Another month has concluded and now we can look back at February to analyse where the property market might be heading. February is usually characterised by a slight jump in numbers. It is a new year and a lot of people chose this period to look for their new home. We will look at number of metrics that help us get sense of the property market today. Metrics could include property market drivers such as vacancy rates, house prices and others.
Sydney property market
Sydney market has declined a further 0.97% overall, the decline for houses was 1.07% and units 0.76%. A lot of analysts are surprised that units over performed houses in Sydney market. We are not surprised. We believe unit prices are supported by significant amount of off-the-plan units settling. This keeps artificially high prices, since buyers wouldn’t want to lose the deposit. We expect units to underperform in the medium term more than houses.
Sydney house prices are now 11.51% off their peak according to Corelogic. We are seeing unit declines accelerating but house declines moderating.
Verdict: We expect further declines in Sydney property market
Melbourne property market
Melbourne market has declined a further 1% overall, the decline for houses was 1.19% and units 0.59%. Similarly to Sydney, a lot of analysts are surprised that units over performed houses in Melbourne market. We are not surprised. We believe unit prices are supported by significant amount of off-the-plan units settling. This keeps artificially high prices, since buyers wouldn’t want to lose the deposit. We expect units to underperform in the medium term more than houses.
As we mentioned before, we were expecting losses in Melbourne to accelerate. We mentioned to Melbourne property market is lagging behind Sydney and we expected the losses to bottom after Sydney market, our thesis seemed to be spot on.
Verdict: We expect further declines in Melbourne property market. We continue to expect that Melbourne will have more pronounced losses than Sydney, unless the lending restrictions are lifted.
Brisbane property market
Brisbane market has declined to 0.30% overall, the decline for houses was 0.28% and units 0.40%. We believe the falls in other capitals, lending restrictions and uncertainty over federal elections and associated changes in investment laws are slowing down Brisbane growth. Overall, for us Brisbane is still a good story. There is significant amount of infrastructure spend that is coming on line towards the end of 2019 and affordability remains better than in our 2 biggest capitals.
Verdict: We expect Brisbane to be sideways for the first half of 2019, with moderate increase towards the end of the year. We are optimistic on Brisbane story in 2020.
Canberra property market
Canberra market has increased to 3.39% overall, the decline for houses was 0.12% and units 0.40%. We personally think a lot of the growth is off the back of excellent rental market and expectation of the spending spree should Labor.
Verdict: We expect Canberra to be moderately up in 2019.
Adelaide property market
Adelaide market has increased to 0.97% overall, the decline for houses was 0.05% and units increased by 0.62%. We are excited about vacancy rates in Adelaide, however we are not entirely sure about how sustainable this growth is. Adelaide economy is still struggling to move towards knowledge based economy. We continue to watch Adelaide property market, however for now we are not confident enough about its fundamentals.
Verdict: We expect Adelaide to be moderately up in 2019.
Perth property market
Perth market has decreased to 6.92% over the year, the decline for houses was 1.40% and units decreased by 1.73%. We are excited about vacancy rates in Perth, as they are decreasing rapidly. We believe this should provide some support to property prices. However, we think the biggest issue for WA is its significant reliance on mining. This is one of the reasons with think Brisbane property market outperformed Perth property market. Unlike WA, QLD economy is more diversified which enabled it transition better to post mining boom economy.
Verdict: We expect Perth to be down in 2019, however we are seeing 2019 as the bottom for Perth market.
Bottom line: Federal election and associated changes in negative gearing and CGT rules remain ambiguous. It is very hard to analyse and form educated expectations of market performance in the near future due to these opacities. We continue to expect our initial forecasts to play out, bar any shocks to the market from economic or federal changes.