Property owners in most capital cities have enjoyed a great run in the last 5 years. Sydney and Melbourne have lead the charge with annual double digit growth but is that run about to come to an end?
If it does what should you do? Read on to get our take on this.
CoreLogic’s Monthly Housing & Economic Chart Pack for September 2017 shows signs the property bull market is running out of steam, evidenced by the following statistics:
Dwelling values were unchanged
- National dwelling values were unchanged in August with capital city values rising by 0.1% and combined regional areas seeing values fall -0.2%. Across the individual capital cities, only Perth and Darwin recorded falls while Sydney values recorded no change.
- Dwelling values were 0.5% higher nationally over the three months to August 2017 with capital city values 0.6% higher and regional market values -0.1% lower. Again, Perth and Darwin were the only cities in which values fell over the quarter.
Declining trend in settled house and unit sales
- An estimated 301,740 capital city dwelling sales were settled over the 12 months to August 2017 with the number of settled sales -4.5% lower over the year.
- Both house and unit sales have fallen over the past year.
- Transaction volumes have fallen over the past year in Sydney, Melbourne and Brisbane.
Gross rental yields are softening
- Gross rental yields were recorded at 3.6% nationally in August 2017; 3.3% across the combined capital cities and 5.0% across the combined regional markets.
- Gross rental yields are lower than they were a year ago across all capital cities.
Days on the market is creeping slightly higher
- The typical capital city dwelling is taking 43 days to sell which is lower than the 48 days it took a year ago but up from a recent low of 36 days.
- The days on market figure is higher over the year in Brisbane and Perth and unchanged in Sydney. Both Sydney and Melbourne have recently seen the days on market figure rise from their lows.
Properties advertised for sale less than a year ago
- The number of new properties advertised for sale is -1.0%, lower than a year ago nationally and -0.5% lower across the combined capital cities.
- Over the past 28 days, total advertised properties, nationally, were -4.8% lower than a year ago.
Auction clearance rates have eased
- Combined capital city auction clearance rates have remained below 70% for each of the past 14 weeks.
- Sydney’s final auction clearance rate has been above 70% just once in the last 12 weeks.
Other factors impacting the housing market
- The number of dwellings approved for construction have eased from record-high levels
- Upgraders and investors remain the key drivers of housing demand, while investor demand is slowing
- Investors are typically paying 60 basis points more on their mortgage than owner occupiers.
What does it all mean?
At UGC, we have been forecasting a slow down of the residential property market in the 2nd half of 2017. These statistics support that prediction but it’s not slowing as much as we thought. We still believe that property price growth will slow across the country and most likely see some falls in value in high density dwellings in the capital cities.
- If you are already in the property market, there is no need to panic and no reason to sell unless you have a poor property or are under financial pressure from other circumstances.
- If you are looking to invest, the slow down makes it a good time to enter the market but be clear on your objectives and have a quality selection process.