Quarterly Market Insights June Quarter 2019
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
1
2
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
TABLE OF CONTENTS Foreword
04
NATIONAL HIGHLIGHTS National Highlights
08
Buyer Profiles
10
VICTORIA Market Drivers
14
Land Market
16
Apartments and Townhouses
24
Development Sites
28
QUEENSLAND Market Drivers
32
Land Market
34
Apartments and Townhouses
38
FEATURE ARTICLES Is it Time to Rethink Density?
QUARTERLY MARKET INSIGHTS
42
JUNE QUARTER 2019
3
Julian Coppini Chief Operating Officer j.coppini@oliverhume.com.au
FOREWORD The Australian property market continues to stabilise with tentative signs of recovery in several key markets especially Melbourne and Sydney. Although lingering challenges and headwinds remain, including the legacy of tighter lending conditions and pre-election uncertainty, these are dissipating and markets appear to be experiencing a ‘soft-landing’ as they return to more normal conditions. A range of factors support the tentative recovery including low (and declining) interest rates, more flexible lending conditions following the recent announcement by the Australian Prudential Regulatory Authority (APRA), continued robust population growth and expectations around future support for first home buyers and tax cuts. In Victoria, although off a low base, land enquiries and sales are improving on a weekly basis, a trend mirrored in the broader residential property market where auction clearance rates are now trending higher. The Queensland market remains relatively stable after experiencing a period of softened sales rates. However, the Queensland market remains fortunate as it has not been exposed to the extreme highs and lows witnessed in both the Sydney and Melbourne markets and the peak and trough cycles in Queensland are far less severe. A clear challenge to the market now is a softer economy. Although two interest rate cuts in quick succession is a positive for the property market in the short to medium term there is no denying that the Reserve Bank of Australia (RBA) has acted to ensure growth returns to trend and that unemployment does not increase given the softening in leading indicators of labour demand.
Consumer confidence and consumer spending remain soft, partly, as a result of subdued wages and incomes growth and this remains a challenge given the importance of the consumer to the economy. Population growth remains strong, with Australia’s population growth remaining at near record levels and far above that of other advanced industrialised economies. In Victoria, although population growth remains below recent peaks, the state continues to add around 140,000 people every year, consistent with both strong overseas and interstate immigration driving overall growth. The Victorian Government also recently released its long-term population projections highlighting the opportunities and challenges we have in accommodating a burgeoning population. Greater Melbourne is projected to grow by approximately 4.0 million people – up from 5.0 million in 2018 to 9.0 million in 2056. Regional Victoria is expected to grow by over 700,000 - from 1.5 million to 2.2 million people. Queensland continues to see a rebound in population growth and remains Australia’s second fastestgrowing state after Victoria. Oliver Hume is committed to providing our clients with the latest data and insights to better anticipate the future and make the right strategic decisions. This latest quarterly report is an invaluable tool for understanding current and emerging trends in the property market and includes a range of data and indicators, including our own proprietary property intelligence, compiled and analysed by our specialist in-house research team.
Some commentators expect the cash rate to go lower, reaching all-time historic lows, with a further rate cut pencilled in this year and another one early in the new year.
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QUARTERLY MARKET INSIGHTS
MARCH QUARTER 2019
Perth
Darwin
NORTHERN TERRITORY QUEENSLAND Brisbane
WESTERN AUSTRALIA
Gold Coast
SOUTH AUSTRALIA NEW SOUTH WALES Sydney Adelaide Canberra
VICTORIA Melbourne
TASMANIA Hobart
QUARTERLY MARKET INSIGHTS
MARCH QUARTER 2019
5
1.0 NATIONAL HIGHLIGHTS
1.0 NATIONAL HIGHLIGHTS
1.1
NATIONAL HIGHLIGHTS CASH RATE
ECONOMIC GROWTH
INFLATION
1.0%
1.8%
1.6%
UNEMPLOYMENT RATE
EMPLOYMENT GROWTH
WAGE GROWTH
5.2%
2.4%
2.3%
AVERAGE WEEKLY EARNINGS
HOUSEHOLD SAVING RATIO
NET FOREIGN LIABILITIES
$1,225
2.8%
51%
CONVERSION RATE
POPULATION
EMPLOYMENT RATIO
= US$0.68
1.6% ANNUAL GROWTH
RESIDENTIAL DWELLINGS
HOUSEHOLD WEALTH
HOUSEHOLD DEBT
$636K
737%
190%
AS A SHARE OF INCOME
AS A SHARE OF INCOME
RISKIER LENDING LOW
RISKIER LENDING LOW
NON-PERFORMING LOANS
7%
16%
0.9%
A$1
>90% LOAN TO VALUATION
25MIL
INTEREST ONLY
OF GDP
63%
RISING BUT LOW
Sources: Reserve Bank of Australia (RBA), Australian Bureau of Statistics (ABS).
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QUARTERLY MARKET INSIGHTS
JUNE MARCH QUARTER QUARTER 2019 2019
Jun-1984 Mar-1985 Dec-1985 Sep-1986 Jun-1987 Mar-1988 Dec-1988 Sep-1989 Jun-1990 Mar-1991 Dec-1991 Sep-1992 Jun-1983 Mar-1984 Dec-1984 Sep-1985 Jun-1986 Mar-1987 Dec-1987 Sep-1988 Jun-1999 Mar-2000 Dec-2000 Sep-2001 Jun-2002 Mar-2003 Dec-2003 Sep-2004 Jun-2005 Mar-2006 Dec-2006 Sep-2007 Jun-2008 Mar-2009 Dec-2009 Sep-2010 Jun-2011 Mar-2012 Dec-2012 Sep-2013 Jun-2014 Mar-2015 Dec-2015 Sep-2016 Jun-2017 Mar-2018 Dec-2018
Annual Net Overseas Migration (000s)
Dec-1982
Annual Growth (000s) Annual Growth (%)
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
Dec-2018
Dec-2017
Dec-2016
Dec-2015
Dec-2014
Dec-2013
Dec-2012
Dec-2011
Dec-2010
Dec-2009
Dec-2008
Dec-2007
Dec-2006
Dec-2005
Dec-2004
Dec-2003
Dec-2002
Dec-2001
Dec-2000
Dec-1999
Dec-1998
Dec-1997
Dec-1996
Dec-1995
Dec-1994
Dec-1993
Dec-1992
Dec-1991
Dec-1990
Dec-1989
Dec-1988
Dec-1987
Dec-1986
Dec-1985
Dec-1984
Dec-1983
Annual Growth (000s) 500
400
300 1.5
250
200 1.0
100
0 Annual Growth (%)
Australia’s population continues to grow at near-record levels. Australia’s population grew by 1.6 per cent in 2018. Around 404,800 people were added to the population in 2018. Overseas migration remains the key driver of population growth and also remains a near-record highs.
Australia - Annual Population Growth 2.5
450
2.0
350
150
0.5
50
0.0
Source: ABS, Oliver Hume Research.
Australia - Annual Net Overseas Migration
350
300
250
200
150
100
50
0
Source: ABS, Oliver Hume Research.
9
1.0 NATIONAL HIGHLIGHTS
Darren Blair National Marketing Manager d.blair@oliverhume.com.au
1.2
BUYER PROFILES The dust has settled on the election jitters that the residential market faced from March to May this year. We are beginning to see a substantial stabilisation in purchaser behaviour. From 2015 through to 2017, we noticed a pattern in buyer behaviour which was driven by simple economics – demand outstripped supply in the greenfield market. This led to quicker than normal price escalation as well as most lots being purchased on the day of release. As the market slowed through 2018 and 2019, seller strategies changed, which provided more product to market than there were buyers. With this change in strategy, we analysed the behaviour of potential buyers began to change. With an abundance of available options available to assess, coupled with commentary from the media, the time for buyers to decide on their purchase began to move out. The median time to purchase for buyers from enquiry moved out with notable changes detected with individual purchasers taking up to two years to decide from the moment they first enquired on a project. The median time it took someone to sign a contract from the first enquiry is still under one month. Although there is still careful consideration from those looking to enter the market, we are beginning to see confidence return through purchaser behaviour. More decisive choices from purchasers looking to not miss out on their ideal block. With APRA assistance in making lending slightly easier and the RBA reducing rates over the past few months coupled with stronger sentiment and clearance rates in the established market – the buoyant growth corridor market is not far away.
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QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
Product extends beyond just adjusting lot sizes, it talks to interesting placemaking, attractive open spaces and amenity which enhances the liveable nature of a new community.
PURCHASER PROFILE SNAPSHOT Household Number of Persons
Age Distribution 9%
2.8%
16.8%
20.3%
38.5%
1 Person
9.2%
2 Persons
3 Persons
4 Persons
21.6%
38.3%
5 Persons
18-24
43.5%
25-34
35-49
50-59 Source: Oliver Hume Research.
Country of Birth - Top 10 (%) 58.16%
50%
21.88%
25%
7.29% 3.26%
2.11%
1.73%
1.73%
1.54%
1.15%
1.15%
0% Australia
Person 1
Person 2
India
Philippines
Sri Lanka
New Zealand
China
Pakistan
UK
Nepal
Turkey
Source: Oliver Hume Data - 2019 ytd.
QUARTERLY QUARTERLY MARKET MARKET INSIGHTS INSIGHTS MARCH JUNE QUARTER 2019
11
2.0 VICTORIA
2.0 VICTORIA
George Bougias National Head of Research g.bougias@oliverhume.com.au
2.1
MARKET DRIVERS Economy Victoria remains one of Australia’s best performing economies with employment remaining a key strength and the state benefitting from robust population growth. Other areas of economic strength include retail trade and construction work done. Recently the following indicators were above (or below) the decade average:
DWELLING COMMENCEMENTS
UNEMPLOYMENT
POPULATION GROWTH
ECONOMIC GROWTH
15,899 6.5% Level this quarter
4.7% 16.5% Level this quarter
2.18% 4.8%
Level this quarter
$424,926m 26.6%
Compared with decade average
Compared with decade average
Compared with decade average
Compared with decade average
Level this quarter
EQUIPMENT INVESTMENT
HOUSING FINANCE
RETAIL SPENDING
CONSTRUCTION WORK
$3,334m 10.3% Level this quarter
13,916 1.9% Level this quarter
$20,925m $13,494m 16.6% 30.1% Level this quarter
Level this quarter
Compared with decade average
Compared with decade average
Compared with decade average
Compared with decade average Source: https://www.commsec.com.au/stateofstates
Victoria’s labour market remains stable and continue to be a national leader.
State Unemployment Rates %
In July 2019 trend employment increased by 5,000 persons with the state recording amongst the highest annual employment growth rate.
8
Victoria’s trend unemployment rate was 4.8% in July 2019, which was one of the lowest in Australia and well below the national average (5.3%).
5
Trend
7 6
4 3 2 2009 NSW
14
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
2014 VIC
2019 QLD
2009 SA
2014
2019
WA TAS Source: ABS, RBA.
Population Victoria remains the national population growth leader with annual growth remaining high albeit below recent peaks.
In 2018, Victoria recorded the highest population growth rate of all states and territories (2.2%.) The state’s population now exceeds 6.52 million people, a new record, adding 139,400 people over the year.
December Quarter 2018 Key Figures Preliminary Data
Population at end Dec Qtr 2018 (‘000)
Change over previous year (‘000)
Change over previous year (%)
New South Wales
8,046.1
123.8
1.6
Victoria
6,526.4
139.4
2.2
Queensland
5,052.8
89.9
1.8
South Australia
1,742.7
14.6
0.8
Western Australia
2,606.3
24.0
0.9
Tasmania
531.5
6.5
1.2
Northern Territory
245.9
-1.0
-0.4
Australian Capital Territory
423.8
7.6
1.8
25,180.2
404.8
1.6
Australia
(a) Includes Other Territories comprising Jervis Bay Territory, Christmas Island, the Cocos (Keeling) Islands and Norfolk Island. Source: ABS, Oliver Hume Research.
Population Growth - Selected States and Australia (%) 4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
QLD
SA
WA
Dec-2017
Dec-2018
Dec-2016
Dec-2014
Dec-2015
Dec-2013
Dec-2011
Dec-2012
Dec-2010
Dec-2009
Dec-2008
Dec-2007
Dec-2006
Dec-2005
Dec-2004
Dec-2003
Dec-2001
Dec-2002
Dec-2000
Dec-1999
Dec-1997
Dec-1998
Dec-1996
Dec-1995
Sep-1994
Dec-1992
Dec-1993
Dec-1991
Dec-1990
Dec-1989
Dec-1987 VIC
Dec-1988
Dec-1986
Dec-1984 NSW
Dec-1985
0%
Source: ABS, Oliver Hume Research.
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
15
2.0 VICTORIA
2.2
LAND MARKET
Although gross lot prices continue to moderate... the outlook has improved‌
Prices Although gross lot prices continue to moderate and incentives / rebates remain high, conditions and the outlook for the Victorian land market have improved in recent months. The improvement is for a range of reasons including more flexible lending conditions, interest rate reductions (and the expectations of future interest rate cuts), robust population growth, greater certainty following the Federal election and a general improvement in the broader property market. Although on average a high level of incentives and rebates are expected to persist for some time ensuring net prices remain below well-below gross lot prices - gross lot prices are expected to level out over the next 12-18 months as demand rebounds.
Growth Area Median Land Price (Sold) $400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
16
Whittlesea Wyndham Metro Melbourne
QUARTERLY MARKET INSIGHTS
QI. ‘19
QIII. '18
QIV. '18
QI. '18
QII. '18
QIII. '17
QIV. '17
QI. '17
QII. '17
QIII. '16
QIV. '16
QI. '16
QII. '16
QIII. '15
QIV. '15
QI. '15
QII. '15
QIII. '14
QIV. '14
QI. '14
QII. '14
QIII. '13
QIV. '13
QI. '13
QII. '13
QIII. '12
QIV. '12
QI. '12
QII. '12
QIII. '11
QIV. '11
QI. '11
Casey Melton Geelong
QII. '11
QIII. '10
QIV. '10
QI. '10 Cardinia Hume Mitchell
QII. '10
$0
Source: Oliver Hume Sold Lots, Annual moving average. Median (all of VIC)
JUNE QUARTER 2019
The median lot price for metropolitan Melbourne (gross prices, conventional lots) was $312,000 in the June quarter 2019. On average incentives remain around $15,000 to $30,000 per lot although higher incentives are on offer in some estates.
Metro. Melbourne Growth Area Municipalities Median Land Price (Sold) 350,000 330,000 310,000 290,000 270,000 250,000 230,000 210,000 190,000 175,000
QI. ‘19
QII. ‘19
QIII. ‘18
QIV. ‘18
QI. ‘18
QII. ‘18
QIII. ‘17
QIV. ‘17
QI. ‘17
QII. ‘17
QIII. ‘16
Metro Melbourne (All 7 Growth Areas) - Conventional
QIV. ‘16
QI. ‘16
QII. ‘16
QIII. ‘15
QIV. ‘15
QI. ‘15
QII. ‘15
QIII. ‘14
QIV. ‘14
QI. ‘14
QII. ‘14
QIII. ‘13
QIV. ‘13
QI. ‘13
QII. ‘13
QIII. ‘12
QIV. ‘12
QI. ‘12
QII. ‘12
QIII. ‘11
QIV. ‘11
QI. ‘11
QII. ‘11
QIII. ‘10
QIV. ‘10
QI. ‘10
QII. ‘10
QIII. ‘09
QIV. ‘09
150,000
Source: Oliver Hume Research. Sold Lots.
On an annual basis, lot price declines (on a gross price basis) were the largest in the more expensive Casey and Cardinia local government areas. Prices rose in the relatively more affordable markets of Geelong and Mitchell.
Metropolitan Melbourne Median Lot Prices Municipality
QII, ‘18
QI, ‘19
QII, ‘19
QoQ
YoY
Mitchell
$269,000
$260,000
$272,500
4.8%
1.3%
Cardinia (S)
$355,000
$348,000
$333,000
-4.3%
-6.2%
Casey (S)
$365,000
$350,000
$335,000
-4.3%
-8.2%
Hume (N)
$346,000
$312,000
$326,000
4.5%
-5.8%
Melton (W)
$285,000
$286,000
$280,500
-1.9%
-1.6%
Whittlesea (N)
$327,000
$298,000
$300,000
0.7%
-8.3%
Wyndham (W)
$317,000
$322,500
$306,000
-5.1%
-3.5%
Geelong (W)
$270,000
$276,900
$279,000
0.8%
3.3%
Surf Coast (W)
$455,000
$392,500
$430,000
9.6%
-5.5%
Metro Melbourne (All 7 Growth Areas) - Conventional
$323,000
$315,000
$312,000
-1.0%
-3.4%
Metro Melbourne (All 7 Growth Areas) - All Lots
$325,000
$318,000
$313,000
-1.6%
-3.7%
Median (All of Vic)
$314,400
$305,500
$305,000
-0.2%
-3.0% Source: Oliver Hume Research.
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
17
2.0 VICTORIA
2.2
LAND MARKET (CONT.)
Land sales are rebounding‌ (and) are projected to continue rising...
Sales Volumes Land sales are rebounding and rising from recent lows. Land sales are projected to continue rising over the next 12-18 months. The volume of land sales remains well below underlying requirements, given Melbourne’s strong population growth, and is currently consistent with previous record lows which were relatively short-lived.
Monthly Melbourne Growth Area Project Land Sales (2005 - 2019) 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100
Monthly Project Land Sales (LHS) Moving Quarterly Average Monthly Sales - Long RUn Median (LHS) 4 Qtr. Moving Ave.
18
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
Jun-19
Dec-18
Jun-18
Dec-17
Jun-17
Jun-16
Dec-16
Dec-15
Jun-15
Dec-14
Jun-14
Dec-13
Jun-13
Dec-12
Jun-12
Dec-11
Jun-11
Dec-10
Jun-10
Dec-09
Jun-09
Dec-08
Jun-08
Dec-07
Jun-07
Dec-06
Jun-06
Jun-05
Dec-05
Dec-04
Jun-04
-
Source: Oliver Hume Sold Lots. Selected estates.
Time on market, a key market indicator, declined in the June quarter 2019 for the first time after having risen for several quarters
Time on Market Time on market, a key market indicator, declined in the June quarter 2019 for the first time after having risen for several quarters , a further sign that the market is returning to more normal conditions.
Metro. Melbourne, All Growth Area LGAs | Average Time on Market (Days) 198
200
192
189 183
180
171 165 156
160
147 140
120
114
114 102 102
100
87
87 81 75 75
80
63
60
60
60
57 51
48 40
30
30
24 21 21
21
20
QII. ‘19
QI. ‘19
QIV. ‘18
QIII. ‘18
QII. ‘18
QI. ‘18
QIV. ‘17
QIII. ‘17
QII. ‘17
QI. ‘17
QIV. ‘16
QIII. ‘16
QII. ‘16
QI. ‘16
QIV. ‘15
QIII. ‘15
QII. ‘15
QI. ‘15
QIV. ‘14
QIII. ‘14
QII. ‘14
QI. ‘14
QIV. ‘13
QIII. ‘13
QII. ‘13
QI. ‘13
QIII. ‘12
QIV. ‘12
QII. ‘12
0
Source: Oliver Hume.
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
19
VICTORIA
JUNE QUARTER 2019 MEDIAN LOT PRICES BY SUBURB (GROSS)
WALLAN $242,000 n/a
400 SQM AND 488 SQM LOTS
KALKALLO $320,500 $363,000
MICKLEHAM $323,000 $345,000
CRAIGIEBURN $349,000 $366,000
ROXBURGH PARK $367,500 $415,000
GREENVALE $389,000 n/a MELTON SOUTH $266,000 $285,000
PLUMPTON $342,500 $385,750
FRASER RISE $337,000 $365,000
WYNDHAM VALE $288,000 $335,000
WEIR VIEWS $259,000 $285,000
TARNEIT $319,500 $365,000
MAMBOURIN $288,500 $313,500
LOVELY BANKS n/a $272,000
WERRIBEE $314,000 $345,000
MELBOURNE TRUGANINA $347,950 $387,500
POINT COOK $516,000 n/a
LARA $258,000 $266,500
GEELONG CHARLEMONT n/a $295,000
MT DUNEED $251,900 $271,900 ARMSTRONG CREEK $271,250 $299,500
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QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
ST LEONARDS $239,950 $249,950
BEVERIDGE $285,000 $300,000
WOLLERT $332,000 $427,000
BERWICK $428,000 $465,000 OFFICER $340,000 $350,000
CLYDE $350,000 $357,000
CRANBOURNE EAST $345,000 n/a
CRANBOURNE $355,000 $375,000
CLYDE NORTH $314,500 $383,500
BOTANIC RIDGE $335,000 $355,000
400 sqm Median Price 448 sqm Median Price Source: Oliver Hume Research. Sold.
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
21
2.0 VICTORIA
2.3
APARTMENTS AND TOWNHOUSES Economy In particular, tighter lending conditions and serviceability requirements had made the purchase of more expensive property, including standard family homes, relatively more difficult to transact.
While the moderation in Melbourne house prices continued in the June quarter (the median house price declined by 1.1% over the quarter to be 2.4% down over the year), the median price of units and townhouses remained broadly stable (up by 0.6% over the quarter and approximately level over the year).
As the same time many first home buyers have capitalised on recent market challenges and the withdrawal of investors and, supported by government incentives, have re-entered the market. Although traditional homes remain a key product of interest, first home buyers are increasingly opting for relatively affordable products such as townhouses.
While compositional factors explain some of the recent pricing trends, with medium density products such as townhouses and larger apartments emerging as increasingly popular in the most recent phase of the property cycle, the various headwinds affecting the general property market have also affected the traditional housing segment more so.
Median House and Unit Prices, Melbourne $900,000
$800,000
Median Price ($)
$700,000
$600,000
$500,000
$400,000
$300,000
22
Jun-19
Feb-19
Oct-18
Jun-18
Oct-17
Feb-18
Jun-17
Feb-17
Oct-16
Jun-16
Feb-16
Jun-15
Oct-15
Feb-15
Jun-14
Oct-14
Feb-14
Source: REIV, Oliver Hume Research.
Units and Apartments
QUARTERLY MARKET INSIGHTS
Oct-13
Jun-13
Oct-12
Feb-13
Jun-12
Feb-12
Oct-11
Jun-11
Feb-11
Jun-10
Oct-10
Feb-10
Jun-09 House
Oct-09
$200,000
JUNE QUARTER 2019
MELBOURNE
METROPOLITAN MELBOURNE HOUSE Quarterly growth Annual change UNIT & APARTMENT Quarterly growth Annual change
INNER MELBOURNE
$785,000 1.1% 2.4%
$590,000 0.6% 0.0%
MIDDLE MELBOURNE HOUSE Quarterly growth Annual change UNIT & APARTMENT Quarterly growth Annual change
Outer Melbourne (>20km)
$1,304,000
HOUSE
4.3% 9.8%
Quarterly growth Annual change UNIT & APARTMENT
1.8% 9.0%
$650,000 1.3% 0.5%
1.6% 0.8%
Quarterly growth Annual change
The REIV ‘house’ classification includes: - Detached houses - Terraced houses - Semi-detached houses - Holiday houses - Duplexes - House and granny flat.
$622,000
HOUSE
3.1% 3.0%
Quarterly growth Annual change UNIT & APARTMENT Quarterly growth Annual change
Middle Melbourne (10-20km)
$589,000
OUTER MELBOURNE
$894,000
Inner Melbourne (<10km)
$495,500 0.3% 1.1%
QUARTERLY MARKET INSIGHTS
‘Units & apartments’ include: - Flats - Units - Apartments - Townhouses - Penthouses - Villas - Residential warehouse conversions - Bed-sits
Source: Real Estate Institute of Victoria.
JUNE QUARTER 2019
23
2.0 VICTORIA
2.3
APARTMENTS AND TOWNHOUSES (CONT.) Supply Building approvals data continues to highlight the residential construction slowdown current underway and across key markets especially. Trends in Victoria are not dissimilar to what is occurring across the eastern seaboard with residential construction activity in NSW and Queensland also forecast to undergo decline over the medium-term. While housing approvals have experienced some weakness in recent months, overall levels remain reasonably high. It is, however, in the medium and high-density markets that the extent of the looming residential construction slowdown can be seen. The greatest declines are in the high-density sector (flats, units and apartments) where over the last year there were only around 12,000 building approvals – the lowest level since 2012. Despite the moderation in the building approval pipeline, which measures potential supply at the early phase of the cycle and provides an indication of medium-term supply levels, Melbourne arguably has the greatest potential to experience an increase in residential construction in the short-term. This is due to the high number of apartment projects currently being ‘marketed’ but would require the vast majority of the projects currently being ‘marketed’ progress to construction. At the other extreme, where no marketed projects advance to construction, Melbourne’s new apartment construction levels would decline to levels more akin to that of Sydney and Brisbane where more steeper declines in construction are forecast.
24
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
Nevertheless, despite any short-term boost to residential apartment construction that may occur through the transition of projects currently being marketed moving to under construction, the steady decline of building approvals continues to point to emerging supply pressures. This is especially the case with population growth remaining at near-record levels and in the context of the myriad of challenges the apartment market has faced in recent years. These challenges include more restrictive planning, the removal of stamp duty exemptions for investors, an increase in government taxes including higher stamp duty surcharges on foreign investors and the vacancy tax and other restrictions on the sale of new apartments to foreign purchasers.
Houses Semi-detached, row or terrace houses, townhouses Flats units or apartments
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
Jun-2019
Jun-2018
Jun-2017
Jun-2016
Dwellings excluding houses
Jun-2015
Jun-2014
Jun-2013
Jun-2012
Jun-2011
Jun-2010
Jun-2009
Jun-2008
Jun-2007
Jun-2006
Jun-2005
Jun-2004
Jun-2003
Jun-2002
Houses
Jun-2001
Jun-2000
Jun-1999
Total Number of dwelling units (No.)
Jun-1983
Jun-2019
Jun-2018
Jun-2017
Jun-2016
Jun-2015
Jun-2014
Jun-2013
Jun-2012
Jun-2011
Jun-2010
Jun-2009
Jun-2008
Jun-2007
Jun-2006
Jun-2005
Jun-2004
Jun-2003
Jun-2002
Jun-2001
Jun-2000
Jun-1999
Jun-1998
Jun-1997
Jun-1996
Jun-1995
Jun-1994
Jun-1993
Jun-1992
Jun-1991
Jun-1990
Jun-1989
Jun-1988
Jun-1987
Jun-1986
Jun-1985
Jun-1984
Total Number of dwelling units (No.)
Monthly Building Approvals By Type - Victoria 4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Source: ABS. Oliver Hume Research.
Annual Building Approvals By Type - Victoria
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Source: ABS. Oliver Hume Research.
25
VICTORIA
DEVELOPMENT SITES BALLARAT Activity in the development site market is beginning to rebound, consistent with broader trends in the property market, with greater certainty about current and future market conditions seeing some players transacting or looking to transact. However, transaction levels remain below long-run average levels as buyers and sellers continue to test the level of key indicators (such as price per hectare and retail lot prices) especially in markets which experienced significant price and volume growth but which are now facing a more moderate outlook in the short-medium term. The figures on the right present indicative values based on recent transactions.*
SUBURBS
DEVELOPMENT SITE INDICATIVE VALUE (PER HA)
1
Tarneit
1,650,000
2
Clyde North
1,500,000
3
Sunbury
1,200,000
4
Plumpton
1,700,000
5
Melton
800,000
6
Greenvale
1,750,000
7
Gisborne
900,000
8
Donnybrook
1,350,000
9
Deanside
1,600,000
10
Bonnie Brook
1,400,000
11
Armstrong Creek
1,100,000
12
Aintree
1,200,000
Based on 2-5 year terms. These are indicative only as values can vary widely depending on factors such as PSP status, development sequencing and servicing etc. *
GEELONG
11
26
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
7
8 3 6 10 12
4 5
9
1
MELBOURNE
2
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
27
3.0 QUEENSLAND
3.0 QUEENSLAND
Amanda Bittenbinder Queensland Research Manager a.bittenbinder@oliverhume.com.au
3.1
MARKET DRIVERS Economy Queensland’s economic growth remains steady with areas of strength including the labour market, population growth, equipment investment and retail spending. Recently the following indicators were above (or below) the decade average:
DWELLING COMMENCEMENTS
UNEMPLOYMENT
POPULATION GROWTH
ECONOMIC GROWTH
8,446 9.97% Level this quarter
6.3% 6.0% Level this quarter
1.81% 5.2% Level this quarter
$395,229m 20.6%
Compared with decade average
Compared with decade average
Compared with decade average
Compared with decade average
Level this quarter
EQUIPMENT INVESTMENT
HOUSING FINANCE
RETAIL SPENDING
$2,964m 0.8% Level this quarter
8,660 10.8% Level this quarter
$15,942m $9,736m 9.4% 21.7% Level this quarter
Level this quarter
Compared with decade average
Compared with decade average
Compared with decade average
Compared with decade average
Source: https://www.commsec.com.au/stateofstates
30
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
CONSTRUCTION WORK
Population Population remains an increasingly important driver for the property market and economic growth across Queensland. Queensland continues to record the largest number of interstate migrants, buoyed by the relative affordability of the South East Queensland property market and a steady jobs market. Net overseas migration to Queensland is also improving and has risen to levels last seen in late 2016.
Queensland Population Change | Growth Components 140,000
120,000
100,000
80,000
60,000
40,000
20,000
Total Population Growth Net Overseas Migration
Dec-18
Jun-18
Jun-17
Dec-17
Jun-16
Dec-16
Jun-15
Dec-15
Jun-14
Dec-14
Jun-13
Natural Increase Net Interstate Migration
Dec-13
Jun-12
Dec-12
Jun-11
Dec-11
Jun-10
Dec-10
Jun-09
Dec-09
Jun-08
Dec-08
Jun-07
Dec-07
Jun-06
Dec-06
Jun-05
Dec-05
Jun-04
Dec-04
Jun-03
Dec-03
Jun-02
Dec-02
Jun-01
Dec-01
Jun-00
Dec-00
-
Source: Oliver Hume Research.
Net Interstate Migration (Qtrly) 10,000 8,000 6,000 4,000 2,000 -2,000 -4,000 -6,000
Mar-2008 Jun-2008 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010 Jun-2010 Sep-2010 Dec-2010 Mar-2011 Jun-2011 Sep-2011 Dec-2011 Mar-2012 Jun-2012 Sep-2012 Dec-2012 Mar-2013 Jun-2013 Sep-2013 Dec-2013 Mar-2014 Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015 Mar-2016 Jun-2016 Sep-2016 Dec-2016 Mar-2017 Jun-2017 Sep-2017 Dec-2017 Mar-2018 Jun-2018 Sep-2018 Dec-2018
-8,000
NSW
VIC
Source: Oliver Hume Research.
QLD
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
31
3.0 QUEENSLAND
3.2
LAND MARKET Sales Volumes Sentiment continues to improve in the South East Queensland market. Around 1,300 sales were recorded in the June quarter 2019.
The recent decisions by APRA to lower serviceability requirements and the interest rate cuts by the RBA have spurred renewed interest by buyers, however it will take some time to see the full impact these policy changes make to the market.
Although the quarter recorded an increase in sales from the previous two quarters, the South East Queensland market remains slightly below the long term average. The most recent sales evidence points towards a gradual recovery over the next 12 months.
South East Queensland Project Land Sales 2,500
2,000
1,500
1,000
500
SEQ Total Sales
4%
Jun-19
Mar-19
Dec-18
Sep-18
15%
18%
21%
SEQ Project Land Sales Market Share QII.’19 25%
QUARTERLY MARKET INSIGHTS
Jun-18
Source: Oliver Hume Sold Lots, Annual moving average.
SEQ Long Run Average
Ipswich and Logan continue to represent the majority of all sales across the South East Queensland market. The Brisbane, Redland and Moreton bay all recorded higher percentages than previous quarters.
32
Mar-18
Dec-17
Sep-17
Jun-17
Mar-17
Dec-16
Sep-16
Jun-16
Mar-16
Dec-15
Sep-15
Jun-15
Mar-15
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
0
JUNE QUARTER 2019
15%
Brisbane Gold Coast Ipwisch Logan Moreton Bay Redland
Prices Median prices rose over the quarter for four of the six major growth corridors. Moreton Bay and Gold Coast median prices softened over the quarter.
South East Queensland Median Prices $450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0 Brisbane QII.’18
QIII.’18
QIV.’18
Gold Coast QI.’19
Ipswich
Logan
Moreton Bay
QII.’19
Redland
SEQ
Source: Oliver Hume Research.
Median Lot Prices by Local Government Area LGA
QI. '18
QI. '19
QII.'19
QoQ
YoY
Brisbane (C)
$352,375
$385,375
$389,125
1%
9%
Gold Coast (C)
$319,325
$341,200
$326,225
-4%
-2%
Ipswich (C)
$205,800
$212,975
$219,225
3%
6%
Logan (C)
$213,925
$219,188
$220,938
1%
4%
Moreton Bay (R)
$260,050
$246,500
$245,125
-1%
-6%
Redland (C)
$302,500
$306,875
$314,875
3%
5%
SEQ
$237,763
$241,750
$244,250
1%
2% Source: Oliver Hume Research.
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
33
3.0 QUEENSLAND
3.2
LAND MARKET (CONT.) Sizes Affordability continues to be a major driver of the market with lots in the range of 300 to 400 square metres accounting for the largest portion of sold stock across the South East Queensland market.
SEQ Project Land Sales (0 - 1,000 sqm) Market Share by Product Type 100%
11%
10%
9%
14%
17%
15%
31%
31%
32%
8%
11%
90%
80%
12% 14%
70%
60%
33%
31%
42%
37%
5%
7%
50%
40%
30%
34%
34%
36%
20%
10%
10%
10%
6%
0% QIII. ‘18 Less than 300sqm
QIV. ‘18
301-400sqm
401-500sqm
QI. ‘19 501-600sqm
QII. ‘19
601-1,000sqm
Long-run Average Source: Oliver Hume Research.
Median Lot Sizes by Local Government Area LGA
QII. '18
QI. '19
QII.'19
5 yr Change
QoQ
YoY
Brisbane (C)
402
401
401
-20.2%
0%
0%
Gold Coast (C)
467
462
460
-5.2%
0%
-1%
Ipswich (C)
443
428
432
-7.3%
1%
-2%
Logan (C)
403
418
422
-17.7%
1%
5%
Moreton Bay (R)
420
394
390
-11.2%
-1%
-7%
Redland (C)
400
415
425
-32.0%
2%
6%
SEQ
426
424
425
-10.5%
0%
0%
34
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
Value Rates Brisbane continues to record the highest value rate with a median value of $970 per square metre. Ipswich remains the most affordable with the median rate of $507 per square metre. Moreton Bay saw the largest reduction in median lot size, resulting in the average value rate increasing by 2% over the year.
South East Queensland Project Land Sales | Median Value Rate (QII. ‘19) South East Queensland Redland Moreton Bay Logan Ipswich Gold Coast Brisbane $0
$200
$400
$600
$800
$1,000
$1,200
Source: Oliver Hume Research.
Annual Change in Land Size & Value Rate 0%
South East Queensland Redland Moreton Bay
2% 6%
-1% -7%
2%
Logan
5%
-1% -2%
Ipswich
8% -1%
Gold Coast
-1% 0%
Brisbane -8%
-6%
-4%
-2%
9% 0%
2%
4%
6%
8%
10%
12%
Source: Oliver Hume Research.
Median Value Rates by Local Government Area LGA
QII. '18
QI. '19
QII.'19
QoQ
$ Value YoY Change (QoQ)
$ Value Change (YoY)
Brisbane (C)
$887
$961
$970
1%
$9
9%
$83
Gold Coast (C)
$715
$738
$709
-4%
-$29
-1%
-$7
Ipswich (C)
$469
$498
$507
2%
$10
8%
$39
Logan (C)
$530
$524
$523
0%
-$1
-1%
-$6
Moreton Bay (R)
$619
$625
$629
1%
$3
2%
$10
Redland (C)
$748
$739
$741
0%
$2
-1%
-$6
SEQ
$564
$570
$575
1%
$5
2%
$11
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
35
3.0 QUEENSLAND
3.2
LAND MARKET (CONT.) Time on Market The June quarter 2019 recorded an average time on market of two months for lots across South East Queensland, after peaking at four months the previous quarter. Moreton Bay recorded the shortest time on market with the average time frame being one month while lots in Brisbane, Ipswich and Logan averaged three months.
The June quarter 2019 recorded an average time on market of 2 months
Average Time on Market - South East Queensland 4.5
4.0
3.5
Months
3.0
2.5
2.0
1.5
1.0
0.5
0 QI. ‘18
QII. ‘18
QIII. ‘18
QIV. ‘18
QI. ‘19
QII. ‘19
Source: Oliver Hume Sold Lots, Annual moving average.
36
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
Carver’s Reach - Oliver Hume project at Park Ridge, Queensland QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
37
3.0 QUEENSLAND
3.3
APARTMENTS AND TOWNHOUSES Brisbane
Gold Coast
In recent years, the Brisbane apartment market has seen a significant increase in the number of residential apartment buildings leading to a high level of high supply relative to demand.
The Gold Coast market continues to see interest from the downsizer market segment with these buyers making up an increasing number of sales recently.
The height of new apartment applications was in 2015-16 with over 36,700 apartments submitted to the Brisbane City Council for review. Since the height of the boom in 2015-16, the number of building approved and completed has declined. Nevertheless, concerns around oversupply have persisted and developers have been offering a range of incentives including deferred settlement periods, price reductions and other arrangements including vendor finance, payment of stamp duty, furniture packages and rental guarantees. The Brisbane apartment market is showing signs of recovery and this comes at a time when a decline in construction activity is expected in the short-term. The extent of the decline is unclear however and is dependent on the number of marketed projects that commence construction. Some price growth is already occurring, and this is expected to continue. Although the Brisbane apartment market has faced considerable headwinds in recent years, various tailwinds are expected to lead to continued support as the market normalizes. These include more flexible lending conditions, a more stable policy environment and the end of uncertainty (especially around the property taxation regime) and lower and declining interest rate cuts.
38
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
Interest from these and other buyers, combined with above average yields and an already low vacancy rate (under 2%), is expected to support prices and sales activity over the short to medium term. Since 2015, new two bedroom and two bathroom apartments have dominated the apartment mix in the Gold Coast market representing around 50% of all new apartment stock. Over the medium to long term the Gold Coast, already one of the fastest growing regional cities in Australia and the location for several new infrastructure projects, is expected to experience robust demand for apartments and other dwellings as the forecast population of 1 million people (by around 2034) gets closer. Future infrastructure projects include the Pacific Motorway Upgrade, Stage 3 of the Gold Coast Light Rail and the future planned Cruise Ship Terminal.  
NORTHSHORE
INNER NORTH
INNER WEST BRISBANE CBD
INNER EAST
INNER SOUTH
BRISBANE INNER CITY BEDROOM BREAKDOWN ($/SQM) BRISBANE CBD 1 Bed 2 Bed 3 Bed
GOLD COAST LGA
$7,361 $7,500 $6,946
INNER SOUTH 1 Bed 2 Bed 3 Bed
GOLD COAST
INNER WEST
$5,969 $5,806 $7,718
1 Bed 2 Bed 3 Bed
INNER NORTH
$6,077 $6,524 $6,457
1 Bed 2 Bed 3 Bed
$5,938 $6,290 $6,330
1 Bed 2 Bed 3 Bed
INNER EAST
$6,400 $6,813 $6,679
$7,203 $7,745 $8,256
1 Bed 2 Bed 3 Bed
NORTH SHORE 1 Bed 2 Bed 3 Bed
$6,575 $6,318 $6,452
Source: ABS, Oliver Hume Research.
MARKET INSIGHTS JUNE QUARTER 2019 2019 QUARTERLYQUARTERLY MARKET INSIGHTS DECEMBER QUARTER
39
4.0 FEATURE ARTICLES
4.0 FEATURE ARTICLES
George Bougias National Head of Research g.bougias@oliverhume.com.au
IS IT TIME TO RETHINK DENSITY? With new forecasts of record population growth across Australia’s major capital cities over the next few decades and affordability remaining a challenge is it time to reconsider the core principles and policies that guide the management of this growth? The accepted wisdom that we should be simply directing development and people towards higher density living in our major cities, especially Melbourne and Sydney, is increasingly being challenged by many buyers and households who continue to vote with their feet and move to more affordable locations - including greenfield suburbs, peri-urban locations and regional centres – many of whom are seeking the traditional detached house.
42
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
Two recent reports have highlighted current and emerging trends about how our cities might evolve in the future and what the opportunities and challenges might be Recent population projections by the Victorian Government suggest Greater Melbourne could have a population of nine million by 2056 with a full state population of 11.2 million, up from 6.5 million in 2018. Greater Melbourne is expected to grow by 1.6% every year while the rest of Victoria could grow by 1.0% every year.
How do we deal with this growth? The CSIRO’s latest Australian National Outlook 2019 (ANO) suggests the country could face a ’Slow Decline’ if we do not take action on our most significant economic, social and environmental challenges. The report highlights several key shifts that are required to meet these challenges and maintain our high standard of living, including a focus on greater densification of our cities. “An urban shift will enable well-connected, affordable cities that offer more equal access to quality jobs, lifestyle amenities, education and other services,” the report said. The report notes that the ‘shift’ could potentially be achieved by planning for higher-density, multicentre and well-connected capital cities to reduce urban sprawl and congestion, creating mixed land use zones with diverse, high-quality housing options and investing in innovative transportation infrastructure. However, policies that direct most people into higher density housing options in our major cities do not always reflect the needs or aspirations of buyers and households. Affordability constraints and the fact that many households, especially young and established families, prefer a detached house should be carefully considered when advocating for increased density as a ‘one size fits all’ policy. While increased densities in our major cities are one way of coping with rapid (and often unexpected) population growth it is worthwhile considering what buyers, families and households want and what the alternatives might be. Young people are increasingly abandoning expensive coastal cities (where apartments are the main housing option for new property market entrants) in favour of more affordable locations where they can purchase single-family homes.
The reason is simple. Although many younger people who want to live and work in wealthy coastal capital cities, they often have little choice but to become permanent renters, usually in smaller apartments. They are keenly aware that home ownership is critical to long-term financial security and family formation. In response, four-fifths of home buyers under 35 in America choose to purchase single-family detached houses in the suburbs. Since 2010, around 1.8 million Americans have moved away from the urban core of major metropolitan areas. They have opted, instead, to move to lower-density areas where single-family houses are the norm. Some commentators have argued that the push for densification of our cities is not the result of market conditions but the concerted efforts by some who want to fundamentally alter the way cities are built. Arguably, responding to actual market needs and addressing key issues like affordability and declining home ownership figure less prominently. While not often highlighted, we see a similar phenomenon in Australia where our greenfield and other outer suburbs and peri-urban areas are popular with many buyers and households. However, in these markets, supply falls short of demand. We are also seeing many regional centres across the country experience rapid population growth. While increasing density across our urban areas represents one important tool for accommodating a burgeoning population, it cannot be the only strategy when we are dealing with a complex range of issues especially those that relate to how and where people want to live and raise a family. Rather than looking to simply transform Australian cities and urban areas into densely populated metropolises, we should be more nuanced about how we will build the cities of the future with individual and family choice and market aspirations taking a key role in our thinking.
QUARTERLY MARKET INSIGHTS
JUNE QUARTER 2019
43
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BRISBANE OFFICE
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Important: The information in this document has been prepared a general guide only and does not constitute advice. We have relied upon information from sources generally regarded as authoritative. Whilst the information has been prepared in good faith and with due care, no representation is made in relation to the accuracy of the whole or any part of the publication. No liability for negligence or otherwise is assumed for any loss or damage suffered by any party resulting from their use of this publication. The whole or any part of this publication must not be mirrored, reproduced or copied, without written consent. The document may contain future forecasts of a range of variables, which can be affected by a significant number of unpredictable factors, including social and economic conditions. It only represents the best judgements and estimates, made by Oliver Hume Research. No assurances can be given that the forecasts will be achieved. This document should be read in conjunction with any other documentation prepared by the marketing agent and associated consultants.