Oliver Hume Quarterly Market Insights - September Quarter 2021

Quarterly Market Insights SEPTEMBER QUARTER 2021

TABLE OF CONTENTS Foreword

04

National Highlights

08

VICTORIA Market Drivers

12

Land Market

16

Apartments and Townhouses

24

Development Sites

28

QUEENSLAND Market Drivers

34

Land Market

36

Apartments and Townhouses

50

FEATURE ARTICLES Working From Home and Housing Choices

54

Australia’s Landmark Submarine Deal and the South Australian Property Market

56

Demand For Detached Housing Proves Strong as Pandemic Changes Designs

58

1.0

Foreword There’s a growing sense of optimism as COVID-19 restrictions lift.

Record high land sales volumes and rising prices, underpinned by strong demand, are hallmarks of the current market. The stage is set for greenfield and other residential property markets to continue to perform over the final months of the year.

The positive momentum continued in the last quarter driven by many of the factors that have played a role over the last year. These include record low interest rates, government fiscal stimulus and improving confidence and optimism.

Despite the major challenges faced since early 2020, the economic recovery and rebound occurred faster than previously forecast.

In Victoria, land sales remain at record highs and price growth continues. Indeed, the September quarter saw greenfield residential land prices reach record highs.

Momentum remains positive with Melbourne’s most recent lockdown coming to an end and buyer enquiry remaining strong in recent months. All of this bodes well for the remainder of 2021 and early 2022.

Although first home buyers have steadily retreated over the last year, partly due to higher prices and fewer key government incentives, upgrader buyers remain active.

In addition, we continue to observe a steady inflow of investors following an earlier hiatus. Investors are likely to be an increasingly important segment over the short to medium term.

The Queensland market continues to see increasing levels of interest. Despite numerous lockdowns and other restrictions being implemented across the nation, to various degrees, Queensland continues to attract large numbers of interstate migrants with many choosing the greenfields to call home.

Importantly, the Queensland greenfield market remains relatively affordable - just one of the many factors which has seen a surge in demand for new residential land in the Sunshine state.

Indeed, strong demand has led to declining levels of stock which is available for sale and this has further intensified competition in the market. South East Queensland’s growth corridors, especially the Logan and Ipswich municipalities, are doing much of the heavy lifting in satisfying buyer demand.

4

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

COVID-19 has changed many aspects of the property market. In some cases, COVID-19 has led to an acceleration of trends which had been underway for many years. Working from home, now firmly entrenched across the economy, is just one example.

On the policy front, the Australian Prudential Regulation Authority (APRA) has announced it will aim to reduce the maximum amount that households can borrow to slow credit growth.

Tougher serviceability tests, however, are likely to have a modest impact on the market and it is possible that further measures might be introduced. Changes to lending conditions are important to the overall health of the market and Oliver Hume will be tracking the impact of APRA’s recent decision.

Going forward, the gradual reopening of interstate and international borders, including the eventual full resumption of Australia’s migration program, will be a significant boost to the market. Importantly, it will also provide further evidence of how COVID-19 has affected buyer preferences on a more permanent basis.

In such uncertain times, understanding current and emerging trends in the property market has never been more important.

The latest Quarterly Market Insights analyses the multiple indicators we track to help us understand the greenfield and broader residential property markets.

The report includes our own proprietary property intelligence and has been prepared by our expert inhouse research team. Delivering the latest data and intelligence to our clients, stakeholders and strategic partners empowers them to react to trends, anticipate the future and make strategic decisions.

It’s all part of our commitment to providing leading market insights, forecasts and in-depth analysis of the Australian residential property market.

Julian Coppini Chief Executive Officer - Project Marketing j.coppini@oliverhume.com.au

Darwin

NORTHERN TERRITORY QUEENSLAND WESTERN AUSTRALIA

Brisbane Gold Coast

SOUTH AUSTRALIA NEW SOUTH WALES

Perth

Sydney Adelaide

Canberra

VICTORIA Melbourne

TASMANIA Hobart

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

5

1.0

National Highlights

1.1

George Bougias

National Highlights

National Head of Research g.bougias@oliverhume.com.au

Cash Rate Target

Economic Growth

Inflation

0.1%

9.6%

3.8%

Unemployment Rate

Employment Growth

Wage Growth

4.5%

3.1%

1.7%

Average Weekly Earnings

Household Saving Ratio

Net Foreign Liabilities

$1,305

9.7%

44.5%

Conversion Rate

Population

Employment Ratio

A$1

25.7M

62.2%

Residential Dwellings

Household Wealth

Household Debt

$836K

895%

184%

Loan Repayment Deferrals

Housing Credit Growth

0.5% 0.3%

1.2% 6.4%

Commercial Property Risks Elevated

=US$0.73

of Housing Loans

of small and medium Business Loans

As a share of Income

Investor

of GDP

As a share of Income

6.0% But low share of banks’ assets

Owner Occupier

Sources: Reserve Bank of Australia (RBA), Australian Bureau of Statistics (ABS).

8

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

Australia’s population has remained largely stable throughout the pandemic due to COVID-19 related international border restrictions.

Australia’s population increased by 21,000 people (0.1%) over the March quarter 2021 (to 25.7 million people).

Annual population growth was 35,700 people (0.1%).

Net overseas migration was negative in the March 2021 quarter (-14,700).

Natural increase reached 35,700 in the March 2021 quarter (up 3,800 from the previous quarter).

On an annual basis, while net overseas migration was negative (-95,300), it was more than offset by population growth via natural increase (131,000).

Components of Quarterly Population Change - Australia 140,000

120,000

100,000

80,000

60,000

40,000

20,000

0

-20,000

-40,000

-60,000 Mar-17 Total growth

Mar-18 Net overseas migration

Mar-19 Natural increase

Mar-20

Mar-21

Source: ABS, National, state and territory population March 2021..

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

9

2.0

Victoria

2.1

Market Drivers

Economy The ending of Victoria’s most recent (sixth) lockdown is expected to see a sharp rebound in economic and labour market activity.

Unemployment is forecast to edge lower over the short to medium term, consistent with an improving labour market and economy.

Due to the lockdown and other restrictions, the state’s unemployment rate trended higher, in recent months, rising to 4.8% in September 2021. The unemployment rate is slightly higher than the national average (4.6% on a seasonally adjusted basis) but remains low overall.

State Unemployment Rates (%) %

8

7

6

5

4

3 2017 VIC SA

12

NSW TAS

2021 QLD WA

QUARTERLY MARKET INSIGHTS

2017

2021 Source: RBA, ABS.

SEPTEMBER QUARTER 2021

Carrington - New Oliver Hume project. Artist impression.

Labour Underutilisation Rates - Australia %

12

9

6

3 1996 Underemployment Rate*

2001 Unemployment Rate

2006

2011

2016

2021

* Full-time workers on reduced hours for economic reasons and part-time workers who would like, and are available, to work more hours Source: RBA, ABS.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

13

2.1

Market Drivers

Population Victoria’s population declined over the year (ending 31 March 2021) due to the combined impacts of lockdowns and international border closures.

Victoria was the only jurisdiction to record negative population growth (-0.6%) with the population decline driven by negative interstate migration (around 18,200 people) and negative overseas migration (around 53,400 people).

Components of Annual Population Growth 60,000

40,000

20,000

0

-20,000

-40,000

-60,000 NSW Natural increase

14

VIC Net interstate migration

QUARTERLY MARKET INSIGHTS

QLD

SA

Net overseas migration

SEPTEMBER QUARTER 2021

WA

TAS

NT

ACT

Source: ABS. Oliver Hume Research. Estimated Resident Population.

Population Change by State and Territory Preliminary Data

Population at 31 Mar 2021 (‘000)

Change over previous year (‘000)

Change over previous year (%)

New South Wales

8,176.4

11.7

0.1

Victoria

6,648.6

-42.9

-0.6

Queensland

5,206.4

43.9

0.9

South Australia

1,771.7

2.7

0.2

Western Australia

2,675.8

15.2

0.6

Tasmania

542.0

2.1

0.4

Northern Territory

247.0

1.2

0.5

Australian Capital Territory

431.8

1.7

0.4

25,704.3

35.7

0.1

Australia (a)

(a) Includes Other Territories comprising Jervis Bay Territory, Christmas Island, the Cocos (Keeling) Islands and Norfolk Island.

Source: ABS, Oliver Hume Research.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

15

2.2

Land Market

Prices New residential land prices continued to increase in the September quarter 2021 reaching record highs.

The median (gross) price of metropolitan Melbourne conventional lots increased from $324,000 to $334,900 (3.4%) in the September quarter 2021 (up 7.7% over the year).

All metropolitan Melbourne municipalities, except for the Casey local government area, recorded an increase.

Victorian Growth Area Median Land Prices $450,000

$400,000

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

Cardinia Hume Mitchell

16

Casey Melton Geelong

Whittlesea Wyndham Metro Melbourne

QUARTERLY MARKET INSIGHTS

QIII. ‘21

QI. ‘21

QIII. ‘20

QI. ‘20

QIII. ‘19

QI. ‘19

QIII. ‘18

QI. ‘18

QIII. ‘17

QI. ‘17

QIII. ‘16

QI. ‘16

QIII. ‘15

QI. ‘15

QIII. ‘14

QI. ‘14

QIII. ‘13

QI. ‘13

QIII. ‘12

QI. ‘12

QIII. ‘11

QI. ‘11

QIII. ‘10

QI. ‘10

QIII. ‘09

$0

Source: Oliver Hume Research. Sold Lots. Annual moving average.

Median (all of VIC)

SEPTEMBER QUARTER 2021

Metropolitan Melbourne Growth Area Municipalities Median Land Prices $350,000 $330,000 $310,000 $290,000 $270,000 $250,000 $230,000 $210,000 $190,000 $175,000

QIII. ‘21

QI. ‘21

QIII. ‘20

QI. ‘20

QIII. ‘19

QI. ‘19

QIII. ‘18

QI. ‘18

QIII. ‘17

QI. ‘17

QIII. ‘16

QI. ‘16

QIII. ‘15

QI. ‘15

QIII. ‘14

QI. ‘14

QIII. ‘13

QI. ‘13

QIII. ‘12

QI. ‘12

QIII. ‘11

QI. ‘11

QIII. ‘10

QI. ‘10

$150,000

Source: Oliver Hume Research. Sold Lots.

Victorian Median Lot Prices QIII, ‘20

QIV, ‘20

QI, ‘21

QII, ‘21

QIII, ‘21

% Change (QoQ)

% Change (YoY)

Cardinia

$340,500

$349,000

$344,500

$347,500

$365,000

5.0%

7.2%

Casey

$340,900

$347,000

$355,500

$419,833

$404,000

-3.8%

18.5%

Geelong

$282,000

$275,000

$294,900

$288,767

$313,750

8.7%

11.3%

Hume

$323,000

$320,500

$315,000

$314,800

$326,000

3.6%

0.9%

Melton

$292,000

$304,500

$317,000

$321,667

$336,000

4.5%

15.1%

Mitchell

$270,000

$260,000

$265,000

$269,333

$280,000

4.0%

3.7%

Whittlesea

$300,500

$318,000

$330,450

$331,850

$334,000

0.6%

11.1%

Wyndham

$307,500

$315,200

$313,900

$311,250

$314,900

1.2%

2.4%

Metro Melbourne (All Growth Areas) - Conventional

$311,000

$319,000

$323,000

$324,000

$334,900

3.4%

7.7%

Metro Melbourne (All Growth Areas) - All Lots

$313,000

$319,000

$320,000

$321,667

$335,000

4.1%

7.0%

Median (All of Victoria)

$300,000

$308,000

$315,000

$311,000

$325,000

4.5%

8.3%

Municipality

Source: Oliver Hume Research. Sold Lots.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

17

2.1

Land Market

Sales Volumes Continued lockdowns and other restrictions have done little to dampen buyer demand.

In addition, investors are playing an increasing important role in the market.

Land sales remain at record highs as buyers continue to enter the market driven by a range of factors.

Regional markets continue to see strong levels of demand with several locations seeing record levels of interest.

Record low interest rates, fear of missing out, expectations of future price growth and steady buyer and consumer confidence are some of the drivers which have supported robust sales volumes in recent months.

In addition to Geelong, a traditionally popular growth corridor, buyers are increasingly active across several other regional markets including across the Baw Baw and Macedon Ranges Shires, Ballarat and beyond.

Although first home buyers have retreated, due partly to higher prices and fewer government incentives, upgrader buyers remain active.

Monthly Land Sales - Metropolitan Melbourne 3,000

2,500

2,000

1,500

1,000

500

Sep-21

Mar-21

Sep-20

Mar-20

Sep-19

Mar-19

Sep-18

Sep-17

Mar-18

Mar-17

Sep-16

Mar-16

Sep-15

Sep-14

Mar-15

Sep-13

Mar-14

Mar-13

Sep-12

Sep-11

Mar-12

Mar-11

Sep-10

Mar-10

Sep-09

Mar-09

Sep-08

Sep-07

Mar-08

Mar-07

Sep-06

Mar-06

Sep-05

Sep-04

Mar-05

0

Source: Oliver Hume Research.

18

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

Monthly Land Sales - City of Greater Geelong 450

400

300

250

200

150

100

50

Sep-21

Sep-20

Sep-19

Sep-18

Sep-17

Sep-16

Sep-15

Sep-14

Sep-13

Sep-12

Sep-11

0 Sep-10

Monthly Sales (No.)

350

Source: Oliver Hume Research.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

19

VICTORIA

Median Lot Prices

by Suburb (Gross) 400 sqm and 488 sqm Lots September Quarter 2021

FRASER RISE $361,217 $401,924

MELTON SOUTH $307,333 n/a

WYNDHAM VALE $301,100 $348,380

TARNEIT $356,993 $388,615

MAMBOURIN $297,278 $326,050

LARA $299,224 $315,651

GEELONG CHARLEMONT $308,875 $324,444

MT DUNEED $334,733 $363,900 ARMSTRONG CREEK $339,833 $345,817

WERRIBEE $320,800 $343,833

TRUGANINA $364,181 $396,993

400 sqm Median Price

WALLAN $260,500 $288,375

MICKLEHAM $381,000 $413,400

448 sqm Median Price Source: Oliver Hume Research. Sold.

KALKALLO n/a $353,000

BEVERIDGE $288,466 $305,143

CRAIGIEBURN $415,667 $444,500

WOLLERT $376,109 $403,429

GREENVALE $435,000 $471,000

MELBOURNE

BERWICK $547,700 $574,647 OFFICER $376,968 $420,240

CLYDE n/a $404,500

VICTORIA

Metropolitan Melbourne September Quarter 2021

COMMONLY SOLD LOTS

12.5m x 28m 12.5m x 32m MEDIAN PRICE

$335,000 MEDIAN SIZE

392 sqm MEDIAN VALUE RATE

$895 per sqm

2.3

Apartments and Townhouses

Apartments One of the major trends throughout the pandemic has been the surge in buyer demand for detached dwellings (houses).

The surge was partly due to shifting preferences with many buyers choosing to build new houses in both metropolitan and regional greenfield locations.

However, record low interest rates and government incentives also allowed many purchasers to buy larger dwellings.

In turn, the industry was able to respond quickly, ensuring supply could be brought to market.

Market activity in higher density markets was much different.

High-density (apartment) markets were heavily impacted by COVID-19 and, especially, the closure of international borders.

As a result, vacancy rates increased and apartment prices (and rents) have generally lagged trends in the broader market.

Some sub-markets, especially those in the inner suburbs of large capital cities, even experienced declines in price and rents initially and continue to experience only a relatively modest rebound.

For example, the Real Estate Institute of Victoria (REIV) reports that unit and apartment prices for metropolitan Melbourne edged higher in the September quarter 2021 (up 0.4%) to be 5.6% higher on an annual basis.

24

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

However, overall prices were dragged down by softer conditions in the inner Melbourne market (0-10 km from the CBD) where unit and apartment prices rose by only 2.6%.

In contrast, unit and apartment prices in the middle Melbourne (10-20 km) and outer Melbourne (20+ km) markets are up 6.8% and 10.1%, respectively, over the year.

The apartment market is, however, steadily improving.

Buyers are increasingly active in securing competitively priced apartments - especially when compared to detached housing which has experienced significant capital appreciation.

Apartment tenant demand also appears to have stabilised, overall, with many tenants capitalising on the rare opportunity to lock-in good rental deals.

It will take some time for new apartment stock to be brought to market with leading indicators of new supply in the pipeline, such as approvals, remaining relatively subdued (although above recent troughs).

This is in contrast to the detached housing sector which saw new supply surge due, partly, to the HomeBuilder incentive.

Apartment market fundamentals are expected to gradually improve as international borders are reopened.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

25

2.3

Apartments and Townhouses

Townhouses Over the last few years townhouse have become increasingly popular.

Detached housing has becoming increasingly out of reach for many buyers with prices rising throughout the pandemic and reaching record highs.

More recently, throughout the pandemic, this trend has continued and demand for townhouses has remained strong.

This had made townhouses even more popular, including especially for first home buyers (looking at entering the market) and for downsizers (looking to stay in the same location).

A key reason has been affordability.

Townhouses allow buyers to purchase a landed product at, generally, a more competitive price compared to detached housing.

Post-pandemic, townhouses are likely to become even more popular for many buyers as they seek value for money, a good location (close to amenities and transport) and the latest designs suitable for modern living.

Another reason has been the continued evolution of the townhouse market with new stock offering new, flexible and modern designs suitable for a diverse range of buyer groups (including upgraders, downsizers, first home buyers, families, couples and investors).

National dwellings approved, by building type, seasonally adjusted 17,500

No. of dwellings approved

15,000

12,500

10,000

7,500

5,000

Private sector houses

26

Private sector dwellings excluding houses

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

Aug-21

Aug-20

Aug-19

Aug-18

Aug-17

Aug-16

Aug-15

Aug-14

Aug-13

Aug-12

Aug-11

Aug-10

Aug-09

Aug-08

Aug-07

Aug-06

2,500

Source: ABS.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

27

2.4

Peter Vassallo

Development Sites

Managing Director | Development Sites p.vassallo@oliverhume.com.au

Robust conditions in the retail greenfield residential market are being mirrored by an increasingly competitive development sites market.

Although development site broadhectare values remained resilient in the early phase of the pandemic, since around early 2020 when COVID-19 first emerged in Australia, they have since increased and are currently at record highs.

Many developers are accepting lower returns (generally 10% to 15% although, in some cases, lower).

Risks have also increased as with other property markets.

A key risk is that future costs are not being fully accounted for.

Buyer enquiry and transactions activity remains strong.

This is especially the case if inflationary pressures are not transitory but continue to build, eventually flowing through to costs on a more permanent basis.

Many of the factors which drove the upswing in the broader greenfield residential market have also underpinned stronger conditions in the development site market.

This is already starting to occur across markets both in Australia and overseas.

These factors include record low interest rates, substantial government fiscal stimulus, a faster than expected economic rebound and increasing business and consumer confidence.

However, the development site market has also been buoyed by specific factors, including, the weight of development capital looking for a return.

Regional markets continue to see strong interest with high levels of demand being reflected in broadacre prices.

Of note is pricing in the Geelong growth corridor which is currently at levels seen in Melbourne not too long ago.

At a local level, this has been driven by a growing number of buyers investigating a limited number of residential greenfield opportunities.

This more local trend has been underpinned by intense competition, globally and nationally, in the search for yield in an environment where returns have trended down.

Of note is the increasing interest from interstate buyers looking at greenfield opportunities in Melbourne and, to a lesser degree, regional Victoria.

Traditionally, Victorian developers have often played a leading role in examining opportunities beyond state borders.

In contrast, the current market has seen a reversal of this long-standing trend with many interstate developers now active in Victoria.

Intense competition, combined with greater optimism and confidence, have been reflected in declining hurdle rates and rising escalation rates.

28

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

Although development site broadhectare values remained resilient in the early phase of the pandemic, since around early 2020 when COVID-19 first emerged in Australia, they have since increased and are currently at record highs.

Lenders are also more competitive.

For example, the differences between bank and non-bank offerings have narrowed, and non-banks are becoming even more competitive vis-à-vis banks.

These include - but are not limited to - the Victorian State Government’s controversial Windfall Gains Tax (WGT).

As we emerge from the pandemic - and the process of economic recovery and rebuild gathers pace - the development site market has entered a new phase.

In addition, the Australian Prudential Regulation Authority’s (APRA) recent decision to increase the minimum interest rate buffer, to be used by banks when assessing the serviceability of home loan applications, is expected to have a modest impact initially.

While the end of lockdowns and easing of many COVID-19 restrictions are important milestones, they are not the only ones marking this new phase.

However, the increase in the buffer interest rate might not be the last action in the regulator’s effort to slow credit growth.

Various policy changes will also be important drivers of market conditions having short, medium and longterm impacts.

Finally, the gradual reopening of interstate and overseas borders will be crucially important drivers of market activity over the medium to long-term.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

29

3.0

Queensland

Queensland at a Glance September Quarter 2021

STATE FINAL DEMAND (Jun Qtr 21)

11.5% BUILDING APPROVALS (Aug 21)

4.0% EXPORTS (GOODS OVERSEAS) (Aug 21)

$62.5b EMPLOYMENT GROWTH (Sep 21)

1.2% UNEMPLOYMENT RATE (Sep 21)

4.9%

RETAIL TRADE (Aug 21)

0.9% BUSINESS INVESTMENT (Jun Qtr 21)

4.2% INFLATION (CPI) (Jun Qtr 21)

4.9% EMPLOYMENT PERSONS (Sep 21)

2.66m POPULATION (Mar Qtr 21)

5.21m

Source: Queensland Government Statistician’s Office.

3.1

Amanda Bittenbinder

Market Drivers

Queensland Research Manager a.bittenbinder@oliverhume.com.au

Economy The Queensland economy continues to improve with the economic recovery well underway amidst continuing impacts of the Covid-19 pandemic. Overall economic activity is up 11.9% on the decade average underpinned by retail and household spending. Population growth, driven especially by interstate migration, is also an increasingly important driver of growth.

A robust residential property market has seen housing finance commitments continue to increase, up around 65% on the 10-year average and 29% over the year.

Dwelling starts are also increasing and are up around 52% over the year.

Housing Finace - 10 Year Average Comparison

NSW

VIC

ACT

QLD

SA

NT

TAS

WA

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Source: ABS, CommSec State of States Report.

34

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

Net Interstate Migration (Quarterly) 12,000 10,00 8,000 6,000 4,000 2,000 0 -2,000 -4,000 -6,000

NSW

VIC

QLD

Sep-20

Mar-20

Sep-19

Mar-19

Sep-18

Mar-18

Sep-17

Mar-17

Sep-16

Mar-16

Sep-15

Mar-15

Sep-14

Mar-14

Sep-13

Mar-13

Sep-12

Mar-12

Sep-11

Mar-11

Sep-10

Mar-10

Sep-09

Mar-09

Sep-08

Mar-08

-8,000

Source: ABS.

Queensland Population Change | Growth Components 140,000

120,000

100,000

80,000

60,000

40,000

20,000

-

-20,000

Total Population Growth

Natural Increase

Net Overseas Migration

Net Interstate Migration

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

Sep-20

Dec-19

Mar-19

Jun-18

Sep-17

Dec-16

Mar-16

Jun-15

Sep-14

Dec-13

Mar-13

Jun-12

Sep-11

Dec-10

Mar-10

Jun-09

Sep-08

Dec-07

Mar-07

Jun-06

Sep-05

Dec-04

Mar-04

Jun-03

Sep-02

Dec-01

Sep-00

-40,000

Source: ABS.

35

3.2

Land Market

Land Market The South East Queensland (SEQ) market continues to record robust sale volumes despite ongoing concerns surrounding stock availability. Over the September quarter there were 1,672 sales. The sales rate moderated over the quarter but remained wellabove the long-term average.

Stock availability continues to dampen sales volumes.

At the end of the September quarter there were around 380 lots remaining on the market (a decline of almost 70% over the year). The Gold Coast was the only market that didn’t record a sharp fall in available stock over the year. However, this was due to stock being released late in the quarter. Preliminary figures suggest that very little of this stock remains on market.

South East Queensland Project Land Sales 2,500

2,289

2,000

1,672

1,500

1,448

1,000

500

SEQ Total Quarterly Sales

36

SEQ Long Run Average

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

Jun-21

Sep-21

Mar-21

Dec-20

Sep-20

Jun-20

Dec-19

Mar-20

Jun-19

Sep-19

Dec-18

Mar-19

Jun-18

Sep-18

Dec-17

Mar-18

Jun-17

Sep-17

Mar-17

Dec-16

Jun-16

Sep-16

Dec-15

Mar-16

Sep-15

Jun-15

Dec-14

Mar-15

Jun-14

Sep-14

Dec-13

Mar-14

Jun-13

Sep-13

Dec-12

Mar-13

Sep-12

0

Source: Oliver Hume Research. Sold Lots.

Available Stock Comparison - Growth Corridors 1,400

1,200

1,000

800

600

400

200

0 Brisbane Sep-20

Gold Coast

Ipswich

Logan

Moreton Bay

Redland

SEQ Source: Oliver Hume Research.

Sep-21

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

37

3.2

Land Market

Market Share The Logan and Ipswich markets accounted for most sales over the September quarter due to affordability and the availability of stock. The Logan local government area represented around a third of sales over the quarter (over 540 transactions accounting for 32.5% of all sales).

Moreton Bay’s market share continues to moderate as the volume of new stock in the region continues to be constrained by delays in the development pipeline.

Growth Corridor Sales Market Share

Quarter

Brisbane Sales Market Share

Gold Coast Sales Market Share

Ipswich Sales Market Share

Logan Sales Market Share

Moreton Bay Sales Market Share

Redland Sales Market Share

Sep. '21

12.5%

10.8%

26.6%

32.5%

13.5%

4.2%

Mar. ‘21

9.9%

17.5%

19.8%

36.9%

13.4%

2.5% Source: Oliver Hume Research.

South East Queensland Project Land Sales | Market Share

BRISBANE

12.5%

GOLD COAST

10.8%

IPSWICH

26.6%

LOGAN

32.5%

MORETON BAY

70,590

REDLAND

13.5%

4.2% 24,123 Source: Oliver Hume Research.

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QUARTERLY MARKET INSIGHTS

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39

3.2

Land Market

Median Price The median lot price for the South East Queensland region, although slightly higher over the year, has remained relatively stable in recent months. However, there is increased pressure on pricing in some markets due to very limited stock availability.

This is most evident in the Moreton Bay and Redland markets where a lack of stock, combined with pent-up demand, has led to significant price escalations. Gold Coast pricing continues to reflect mostly premium stock available for purchase.

South East Queensland Median Lot Prices by Local Government Area $500,000

$450,000

$400,000

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

$0 Brisbane QIII.’20

40

QIV.’20

QI.’21

Gold Coast QII.’21

Ipswich

QIII.’21

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

Logan

Moreton Bay

Redland

SEQ

Source: Oliver Hume Research.

MORETON BAY

BRISBANE

REDLAND IPSWICH

LOGAN

GOLD COAST

South East Queensland Median Land Prices by Local Government Area LGA

QIII. ‘21

QII. ‘21

QIII. ‘20

QoQ

YoY

5yr Change

Brisbane (C)

$372,000

$369,725

$389,725

0.6%

-4.5%

-2.0%

Gold Coast (C)

$432,675

$412,675

$331,450

4.8%

30.5%

60.4%

Ipswich (C)

$220,800

$216,300

$214,563

2.1%

2.9%

9.8%

Logan (C)

$221,000

$219,000

$221,225

0.9%

-0.1%

6.4%

Moreton Bay (R)

$332,875

$280,000

$264,000

18.9%

26.1%

32.7%

Redland (C)

$346,688

$335,938

$307,500

3.2%

12.7%

8.1%

South East Queensland

$248,000

$249,000

$247,500

-0.4%

0.2%

3.6% Source: Oliver Hume Research.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

41

3.2

Land Market

Median Lot Size Most transactions in the South East Queensland market over the September quarter occurred in the 301-500 sqm range (74% of all lots sold). Lots sized 401-500 sqm experienced the largest increase in market share over the past quarter (from 33% to 36% of sales).

Overall, median lot sizes declined slightly (down 0.2%) over the quarter to be down around 3% over the year.

Moreton Bay was the only market where lot sizes did not decline over the year. This was due to the profile of new stock released to market.

South East Queensland Project Land Sales (0 - 1,000 sqm) Market Share by Product Type 100%

10%

10%

12%

10%

10%

14%

13%

9%

8%

7%

9%

10%

13%

33%

34%

10%

10%

11%

13%

36%

33%

90%

13%

15%

80%

15%

70%

60%

34% 36%

35%

33%

34%

31%

50%

40%

30%

41% 38%

34%

36%

34%

37%

37%

41% 38%

37%

20%

10%

0%

5%

6%

6%

7%

7%

8%

QIII. ‘19

QIV. ‘19

QI. ‘20

QII. ‘20

QIII. ‘20

QIV. ‘20

Less than 300 sqm

42

301-400 sqm

401-500 sqm

QUARTERLY MARKET INSIGHTS

501-600 sqm

601-1,000 sqm

SEPTEMBER QUARTER 2021

7%

7%

5%

7%

QI. ‘21

QII. ‘21

QIII. ‘21

Long-run Average

Source: Oliver Hume Research.

South East Queensland Median Lot Sizes by Local Government Area (sqm) LGA

QIII. '21

QII.'21

QIII.’20

QoQ

YoY

5 yr Change

Brisbane (C)

412

422

430

-2.4%

-4.1%

-7.8%

Gold Coast (C)

426

431

427

-1.2%

-0.2%

-14.3%

Ipswich (C)

418

422

432

-1.0%

-3.2%

-5.4%

Logan (C)

397

402

423

-1.2%

-6.1%

-7.0%

Moreton Bay (R)

421

413

412

1.9%

2.2%

-5.0%

Redland (C)

437

448

399

-2.5%

9.4%

-4.1%

SEQ

408

409

421

-0.2%

-3.0%

-7.8% Source: Oliver Hume Research.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

43

3.2

Land Market

Value Rates Median value rates across all South East Queensland growth corridors increased over the quarter. The largest increase was recorded in the Moreton Bay market where the median value rate reached $791 per sqm, an increase of around 16% over the quarter, although this is expected to moderate as more traditional stock is released.

South East Queensland Project Land Sales (QIII. ‘21) | Median Value Rate ($ per sqm)

IPSWICH

$529

LOGAN

$557

SOUTH EAST QUEENSLAND

$608

MORETON BAY

$791

REDLAND

$794

BRISBANE

GOLD COAST

$902

$0

$200

$400

$600

$800

$1,016

$1,000

$1,200

Source: Oliver Hume Research.

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QUARTERLY MARKET INSIGHTS

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Bellevue by HB Land - New Oliver Hume project. Artist impression.

South East Queensland Median Value Rates by Local Government Area ($/sqm) LGA

QIII. '21

QII. ‘21

QIII. ‘20

QoQ

$ Value Change (QoQ)

YoY

$ Value Change (YoY)

5 yr Change

$ Value Change (5Yr Change)

Brisbane (C)

$902

$876

$906

3.1%

$27

-0.4%

-$4

6.3%

$53

Gold Coast (C)

$1,016

$958

$777

6.1%

$58

30.8%

$240

87.2%

$473

Ipswich (C)

$529

$513

$497

3.1%

$16

6.4%

$32

16.0%

$73

Logan (C)

$557

$545

$523

2.1%

$12

6.4%

$34

14.4%

$70

Moreton Bay (R)

$791

$678

$641

16.7%

$113

23.4%

$150

39.6%

$224

Redland (C)

$794

$750

$770

5.9%

$44

3.1%

$24

12.6%

$89

SEQ

$608

$609

$589

-0.2%

-$1

3.3%

$19

12.4%

$67

Source: Oliver Hume Research.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

45

3.2

Land Market

Time on Market The median time on market has decreased across all the growth corridors, with most lots selling within the same month of release.

Lots have not transacted this quickly since late 2018.

This is largely attributed to the continued build up of buyer demand. As limited stock continues to enter the market this trend is likely to continue into the new year.

South East Queensland New Residential Land - Median Time on Market (Days) 140 122 115

120

100

90

91

89

90

80 59

59

61

61

61

61

40

31

31

QIV. ‘17

48

QIII. ‘17

60

45

31

31

20

QIII. ‘21

QII. ‘21

QI. ‘21

QIV. ‘20

QIII. ‘20

QII. ‘20

QI. ‘20

QIV. ‘19

QIII.’19

QII.’19

QI. ‘19

QIV. ‘18

QIII. ‘18

QII. ‘18

QI. ‘18

QII. ‘17

0

Source: Oliver Hume Research. Median data.

South East Queensland New Residential Land - Median Time on Market (Days) 100 90 80 70 60 50 40 40 30

30

31

31

31

BRISBANE

GOLD COAST

IPSWICH

LOGAN

MORETON BAY

31

30 20 10 0 REDLAND

SEQ Source: Oliver Hume Research.

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QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

47

QUEENSLAND

South East Queensland September Quarter 2021

COMMONLY SOLD LOTS

401-425 sqm (16%) & 351-375 sqm (14%) MEDIAN PRICE

$248,000 MEDIAN SIZE

408 sqm MEDIAN VALUE RATE

$608 per sqm

3.3

Apartments and Townhouses

Brisbane

Gold Coast

The Brisbane apartment market has mirrored trends in the broader Brisbane residential market in recent months and continues to improve. Brisbane unit prices are up over the year although the rate of price growth is well below that of houses. Off-theplan apartment sale volumes have also risen and remain above recent lows. The continued divergence between house and apartment prices has increased the relative affordability of apartments and should help to underpin new apartment sales over the short to medium term.

Gold Coast apartment market conditions continued to improve in the second half of 2021.

Apartment sales continues to be dominated by two bedroom stock followed by 3 bedroom stock. Around a third of all sales are in the $650,000 to $750,000 range. Premium apartments, priced over $900,0000, are increasingly popular and accounted for around one in five sales in the previous quarter.

The apartment market is experiencing increasing rents, very low vacancy rates and strong demand from both owner occupiers and investors.

The reopening of interstate borders will be an important boost to an already strengthening Gold Coast apartment market.

The Gold Coast is expected to see increased demand for apartments and other dwellings, once interstate travel restrictions are eased, placing further pressure on the limited supply of new apartments.

Higher construction costs continue to flow through into higher sales prices. Rawlinsons reports that, over the first quarter of 2021, prices for construction materials increased across all categories.

Increase in Brisbane Material Costs LVL, LAMINATED BEAMS

TIMBER FRAMING

15%

15%

MESH REINFORCEMENT

BAR REINFORCEMENT

10%

$150/T

ROOFING/PURLINS

STRUCTURAL STEEL

10%

10%

CONCRETE

$10/CUM 50

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

The Dawn Edition Helensvale. Artist impression.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

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4.0

Feature Articles

FEATURE ARTICLE

Working From Home and Housing Choices

How Working From Home Is Changing Housing Choices The rise in working from home is playing a key role in the housing choices of Australians and is one of the major emerging trends affecting the residential property market.

How working from home will ultimately change the property market in the long run is a key question facing the industry.

However, governments and policy makers are also taking notice, not least because of what working from home means for our cities and regions and economic prosperity overall.

For example, the Reserve Bank of Australia (RBA) recently told a parliamentary inquiry into housing affordability and supply that the ability to work from home, combined with lockdowns and record-low interest rates, might have increased the attractiveness of regional areas and shifted demand towards lower density dwellings (such as houses).

The ‘New Normal’ We are, potentially, only at the beginning of a period of major change given the transition to a ‘new normal’ has been hindered by extended lockdowns and other restrictions.

Given the already significant adoption of working from home we could well see many buyers vote with their feet once freed of mobility restrictions and harsh lockdowns.

This could result in further substantial changes to Australia’s property market.

Although much of the evidence and research for such as view is preliminary it is, arguably, compelling.

The Productivity Commission’s recent Working from Home report (September 2021) concludes, for example, that the ongoing shift to working from home is one of the most significant changes to how Australians have worked in the last half century.

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As the Chair of the Productivity Commission, Michael Brennan, noted “in less than two years we have gone from less than 8 per cent of Australians working from home to 40 per cent. While this percentage may not always remain so high it is inevitable that more Australians will work from home.”

Similarly, a University of Sydney Business School survey suggests that 75% of workers consider their employers will support future work from home plans and that many wish to work from home an average of two days per week.

Working from Home – A Global Phenomenon Working from home is now global and continues to increase.

Experts from around the world are grappling to understand the scale of this trend and its impact.

In the United States, for example, Stanford economist Nicholas Bloom suggests around 22% of all full workdays will be done from home in the future (up from just 5% before).

The McKinsey Global Institute suggests that over 20% of the workforce could work remotely three to five days a week.

Research from the World Bank suggests one in every five jobs could be done from home.

An Organisation for Economic Co-operation and Development (OECD) study finds that, although the opportunity for remote working varies greatly between and within nations, between 40% and 50% of jobs could potentially be done from home in some countries.

Looking Forward Many factors – including business strategies, government policy, demographics and the technology – will shape the working from home phenomenon and its impact on the economy, property market and many other aspects of our economic and social lives.

At Oliver Hume we continue to track this and many other trends to better understand the property market of the future.

Through our proprietary market intelligence and inhouse experts, we endeavour to understand not just where market currently is, but where it is heading and how opportunities can be maximised.

It appears, however, that working from home is here to stay.

While it is very difficult to fully ascertain the scale and impact of this major trend in the future it is important that we remain focussed on trying to understand it.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

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FEATURE ARTICLE

Australia’s Landmark Submarine Deal and the South Australian Property Market Australia’s landmark deal with the United States and Britain to acquire at least eight nuclear-powered submarines is tremendously significant for Adelaide and South Australia.

The deal is part of a broader trilateral security partnership dubbed “AUKUS” - Australia, the United Kingdom, and the United States.

Construction of the first submarines is due to commence in Adelaide this decade and will herald a new era of employment growth, manufacturing, innovation and economic development for South Australia.

Adelaide’s economy and the local property market will be key beneficiaries of the new strategic AUKUS partnership - and the new hi-tech submarine manufacturing specifically - further strengthening South Australia’s status as the nation’s ‘defence state.’

In addition to the new submarines around $6.4 billion, supporting 1,300 jobs, will be invested for the Life-ofType Extension and Full-Cycle Docking to the existing Collins class submarine fleet at South Australia’s Osborne Naval Shipyard.

The recent announcement comes at a time when Adelaide is welcoming back many South Australians – due to a range of factors including COVID-19 and the city’s relative housing affordability - and is increasingly recognised globally for its lifestyle and other competitive advantages.

This process is the complete replacement of key systems, essentially rebuilding each submarine, and will extend the service life of the fleet.

For example, Adelaide was recently ranked the world’s third most liveable city and the most liveable city in Australia.

The employment and other economic impacts of the new submarines and associated naval manufacturing will be significant.

Around 5,000 workers could be employed in South Australia’s naval shipbuilding industry over the next decade.

This includes many highly proficient and skilled professionals such as naval engineers, shipbuilders and designers.

The skill and knowledge of these workers will be worldclass given the sophistication and technology required to build advanced nuclear-powered submarines which are amongst the most complex machines ever made.

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The process will ensure Australia’s submarine capability is preserved until the new submarines are ready for service.

South Australia’s status as the nation’s shipbuilding capital is furthered by an additional $5.1 billion in upgrades to the Hobart Class destroyers at Osborne.

This investment is expected to create another 300 jobs in the state.

The new AUKUS partnership will extend beyond the new submarines and will include significant technology and knowledge sharing between the three nations.

This includes greater integration of many highly advanced security and defence-related science and technologies such as artificial intelligence, cyber, quantum technologies and other undersea capabilities.

Greater integration across industrial capability and supply chains fields is also planned.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

57

FEATURE ARTICLE

Demand For Detached Housing Proves Strong As Pandemic Changes Designs One of the questions heading into 2021 was what the end of HomeBuilder incentive would mean for the market.

Importantly, in addition to the quest for more space, many design and other features of homes being sought by buyers are changing.

Various alternative scenarios were being discussed.

It appears that COVID-19 has resulted in some buyers viewing their homes differently, due to the markedly different economic and health environment, and preferences are also changing.

Would demand moderate due to the end of the incentive? Or would demand continue to increase, buoyed by a rebounding economy and greater confidence?

Although this might appear novel, a quick glance into history suggests this is not a new phenomenon.

As we approach the end of 2021, the verdict is in.

Although record low interest rates, higher household savings and other factors have played a major role throughout 2021, the second year of COVID-19 has showed that Australia’s appetite for residential property remains strong.

Demand for detached housing, especially, is robust.

The latest Housing Industry Association figures show national new home sales rose 5.8% in August from the previous month.

Moreover, sales in recent months across the nation have continued to remain strong.

Pandemics, infections and related events have long been catalysts for changes in the built environment, architecture and design.

For example, an outbreak of cholera in London led to carpets and drapes in bathrooms being replaced with surfaces that were easier to clean. Today, modern bathrooms now prioritise tiles or marble, creating smooth services which can be cleaned and disinfected.

Similarly, powder rooms or bathrooms for guests are a common feature in modern house designs. However, the origin of this practice dates to the 1918 flu pandemic. Having a small bathroom in the main area meant guests weren’t required to walk through the entire dwelling to wash.

This is especially the case when compared to the period before COVID-19.

For example, sales over the past three months have been stronger than the same periods in both 2019 and 2018 (15.4% and 4.5% higher).

Similarly, Oliver Hume data shows new enquires for residential land in Victoria increased by 7% in August and 15% in July (from the previous month).

Stronger demand for detached homes suggests that, for at least some market segments, we could be in the early phase of a structural shift towards lower density dwellings such as detached house and townhouses.

Detached housing is clearly ticking boxes for many buyers because of this product’s capacity to deliver more space to live, work and play – space which has been increasingly sought after over the last year and a half as millions have been subject to lockdowns and other restrictions.

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Pandemics, infections and related events have long been catalysts for changes in the built environment, architecture and design.

So how are designs changing in the era of COVID-19?

House designs continue to evolve and it is likely that the impact of COVID-19 will continue to be felt for years.

However, even though we are only beginning to see many aspects of house design change, it is clear change is underway.

To date, some of the most distinctive design changes include: • Home offices: The rise in working from home means a dedicated space for a home office is increasingly highly sought after • Antimicrobial materials: The priority on health and safety could lead many people to choose easy-toclean materials and surfaces that are antimicrobial • Outdoor space emphasis: Integrating outdoor living into new homes are leading to more features like sprawling backyards, balconies and porches where people can play, cook, eat and exercise

• Multi-purpose spaces: More families spending more time at home is creating a need for spaces that can function for different purposes including as recreational space, gym, study or storage • Open space: People are sending more time at home. Seeking peace and comfort at home and larger living spaces can help them make the most of their leisure time.

Of course, the degree to which these changes in home design are permanent or transitory remains to be seen.

However, the growing recognition that a similar event could occur again in the future, suggests design changes will continue to flow through from the imaginations of architects and designers to the estates and suburbs of our cities and regions.

QUARTERLY MARKET INSIGHTS

SEPTEMBER QUARTER 2021

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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.