction, an increase of 20.1% over the month and a 1.0% increase year-on-year.

•

Recent data points to an easing in unit approvals with 2,865 approvals in May 2018 the fewest since December 2017 however, year-on-year approvals are 13.0% higher.

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The Australian Residential Property Market and Economy New South Wales A very high number of dwellings were under construction across NSW at the end of March 2018

Housing finance commitments in NSW rebound in May 2018

•

According to the ABS there were 87,266 dwellings under construction across NSW at the end of March 2018, which was only slightly lower than the historic high of 89,162 dwellings over the previous quarter.

•

The total value of housing finance commitments in NSW during May 2018 was $14.4 billion which was 19.4% higher over the month but -8.1% lower from its recent peak.

•

•

The 87,266 is split between: 20,041 new houses, 66,054 new units and 1,171 non-new dwellings.

•

The number of new houses under construction increased to its highest volume since September 1989 over the quarter while the number of new units under construction fell however, it was the third highest figure on record.

The $14.4 billion was split between: $2.7 billion in owner occupier refinances, $5.9 billion in owner occupier new lending and $5.8 billion in lending to investors.

•

Although the value of lending rebounded over the month, all segments of lending across NSW are trending lower and as a share of total lending investors have shrunk to their smallest share since April 2016.

80,000

No of dwellings under construction, NSW Houses

$8

Units

$7

60,000

$6

50,000

$5

$ billion

70,000

40,000 30,000

$4 $3

20,000

$2

10,000

$1

0

$0

Source: CoreLogic, ABS

Housing finance commitments, NSW Owner occupier refinances (3 mth average) Owner occupier non-refinances (3 mth average) Investors (3 mth average)

Source: CoreLogic, ABS

© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is permitted. The information is deemed reliable but not guaranteed.

The Australian Residential Property Market and Economy Victoria Dwelling values are increasing at their slowest annual pace since January 2013 •

Melbourne dwelling values fell by -1.4% over the second quarter of 2018 which was their largest quarterly fall since February 2012 and regional Vic values increase by 1.8%.

•

Over the 2017-18 financial year, Melbourne dwelling values increase by 1.0%, their slowest annual rate of growth since January 2013, while in regional Vic values increased by 5.0%, their fastest annual rate of growth since September 2017.

•

In Melbourne, there were 20,247 transactions settled over the three months to June 2018 which was -14.1% lower than the same period in 2017.

•

There were 7,383 house and unit settlements in regional Vic over the three months to June 2018 which was -1.8% lower than the number over the second quarter of 2017.

12,000

Monthly house and units sales with 3 month average, Vic Houses

Units

10,000 8,000 6,000

•

Although value growth has slowed rapidly over the past year in Melbourne, regional Vic continues to see comparatively stronger growth, driven by housing being much more affordable than it is in Melbourne.

40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10%

Annual change in dwelling values Melbourne

Regional Vic

Values falls are confined to the upper quartile of the market •

Over the past year, dwelling values for the most affordable 25% of Vic housing stock has increased by 4.5% while the middle 50% of housing stock has increased 5.0% and the most expensive 25% has recorded a decline of -1.7%.

•

In Melbourne, the most affordable 25% of properties have increased in value by 9.3% over the past year compared to a 3.3% increase across the middle 50% of the market and a -2.5% fall across the 25% of most expensive properties.

•

Regional Vic dwelling values have increased 4.5% across the most affordable 25% of properties over the past year, are 5.0% higher across the middle 50% of properties and have increased by 5.6% across the most expensive 25% of properties.

Annual change in Vic dwelling values across market segments

35.0%

Low 25%

Middle 50%

Top 25%

4,000 2,000 0

Rental growth has accelerated in regional Vic while it has slowed in Melbourne •

Over the second quarter of 2018, Melbourne rents fell by 0.9% while they increased by 0.7% over the period in regional Vic.

•

Throughout the past year, Melbourne rental growth has slowed from 4.4% to 3.1% and in regional Vic annual rental growth was 2.1% a year ago and has increased to 3.4% over the past year.

•

Both Melbourne and regional Vic are seeing rental rates continue to rise however, there is a clear slowing of rental growth in Melbourne and an acceleration in regional Vic.

15%

Melbourne

Regional Vic

10% 5% 0% -5%

In Melbourne, gross rental yields are slowly rising from their historic lows •

Gross rental yields in Melbourne were recorded at 3.00% in June 2018, up from 2.97% a year earlier.

•

Regional Vic gross rental yields have fallen from 4.75% in June 2017 to 4.41% in June 2018.

25.0% 15.0% 5.5%

5.0%

Annual change in rents

Gross rental yields Melbourne

Regional Vic

5.0%

-5.0%

4.5%

-15.0%

4.0% 3.5%

There’s been a significant fall in sales transactions over the past 12 months •

3.0% 2.5%

Over the past three months there was 27,630 house and unit settlements in Vic which was 11.1% lower than over the same three month period last year.

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The Australian Residential Property Market and Economy Victoria 9%

Quarterly and annual change in state final demand - Vic Quarterly change

Annual change

7% 5% 3%

Vic remains the nation’s population growth powerhouse but growth has started to slow •

Vic’s population increased by 143,420 persons over the 2017 calendar year which was the state’s smallest increase in population since December 2015 however, it still accounted for 37.0% of the nation’s population increase

•

Looking at the components, the 143,420 person population increase was comprised of 42,312 from natural increase, 84,722 persons from net overseas migration and 16,386 persons from net interstate migration.

•

While natural increase was at an historic high level, net overseas migration was the lowest it’s been since September 2016 and net interstate migration has been falling for three consecutive quarters and is the lowest it’s been since March 2016.

1% -1% -3%

Source: CoreLogic, ABS

Growth in state final demand for Vic over the June 2018 quarter was the strongest in a number of years •

•

•

14%

State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets. It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories. Given it excludes exports and inventories it isn’t directly comparable to GDP. State final demand in Vic increased by 1.9% over the March 2018 quarter which was the strongest quarterly increase since a 2.3% increase in March 2013.

Over the past 12 months, Vic state final demand has increased by 4.9% which was the greatest growth of all states and territories.

Vic unemployment rate (trend)

12%

100,000

20,000 0

-40,000

Source: CoreLogic, ABS

While unit approvals are well down from their peak, house approvals are climbing •

In May 2018, there were 6,435 dwellings approved for construction in Vic which was 11.8% higher over the month and 18.3% higher year-on-year.

•

Over the month there were 3,714 houses approved for construction, an increase of 9.7% over the month and a 7.9% increase year-on-year.

•

While unit approvals are down from their peak, the 2,721 approvals in May 2018 was 14.8% higher over the month and 36.4% higher year-on-year.

2% 0%

The unemployment rate in Vic has fallen substantially over the past year Vic’s trend unemployment rate was recorded at 5.5% in June 2018 which was down from 6.1% a year earlier.

7,000

Houses and units approved for construction, Vic Houses (3 mth average)

Units (3 mth average)

6,000 5,000 4,000

•

Vic has created 64,000 jobs over the 12 months to June 2018.

•

Based on the 64,000 jobs created over the past year, total employment has increased by 2.0% and 20.0% of all jobs created nationally last year were in Vic.

8%

Net interstate migration

-20,000

6%

•

Net overseas migration

40,000

8%

Source: CoreLogic, ABS

Natural increase

60,000

10%

4%

Components of annual population growth, Vic

80,000

3,000 2,000 1,000 0

Source: CoreLogic, ABS

Vic annual change in employment (trend)

6% 4% 2% 0% -2% -4% -6% -8%

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Victoria An historic high number of dwellings are under construction across Vic

Housing finance commitments rose across all segments in May 2018

•

According to the ABS there were 73,290 dwellings under construction across Vic at the end of March 2018, which was an historic high.

•

•

The 73,290 is split between: a record high 23,804 new houses, an historic high 48,971 new units and 515 non-new dwellings.

The total value of housing finance commitments in Vic during May 2018 was $10.7 billion which was 26.0% higher over the month and a new record high.

•

The $10.7 billion was split between: $2.3 billion in owner occupier refinances, $5.0 billion in owner occupier new lending and $3.5 billion in lending to investors.

•

While all segments of lending have rebounded, lending to investors as a share of total lending has trended much lower over recent months.

•

There was a significant rebound in the number of dwellings under construction across the state over the quarter with the number under construction now 7.6% higher than the previous record high.

60,000

No of dwellings under construction, Vic Houses

$6

Units

$5

40,000

$4 $ billion

50,000

30,000

$3

20,000

$2

10,000

$1

0

$0

Source: CoreLogic, ABS

Housing finance commitments, Vic Owner occupier refinances (3 mth average) Owner occupier non-refinances (3 mth average) Investors (3 mth average)

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Queensland Slow growth in dwelling values continues across Qld •

Over the second quarter of 2018, Brisbane dwelling values increased by 0.3% while across regional Qld values fell by -0.2%.

•

-12.9% lower than the number over the second quarter of 2017.

14,000

Monthly house and units sales with 3 month average, Qld Houses

Units

12,000 10,000 8,000

Brisbane dwelling values increased by 1.1% over the 2017-18 financial year while in regional Qld values increased by a slower 0.3%.

6,000 4,000 2,000 0

•

Annual value growth in each of Brisbane and regional Qld has slowed from a year ago and while values continue to rise it is at a very slow pace.

35% 30% 25% 20% 15% 10% 5% 0% -5% -10%

Annual change in dwelling values Brisbane

Regional Qld

The most affordable properties in Qld have recorded values fall over the past year while more expensive stock is seeing values rise •

Dwelling values across the 25% of most affordable housing stock in Qld has fallen by -2.0% over the past year compared to a 0.6% increase across the middle 50% of housing stock and a 1.7% increase across the most expensive 25% of housing stock.

•

In Brisbane, values have increased by 0.9% over the past year across both the most affordable and the most expensive 25% of properties in the city and they have increased by 1.2% across the middle 50% of the market.

•

Regional Qld dwelling values have fallen by -3.1% across the most affordable 25% of properties over the past year, are -0.8% lower across the middle 50% of properties and have increased by 2.2% across the most expensive 25% of properties.

45.0%

Rental growth has accelerated across the state over the past year •

In Brisbane, rental rates increased by 0.3% over the three months to June 2018 while rents increased by 0.6% over the same period in regional Qld.

•

Rental growth in Brisbane has accelerated over the past year from a -0.4% annual decline a year ago to a 1.2% increase over the past year, the largest annual increase since July 2015.

•

In regional Qld, rents have increased by 3.3% over the past year, their fastest rate of growth since September 2012.

15%

Middle 50%

Brisbane

Regional Qld

10% 5% 0% -5%

Rental yields have increased slightly over the past year •

Gross rental yields in Brisbane have increased from 4.39% in June 2017 to 4.43% currently.

•

In regional Qld, gross rental yields are currently recorded at 5.29%, up from 5.26% a year ago.

Annual change in Qld dwelling values across market segments Low 25%

Annual change in rents

Top 25%

35.0% 5.8% 5.6% 5.4% 5.2% 5.0% 4.8% 4.6% 4.4% 4.2% 4.0%

25.0% 15.0% 5.0% -5.0% -15.0%

Gross rental yields Brisbane

Regional Qld

Transaction volumes are substantially lower over the past year •

There were 23,513 dwellings sales across Qld over the three months to June 2018 which was -14.4% fewer than the same period in 2017.

•

The number of settled sales in Brisbane was 16.0% lower over the past three months compared to the same period in 2017 with 11,068 sales

•

There were 12,445 house and unit sales in regional Qld over the three months to June 2018 which was

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The Australian Residential Property Market and Economy Queensland 12% 10%

Quarterly and annual change in state final demand - Qld Quarterly change

Annual change

8% 6% 4%

Qld has led the nation in net interstate migration over the past year •

The population of Qld increased by 81,461 persons over the 12 months to December 2017 with Qld accounting for 21.0% of the nation’s population growth over the year.

•

The 81,461 person increase in population was split between: natural increase of 29,602 persons, net overseas migration of 29,349 persons and net interstate migration of 22,510 persons.

•

Over the year, natural increase was the lowest it’s been since June 2006, net overseas migration was the lowest it’s been since June 2016 and net interstate migration has increased for 12 consecutive quarters and is at its highest level since September 2007.

2% 0% -2% -4%

Source: CoreLogic, ABS

Growth in state final demand in Qld has slowed over the past year •

•

•

12%

State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets. It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories. Given it excludes exports and inventories it isn’t directly comparable to GDP. Over the March 2018 quarter, state final demand in Qld has increased by 0.5% which was down from 1.1% the previous quarter and up from 0.2% the previous year.

State final demand increased by 2.9% over the past year its slowest annual growth since December 2016.

Qld unemployment rate (trend)

70,000

20,000 10,000 0

Source: CoreLogic, ABS

Dwelling approvals are falling across Qld •

There were 2,840 dwellings approved for construction across the state in May 2018 which was -18.3% fewer over the month and a decline of 24.6% year-on-year.

•

There were 1,971 houses and 869 units approved for construction over the month.

•

House approvals in May were 1.8% higher over the month but -16.1% lower year-on-year while unit approvals were -43.6% lower over the month and 38.7% lower year-on-year.

0%

Source: CoreLogic, ABS

Qld’s job creation is quite strong but the unemployment rate remains stubbornly high

• •

10%

The trend unemployment rate in Qld was reported at 6.1% in June 2018, slightly higher than the 6.0% recorded a year earlier.

Net interstate migration

30,000

6%

•

Net overseas migration

40,000

8%

2%

Natural increase

50,000

10%

4%

Components of annual population growth, Qld

60,000

4,000 3,500

Houses and units approved for construction, Qld Houses (3 mth average)

Units (3 mth average)

3,000 2,500

Over the past 12 months, Qld has created 62,739 jobs.

Based on 62,739 jobs created over the past year, total employment has increased by 2.6% which has accounted for 19.6% of all jobs created nationally.

2,000 1,500 1,000 500 0

Source: CoreLogic, ABS

Qld annual change in employment (trend)

8% 6% 4% 2% 0% -2% -4%

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Queensland The number of dwellings under construction increased over the quarter

The value of housing finance commitments showed a substantial rise over the month

•

At the end of March 2018 there were 33,813 dwellings under construction in Qld which was 2.6% more than at the end of 2017.

•

•

The 33,813 dwellings under construction was split between: 10,734 new houses, 22,905 new units and 174 non-new dwellings.

In May 2018 there was $5.2 billion worth of housing finance commitments in Qld which was 24.1% higher over the month but -1.7% lower year-onyear.

•

The $5.2 billion in housing finance commitments was split between: $1.0 billion for owner occupier refinances, $2.7 billion for owner occupier new lending and $1.5 billion to investors.

•

Each segment of lending recorded an increase over the month however, owner occupier new lending and investor lending was lower than it was a year earlier.

•

The number of new houses under construction was the highest it has been since December 2008 while the number of units under construction was slightly higher than the previous quarter.

35,000

No of dwellings under construction, Qld Houses

$4

Units

$3

25,000

$3

20,000

$2

$ billion

30,000

15,000

$2

10,000

$1

5,000

$1

0

$0

Source: CoreLogic, ABS

Housing finance commitments, Qld Owner occupier refinances (3 mth average) Owner occupier non-refinances (3 mth average) Investors (3 mth average)

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy South Australia Values continue to rise albeit at a very slow pace •

Adelaide dwelling values increased by 0.9% over the June 2018 quarter while in regional SA values increased by 1.3%.

•

Over the past 12 months, Adelaide dwelling values are 1.1% higher compared to a -0.1% fall in values across regional SA.

•

The annual rate of value change is slower over the year in Adelaide and higher in regional SA with changes over the year to June 2017 recorded at 5.4% and -0.5% respectively.

25%

•

There were 2,245 house and unit sales in regional SA over the three months to June 2018 which was 9.8% higher than the number over the second quarter of 2017.

4,000

Adelaide

Regional SA

15% 10% 5% 0% -5%

The middle 50% of housing stock across SA has recorded the strongest value growth over the past year Across SA, dwelling values for the most affordable 25% of properties have increased by 0.3% over the past year compared to a 1.3% increase across the middle 50% of housing stock and a 1.1% increase for the most expensive 25% of housing stock.

•

In Adelaide, values have increased by 1.4% over the past year for the most affordable properties in the city, they have increased by 1.7% across the middle 50% of the market and the most expensive properties have increased in value by 0.8%.

•

Regional SA dwelling values have increased by 1.4% across the most affordable 25% of properties over the past year, are -0.4% lower across the middle 50% of properties and have fallen by -1.2% across the most expensive 25% of properties.

25.0%

Units

2,500 2,000 1,500 1,000 500 0

Rental growth has accelerated across the state over the past year however, it has slowed from recent peaks •

Adelaide rents increased by 0.4% over the June 2018 quarter while in regional SA rental rates rose by 0.5% over the quarter.

•

Over the past 12 months, Adelaide rents increased by 2.2% and rents in regional SA were 4.6% higher.

•

The 2.2% annual increase in Adelaide rents was higher than the 1.9% a year ago but down from the recent peak of 3.2% in January 2018 while rental growth in regional SA has slowed from 7.1% in April 2018.

-10%

30.0%

Houses

3,000

Annual change in dwelling values

20%

•

Monthly house and units sales with 3 month average, SA

3,500

10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10%

Low 25%

Middle 50%

Adelaide

Regional SA

Gross rental yields have softened over recent months in SA •

Over the 12 months to June 2018, gross rental yields in Adelaide have increased from 4.23% to 4.24%.

•

In regional SA, gross rental yields were recorded at 5.92% in June 2017 and 6.12% in June 2018.

Annual change in SA dwelling values across market segments Top 25%

20.0%

Annual change in rents

15.0% 10.0% 5.0% 6.5%

0.0% -5.0%

Gross rental yields Adelaide

Regional SA

6.0%

-10.0% 5.5% 5.0%

Transaction volumes are marginally lower over the past year •

There were 9,210 dwellings sales across SA over the three months to June 2018 which was -0.6% fewer than the same period in 2017.

•

With 6,965 settled sales, the number of sales in Adelaide was -3.6% lower over the past three months compared to the same period in 2017.

4.5% 4.0%

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The Australian Residential Property Market and Economy South Australia 12% 10%

Quarterly and annual change in state final demand - SA Quarterly change

Annual change

8% 6% 4%

The loss of residents from interstate migration is starting to slow in SA •

SA’s population increased by 10,671 persons over the 2017 calendar year with SA accounting for 2.8% of the nation’s population increase.

•

The 10,671 person increase in population was split between: natural increase of 4,995 persons, net overseas migration of 11,747 persons and a loss from net interstate migration of 6,071 persons.

•

Over the year, net overseas migration fell from 12,107 persons the previous year while the loss of residents from net interstate migration was the lowest it has been since December 2015.

2% 0% -2% -4%

Source: CoreLogic, ABS

The annual change in state final demand for SA is much lower than a year ago •

State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets. It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories. Given it excludes exports and inventories it isn’t directly comparable to GDP.

•

SA state final demand fell by -0.2% over the March 2018 quarter, its weakest result since June 2015.

•

State final demand increased by 2.1% over the past year its slowest annual growth since December 2016.

14%

20,000

Net interstate migration

0 -5,000 -10,000

Source: CoreLogic, ABS

In SA, dwelling approvals have trended higher •

There were 1,528 dwellings approved for construction in SA during May which was 57.0% greater than the previous month and 5.7% higher than a year ago.

•

There were 829 houses and 699 units approved for construction over the month.

•

In May 2018, house approvals were 29.3% higher over the month and 6.4% higher year-on-year while unit approvals were 110.5% higher over the month and 5.0% higher year-on-year.

10%

4% 2% 0%

Net overseas migration

5,000

12%

6%

Natural increase

10,000

SA unemployment rate (trend)

8%

Components of annual population growth, SA

15,000

Source: CoreLogic, ABS

The trend unemployment rate in SA is starting to fall 1,200

Houses and units approved for construction, SA Houses (3 mth average)

Units (3 mth average)

1,000

•

In May 2018, the trend unemployment rates for SA was recorded at 5.7% which was the lowest it has been since October 2012 and down from 6.6% a year ago.

600 400 200 0

•

There have been 19,411 new jobs created in SA over the past 12 months.

•

The 19,411 increase in employment over the past year equates to a 2.4% increase in employment with SA accounting for 6.0% of job creation nationally over the past year.

6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5%

800

Source: CoreLogic, ABS

SA annual change in employment (trend)

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy South Australia An historic high number of dwellings are currently under construction across SA

There was a rise in the value of housing finance commitments in May 2018

•

There were 10,268 dwellings under construction across SA at the end of the March 2018 quarter which was an historic high.

•

•

The 10,268 dwellings under construction was split between: 4,850 new houses, 5,348 new units and 71 non-new dwellings.

In May 2018 there was $1.6 billion worth of housing finance commitments in SA which was 18.6% higher over the month but -3.7% lower year-onyear.

•

The $1.6 billion in housing finance commitments was split between: $366.6 million for owner occupier refinances, $845.9 million for owner occupier new lending and $388.0 million to investors.

•

The value of lending to each category rose over the month while over the year each owner occupier segment recorded an increase in commitments while commitments by investors were down almost 20%.

•

There was a record high number of units under construction at the end of the quarter while houses under construction were slightly higher over the quarter and remain elevated.

7,000

No of dwellings under construction, SA Houses

$1,000

Units

6,000

$800 $ million

5,000 4,000 3,000

Housing finance commitments, SA Owner occupier refinances (3 mth average) Owner occupier non-refinances (3 mth average) Investors (3 mth average)

$600 $400

2,000 $200

1,000

$0

0

Source: CoreLogic, ABS

Source: CoreLogic, ABS

© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is permitted. The information is deemed reliable but not guaranteed.

The Australian Residential Property Market and Economy Western Australia Although values are still falling the rate of decline has slowed over the past year in Perth •

Over the June 2018 quarter, Perth dwelling values have fallen by -0.7% while in regional WA values were -0.1% lower.

•

Perth dwelling values have fallen by -2.1% over the past year while in regional WA values have recorded a larger -3.3% fall.

•

Regional WA sales volumes were 4.8% higher over the past quarter than they were a year ago with 2,258 settled sales over the June 2018 quarter.

7,000

Monthly house and units sales with 3 month average, WA Houses

Units

6,000 5,000 4,000 3,000 2,000

•

Compared to the annual change in dwelling values over the year to June 2017, the rate of decline has slowed in Perth this year and in regional WA the rate of decline has accelerated.

40%

Annual change in dwelling values Perth

Regional WA

30%

1,000 0

Although rents continue to fall, the rate of decline has slowed •

Over the June 2018 quarter, rental rates have increased by 0.3% in Perth and they have fallen by -0.9% in regional WA.

•

Perth rental rates have fallen by -0.2% over the past 12 months and in regional WA rental rates are -0.9% lower.

•

The -0.2% annual decline in rents in Perth is the strongest annual change in rents since March 2013 while the -0.9% fall in regional WA is an improvement from the -2.4% annual fall in June 2017.

20% 10% 0% -10% -20%

The most expensive properties in WA have seen the most moderate value declines •

Across WA, dwelling values for the most affordable 25% of properties and the middle 50% of properties have each fallen by 3.8% over the past year compared to a -2.1% fall for the most expensive 25% of housing stock.

•

In Perth, values have fallen by -4.5% over the past year for the most affordable properties in the city, they have fallen by -3.4% across the middle 50% of the market and the most expensive properties have fallen in value by -1.9%.

•

Regional WA dwelling values have fallen -4.2% across the most affordable 25% of properties over the past year, are -4.1% lower across the middle 50% of properties and have fallen by -4.3% across the most expensive 25% of properties.

50.0%

15%

Middle 50%

Perth

Regional WA

10% 5% 0% -5% -10%

Yields are softening in Perth while they rise in regional WA •

Over the 12 months to June 2018, gross rental yields in Perth have fallen from 3.99% to 3.91%.

•

In regional WA, gross rental yields were recorded at 5.52% in June 2017 and increased to 5.65% in June 2018.

Annual change in WA dwelling values across market segments Low 25%

Annual change in rents

Top 25%

40.0% 30.0% 20.0% 10.0% 6.5%

0.0% -10.0%

6.0%

-20.0%

5.5%

Gross rental yields Perth

Regional WA

5.0% 4.5%

Sales volumes are marginally lower than they were a year ago •

Over the June 2018 quarter there were 9,561 settled sales across WA which was -0.4% fewer than the same period in 2017.

•

In Perth there were 7,303 settled sales over the past three months which was -2.0% lower than the June 2017 quarter.

4.0% 3.5%

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The Australian Residential Property Market and Economy Western Australia 20% 15%

After slowing for a number of year’s population growth in WA is starting to pick-up

Quarterly and annual change in state final demand - WA Quarterly change

Annual change

10% 5%

•

The population of WA increased by 21,395 persons over the 12 months to December 2017 which equated to 5.5% of the national population increase.

•

Breaking down the increase in population, it was split between: natural increase of 20,004 persons, net overseas migration of 14,209 persons and a decline in population from net interstate migration of 12,818 persons.

•

Net overseas migration to WA over the past year was the strongest it has been since December 2014 while the loss of residents from net interstate migration was the lowest it’s been since September 2016.

0% -5% -10% -15%

Source: CoreLogic, ABS

State final demand recorded a large fall over the March 2018 quarter •

•

•

12%

State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets. It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories. Given it excludes exports and inventories it isn’t directly comparable to GDP. WA state final demand fell by -1.1% over the March 2018 quarter, its weakest result since September 2016.

60,000

Net overseas migration

Net interstate migration

30,000 20,000 10,000

State final demand increased by 0.8% over the past year which was slower growth than the previous quarter (+1.5%) but a significant improvement on the -6.7% fall a year earlier.

0

WA unemployment rate (trend)

-20,000

Source: CoreLogic, ABS

Dwelling approvals have fallen substantially over recent years •

In May 2018 there were 1,638 dwellings approved for construction in WA which was 28.0% higher over the month by -7.5% lower year-on-year.

•

Over the month there were 1,206 houses and 432 units approved for construction.

•

The number of houses approved in May 2018 was 15.3% higher over the month but -11.4% lower year-on-year while unit approvals rose 84.6% over the month and were 5.4% higher year-on-year.

8% 6% 4% 2% 0%

Source: CoreLogic, ABS

The unemployment rate is increasing as job creation slows in WA The trend unemployment rate in WA was recorded at 6.4% in May 2018 which is the highest it has been since January 2017.

•

Over the past 12 months, an additional 20,368 jobs were created in WA.

•

With a 20,368 increase in employment over the year, total employment rose by 1.5% which represented just 6.3% of jobs growth nationally over the year.

8%

Natural increase

40,000

-10,000

10%

•

Components of annual population growth, WA

50,000

2,500

Houses and units approved for construction, WA Houses (3 mth average)

Units (3 mth average)

2,000 1,500 1,000 500 0

Source: CoreLogic, ABS

WA annual change in employment (trend)

6% 4% 2% 0% -2% -4%

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Western Australia The number of dwellings under construction is trending lower

While housing finance commitments rose in May they are well below peak levels

•

At the end of March 2018 there were 14,409 dwellings under construction throughout WA which was lower than both the previous quarter and the same quarter in 2017.

•

There was $2.6 billion worth of housing finance commitments in WA in May 2018 which was 17.2% higher over the month but -11.8% lower year-onyear.

•

The 14,409 dwellings under construction consisted of: 7,694 new houses, 6,605 new units and 110 non-new dwellings.

•

•

The 7,694 new houses under construction was the fewest since the March 2017 quarter while the 6,605 units under construction was marginally lower than the previous quarter.

The $2.6 billion in housing finance commitments was split between: $499.2 million for owner occupier refinances, $1.4 billion for owner occupier new lending and $646.0 million to investors.

•

The value of lending to each category rose over the month while over the year each category of lending was lower with owner occupier refinances and investor commitments recording much greater falls.

No of dwellings under construction, WA Houses

$2,500

Units

$2,000 $ million

20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

Housing finance commitments, WA Owner occupier refinances (3 mth average) Owner occupier non-refinances (3 mth average) Investors (3 mth average)

$1,500 $1,000 $500 $0

Source: CoreLogic, ABS

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Tasmania While most other states have seen value growth slow substantially over the past year, growth remains strong in Tas •

Hobart dwelling values increased by 2.3% over the June 2018 quarter while in regional Tas values were 1.7% higher.

•

Over the 2017-18 financial year, Hobart dwelling values have increased by 12.7% while in regional Tas values were 5.6% higher.

•

Over the previous financial year, Hobart dwelling values increased by a similar rate (12.8%) while in regional Tas growth is slightly down from the 6.4% a year ago.

50%

Annual change in dwelling values Hobart

Regional Tas

40%

•

There were 1,685 settled house and unit sales in regional Tas over the three months to June 2018 which was -12.9% lower than the number over the second quarter of 2017.

1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

Hobart rents increased by 1.9% in the June 2018 quarter while rents were 0.8% higher over the same period in regional Tas.

•

Hobart rents have increased by 10.7% over the past year which is a greater annual increase than the 8.2% a year earlier.

•

In regional Tas rental rates have increased by 9.6% over the 2017-18 financial year compared to an increase of 2.5% over the 2016-17 financial year.

-10%

The most expensive properties in Tas have recorded the greatest value growth over the past year •

•

•

80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0%

Across Tas, dwelling values for the most affordable 25% of properties have increased 8.5%, the middle 50% of properties have increased by 8.8% and the most expensive 25% of housing stock has seen values rise 10.6%.

15%

In Hobart, values have increase by 14.8% over the past year for the most affordable properties in the city, they have increased by 13.0% across the middle 50% of the market and the most expensive properties have increased in value 12.2%.

-10%

Regional Tas dwelling values have increased 7.2% across the most affordable 25% of properties over the past year, are 6.6% higher across the middle 50% of properties and have risen by 4.1% across the most expensive 25% of properties.

Annual change in Tas dwelling values across market segments Low 25%

Middle 50%

Top 25%

Units

•

20%

0%

Houses

Rental growth is strong across Tas although it has slowed over the quarter

30%

10%

Monthly house and units sales with 3 month average, Tas

Annual change in rents Hobart

Regional Tas

10% 5% 0% -5%

Rental yields are falling in Hobart as values outpace rents, but lifting elsewhere in the state •

Gross rental yields in Hobart have fallen over the 12 months to June 2018 to 4.94% from 5.14%.

•

Outside of Hobart, rental yields have firmed over the year from 5.69% to 5.74%.

6.3% 6.1% 5.9% 5.7% 5.5% 5.3% 5.1% 4.9% 4.7% 4.5%

Gross rental yields Hobart

Regional Tas

Low sales volumes due to low stock for sale is contributing to value growth in Tas •

There were 2,774 settled dwelling sales across Tas over the three months to June 2018 which was 14.4% fewer than the same period in 2017.

•

The 1,089 settled sales in Hobart over the June 2018 quarter was -16.7% fewer sales than over the same period in 2017.

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The Australian Residential Property Market and Economy Tasmania 20%

Population growth has accelerated over the past year in Tas

Quarterly and annual change in state final demand - Tas Quarterly change

Annual change

15% 10% 5%

•

Over the year to December 2017, the population of Tas increased by 4,875 persons which equated to 1.3% of the nation’s population growth.

•

Breaking down the increase in population, it was split between: natural increase of 831 persons, net overseas migration of 2,161 persons and net interstate migration of 1,883 persons.

•

Net overseas migration to Tas over the past year was slightly down on the previous year (2,277 persons) while net interstate migration was the strongest it has been since June 2004.

0% -5% -10%

Source: CoreLogic, ABS

State final demand for Tas has been steady over the past year •

State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets. It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories. Given it excludes exports and inventories it isn’t directly comparable to GDP.

•

State final demand in Tas increased by 2.0% over the March 2018 quarter, its strongest growth in a year.

•

State final demand increased by 3.9% over the past year which was an equivalent rate of increase to 12 months earlier.

14%

5,000 4,000 3,000 2,000 1,000 0 -1,000 -2,000 -3,000 -4,000 -5,000

Across Tas there were 285 dwellings approved for construction in May 2018 which was the secondhighest number of monthly approvals over the past three years.

•

The 285 approvals were split between 257 houses and 28 units.

•

The number of houses approved in May 2018 was 34.6% higher over the month and 20.1% higher year-on-year while unit approvals fell -6.7% over the month and were -48.1% lower year-on-year.

8%

2%

Source: CoreLogic, ABS

While it has been strong, Tas jobs growth has slowed substantially over the past year •

The trend unemployment rate in Tas was recorded at 6.3% in May 2018 which is the highest it has been since October 2016.

400 350

Houses and units approved for construction, Tas Houses (3 mth average)

Units (3 mth average)

300 250 200

•

Over the past 12 months, an additional 2,893 jobs were created in Tas.

•

With a 2,893 person increase in employment over the year, total employment rose by 0.5%, its slowest growth since November 2016 and representing 0.9% of jobs growth nationally over the year.

10% 8% 6% 4% 2% 0% -2% -4% -6% -8%

Net interstate migration

•

10%

0%

Net overseas migration

A housing supply response is slowly starting to occur across Tas

12%

4%

Natural increase

Source: CoreLogic, ABS

Tas unemployment rate (trend)

6%

Components of annual population growth, Tas

150 100 50 0

Source: CoreLogic, ABS

Tas annual change in employment (trend)

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Tasmania The number of dwellings under construction is trending higher

The value of housing finance commitments continues to trend higher

•

At the end of March 2018 there were 1,973 dwellings under construction throughout Tas which was the greatest number under construction since September 2015.

•

There was $382.3 million worth of housing finance commitments in Tas in May 2018 which was 12.8% higher over the month and 7.4% higher year-onyear.

•

The 1,973 dwellings under construction consisted of: 1,503 new houses, 447 new units and 22 nonnew dwellings.

•

•

The 1,503 new houses under construction was the greatest since the September 2015 quarter while the 447 units under construction was marginally lower than the previous quarter.

The $328.3 million in housing finance commitments was split between: $75.2 million for owner occupier refinances, $225.5 million for owner occupier new lending and $81.6 million to investors.

•

The value of lending to each category rose over the month while over the year each category of lending rose except investor lending.

2,500

No of dwellings under construction, Tas Houses

$250

Units

$200

1,500

$150

$ million

2,000

1,000

$100

500

$50

0

$0

Source: CoreLogic, ABS

Housing finance commitments, Tas Owner occupier refinances (3 mth average) Owner occupier non-refinances (3 mth average) Investors (3 mth average)

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Northern Territory Housing market remains weak in NT however, there is quite a divergence between Darwin and the rest of the state •

Over the June 2018 quarter, dwelling values in Darwin fell by -0.8% while in regional NT they increased by 4.0%.

•

Darwin dwelling values fell by -7.7% over the 12 months to June 2018 while over the previous 12 months values had fallen by a lower -2.6%.

•

Over the past year, dwelling values in regional NT increased by 4.8% which is a significant improvement on the -7.0% fall in values the previous year.

30% 25% 20% 15% 10% 5% 0% -5% -10% -15%

•

Annual change in dwelling values Darwin

Regional NT

While settled sales rose in Darwin, the 139 sales in regional NT over the quarter was -8.6% fewer than the same period a year earlier.

500 450 400 350 300 250 200 150 100 50 0

Throughout NT the most affordable 25% of properties have recorded a -3.8% fall in values over the past year compared to a -4.2% fall across the middle 50% of suburbs and a -6.2% fall across the most expensive 25% of suburbs.

•

In Darwin, the past year has seen values fall -8.4% across the most affordable 25% of properties, a decline of -6.0% across the middle 50% of properties and a fall of -7.2% across the most expensive 25% of properties.

•

35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0%

Regional NT dwelling values have increased 5.4% across the most affordable 25% of properties over the past year, are 7.2% higher across the middle 50% of properties and have risen by 3.3% across the most expensive 25% of properties.

Annual change in NT dwelling values across market segments Low 25%

Middle 50%

Top 25%

Houses

Units

Rental growth is accelerating in regional NT as the declines in Darwin slow •

Darwin rents fell by -1.0% in the June 2018 quarter while rents were 0.5% higher over the same period in regional NT.

•

Darwin rents have fallen by -1.7% over the past 12 months with the rate of rental decline slowing from an annual decline of -4.2% a year earlier.

•

Over the past 12 months rents in regional NT have increased by 3.0% which is slightly higher than the 2.7% annual increase a year ago.

Value falls are greatest across the most expensive housing stock •

Monthly house and units sales with 3 month average, NT

30% 25% 20% 15% 10% 5% 0% -5% -10% -15%

Annual change in rents Darwin

Regional NT

Rental yields are rising in Darwin and are slightly lower in regional NT •

Darwin’s gross rental yields have increased to 5.74% in June 2018 from 5.44% a year earlier.

•

In regional NT gross rental yields currently sit at 6.93% compared to 6.98% a year earlier.

8.0%

Gross rental yields Darwin

Regional NT

7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5%

Settled sales volumes have increased marginally over the past year •

Throughout the June 2018 quarter there were 710 settled dwelling sales across NT which was 4.6% more sales than over the same quarter in 2017.

•

In Darwin there were 571 settled sales over the quarter which was 8.3% more sales than over the June 2017 quarter.

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The Australian Residential Property Market and Economy Northern Territory 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10%

NT’s population is barely growing

Quarterly and annual change in state final demand - NT Quarterly change

Annual change

•

The population of NT increased by 572 persons over the 2017 calendar which equated to 0.1% of national population growth and was NT’s smallest annual increase in population since March 2015.

•

Breaking down the increase in population, it was split between: natural increase of 2,775 persons, net overseas migration of 1,060 persons and a loss from net interstate migration of 3,263 persons.

•

Net overseas migration to NT over the past year was the smallest it has been since June 2016 while the loss of residents from net interstate migration was the greatest on record.

Source: CoreLogic, ABS

NT state final demand has fallen over the past year •

State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets. It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories. Given it excludes exports and inventories it isn’t directly comparable to GDP.

•

State final demand in NT fell by -2.0% over the March 2018 quarter, although the rate of decline slowed over the quarter.

•

State final demand fell by -7.9% over the past year which was its largest annual fall since December 2015.

12%

5,000 4,000 3,000 2,000 1,000 0 -1,000 -2,000 -3,000 -4,000

69 dwellings were approved for construction in NT in May 2018 which was 46.8% over the month and 16.9% higher year-on-year.

•

Of the 69 approvals, 66 were for houses which was 65.0% higher over the month and 15.8% higher year-on-year.

•

Few units are being approved for construction with just 3 in May 2018 which was -57.1% lower than the previous month but actually 50% higher than a year previous.

4% 2%

Source: CoreLogic, ABS

The unemployment rate in NT is one of the countries lowest and it is trending lower NT’s trend unemployment rate was recorded at 4.0% in May 2018 which was up from 3.3% a year ago however it is once again starting to fall.

•

Over the past 12 months, an additional 685 jobs were created in NT.

•

With a 685 person increase in employment over the year, total employment rose by 0.5%, its strongest growth since June 2017 and representing 0.2% of jobs growth nationally over the year.

30% 25% 20% 15% 10% 5% 0% -5% -10% -15%

Net interstate migration

•

6%

•

Net overseas migration

Dwelling approvals are climbing off a very low base

10%

0%

Natural increase

Source: CoreLogic, ABS

NT unemployment rate (trend)

8%

Components of annual population growth, NT

450 400 350 300 250 200 150 100 50 0

Houses and units approved for construction, NT Houses (3 mth average)

Units (3 mth average)

Source: CoreLogic, ABS

NT annual change in employment (trend)

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Northern Territory The number of dwellings under construction is trending lower

There has been a slight rebound in mortgage demand

•

There were 967 dwellings under construction across the NT at the end of March 2018 which was marginally higher than the 952 under construction at the end of the previous quarter

•

In May 2018 there was $138.8 million worth of housing finance commitments which was 24.5% higher over the month and 2.8% higher year-onyear.

•

The 967 dwelling under construction consisted of: 252 new houses, 709 new units and 26 non-new dwellings.

•

•

The 252 new houses under construction was slightly higher than the previous quarter but lower than a year ago while the 709 new units was greater than both the previous quarter and year.

The $138.8 million in housing finance commitments was split between: $22.9 million for owner occupier refinances, $72.6 million for owner occupier new lending and $43.3 million to investors.

•

The value of lending to each category rose over the month while over the year each category of lending rose except investor lending.

No of dwellings under construction, NT Houses

$160

Units

$140 $120 $ million

2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

Housing finance commitments, NT Owner occupier refinances (3 mth average) Owner occupier non-refinances (3 mth average) Investors (3 mth average)

$100 $80 $60 $40 $20 $0

Source: CoreLogic, ABS

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Australian Capital Territory Dwelling value growth has slowed over the past year in Canberra •

Over the second quarter of 2018 Canberra dwelling values increased by 0.2%

•

Over the 2017-18 financial year, Canberra dwelling values increased by 2.3% compared to a 7.8% increase over the previous year.

25%

Annual change in Canberra dwelling values

Rents are rising faster than values pushing yields higher

20% 15% 10% 5%

•

As at June 2018, gross rental yields in Canberra were recorded at 4.64% compared to 4.52% a year earlier.

•

The 4.64% gross rental yield is the highest yields have been since September 2014.

0% -5% -10% -15%

The most affordable properties have recorded the slowest annual value growth •

Over the past 12 months, the most affordable 25% of Canberra properties have increased by 1.6% compared to a 2.6% increase across the middle 50% of properties and a 2.2% rise in the most expensive 25% of properties.

40.0%

Annual change in Canberra rents

10% 8% 6% 4% 2% 0% -2% -4% -6% -8%

Gross rental yields, Canberra 5.2% 5.0% 4.8% 4.6% 4.4% 4.2%

Annual change in ACT dwelling values across market segments Low 25%

Middle 50%

Top 25%

30.0%

State final demand is down over the quarter with the annual change slowing

20.0% 10.0% 0.0%

•

State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets. It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories. Given it excludes exports and inventories it isn’t directly comparable to GDP.

•

In the ACT, state final demand fell by -0.8% over the March 2018 quarter which was the largest quarterly fall since September 2015.

•

In March 2018, state final demand was 1.6% higher than a year earlier which was the slowest year-onyear growth since June 2016.

-10.0% -20.0%

Settled sales volumes stable over the past year •

1,000 900 800 700 600 500 400 300 200 100 0

Canberra recorded 2,223 dwelling settlements over the June 2018 quarter which was one more sale than over the same period in 2017.

Monthly house and units sales with 3 month average, ACT Houses

Units

15%

Quarterly and annual change in state final demand - ACT Quarterly change

Annual change

10%

Although rental growth in Canberra is slower than a year ago it remains quite strong •

•

Over the June 2018 quarter, Canberra rents increased by 1.3% which was slightly greater than the 1.0% increase over the same quarter in 2017.

5% 0% -5%

Source: CoreLogic, ABS

Over the past 12 months Canberra rents have increased by 4.5% which is lower than the 7.1% annual increase a year earlier.

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The Australian Residential Property Market and Economy Australian Capital Territory 9% 8% 7% 6% 5% 4% 3% 2% 1% 0%

ACT unemployment rate (trend)

Source: CoreLogic, ABS

•

Of the 349 approvals, 132 were for houses which was 41.9% higher over the month and 69.2% higher year-on-year.

•

The remaining 217 approvals were for units which was 38.2% higher over the month but -21.4% fewer than in May 2017.

Houses and units approved for construction, ACT

1,200

Houses (3 mth average)

1,000

ACT has the nation’s lowest unemployment rate and it is trending lower •

Units (3 mth average)

800 600 400

The trend unemployment rate in ACT was recorded at 3.7% in May 2018 which was lower than the 4.0% a year earlier and the lowest it has been since January 2017.

200 0

Source: CoreLogic, ABS

•

Total employment in the ACT has increased by 4,844 persons over the past year.

ACT has a high but falling number of dwellings under construction

•

The 4,844 person increase employment represented growth of 2.2% over the year and it accounted for 1.5% of job creation nationally.

•

The 967 dwelling under construction consisted of: 252 new houses, 709 new units and 26 non-new dwellings.

•

The 252 new houses under construction was slightly higher than the previous quarter but lower than a year ago while the 709 new units was greater than both the previous quarter and year.

11%

ACT annual change in employment (trend)

9% 7% 5% 3% 1% -1% -3%

6,000

-5%

5,000

No of dwellings under construction, ACT Houses

Units

4,000 Source: CoreLogic, ABS

3,000 2,000

Migration to ACT is climbing •

1,000

ACT’s population increased by 8,761 persons over the 2017 calendar year, equating to 2.3% of national population growth and it was the greatest population increase for ACT since March 1986.

•

Breaking down the increase in population, it was split between: natural increase of 3,888 persons, net overseas migration of 4,201 persons and an increase from net interstate migration of 672 persons.

•

Net overseas migration to ACT over the past year was the greatest it has ever been while net interstate migration was the lowest it has been since September 2016.

5,000 4,000 3,000 2,000 1,000 0 -1,000 -2,000 -3,000 -4,000

Components of annual population growth, ACT Natural increase

Net overseas migration

0

Source: CoreLogic, ABS

Mortgage demand is fairly steady in ACT •

In May 2018 there was $666.7 million worth of housing finance commitments which was 8.9% higher over the month but -4.6% lower year-onyear.

•

The $666.7 million in housing finance commitments was split between: $123.4 million for owner occupier refinances, $349.0 million for owner occupier new lending and $194.3 million to investors.

•

The value of lending to each category rose over the month while over the year owner occupier refinances were the only category in which lending was greater.

Net interstate migration

$500

Source: CoreLogic, ABS

Dwelling approvals are below their peak but above long-term average levels •

In May 2018 there were 349 dwellings approved for construction in ACT which was 39.6% more than the previous month but -1.4% lower year-on-year.

$ million

$400

Housing finance commitments, ACT Owner occupier refinances (3 mth average) Owner occupier non-refinances (3 mth average) Investors (3 mth average)

$300 $200 $100 $0

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Mortgage Lending Housing finance commitments to owner occupiers are holding steady as investor commitments trend much lower ►

There was $31.9 billion in housing finance commitments in May 2018 to Australian lenders.

►

The total value of housing finance commitments increased by 0.5% over the month however, the value of commitments was-3.7% lower year-onyear.

►

The $31.9 billion in commitments was split between $21.2 billion to owner occupiers and $10.7 billion to investors.

►

The value of owner occupier housing finance commitments (including refinanced loans)

$25

increased by 0.7% over the month and was 2.1% higher year-on-year. ►

Finance commitments to investors fell by -0.1% in May 2018 and they were -13.4% lower year-onyear.

►

The ongoing changes to lending policies for investors has led to less mortgage activity across this segment however, stamp duty concessions in NSW and Vic for first home buyers and low interest rates continue to support demand from the owner occupier segment.

Monthly value of housing finance commitments, National Owner occupier

Investor

Billions

$20 $15 $10 $5 $0

Source: CoreLogic, ABS

The value of lending to owner occupiers is trending higher ►

►

In May 2018, the $21.2 billion in owner occupier housing finance commitments was split between: $1.9 billion for construction of dwellings, $1.2 billion for purchase of new dwellings, $6.3 billion for refinancing of established dwellings and $11.8 billion for purchase of established dwellings.

Owner occupier lending has been rising on the

$14

$12

Billions

$10

back of increases in lending for all sectors over the past year except for construction of dwellings. ►

Year-on-year, finance commitments were lower for construction of dwellings (-5.3%) and higher for purchase of new dwellings (+7.0%), refinancing of established dwellings (+3.4%) and purchase of established dwellings (+2.2%).

Monthly value of owner occupier housing finance commitments by type Construction of dwellings Purchase of new dwellings Refinance of established dwellings Purchase of established dwellings

$8 $6 $4

$2 $0

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Mortgage Market Lending to investors is well below its peak but remains significantly higher than long-term levels ►

►

In May 2018 there was $10.7 billion in housing finance commitments to investors, consisting of $1.1 billion for construction of dwellings and $9.7 billion for established housing.

peak which occurred in April 2015.

Lending for construction of dwellings fell over the month (-4.7%) but rose +5.4% over the year while lending for established dwellings increased over the month (+0.4%) and fell -15.1% over the year.

►

The value of investor housing finance commitments had been easing on the back of higher mortgage rates to investors and other policy constraints restricting lending to this segment.

►

As at May 2018, the value of investor housing finance commitments was -27.5% below its historic

►

Although the value of lending to investors has fallen, investors accounted for 42.0% of the total value of new finance commitments (excluding refinances) in May 2018 which was well above the long-run average share of 34.3%.

►

New South Wales and Victoria have seen heightened levels of investor borrowing over recent years with New South Wales’ much higher than Victoria’s level, and the recent increases in mortgage rates to investors, as well as tighter lender credit policies, are most likely to impact on demand within those markets where investors have been most active.

Monthly value of investor housing finance commitments by type $16 Construction of dwellings

$14

Purchase of established dwellings

Billions

$12 $10

$8 $6 $4 $2 $0

Source: CoreLogic, ABS

Owner occupier first home buyer finance commitments have surged higher since the middle of 2017 ►

Data on owner occupier housing finance commitments to first home buyers shows that there were 10,302 commitments in February 2018.

►

The volume of commitments was 20.4% higher over the month and 22.1% higher than at the same time last year.

►

A key driver of the rebounding first home buyer numbers has been the removal of stamp duty for

20,000

first home buyers under certain price thresholds in NSW and Vic from July 1, 2017. ►

Comparing the number of first home buyer commitments to last year across the states shows volumes are higher in NSW (+68.8%), Vic (+33.1%), SA (+6.3%), Tas (+24.8%) and NT (+24.0%) are unchanged in Qld and are lower in WA (-6.6%) and ACT (-11.2%).

Monthly number of owner occupier first home buyer finance commitments

18,000

16,000 14,000 12,000 10,000 8,000 6,000

4,000 2,000 0

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Mortgage Market Owner occupier average loan sizes continue to creep higher

$450,000



The average new mortgage size to owner occupiers was recorded at $400,100 in May 2018.

$400,000



Average mortgage sizes were 0.4% higher over the month and they are 5.3% higher year-on-year.



First home buyer average loans sizes are $344,600 and have increased by 8.4% over the past year their fastest annual growth rate since July 2014.



Average owner occupier loan size, monthly

$350,000

$300,000 $250,000 $200,000

$150,000 $100,000

Non-first home buyer average loan sizes sit at $412,000 and have increased by 5.6% year-on-year.

$50,000 $0

Source: CoreLogic, ABS

The majority of owner occupiers take out a variable rate mortgage 

Housing finance data reveals that in May 2018, 12.1% of owner occupier mortgage commitments were for fixed-rate loans.

Monthly proportion of new mortgages on a fixed rate home loan



At its absolute peak, in March 2008, approximately one quarter of mortgages were on a fixed rate.

30%



Variable rate mortgages are clearly preferred by Australian owner occupiers, again this data is not published for investors.

25%





The falling proportion of new mortgages on a fixed rate is somewhat counter intuitive considering three year and five year fixed mortgage rates are often cheaper than variable mortgage rates however, with variable rates under some upwards pressure there may be an increase in demand for fixed rate product over the coming months.

The majority of mortgages being on a variable rate means that when the RBA change the cash rate setting or lenders adjust mortgage rates, it has an almost immediate impact on household finances.

20%

15%

10%

5%

0%

Source: CoreLogic, ABS

Interest-only lending is comprising a much smaller proportion of new mortgages



The $13.626 billion in new interest only lending was an historic low (data is available from March 2008).



Although in value terms it was an historic low, as a share of total new lending interest-only mortgage originations accounted for 15.7% of total originations, which was slightly higher than the previous quarter (15.2%).





Quarterly value of new interest-only mortgages

Over the March 2018 quarter, the Australian Prudential Regulation Authority (APRA) reported that there was $13.626 billion in new interest-only lending.

APRA has regulated that lenders can’t lend more than 30% of total new lending for interest-only purposes and lending currently sits at around half that cap.

$50

$45 $40 $35

$30

Billions



$25 $20

$15 $10 $5

$0

Source: CoreLogic, APRA

Although there was no real rebound in interest-only lending over the quarter some lenders have started reducing mortgage rates for interest-only products which may lead to a moderate rebound over the coming quarters.

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The Australian Residential Property Market and Economy Mortgage Market Average outstanding mortgage balances rose by 4.2% over the year to March 2018 ►

►

The average outstanding mortgage balance was recorded at $269,000 as at the end of March 2018 which was 4.2% higher over the year.

Interest-only mortgages had the highest average outstanding amount at $350,600, up 1.9% over the year.

►

Mortgages with an offset facility also had an above average outstanding amount ($317,800) having risen by 1.6% over the past year.

►

The average outstanding balance on a reverse mortgage has increased by 5.3% over the past year to $105,400.

►

Low-documentation mortgages had an average outstanding balance of $197,900 which has increased by 2.6% over the past year.

►

Other non-standard mortgages have seen their average outstanding balances fall by -0.1% over the year to $185,500 at the end of March 2018.

►

While outstanding mortgages amounts are edging slightly higher, they remain substantially lower than current prices indicating that, on average, mortgagees have significant equity in their properties.

Average outstanding mortgage balance $290,000

$270,000

$250,000

$230,000

$210,000

$190,000

$170,000

Source: CoreLogic, APRA

The share of high loan to value ratio (LVR) lending continues to fall ►

►

►

►

►

According to APRA there was $86.752 billion in new mortgage lending over the March 2018 quarter. $27.012 billion worth of new mortgage lending over the ► quarter was for loans with an LVR of 60% or less which accounted for 27.7% of all new mortgage lending for the quarter, its highest share since June 2013. ► Loans with an LVR of between 60% and 80% accounted for 52.7% of all new lending over the quarter at $45.677 billion. ► An historic high 80.3% of new mortgages over the quarter had an LVR of less than 80%.

13.0% of lending over the quarter was for loans with an

LVR of between 80% and 90%, at a total of $11.278 billion.

Just $5.786 billion was lent for mortgages with an LVR of more than 90% over the March 2018 quarter which was an historic low value and share of total (6.7%).

The trend towards fewer new mortgages being written with high LVR’s reflects a more conservative approach to mortgage lending being taken by lenders.

Mortgages with LVR’s above 80% also typically incur lenders mortgage insurance (LMI) and a reduction in higher LVR lending likely implies reduced demand for this product.

Proportion of total new mortgage lending by loan to valuation ratio band 60%

Less than 60%

60% to 80%

80% to 90%

Greater than 90%

50% 40% 30% 20%

10% 0%

Source: CoreLogic, APRA

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The Australian Residential Property Market and Economy Mortgage Market Growth in investor housing credit has fell to the lowest level on record over the twelve months ending May 2018 ►

The total value of outstanding mortgage credit, according to the RBA, was $1.76 trillion in May 2018

►

Over the 12 months to May 2018, housing credit has advanced by 5.8% which was its slowest growth since February 2014.

►

Housing credit advanced by 0.4% in March 2018 which was its slowest pace of growth since January 2013.

►

Owner occupier housing credit increased by 7.9% over the year to May 2018, its slowest rate of expansion since November 2017.

►

Owner occupier credit expanded by 0.6% (slowest growth since December 2016) over the month and investor credit was flat (weakest since December 2015).

►

Investor credit expanded by 2.0% over the year which was its slowest rate of annual growth on record.

Annual change in total housing credit, National 35% Owner occupier

Investor

30% 25% 20% 15%

10% 5% 0%

Source: CoreLogic, RBA

Residential Real Estate Underpins Australia’s Wealth

Number of dwellings

Outstanding mortgage debt

Household wealth held in housing

10.0 million

$1.76 trillion

52.2%

Total sales p.a.

Gross value of sales p.a.

459,964

$293.6 billion

Source: CoreLogic, ABS, RBA, ASX

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The Australian Residential Property Market and Economy Housing Supply Approvals for houses and units have eased from their recent highs but remain at elevated levels ►

In May 2018, 17,791 dwellings were approved for construction nationally.

►

Approvals fell by -3.2% over the month and they were 3.1% higher year-on-year.

►

After peaking in November 2017, the number of approvals in May 2018 was -19.8% lower.

►

9,656 of the total approvals in May 2018 were for houses with approvals tracking -9.0% lower over the month and -1.4% lower year-on-year.

►

Despite being higher over the month and year, house approvals in May 2018 were -10.9% lower than their recent peak.

14,000

►

Unit approvals were 4.7% higher over the month, 9.1% higher year-on-year and -36.2% off their November 2017 peak.

►

Looking at annual data, approvals are lower over the year in Sydney (-4.6%), Perth (-8.8%) and Darwin (-25.1%) and are higher in Melbourne (13.3%), Brisbane (1.5%), Adelaide (8.4%), Hobart (35.7%) and Canberra (0.3%).

►

It remains to be seen how many of these approved new properties will be built given slowing housing market conditions and generally tighter financing arrangements for both investors and developers.

Monthly dwelling approvals, National Houses

Units

12,000

10,000 8,000 6,000 4,000 2,000 0

Source: CoreLogic, ABS

Dwelling commencements rebound over the first quarter of 2018 ►

Over the March 2018 quarter there were 57,112 dwelling commencements which was 5.2% higher than the previous quarter and 9.8% higher than the same quarter in 2017.

►

Throughout the states and territories commencements were lower relative to the same quarter last year in NSW, WA, NT and ACT and were higher elsewhere with particularly large increases in Vic and SA.

►

Over the quarter there were 30,788 new houses that commenced construction and 25,969 new units.

►

►

New house commencements were 3.0% higher over the quarter and 13.4% higher year-on-year while new unit ► commencements increased by 8.8% over the quarter and were 6.5% higher year-on-year.

Although dwelling approvals have eased, they remain at historically high levels; as a result commencements are likely to remain elevated.

►

New house commencements were the highest they’ve been since March 2000.

Although commencements are expected to remain high, developers are likely, given the current state of the housing market and tighter credit conditions, to have greater difficulty achieving pre-sales commitments and obtaining development finance.

Quarterly dwelling commencements, National 40,000 Houses

Units

35,000

30,000 25,000 20,000 15,000 10,000 5,000 0

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Housing Supply Dwelling completions remain at elevated levels ►

Over the March 2018 quarter there were 53,782 dwellings completed nationally which was 4.1% higher over the quarter but -5.4% fewer than the corresponding quarter in 2017.

►

The data consisted of 28,184 new house completions and 25,145 new unit completions.

►

New house completions were 1.9% higher over the quarter and -1.5% lower over the year.

►

New unit completions increased by 7.4% over the quarter however, they were -9.3% lower over the

►

past year.

►

Completions were lower over the year in each state and territory except for NSW, Tas and ACT with a substantial fall in completions recorded in NT.

►

There remains a substantial number of dwellings under construction which should ensure that completions continue to remain elevated for some time however, they are likely to drift lower over time as large new housing projects are completed and fewer replacement projects enter the construction phase.

Quarterly dwelling completions, National 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Houses

Units

0

Source: CoreLogic, ABS

The number of dwellings under construction at the end of March 2018 was at an historic high ►

At the end of the March 2018 quarter there were a record-high 227,010 dwellings under construction nationally.

►

The 227,010 dwellings under construction consisted of: 69,639 new houses, 155,275 new units and 2,096 existing dwellings that were being renovated.

►

they remain elevated as do commencements. The heightened volume of stock both in the pipeline or commenced should result in heightened volumes of dwellings under construction over the coming quarters.

The number of new houses under construction increased by 3.9% over the quarter and are 43.3% higher than their long-term average.

►

The number of new units under construction was 3.2% higher over the quarter and 283.9% higher than its long-term average.

►

Although dwelling approvals have eased of late,

►

The heightened level of unit construction in particular, will take a number of years to work its way through to completion.

►

With many of the units under construction sold off the plan, buyers may face some risk that the value of their apartment could be lower at the time of settlement relative to the contract price due to weakening market conditions and higher supply levels, particularly across the high rise investment grade sector.

Quarterly number of dwellings under construction, National 180,000

160,000

Houses

Units

140,000 120,000 100,000 80,000 60,000 40,000 20,000

0 Mar-88

Mar-93

Mar-98

Mar-03

Mar-08

Mar-13

Mar-18

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Housing Supply The number of dwellings approved but not yet commenced construction eases over the quarter ►

At the end of the March 2018 quarter there were 41,818 dwellings approved for construction that were yet to commence; down from a record-high 45,885 dwellings at the end of the previous quarter.

►

This figure consisted of 9,537 new houses awaiting commencement and 31,659 new units not yet commenced.

►

Both houses and units recorded a fall in the number awaiting construction over the quarter however, the number of units awaiting construction remains elevated.

►

The number of dwellings approved but not yet

40,000

commenced across the states and territories are: 21,657 in NSW (an historic high), 7,343 in Vic, 5,976 in Qld (an historic high), 3,475 in SA, 1,998 in WA, 375 in Tas, 153 in NT and 842 in ACT. ►

With the housing market now slowing and tighter lending conditions for both borrowers and developers, it is expected that at the very least, an elevated, if not increasing number of projects which have been approved for construction will be delayed or withdrawn.

Quarterly number of dwellings approved for construction but not commenced, National Houses

Units

35,000 30,000

25,000 20,000 15,000 10,000 5,000 0

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Demographic Overview The annual rate of national population growth has slowed ►

►

►

It was estimated that at the end of the December 2017 quarter, the national population was 24,770,709 persons.

2.5%

Australia’s population increased by 1.6% or 387,969 persons over the 12 months to December 2017.

1.5%

The 1.6% annual growth was the slowest since June 2016 and the 387,969 person increase was the smallest since the same time.

0.5%

Annual change in national population

2.0%

1.0%

0.0%

Source: CoreLogic, ABS

Net overseas migration is slowing as an increasing number of Australians move abroad ►

►

Population growth nationally is comprised of net overseas migration as well as the natural increase in the population (births minus deaths). Statebased migration also includes net interstate migration which cancels out at a national level.

Net overseas migration was recorded at 240,421 persons over the 12 months to December 2017 which was -1.4% lower than at the same time in 2016 due to fewer overseas arrivals and the greatest number of overseas departures on record over the quarter.

►

Natural increase increased by 0.9% over the year and was recorded at 147,548 persons.

►

The fall in overseas arrivals and big jump in overseas departures over the quarter will be an important trend to monitor over the coming quarters, if it continues it may lead to an ongoing fall in net overseas migration which has been a key driver of housing demand.

►

.

Components of annual population change, National 350,000 300,000

Natural increase

Net overseas migration

250,000 200,000 150,000 100,000 50,000 0

Source: CoreLogic, ABS

Victoria remains the population growth powerhouse of the nation ►

►

►

The population of New South Wales increased by 1.5% or 116,823 persons over the 12 months to December 2017. The annual population increase was the lowest it has been since the year to March 2016.

Victoria’s population increased by a nation-leading 2.3% over the 12 months to December 2017 with the population increasing by 143,420 residents over the year. Although the increase in population was substantial it was the smallest annual change since December 2015.

With an increase of 81,461 persons over the year to December 2017, Queensland’s population increased by 1.7% over the year. The 81,461 person increase in population was -3.2% lower than

the previous quarter but 3.6% higher than a year earlier. ►

►

South Australia’s population increased by 10,671 persons over the 12 months to December 2017 resulting in a population growth rate of 0.6%. The 10,671 person increase in population was 2.1% higher than the previous quarter but -6.8% lower than over the previous year.

The population of Western Australia increased by 21,395 persons or 0.8% over the past year. The annual change in population has now increased over each of the past three quarters and is at its highest level since September 2015.

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The Australian Residential Property Market and Economy Demographic Overview

Change in population over the 12 months to December 2017 160,000

►

►

►

The Tasmanian population increased by 4,875 persons or 0.9% over the 12 months to December 2017. The population change was -1.5% lower over the quarter and 18.7% higher over the year.

140,000

120,000

100,000

Northern Territory’s population increased by just 572 persons over the 12 months to December 2017, a -72.3% decline on the increase a year earlier.

80,000

60,000

In the Australian Capital Territory, the rate of population growth was recorded at 2.2% over the past year resulting in an increase in population of 8,761 persons.

40,000

20,000

0 NSW

VIC

QLD

SA

WA

TAS

NT

ACT

Source: CoreLogic, ABS

Net overseas migration has eased but most of the migration continues to occur in NSW and Vic ►

Most of those people immigrating to Australia continue to choose to settle in either NSW or Vic with net overseas migration over the past year recorded at record highs of 92,978 persons in NSW and 84,722 persons in Vic.

►

NSW accounted for 38.7% of net overseas migration nationally and Vic accounted for 35.2%.

If you add in the 12.2% in Qld, the three most populous states accounted for 86.1% of national net overseas migration.

►

Although NSW had net overseas migration of 92,978 persons over the past year, net overseas migration was -3.4% lower than the previous year and the lowest it had been since September 2016.

►

►

Over the 2017 calendar year there was net overseas migration of 84,722 persons in Vic which was 2.2% higher over the year but lower over the quarter.

2016. ►

Over the past year there were 11,747 net overseas migrants to SA which was -3.0% lower than the number a year earlier.

►

Net overseas migration to WA is well below historic peaks however, the 14,209 net migrants to the state over the past year was 18.8% higher than over the previous year and the greatest number since December 2014.

►

Net overseas migration for Tas was recorded at 2,161 persons which was -5.1% lower than a year earlier.

►

The 1,060 net overseas migrants to the NT over the past year was -49.2% lower than the number over the previous year.

►

The ACT had net overseas migration of 4,201 persons over the past year which was 9.2% higher than the number over the previous year and the highest on record.

Qld’s net overseas migration was recorded at 29,349 persons over the past year which was -9.5% lower than over the previous year and the lowest rate of net overseas migrationsince June

Annual number of net overseas migrants by states and territories 120,000 NSW

Vic

Qld

SA

WA

Tas

NT

ACT

100,000 80,000 60,000 40,000 20,000 0 -20,000

Source: CoreLogic, ABS © Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is permitted. The information is deemed reliable but not guaranteed.

The Australian Residential Property Market and Economy Demographic Overview Queensland leads the nation for net interstate migration ►

Over the 12 months to December 2017, NSW recorded a net loss of residents to other states and territories of 19,299, its greatest annual loss since 20,734 residents left over the 12 months to March 2009.

►

Over the past 12 months, net interstate migration in WA has accounted for a loss of 12,818 residents.

Although many residents continue to leave, the annual decline has reduced over each of the past three quarters.

►

Vic recorded a net gain from interstate migration of 16,386 persons, although many people continue to move to the state, the number has fallen by -13.5% over the year and is -16.3% lower than the peak.

►

►

Net interstate migration to Qld was recorded at 22,510 persons over the past year and is 49.7% higher than a year earlier. Annual net interstate migration to Qld now leads the nation and is at its highest level since September 2007.

Net interstate migration to Tasmania saw a net gain of 1,883 residents over the past year, although that might not sound like many residents, it was 53.5% higher over the year and the strongest interstate migration to Tas since June 2004.

►

The net loss of 3,263 residents from NT to other areas of Australia over the past year was its greatest outflow on record.

►

The ACT has recorded a net inflow of residents from other parts of the country of 672 persons over the past year, which was -43.6% lower over the year and the lowest inflow since September 2016.

►

SA recorded a loss of 6,071 persons over the past year due to net interstate migration which was the lowest annual outflow of residents from the state since December 2015.

Annual number of net interstate migrants by states and territories 60,000

NSW

Vic

Qld

SA

WA

Tas

NT

ACT

40,000

20,000 0 -20,000

-40,000 -60,000

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Household Finances Mortgage rates remain close to historic lows, although investors and borrowers on interest only terms continue to pay a premium on their mortgage rates ►

At their July 2018 meeting, the RBA kept the official cash rate on hold at 1.5%.

►

The cash rate has now had its longest period of stability, remaining unchanged since August 2016 and futures markets aren’t expecting a change in the cash rate until 2020.

►

►

For investors, current average mortgage rates are: 5.80% for a standard variable mortgage, 5.10% for a discounted variable mortgage and 4.40% for a three year fixed mortgage.

►

Investors on variable mortgage rates are now typically paying 60 basis points more than owner occupiers (and premiums are even greater for interest-only mortgages) which is a significant contributor to the slowing mortgage demand.

For an owner occupier, average mortgage rates are currently recorded at: 5.20% for a standard variable mortgage, 4.50% for a discounted variable mortgage and 4.15% for a three year fixed rate.

15%

Mortgage rates for owner occupiers over time Standard variable

Discounted variable

3 year fixed

13% 11% 9%

7% 5% 3%

Source: CoreLogic, RBA

Gross household and housing debt continues to rise to new record highs ►

The national ratio of household debt to disposable income was recorded at 190.1% in March 2018, a record high and up from 188.7% the previous quarter and 183.5% a year earlier.

►

The 190.1% ratio of household debt to disposable income is largely made up of housing debt which has a record-high ratio of 140.1% up from 139.1% the previous quarter and 134.7% a year earlier.

►

Of the 140.1% ratio of housing debt to disposable income, 106.7% is owner occupier debt (also a record-high) leaving 33.4% to investors.

►

Although household and housing debt is at historic high levels, the ratio of total interest payments to disposable income sits at 9.0% for total debt and

200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0%

7.4% for housing debt, both of which have edged slightly higher of late, yet also indicating that lower interest rates have improved serviceability which is at levels last seen in early 2003. ►

The high level of housing and household debt makes households much more sensitive to any changes in mortgage rates.

►

Also remember that this is a national view; home owners that have either had their mortgage for many years or have no mortgage are likely to be in a stronger position while recent buyers may be in much higher levels of debt.

Ratio of household and housing debt to disposable income, National Household

Housing

Source: CoreLogic, RBA

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The Australian Residential Property Market and Economy Household Finances With dwelling values starting to fall the ratio of assets to income has started to ease ►

As at the end of the March 2018 quarter, the ratio of household assets to disposable income was recorded at 960.9% and the ratio of housing assets to disposable income was recorded at 526.0%

►

Each of these ratios has fallen over the past quarter as dwelling values have started to fall. With the decline in values expected to continue, it is likely that we will continue to see a decline in these ratios.

►

It is undeniable that households are heavily indebted, largely due to housing however, the macro view is that these assets have a significantly

1200%

higher value than the debt held against them. ►

Of course the macro view does not show what is occurring in individual properties or locations; households that have recently taken out large debt (such as a mortgage) and those who own homes where values have fallen over recent years are likely to be in a much weaker position than these figures indicate.

►

Furthermore, as asset values to start falling, it is unlikely that the debt will decline at an equivalent rate.

Ratio of household and housing assets to disposable income Household

Housing

1000% 800% 600% 400% 200% 0%

Source: CoreLogic, RBA

Annual wage growth has increased slightly but wage rises remain sluggish ►

►

►

The ABS wage price index showed that over the 12 months to March 2018, the Index increased by 2.1%, slightly higher than the historic low of 1.9% in June 2017.

►

Separating the data into private and public sector wages shows that private sector wages increased by 1.9% over the year and public sector wages were 2.3% higher.

►

The ABS has been producing this dataset since late 1997 and the growth in wages for both the private and public sector is only slightly above

6%

historically low levels.

Lower wages growth impacts on a household’s ability and willingness to spend more, particularly on items such as rents and mortgages as well as other non-essential spending.

The low rate of growth in wages appears to have not had any impact on the growth in dwelling values over recent years, but is likely a key driver of weak retail spending, a softening in household saving and increasing indebtedness.

Annual change in wage price index, public and private sector, National Private sector

Public sector

5% 4% 3% 2% 1%

0%

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy National Accounts The Australian economy grew by 1.0% over the first quarter of 2018 ►

The national economy expanded by 1.0% over the March 2018 quarter to be 3.1% higher over the year.

►

Nominal (or inflation adjusted) GDP rose by 2.2% over the March 2018 quarter to be 3.9% higher over the year.

►

The 3.1% annual increase was the fastest pace of economic growth since the economy expanded by 3.3% over the 12 months to June 2016.

►

The total output of the national economy over the 12 months to March 2018 was $1.729 trillion.

►

►

Per capita GDP rose 0.7% over the quarter and was 1.5% higher over the year highlighting that headline GDP is expanding more rapidly than it is for individuals.

Over the past year economic growth has accelerated however, the pace of economic growth remains slightly below its long-term average.

Quarterly and annual change in GDP 10%

Quarterly

Annual

8% 6% 4% 2% 0% -2%

-4%

Source: CoreLogic, ABS

Imports was the only category that subtracted from economic growth over the March 2018 quarter Contributions to quarterly change in GDP, March 2018 quarter ►

►

Over the March 2018 quarter, the percentage point contributions to GDP growth were: +0.3% from government expenditure. +0.2% from household expenditure, +0.1% from private capital formation, +0.2% from public capital formation, +0.2% from inventories, +0.5% from exports and -0.1% from imports.

Looking at the annual change in the value of these components: government expenditure rose 5.1%, household expenditure rose 2.9%, private capital formation rose 2.8%, public capital formation rose 1.1%, exports increased by 4.6% while imports increased by 4.7%.

0.6% 0.5%

0.5% 0.4%

0.3%

0.3%

0.2%

0.2%

0.2%

0.2%

0.1%

0.1% 0.0% -0.1%

-0.1% -0.2% Public Private Private capital Public capital consumption consumption formation formation

Investories

Exports

Imports Source: CoreLogic, ABS

Household saving ratio is at its lowest level since late 2007 Household saving ratio, National ►

►

►

According to data in the National Accounts, the household saving ratio was recorded at 2.1% over the December 2017 quarter.

18%

The household saving ratio has now been below 10% for 23 consecutive quarters and as its lowest levels since the December 2007 quarter

12%

Given that interest rates, are so low, as are riskfree returns, it is little surprise to see that households are saving less and are increasing borrowings however, sluggish wage growth is probably also contributing to households saving less.

16% 14%

10% 8% 6% 4% 2% 0% -2% -4% Mar-83

Mar-88

Mar-93

Mar-98

Mar-03

Mar-08

Mar-13

Mar-18

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Inflation Headline inflation breaches the RBA’s target range while underlying inflation remains below target ►

Although official interest rates remain at their lowest levels since the 1960s, inflation remains stubbornly low.

►

Headline inflation increased by 0.4% over the June 2018 quarter taking it 2.1% higher over the 12 months to June 2018.

►

►

Headline inflation was within the RBA target range over the year however, it was only the third quarter in four years in which headline inflation was within the target range .

The RBA’s preferred measures of underlying inflation; the trimmed mean and weighted median both increased by 0.5% over the June 2018 quarter.

►

The trimmed mean and the weighted median were 1.9% higher over the year.

►

Underlying inflation had been within the RBAs target range (2.0%) for each of the three quarters previous to June 2018.

Annual inflation, National

10%

All groups

Avg of trimmed mean and weighted median

8% 6% 4%

2%

RBA's target range

0% -2%

Source: CoreLogic, ABS

Costs associated with alcohol and tobacco and transport are escalating at the fastest rate ►

►

Inflation is being dragged lower by substantial annual declines in the cost of: communication (-4.2%) and clothing and footwear (-2.0%) along with more moderate falls in furnishings, household equipment and services (-0.5%).

(7.8%), transport (5.2%), health (3.4%), housing (3.1%) and education (2.7%). ►

The components of CPI that have recorded increases greater than headline inflation over the 12 months to June 2018 were: alcohol and tobacco

Across the remaining sub-groups the annual increases have been recorded below 2.1% for: food and non-alcoholic beverages (0.3%), recreation and culture (0.8%) and insurance and financial services (1.5%).

Annual change in the components of CPI, June 2018 Alcohol and Tobacco Transport Health Housing Education All Groups Insurance and Financial Services Recreation and Culture Food and Non-alcoholic Beverages Furnishings, Household Equipment and Services -0.5% Clothing and Footwear -2.0% Communication -4.2% -6%

-4%

-2%

7.8% 5.2%

3.4% 3.1% 2.7% 2.1% 1.5% 0.8% 0.3%

0%

2%

4%

6%

8%

10%

Source: CoreLogic, ABS

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The Australian Residential Property Market and Economy Inflation Electricity, utilities and gas costs power housing costs higher ►

The housing component of CPI has the greatest weighting, reflecting the fact that housing costs tend to comprise the greatest proportion of household budgets.

►

No housing expenditure classes recorded a fall over the past year.

►

Costs associated with: rents (0.6%), maintenance and repair of the dwelling (2.1%), other housing (2.3%), property rates and charges (2.6%) and new dwelling purchase by owner occupiers (2.7%)

increased at a lower annual rate than the housing expenditure class.

Electricity (10.4%), utilities (8.0%), gas and other household fuels (7.1%) and water and sewerage (3.2%) costs increased in excess of the housing component of CPI.

►

Annual change in components of housing CPI, June 2018 Electricity

10.4%

Utilities

8.0%

Gas and Other Household Fuels

7.1%

Water and Sewerage

3.2%

Housing

3.1%

New Dwelling Purchase by Owner Occupiers

2.7%

Property Rates and Charges

2.6%

Other Housing

2.3%

Maintenance and Repair of the Dwelling

2.1%

Rents

0.6% 0%

2%

4%

6%

8%

10%

12%

Source: CoreLogic, ABS

Consumer sentiment rose to its highest levels since November 2013 in July 2018 ►

The Westpac-Melbourne Institute Consumer Sentiment Index was recorded at 106.1 points in July 2018.

►

When consumer sentiment is above 100 points it indicates that consumers are more optimistic than pessimistic.

►

Consumer sentiment has now been more positive than negative for eight consecutive months; the last time sentiment was positive for such a sustained period was in February 2014.

•

130

The 106.1 point reading for consumer sentiment was the highest it has been since November 2013, almost five years ago. ►

The components of the Index indicate respondents are still more pessimistic about family finances over the past year however, respondents were generally more positive about family finances over the next year, economic conditions over the next year and 5 years and it being a good time to buy a major household item.

►

.

Monthly consumer sentiment, National

120

110 100 90 80 70 60

Source: CoreLogic, Westpac-Melbourne Institute

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The Australian Residential Property Market and Economy Conclusion Up until the middle of 2017 dwelling values had been increasing at a rapid rate for a number of years. This growth had largely been occurring in Sydney and Melbourne with more recently value growth in Hobart also strong. Since the middle to late in 2017 value growth has slowed in Sydney and Melbourne and values are now falling in the two largest capital cities.

Prior to the recent slowdown, the surge in dwelling values in Sydney and Melbourne was supported by a number of factors.

These factors included: low mortgage rates, comparatively stronger economic conditions compared to the rest of Australia, and high rates of ad migration.

As a result of these fundamentals, an increasing number of owner occupiers and investors were purchasing in Sydney and Melbourne.

Over the past few years, the banking regulator has tightened lending policies and this, along with deteriorating housing affordability, has been a major contributor to the recent falls in dwelling values. Unlike in 2016 when the rate of value growth in the housing market had slowed, the Reserve Bank has not cut official interest rates which previously supported a rebound in growth despite the tighter lending policies.

Although official interest rates haven’t been adjusted lenders have begun charging premiums to investor and interest-only borrowers and this has dampened demand for those products.

Over recent years, dwelling values had risen at a rate well above household income growth in Sydney and Melbourne which made it more difficult for those that don’t already own a home to save a big enough deposit to purchase.

Subsequently, first home buyer participation had been hovering around historic low levels. Since the beginning of July 2017, the NSW and Vic governments have removed stamp duty for first home buyers under certain price thresholds. This has resulted in a substantial increase in first home buyer demand in each of these states at the same time as we are seeing a cooling of demand from the investor segment and value falling.

Since late 2017, dwelling values have been falling in a number of cities, most notably Sydney and Melbourne, which have also been the two cities in which values have increased at the fastest pace over recent years.

The slowdown in housing market conditions is being driven by higher-valued dwellings while lower valued stock is holding its value much better. This is most likely linked to first home buyer incentives and stamp duty concessions which are supporting demand across lower valued housing stock.

Sydney and Melbourne have both recorded declines in dwelling values over recent months with larger declines recorded in Sydney. After many years of strong growth in values, affordability has deteriorated and a substantial source of housing demand, investors, has slowed. Both cities are also seeing a higher number of

properties being advertised for sale than they have over recent years with the increase much greater in Sydney. As a result, potential purchasers have more choice which means that the urgency to buy has reduced. Recent monthly data indicates the rate of value decline has slowed however, we would anticipate further moderate value declines over the coming months.

Brisbane is experiencing value growth which is slower than it was a year ago. While values continue to rise they are doing so at a slow pace. Population growth and job creation in Queensland is accelerating and this may lead to greater housing demand and and an improved rate of value growth over the coming months.

Adelaide values have increased at a moderate pace over recent months. With slow population growth and, until recently, sluggish jobs growth, Adelaide may continue to be a fairly flat to slightly falling housing market over the coming months.

Perth’s housing market has endured a fall in values in excess of 10% over recent years. The market has been heavily impacted by the end of the mining boom with many residents migrating out of the state and job losses over recent years. Although values are still declining there has now been a rebound in job creation, fewer properties are listed for sale and sales activity has steadied. While this is unlikely to result in any substantial value growth over the short to medium term, we do expect relatively stable housing market conditions over the coming months.

Hobart has recorded the strongest growth in dwelling values for more than a year now and is the only capital city in which values have increased at a double-digit rate over the past year. Hobart is experiencing a lack of housing stock to both buy or rent and increasing demand which is creating significant pressure on both values and rents. There seems little risk of these pressures abating in the short term however, value growth may progressively slow as affordability constraints and tighter credit conditions dampen some of the exuberance.

Housing values in Darwin are more than 20% lower than their peak and have been falling for a number of years now. The local economy remains weak with job numbers falling over the past year and many residents leaving for other parts of the country. Sales volumes remain quite low and have fallen over the year.

Although conditions remain soft across many reference points, the quarterly rate of decline has been improving since August last year.

Canberra dwelling values have fallen marginally over the past couple of months. On an annual basis, value growth has slowed from where it was a year ago.

Transaction volumes have fallen sharply over the year while at the same time job creation and migration to the ACT has accelerated. Although values have fallen recently, fairly flat conditions are anticipated over the coming months.

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The Australian Residential Property Market and Economy Conclusion In CoreLogic’s view the value falls in the housing market, which became much more prevalent over the first half of 2018, are likely to persist for the remainder of the year and into 2019.

The drivers of the expected weaker housing market conditions include.

The record-high pipeline of housing stock currently under construction, the majority of which are units, will be completed over the coming years. There is already evidence suggesting that in certain areas and markets settlements are taking longer and valuations are coming in below or at the purchase price. Recent data also shows that approvals and commencements are no longer at peak levels however, approvals in particular, have rebounded over recent months and the number of dwellings approved but not yet commenced is at an historic high level. There will still be many new properties built because so many are currently under construction however, it is clear that settlement of these projects is likely to become increasingly challenging. Furthermore, it will be interesting to see just how many of those new projects in the pipeline get built.

With a relatively high proportion of off-the-plan unit valuations coming in below the original contract price in certain cities, if the decline is less than or similar to the deposit amount it is unlikely buyers would walk away.

If the differential between contract price and completion valuation grows we may see an increasing number of buyers unable or unwilling to settle their contract.

Overall we expect dwelling value growth to continue to slow in 2018. As we have seen over previous cycles, housing market conditions will continue to vary significantly from region to region and across housing types.

While the headline figures are set to weaken due to weaker housing conditions in the two largest cities, regional markets in particular, are seeing much stronger housing demand and subsequent value growth. This is a trend which is expected to continue over the coming quarters as buyers seek lifestyle properties at a lower cost than the major capital cities.

Should the strong jobs growth and migration continue, Brisbane is potentially the most likely candidate for a further improvement in housing market conditions over the coming quarters.

The ongoing Royal Commission into the banking, superannuation and Financial Services sectors is likely to be an overall negative for the housing market. As issues continue to come to hand it is likely to make getting a mortgage more difficult and potentially impact on the confidence of borrowers.

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The Australian Residential Property Market and Economy About CoreLogic CoreLogic Australia is a wholly owned subsidiary of CoreLogic (NYSE: CLGX), which is the largest property data and analytics company in the world. CoreLogic provides property information, analytics and services across Australia, New Zealand and Asia, and recently expanded its service offering through the purchase of project activity and building cost information provider Cordell. With Australia’s most comprehensive property databases, the company’s combined data offering is derived from public, contributory and proprietary sources and includes over 500 million decision points spanning over three decades of collection, providing detailed coverage of property and other encumbrances such as tenancy, location, hazard risk and related performance information.

With over 20,000 customers and 150,000 end users, CoreLogic is the leading provider of property data, analytics and related services to consumers, investors, real estate, mortgage, finance, banking, building services, insurance, developers, wealth management and government. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and geo spatial services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk.

CoreLogic employs over 650 people across Australia and in New Zealand. For more information call 1300 734 318 or visit www.corelogic.com.au

Granular Data and Analytics Driving Growth in your Business CoreLogic produces an advanced suite of housing market analytics that provides key insights for understanding housing market conditions at a granular geographic level. Granular data is often used for portfolio analysis and benchmarking, risk assessments and understanding development feasibility and market sizing. It gives industry professionals valuable modules which provide essential analytics and insights for decision making and strategy formation within the residential property asset class. We can tailor reports to suit your business requirements.

Call us on 1300 734 318 or email us at ask@corelogic.com.au or visit us at www.corelogic.com.au Market Scorecard: Monitor and measure performance of an individual office or a Franchise brand month on month through a detailed view of the Real Estate Listing and Sales market share across Australia. With the ability to gather market share statistics within your active market this product is designed to identify the competing brands and independents at a suburb, postcode, user defined territory and State level. Easily locate growth opportunities and market hotspots allowing you to view the performance of the established offices in these new areas of interest.

Market Trends: Detailed housing market indicators down to the suburb level, with data in time series or snapshot delivered monthly. CoreLogic’s Market Trends data is segmented across houses and units.

The Market Trends data includes key housing market metrics such as median prices, median values, transaction volumes, rental statistics, vendor metrics such as average selling time and vendor discounting rates.

CoreLogic Indices: The suite of CoreLogic Indices range from simple market measurements such as median prices through to repeat sales indices and our flagship hedonic home value indices. The CoreLogic Hedonic index has been specifically designed to track the value of a portfolio of properties over time and is relied upon by Australian regulators and industry as the most up to date and accurate measurement of housing market performance.

Economist Pack: A suite of indices and indicators designed specifically for Australian economic commentators who require the most up to date and detailed view of housing market conditions. The economist pack includes the CoreLogic Hedonic indices for capital cities and ‘rest of state’ indices, the stratified hedonic index, hedonic total return index, auction clearance rates and median prices.

Investor Concentration Report: Understanding ownership concentrations is an important part of assessing risk. Areas with high investor concentrations are typically allocated higher risk ratings due to the over-representation of a particular segment of the market. Through a series of rules and logic, CoreLogic has flagged the likely ownership type of every residential property nationally as either owner occupied, investor owned or government owned.

Mortgage Market Trend Report: CoreLogic is in a unique position to monitor mortgage related housing market activity. Transaction volumes, dwelling values and mortgage related valuation events all comprise our Mortgage market trend report which provides an invaluable tool for mortgage industry benchmarking and strategy.

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The Australian Residential Property Market and Economy Disclaimers In compiling this publication, RP Data Pty Ltd trading as CoreLogic has relied upon information supplied by a number of external sources. CoreLogic does not warrant its accuracy or completeness and to the full extent allowed by law excludes liability in contract, tort or otherwise, for any loss or damage sustained by subscribers, or by any other person or body corporate arising from or in connection with the supply or use of the whole or any part of the information in this publication through any cause whatsoever and limits any liability it may have to the amount paid to CoreLogic for the supply of such information.

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CoreLogic is authorised as a Property Sales Information provider by the LPI. Victorian Data The State of Victoria owns the copyright in the Property Sales Data which constitutes the basis of this report and reproduction of that data in any way without the consent of the State of Victoria will constitute a breach of the Copyright Act 1968 (Cth). The State of Victoria does not warrant the accuracy or completeness of the information contained in this report and any person using or relying upon such information does so on the basis that the State of Victoria accepts no responsibility or liability whatsoever for any errors, faults, defects or omissions in the information supplied.

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