Australian housing markets report
Sydney and the Upper North Shore - a pause for now
Dr Andrew Wilson – Chief Economist Domain Group April 2016
Copyright 2016 Dr Andrew Wilson – all rights reserved
market-view Australian capital city housing markets - synchronised, orderly growth and correction phases
market-view Housing market analysis – house price cycle model (Wilson 98)
• Change points......
• Define phases peak
peak expansion Prices above last peak
trough recovery correction Prices above last trough Prices below last peak trough
Bubble myth?
contraction Prices below last trough
market-view Recent capital city prices growth
market-view Correction 2011 prices fall higher rates and prices reduce affordability confidence low
-1.3% -1.7%
-3.6% -4.1% -3.9% -4.4% -5.0%
-7.7%
Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin market-view Recovery 2012 prices stabilise and rise lower rates and prices lift affordability confidence reviving
12.2%
5.5% 4.7%
1.8% 0.7% 0.7%
-0.3%
-4.3%
Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin
market-view Expansion 2013 all prices rising sharp fall in rates fuels all markets confidence restored
15.3%
9.9% 9.4%
5.8% 5.1% 4.8% 3.4%
1.9%
Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin market-view Expansion 2014 mixed price growth local factors rise as rates steady over year confidence tested
15.3%
6.6% 6.5%
3.2% 3.0% 1.6% 0.5%
-5.4%
Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin
market-view Expansion 2015 prices growth converges over year as rates fall then rise confidence now generally stabilising
15.3% 14.1%
8.1% 6.3% 6.3% 4.2%
-1.9% -4.4%
Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin
market-view Most markets fall over March quarter Fewer investors, flat rates, low incomes, tighter lending
4.3%
1.2%
-0.05% -0.5%
-1.5% -1.3% -1.4%
-4.9%
Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin
market-view Annual growth rates weakening Market energy now converging - flatter outcomes in prospect
11.8%
7.6% 6.9%
4.8% 4.1% 3.4%
-3.3% -4.7% Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin market-view Most markets now above previous peaks
53.7%
28.3%
12.1% 8.6% 8.0% 5.9% 1.7%
-4.6%
Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin
market-view
Current capital city price cycle
market-view Capital city house price cycle (Wilson Curve)
Sydney Melbourne Darwin Perth
Canberra Adelaide Brisbane expansion
Hobart
correction recovery
contraction
market-view
Current state of the national market
market-view Current state of the national housing market
. Expansion consolidated but now moderating . Capital city house prices consolidating at record levels . Market dynamics now flattening . Sydney boom collapsed and Melbourne surge eased sharply . Brisbane still flat despite end-of-year optimism . Strong revival in Hobart continues in clear catch-up mode . Adelaide and Canberra now subdued following strong year . Mining capitals Perth and Darwin still underperformers but bottom may be in sight.
CONTEXT . Mixed-speed economies – AND housing markets . Markets and market segments patchy . Forward indicators and market drivers increasingly mixed and local . Higher rates impacted markets – testing affordability marginally but confidence generally . Rates of growth converging – no more booms or busts (unless policies change)
market-view
Key price drivers
market-view The future for house price growth?
....as usual depends on the economy
. Key Drivers . Unemployment and jobs . Wages, incomes and profits . Interest rates . Stockmarket . Population growth . Confidence
market-view Current capital city prices
market-view Sydney clearly the most expensive - but now below $1 million
$995,804
$726,962 $638,696 $610,305 $579,914 $512,809 $491,422
$360,212
Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin market-view Real house price growth
market-view Real price growth (less local inflation) subdued since last price peak (ABS Dec qtr 2015)
45.8%
14.7%
3.5%
-4.6% -4.4% -3.9% -7.5% -11.0%
Sydney Melbourne Brisbane Adelaide Perth Canberra Hobart Darwin June 11 June 10 June 10 June 10 June 10 Dec 10 Dec 10 Mar 11 market-view
Interest rates and housing markets
market-view Interest rates drive the cycle – for ALL capitals in sync
$1,100,000 Rates fall again 2015 8.00% Rates fall 08 Rates fall 11-12-13 (economy still flat) Rates rise 06-07 (GFC) (economy fades)
$1,000,000 (mining boom 1) Rates rise 09-10 7.00% (FHOGB – mining boom 2)
$900,000
6.00%
$800,000
5.00%
$700,000
4.00%
$600,000
3.00%
$500,000
2.00%
$400,000
1.00%
$300,000
$200,000 0.00% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Sydney Melbourne Brisbane Adelaide Perth Interest rate
market-view Sydney house prices and interest rates – clear underlying relationship
8% $1,100,000 7.25%
7% $1,000,000 $995,804 6% $900,000
5% 4.75%
$800,000
4%
$700,000 3% 3.00% $600,000 2% 2.00%
1% $500,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Interest Rate Sydney Median
market-view Australian capital city housing markets - synchronised, orderly growth and correction phases
market-view Sydney annual house price growth orderly growth and correction phases
22.1%
15.3%
-1.5%
-4.5%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year so Far market-view Sydney quarterly house price growth orderly growth and correction phases
8.5%
-1.5%
-3.2% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
market-view Sydney unit prices track house prices – but flatter
market-view Sydney houses vs units - in sync (Mar. qtr 16)
$1,100,000
$1,000,000 $995,804
$900,000
$800,000
$700,000
$656,166 $600,000
$500,000
$400,000
$300,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 Houses Units
market-view Buyer types
market-view Investors surge ends? (ABS NSW. loans Dec. qtr. 15)
$25
$20
$15 $15.70bn
$13.67bn
Billions $10
$5 $2.86bn
$0 2008 2009 2010 2011 2012 2013 2014 2015 Investors Changeover buyers First home buyers
market-view Investor market share still above average – changeover, FHB below (ABS NSW. loans)
51.8%
46.2% 45.8%
39.8%
13.6%
8.4%
Investors Changeover buyers First home buyers February Long-term average
market-view Investor loan growth rate now fading - FHB still down (ABS year to Feb. 2016 vs 2015 NSW)
15.0%
10.6%
8.4%
-2.9% Investors Changeover buyers First home buyers Total
market-view Sydney house prices track NSW loans (ABS Dec. qtr)
$1,100,000 $35
$1,000,000 $30 $900,000
$800,000 $25
$700,000
$20
$600,000
$500,000 $15 Billions
$400,000
$300,000 $10
$200,000 $5 $100,000
$0 $0 2008 2009 2010 2011 2012 2013 2014 2015 Loans House prices
market-view Investor loans collapse as APRA increases rates in June – then revives (ABS NSW)
$8 $7.19bn $7
$6
$5 $4.68bn
$4.26bn
$4 Billions
$3
$2
$1
$0 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 market-view All states home investors reviving - strong underlying appetite for property (ABS Dec.)
50.5%
27.5%
14.1% 12.5% 8.7% 8.3% 5.8% 5.3% 1.9%
NSW VIC QLD SA WA TAS NT ACT TOTAL
market-view National investor market revives (ABS )
$18
$16 $15.50bn
$14
$12 $10.94bn $10.45bn
$10 Billions $8
$6
$4
$2
$0 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16
market-view NSW has highest local investor state market share (ABS Feb. )
51.8%
45.9%
40.4% 39.3% 37.1% 38.2% 34.4%
29.3%
NSW VIC QLD SA WA TAS NT ACT market-view NSW has highest national investor market share (ABS Feb. )
40.8%
29.4%
15.0%
7.9%
3.7%
NSW VIC QLD SA WA
market-view NSW however has lowest FHB state market share (ABS Feb. )
18.8% 17.6%
14.6%
12.8% 11.5% 11.6%
8.4% 8.7%
NSW VIC QLD SA WA TAS NT ACT market-view Price ranges
market-view Prestige market surges (March qtr)
54.9% 53.9% 51.5%
13.6%
7.1% 7.6% 8.0%
-1.9% -1.0%
Budget Middle Prestige (up to $890k) ($890k to $2.5m) ($2.5m+) Mar qtr Year Previous price peak
market-view The Upper North Shore
market-view Sydney and the upper north shore in sync (March qtr)
$1,600,000
$1,400,000
$1,290,000 $1,200,000
$1,000,000 $995,804
$800,000
$600,000
$400,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Upper north shore Sydney
market-view Sydney regions December qtr
Region Median Qtr Year
Lower North $2,302,000 12.3% 14.0%
City and East $2,030,000 7.7% 12.8% Northern $1,600,000 1.9% 14.1% Beaches Inner West $1,427,500 -3.2% 5.3%
Upper North $1,290,000 -4.4% 4.0% Shore
South $1,085,000 -1.4% 7.4% Canterbury $855,000 -1.7% 6.2% Bankstown
West $674,750 -2.5% 8.5%
South West $656,000 -0.2% 7.5%
Blue Mountains $563,600 -0.2% 11.2%
Central Coast $543,500 0.6% 13.9% market-view Sydney regions
Houses Median Qtr Year Past peak
Lower North $2,302,000 12.3% 14.0% 59.3%
City and East $2,030,000 7.7% 12.8% 53.2%
Northern Beaches $1,600,000 1.9% 14.1% 51.9%
Inner West $1,427,500 -3.2% 5.3% 60.2%
Upper North Shore $1,290,000 -4.4% 4.0% 61.3%
South $1,085,000 -1.4% 7.4% 50.7%
Canterbury Bankstown $855,000 -1.7% 6.2% 58.3%
West $674,750 -2.5% 8.5% 60.7%
South West $656,000 -0.2% 7.5% 60.8%
Blue Mountains $563,600 -0.2% 11.2% 40.9%
Central Coast $543,500 0.6% 13.9% 46.9%
market-view Sydney regions
Units Median Qtr Year Past peak
Lower North $850,000 2.3% 11.8% 41.9%
City and East $830,000 -2.9% 5.7% 39.5%
Northern Beaches $765,000 -0.6% 10.9% 35.4%
Inner West $730,000 -0.3% 3.1% 35.2%
Upper North Shore $730,000 0.7% 7.4% 25.9%
South $629,000 -3.2% 2.3% 36.7%
Canterbury Bankstown $497,750 -3.9% 6.5% 53.2%
West $495,000 -2.0% 3.8% 38.3%
South West $425,000 -0.6% 9.0% 51.8%
Central Coast $405,000 2.5% 6.9% 34.0%
Blue Mountains NA NA NA NA
market-view Upper North Shore suburbs
market-view Upper north shore top selling suburbs (6 months March)
Houses Sold Median 6 month 1 year 5 year
Baulkham Hills 237 $985,000 -9.0% 7.1% 62.8%
Castle Hill 203 $1,305,000 -5.4% 6.9% 77.6%
St Ives 138 $1,760,500 0.6% 19.8% 74.7%
Wahroonga 109 $1,600,000 6.7% 23.3% 56.9%
Epping 101 $1,580,000 -9.5% 5.3% 85.9%
Carlingford 98 $1,259,000 0.7% 15.5% 73.7%
Turramurra 96 $1,620,000 -15.2% 7.9% 53.7%
Cherrybrook 93 $1,325,000 -5.1% 12.9% 77.9%
Ryde 91 $1,340,000 -6.8% 4.7% 59.5%
West Pennant Hills 86 $1,500,000 -1.3% 20.0% 72.4% market-view Upper north shore top selling suburbs (6 months March)
Units Sold Median 6 month 1 year 5 year
Ryde 136 $637,000 -9.0% 1.1% 47.5%
Chatswood 127 $875,000 -1.7% 5.7% 34.6%
Epping 118 $856,500 0.2% 8.1% 54.3%
Hornsby 97 $630,000 -2.6% 4.6% 49.5%
Baulkham Hills 69 $706,500 8.7% 9.5% 56.1%
Lindfield 67 $902,000 4.3% 21.9% 29.0%
Waitara 60 $650,000 -6.5% 5.3% 44.4%
Macquarie Park 56 $670,000 -0.3% 9.3% 52.0%
Killara 55 $903,000 0.1% 8.4% 30.9%
St Ives 55 $795,000 4.6% 10.4% 35.9%
market-view Sydney housing supply
market-view Sydney houses undersupplied but now rising (ABS building approvals )
18000
15,936 16000
14000
11,927 12000
10000
8000 6,584
6000
4000
2000
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
market-view Sydney units undersupplied now booming (ABS building approvals )
40000 36,243
35000
30000
25000 20,958 20000
15000
10000 9,102
5000
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
market-view Sydney total dwellings undersupplied but rising (ABS building approvals )
60000
52,179
50000
40000
32,885
30000
20000 16,570
10000
0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
market-view Sydney home building boom waning – units down 2243, houses 113 YTD (ABS approvals )
5000
4500
4000
3500
3000 2,680
2500 1,946 2000
1500 1,211 1,050 1000
500
0 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Houses Units
market-view Population and migration impact Sydney housing market
market-view New South Wales overseas migration drives local housing markets (ABS year ending Sept)
80000 $1,000,000 70,311 70000 $900,000 59,089 60000 $800,000
50000 $700,000 39,832 40000 $600,000
30000 $500,000
20000 $400,000
10000 $300,000
0 $200,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Net migration House prices
market-view Sydney population growth drives prices (ABS financial year)
2.5% $1,100,000
$1,000,000
2.0% 2.0% $900,000 1.7%
$800,000
1.5% 1.2% $700,000
$600,000 1.0%
$500,000
$400,000 0.5%
$300,000
0.0% $200,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Pop.growth House prices
market-view Sydney economic performance
market-view Population growth from jobseekers to rise with strong Sydney economy (ABS)
7%
6%
5.5%
5.1% 5.1% 4.9% 5% 4.9%
4%
3% 2012 2013 2014 2015 2016
market-view Population growth as strong economy creates 67,202 jobs over past year (ABS)
2,600,000
2,550,000 2,542,376
2,500,000 2,475,174
2,450,000 2,443,503 2,413,090 2,400,000 2,380,785
2,350,000
2,300,000
2,250,000
2,200,000
2,150,000 2012 2013 2014 2015 2016 market-view Low jobless, high jobs growth, near record participation despite rising population (ABS)
67.5%
67.0% 66.6% 66.5% 66.3% 66.4%
66.0% 65.9% 65.8%
65.5%
65.0%
64.5%
64.0%
63.5%
63.0% 2012 2013 2014 2015 2016
market-view All roads lead to the Sydney job market (ABS)
7.7%
6.7% 6.8% 6.7% 6.1% 6.1% 6.1% 5.9%
5.1% 5.1%
Sydney Melbourne Brisbane Adelaide Perth Mar-16 Mar-15
market-view
Economic outlook
market-view Economic outlook 2016
. Mixed national economic outlook . Pessimism outweighing optimism – future cloudy and recent jobless mixed, chronic low inflation and growth . Reserve Bank wary on near-term direction of economy with early rate cut now more likely – jobless the key . Economy in long-term transition from recent resource driver and increasingly hostage to global forces . Budget deficit constraining spending – growth forecasts revised down – new, higher taxes and spending cuts
. International economy weakening . China growth clearly questionable as yuan and local rates cut - fading global economy looms . Falling commodity prices - New Zealand and Canada interest rates down . US economy still subdued and fragile - lower jobless but wages growth weak and workforce low . AUD still too high despite USD rise from higher US rates - a significant factor for rate cut . Volatile local stockmarket continues its underperformance since GFC
. Mixed results for local economies . NSW solid growth trend – top performer as mixed economy spreads the load . VIC in transition as manufacturing base wanes but building and services holding up . QLD up as dollar falls - strong exporter, tourism, population rising – confidence up slowly . SA economic revival will be a gradual and lengthy process driven by lower dollar . WA in transition as mining building boom ends, lower iron ore prices and resources demand . ACT health dependant on government fiscal policies - as usual . NT boom resources economy faded under population surge but now resuming growth . TAS showing early signs of revival but remains a national underperformer
market-view
Auction markets
market-view Sydney auction clearance rates reflect market prices (Dec qtr)
$1,100,000 80.0%
$1,000,000 70.0%
$900,000 60.0%
$800,000 50.0%
$700,000 40.0%
$600,000 30.0%
$500,000 20.0%
$400,000 10.0%
$300,000 0.0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Median house price ACR
market-view Sydney auction volumes reflect market prices (Dec qtr)
13000 $1,000,000
$900,000 11000
$800,000
9000 $700,000
$600,000 7000
$500,000
5000 $400,000
$300,000 3000
$200,000
$100,000 1000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Auctions House price 4 per. Mov. Avg. (Auctions)
market-view 2015 Sydney auction market fades from APRA higher rates but reviving in 2016?
95% 2015 2016 90% 89.2%
85%
80%
75% 71.2% 70%
65%
60% 57.5%
55%
50% Wk 1 Wk 3 Wk 5 Wk 7 Wk 9 Wk Wk Wk Wk Wk Wk Wk Wk Wk Wk Wk Wk Wk Wk Wk Wk Wk Wk 1 Wk 3 Wk 5 Wk 7 Wk 9 Wk 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 11
market-view Sydney auction volumes down from wary sellers - (change from same weekend previous year)
100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80% June June July July Aug Aug Aug Sep Sep Oct Oct Nov Nov Dec Dec Feb Feb Mar April 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2016 2016 2016 2016
market-view Sydney auction results April 23
region sold rate Northern Beaches 23 88.5% City and East 45 84.9% Lower North 18 75.0%
Inner West 38 74.5%
North West 9 69.2%
West 14 66.7%
Canterbury Bankstown 9 64.3%
South 37 62.7%
Upper North Shore 20 62.5% South West 16 61.5% Central Coast 3 42.9%
Blue Mountains 0 NA market-view The upper north shore auction clearance rates down after revival
88.3%
63.6%
49.2%
Feb 15 Mar 15 April 15 May 15 June 15 July 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Feb 16 Mar 16 Apr 16
market-view Upper north shore auctions also down this year – 1272 vs 1302
617
467 441 409 364
281
Feb 15 Mar 15 April 15 May 15 June 15 July 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Feb 16 Mar 16 Apr 16
market-view Auction clearance rates reflect upper north shore prices (Mar qtr)
100.0% $1,500,000
90.0% $1,400,000
80.0% $1,300,000
70.0% $1,200,000
60.0% $1,100,000
50.0% $1,000,000
40.0% $900,000
30.0% $800,000
20.0% $700,000
10.0% $600,000
0.0% $500,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 House price Auctions
market-view Auction volumes also reflect upper north shore prices (Mar qtr)
2500 $1,600,000
$1,400,000 2000
$1,200,000
1500 $1,000,000
$800,000 1000
$600,000
500 $400,000
0 $200,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Auctions House price 4 per. Mov. Avg. (Auctions)
market-view Sydney market outlook 2016
market-view Sydney market in correction phase until spring
. Sharply weaker house price growth sentiment driven – but fundamentals still strong . Confidence impacted by higher APRA rates - crushed the boom - higher rate sensitive consumers . But local supply and demand factors remain positive: . Shortage of housing, high migration and strong local economy . Investor activity to consolidate as low vacancy rates and rising house rents push up yields . Low first home buyers , high migration, low house building keeps rent demand ahead of supply . Tax enhanced residential investment returns remain a positive in low yield economy . Possible changes to residential property taxes to favour existing investors . Prospect of lower RBA rates on the cards to offset higher bank rates from APRA policies . International investors – particularly from China to remain a driver of unit investment . Sydney correction a short-term crisis in confidence to recover by spring as value perceptions emerge . Sales volumes sharply lower as wary buyers and sellers sidelined - demand brought forward in boom . Low auction numbers to start the season compared to last years boom-time autumn surge . Sydney prices to rise by 2 percent in 2016 following remarkable three year boom of over 50 percent . Upper north shore to consolidate solid start to year also up 2 percent . Inner suburban, higher-priced regions robust, the budget-priced west in pause mode - for now . Low growth, low rates, low inflation economy to constrain house price growth generally in future . Booming house prices clearly a thing of the past – a positive for certainty and predictability . Buying and selling decisions to reflect personal agenda rather than the state of the market
market-view
Housing Market Barometer 2016 forecasts R Boom 12% I S Strong 4%8%
I Robust 6% N G Solid 4% Melbourne 5% Adelaide, Canberra, Hobart 4% Moderate 2% Brisbane, Darwin 3% Sydney, Perth 2% Flat 0% F Moderate 1% A L Solid 2% 0% L Robust 3% I N Strong 4% G 2% Bust 5% market-view
The rising tide
market-view House price history lesson
• Australian housing markets are historically trend-linked
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Sydney Melbourne Brisbane Adelaide Perth
market-view A rising tide lifts all boats - in time
. Economies . Employment . Incomes . Population growth . Prosperity . Confidence . House prices
. Monolithic Australian economy and housing market
market-view Australian residential property’s best friend (the Wilson curve)
Secure, reliable, long-term, tax-enhanced capital growth
market-view Australian property market analysis
. If you require any further information regarding Australian property market analysis I may be contacted by email at [email protected] or phone 0427 410 240
. For all the real-time housing market insights follow me on twitter at @DocAndrewWilson
. Connect on LinkedIn to my wide real estate network linkedin
. Listen 2UE Fridays 2-3pm My Property with Dr Andrew Wilson . Also Saturdays 4BC 830-845am and 2UE 1230-1pm
market-view Thank you
market-view