Australian Economic Property Indicators

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A brief overview of recent national property market indicators.

GLOBAL RESIDENTIAL PROPERTY  PERFORMANCE

In October 2017, the Bank for International Settlements (BIS) released a Working Paper looking at housing prices around the world. It showed that over the last 55 years Australian average house price growth was 8.1% pa, better than the average of advanced economies, but not exceptional as 5 of the 20 advanced economies showed stronger growth. More detailed review (link). This is consistent with Australia being a developed economy with relatively strong growth in population and economic growth.

RESIDENTIAL PROPERTY FORECASTS & PROJECTIONS

NATIONAL PROPERTY  INDICATORS

These charts look at long term trends for the Australian property market in general.

Each region performs differently – for this data please refer to reports for individual regions.

Some summary articles on regional activity are below:

Long term historical trends in property prices are shown in charts below.

Shorter-term movements in property prices vary, because the various research houses use different methodologies and report their findings at different times.

Australian dwelling price growth over the past year show the following movements:

Rent movements are shown in the CoreLogic Rental Review (PDF) and analysis by SQM-Rent-Indexes (PDF).

Vacancy rates are estimated by SQM Vacancy Rates (PDF).

Population movements are released by ABS, with a lag of generally over six months. Latest population figures (link). Latest population projections (link).

Number of Property Listings – SQM (PDF)

Days on Market – SQM (table)

NATIONAL ECONOMIC INDICATORS

The Charts below are mostly from the RBA.  Commentary from Compass Capital.

RBA-Australian-Economy-Snapshot (PDF)

RBA-Financial-Stability-Snapshot (PDF)

RBA-Economy-Composition-Snapshot (PDF)

The global economy, after considerable volatility during and after the GFC, has settled. Australia’s trading partners are now growing around trend. The RBA’s Economic Outlook expects this growth rate to continiue.

Very high commodity prices before the GFC has led to many new projects being initiated. The resulting increase in the supply led to a fall in commodity prices.  This price fall has led to some supply reduction. The world economy has also improved, and commodity prices have recovered somewhat.  The RBA expects Australia’s Ierms of Trade to remain about the same over the next few years.

The Australian exchange rate has tended to move with commodity prices.

The Australian economy has been growing at a moderate pace.

This is expected to continue.

Employment growth remains modest. While the unemployment rate has improved, the proportion of those employed that would like to work longer hours (and are therefore “underemployed”) has increased.

Subdued wages growth is allowing inflation to remain below the RBA’s target range of 2-3%.  The RBA expects inflation to pick up but remain within or below the target range for the next few years.

Share prices have generally recovered since the GFC.

Soft employment conditions have seen consumer sentiment fall to a little below average.

Business conditions and capacity utilisation have improved and are now positive. But businesses confidence has not improved to the same extent.

Low businesses confidence has resulted in low business investment, including in non-mining areas. This is a cause for concern for the authorities.

Low inflation and modest growth has allowed the RBA to keep interest rates at historically low levels, to seek to improve business conditions in the non-resource sectors, both by lowering the cost of funds, and by seeking to reduce upward pressure on the exchange rate. In August 2016, the RBA Cash Rate was reduced to a historic low of 1.5%.

The national housing market is dominated by Sydney and Melbourne, which have shown solid growth, assisted by low interest rates.

Regionally, Sydney and Melbourne have been considerably stronger than other regions. The resource economies of WA and NT have seen the reduction in commodity prices lead to some reduction in house prices. Other capitals are generally showing improved prices.

Improved dwelling prices and low interest rates have resulted in building approvals recovering to high levels, with higher~density housing increasing its share of the total. After decades of deregulation, APRA has called for banks to reduce lending to housing investors, even though investor loans are lower risk and have lower default levels than those to owner occupiers. The forced reduction in supply of finance has allowed banks to increase interest rates on investor loans above those of higher-risk loans to owner occupiers. This has reduced demand – recently, building approvals have started to ease and price pressure has abated.

Dwelling approvals have been particularly strong in inner city Melbourne and Brisbane – refer RBA chart below.

For more detailed commentary, please refer to the latest: