Property Market Breakdown

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Property Market Breakdown

Property Market Breakdown | April – May 2022

CoreLogic’s monthly Hedonic Home Value Index has just been released. Here are some of the most important data and how they would affect the market. 

First quarterly decline for Sydney and Melbourne

Sydney’s Home Value Index (HVI) has recorded their consecutive monthly decline, down 0.2% in April and down 0.5% for the quarter. Melbourne’s performance was a bit better, flat at 0% for April, but down 0.1% for the Quarter. When we look at the whole market, most capital cities had a 1.0% or more increase, but nationally all capital cities only had a 0.3% increase. Adelaide, at 1.9% growth in April, led the pace of capital gains, followed by Brisbane (1.7%), Canberra (1.3%) and Perth (1.1%). This indicates the weights of Sydney and Melbourne play a big part nationally.

Change in dwelling values as at 30 April, 2022

Source: Corelogic, 2022

Stock level are still low

Nationally, Annual change in total advertised supply down 11.3%, combined regional down 19.4%. Interesting, apart from Brisbane Adelaide and Perth, the rest of the capital cities have seen an increase in supply compared to last year. Brisbane and Adelaide have seen the most decline in advertised supply compared to last year, both over 20%. With the continues growth of population and migration, the low stock level in these areas will ensure the stability of the markets. With shortage on labour and most building materials, people not willing to sell, the stock shortage problem will not be fixed overnight.  

Annual change in total advertised supply

Source: Corelogic, 2022

Regionals still going strong

Regional areas still have a much strong growth compared to capital cities, monthly HVI were up 1.4% in April, close to 5x the growth of combined capital cities. The quarterly growth reflects the same picture, with combined regional areas up by 4.7%, compared to combined capital cities’ 1.0%, close to 5x the increase again. This indicates the stability of regional markets have not change.

Change in dwelling values as at 30 April, 2022

Source: Corelogic, 2022

Brisbane leading in Rental increase

Across the whole market, with vacancy rate still extremely low, as the boarder reopens and we are seeing migration starting to come back, making renting even harder in most markets. This has also been reflexed in rental increase. As at the end of April, Brisbane had an annual rental increase of 12.2% for houses, leading all capital cities, followed by Canberra at 9.9% for houses and Adelaide at 9.5% for houses, Melbourne with the least annual rental increase at 5.1%. Nationally, rents went up by 2.7% in the past three months to April. House rents are increasing faster than unit rents. However, we are seeing the trend changing sharply as demand for unit rentals increases.

Annual change in rents, Houses

Source: Corelogic, 2022

Rental growths are overtaking housing value growths

We have noticed, in the past 3 months, national housing value were up 1.9%, while rents increased 2.7%. Gross rental yield was up 0.2% nationally. Higher rental yield and the continued increase in rents are now converting more and more investors to make a move, taking a lager portion of housing market activity.  Financial aggregates published by the RBA to the end of March showed the monthly gain in investor credit growth was at the highest level since August 2015, with the speed of investment credit growth surpassing owner occupier credit for the first time since December 2016.

Would interest rate rise bring the market down?

What we must understand is that, even though interest rate will influence market, it is never the only factor. Our current unemployment rate is at 4.0%, the lowest since Nov 1974. The RBA latest financial stability report has shown the median repayment buffer for owner occupiers with a variable mortgage rate had grown to 21 months in Feb 2022, which is 11 months higher than the start of the pandemic. Even with a 2.0% rise in mortgage rates, the median repayment buffer would still be 19 months. Back in Oct 2021, with the rise of interest rate serviceability buffer rising to 3.0% from 2.5%, have are already seeing this adjustment effecting and working the market in the past 6 months. Low Loan to valuation value of only 5% for LVR greater than 75%, very low Loan in negative equity of only 0.25%, down from 2.25% in Jan 2020 are all indications that the markets and borrower’s stress level are at healthy level. As long as the interest rate is rising at steady pace, the effect on the market will be very minimum.

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