Why long-term investment pays off in Australia

Thinking in the long-term pays off when buying a home in Australia, as capital growth means that returns can build significantly over years.

The new Pain & Gain report from CoreLogic shows that over 9 out of every 10 homes resold for more than their previous purchase price over the September 2016 quarter. The average profit made on selling an Australian home was $262,672, compared to the last time the property changed hands, while the average loss was $71,529.

Sydney paid off the most, with sellers earning an overall profit of $6.22 billion, while the most dramatic change over the year occurred in Perth and Darwin, where the instances of loss on resales almost doubled. Tasmania’s Hobart, on the other hand, recorded a lower proportion of dwellings resold at a loss, as the market’s price growth begins to pick up pace.

Adelaide was one of only three capital cities to record a lower loss rate this quarter while Melbourne now has the lowest proportion of loss-making house resales of all capital cities at 2.1 per cent.

In Brisbane, the number of loss-making unit resales was more than double that of houses.

More than the region, though, the driving factor in the financial success of sellers is the time spent holding on to their assets: homes that resold at a loss had a typical length of ownership of 6.1 years for houses and 6.5 years for apartments, much shorter than the 9.1 years profitable homes (and 7.6 years profitable apartments) were typically held for before selling.

“These latest results highlight that ownership of property, whether for investment or owner occupier purposes, should be seen as a long-term investment,” says Cameron Kusher of CoreLogic Research.

“Although the occurrence of losses rose over the quarter, in most cites the instances of homes reselling at a loss is low with the exceptions being Perth where almost two out of every five dwellings resold at a loss and Darwin where approximately three out of every 10 resales was at a loss over the quarter.”

 

Australian homes sell fastest in Sydney and Melbourne

24th November 2016

In recent years, the Australian property market spotlight has been stolen by two cities: Sydney and Melbourne. While both have seen high levels of demand push up their prices much higher than the rest of the country, though, homes continue to sell like hot cakes. Indeed, values have been rising in both markets for over four years in a row, but even with a low level of discounting from sellers, Australian homes sell fastest in both.

Seller discounts and the amount of time a home spends on the market are both reliable indicators of market conditions. According to CoreLogic RP Data, homes in Australia’s combined capital cities typically took 39 days to sale, slightly longer than the 36 days recorded in September 2015. What is consistent, though, is that Sydney and Melbourne operate at a much faster speed than the other capitals: homes in Hobart and Canberra have seen “fairly large falls in days on market over the past year”, notes CoreLogic, which aligns with accelerating value growth, but in Perth and Darwin, homes are taking much longer to sell, with conditions tougher for vendors and prices falling.

In September 2016, average homes were discounted by 5.7 per cent, down from 6 per cent a year ago.

“The lower level of discounting is reflective of more demand and fewer homes for sale but is also likely to reflect more realistic initial listing prices from vendors,” notes CoreLogic.

Indeed, in Sydney and Melbourne, where discounting levels are the lowest, strong demand from buyers means many homes easily reach their initial listing price, if not sell for a much higher figure. All of this is underpinned by relatively low supply levels.

“While these conditions persist it is difficult to see how home values in Sydney and Melbourne in particular, won’t continue to increase,” concludes CoreLogic.
 

Affordability continues to fall in Australia

3rd August 2016

Affordability continues to fall Down Under, as house prices in Australia’s capital cities reach a record high.

Property values climbed 0.8 per cent across Australia’s eight capital cities in July 2016, according to the latest CoreLogic July Home Value Index, taking growth so far this year to 6.3 per cent and the index an all-time high.

Four of Australia’s eight capital cities recorded a fall in dwelling values over the month, with the overal annual rate of growth also slipping from 11.1 per cent in October 2016 to 6.1 per cent. Prices in Sydney and Melbourne are rising at roughly half their former pace, from their peak annual rate of 18.4 per cent and 14.2 per cent in July 2015 respectively to 9.1 per cent and 7.5 per cent respectively. (Darwin and Perth remain as the only two capital cities to record a negative movement in dwelling values over the past twelve months, with values in Darwin down 7.6 per cent and Perth values falling by 5.6 per cent.)

However, housing remains increasingly unaffordable. Indeed, July marks the 50th month of the combined capitals growth cycle, with combined capital city dwelling values having risen by 38.3 per cent over that period.

CoreLogic head of research Tim Lawless says: “The recent moderation in the rate of capital gains should be viewed as a positive sign that growth in dwelling values may be returning to more sustainable levels. However, the growth trend rate is still tracking considerably faster than income growth resulting in a deterioration of housing affordability.”

Sydney, for example, has seen household incomes rise by 4.5 per cent per annum since June 2012, while house prices have risen 12.1 per cent.

Australia’s two-tier market continues as Sydney and Melbourne lead house price growth

6th July 2016

Australia’s two-tier market is continuing this summer, as Sydney and Melbourne lead house price growth.

New figures from CoreLogic show that capital city property prices rose 0.5 per cent in June 2016. CoreLogic’s capital cities index rose 8.3 per cent year-on-year taking results to a new record high. This is despite five of the eight cities seeing property values fall – a sign of just how strong growth has been in Sydney, Melbourne and Hobart, all of which enjoyed price growth.

Monthly declines of more than 1 per cent were recorded in Darwin (-1.6 per cent), Adelaide (-1.3 per cent) and Canberra (-1.1 per cent), while the falls in Brisbane (-0.1 per cent) and Perth (-0.8 per cent) were less severe. Sydney, though, says prices rise 1.2 per cent, while Melbourne and Hobart recorded growth of 0.8 per cent and 1.8 per cent.

CoreLogic Asia Pacific research director Tim comments: “While the higher rates of capital gains in Sydney and Melbourne can be tied back to strong economic conditions, and high rates of population growth, the same cannot be said for Hobart where economic conditions and migration rates are gradually improving from a low base. The strength in the Hobart market comes after a long period of underperformance, where home values in the city increased by only 1.4 per cent per annum over the past ten years. Potentially, the Hobart housing market is being fuelled by the sheer affordability of housing and a renewed trend towards Melbourne and Sydney buyers unlocking their equity to make lifestyle housing purchases.”

Lawless notes, though, that the markets are continuing to cool, with the pace of capital gains in June “substantially lower” than the April and May results, when CoreLogic reported a 1.7 per cent and 1.6 per cent month-on-month lift in capital city dwelling values.

“The monthly growth rate reduction is likely to be very much welcomed by state and federal government policy makers and regulators who may be concerned about a sustained rebound in capital gains,” he comments.

The disparity between the two tiers in the country’s real estate is evident over a longer timeframe too, with Sydney values now rising for four years, increased by a cumulative 59 per cent. Melbourne has also seen prices rise for the same length of time, with prices 41 per cent higher than growth rate to date.

Sydney property price growth at slowest pace in three years

21st June 2016

Property price growth in Sydney is at its slowest pace in three years, according to new figures. Data from the ABS shows that Sydney price growth has cooled to 9.7 per cent in the year to the March 2016 quarter. Melbourne, on the other hand, has overtaken the city with growth of 9.8 per cent.

Over the same period, Canberra (4.6 per cent) ranked third for price growth, followed by Hobart (4.2 per cent), Brisbane (4.1 per cent) and Adelaide (3.1 per cent). Dwelling prices continued to decline in both Darwin (down 4.9 per cent) and in Perth (down 4.5 per cent) in the year to the March 2016 quarter.

“Residential property prices across Australia’s eight capital cities in the March 2016 quarter were 6.8 per cent higher than 12 months previously,” says HIA economist, Diwa Hopkins. “This pace of growth is slower than what occurred throughout 2015, when growth averaged 9 per cent per annum.”

“This deceleration is largely being driven by developments in the Sydney residential property market, where annual price growth eased back into single-figure territory in March this year,” adds Hopkins. “Sydney prices grew at an annual rate of 9.7 per cent, beating the national average, but are also the city’s slowest pace of growth in almost three years.”

This deceleration in price growth has occurred against a backdrop of waning momentum in property transfers, particularly amongst non-detached housing.

Gap between Australian cities narrows, as price growth slows

22nd March 2016

The gap between Sydney and other Australian capital cities is narrowing, as house price growth slows across the country.

New ABS data shows that the rate of price growth eased during the final quarter of 2015. The annual growth rate of home prices across Australia’s eight capital cities eased to 8.7 per cent in the December 2015 quarter, driven in part by a deceleration of Sydney dwelling price growth.

“From an affordability perspective, the slowdown in dwelling price growth to a more sustainable pace is a welcome development,” comments HIA Senior Economist, Shane Garrett.

“The final quarter of 2015 also saw a narrowing of the gap between the capital cities in terms of price growth. In previous quarters, the divergence in the pace of price growth from city to city was very large.”

In the year to the December 2015 quarter, dwelling price growth remained strongest in Sydney (+13.9 per cent), followed by Melbourne (+9.6 per cent). Over the same period, Canberra (+6.0 per cent) ranked third for price growth, followed by Brisbane (+4.2 per cent), Hobart (+3.5 per cent) and Adelaide (+3.3 per cent). Dwelling prices declined in both Darwin (-3.2 per cent) and in Perth (-2.9 per cent).

During 2015, a record 220,000 new dwellings commenced construction across Australia.

“The additional supply is playing an important role in containing the severe price pressures in markets like Sydney and Melbourne,” adds Garrett.

Sydney house prices slip as capital cities heat up

2nd March 2016

Sydney house prices slipped in the three months to February 2016, as growth in other capital cities continued to heat up.

Sydney has long been the hottest housing market in Australia, but growth has moderated in recent months and other cities have begun to play catch up.

On average, capital city property prices increased by 0.5 per cent in February, but the trend in annual growth has moderated over the past seven months from 11.1 per cent down to 7.6 per cent. Part of that dip is due to Sydney, which was the only capital city to record a fall in dwelling values over the past three months, down 0.2 per cent.

The city with the greatest value rise over the past three months was Hobart (8.5 per cent), ahead of Melbourne (3.8 per cent) and Brisbane (2 per cent).

On a monthly basis, home values rose across each capital city with the exclusion of Perth and Canberra. The largest monthly increases in home values were recorded in the cities that have been underperforming over the growth cycle to date; Hobart dwelling values were 2.9 per cent higher, Adelaide showed a 1.9 oer cent rise, and Brisbane home values increased by 1.8 per cent.

Overall, Sydney and Melbourne remain the strongest markets in trend terms, although the gap is widening between the two, as Melbourne starts to move ahead.

Indeed, over the past 12 months, Melbourne has maintained its number one growth position, with annual capital gains of 11.1 per cent. The city’s values have held relatively firm since December 2015, with the annual rate of capital gain “virtually level over the past three months”.

Sydney’s annual rate of growth, on the other hand, has continued to moderate, having almost halved from its cyclical peak of 18.4 per cent recorded in July last year to reach 9.5 per cent growth over the past 12 months. Despite the slowing trend, Sydney remains the second best performing capital city over the past year, although Lawless notes that a few of the smaller cities “may start to rival Sydney’s position over the coming months”.

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