Brisbane has under performed, but is gathering momentum

Double click on the above to make bigger.  Source:  RP Data

Property Indices

RP Data's blog had a post responding to a Fairfax criticism of the RP Data property index,  It is worth reading.  One interesting graph shows property price index v. ASX index is included below.

Brisbane Apartments outperforming Brisbane Houses

According to RP Data:

"Capital city dwelling values were 1.1 per cent higher over the three months ending July, taking the aggregate capital gain to 5.0 per cent for the year to date across the combined capital cities. The gain was mostly centred in Sydney, Melbourne and Canberra where dwelling values rose 2.0 per cent, 1.8 per cent and 2.1 per cent respectively over the rolling quarter to offset the falls recorded in other capital cities. The Darwin market also recorded a capital gain over the past three months (+0.8%) while the remaining capital cities all recorded a drop in values (Brisbane -0.4%, Adelaide -2.6%, Perth -0.1%, Hobart - 1.2%)."

However, looking at the breakdown of the statistics, Brisbane apartments are doing much better than Brisbane houses.

Brisbane apartment prices (to 31 July 2014):

July 2014 - up 1.3%

Quarter - up 0.8%

Year to Date - up 3%
Year on Year - up 7.4%
Median price based on settled sales of Brisbane apartments over the quarter - $390,000

RP Data June Index Results

Capital city dwelling values have shown a 1.4 per cent capital gain over the month of June 2014, with all cities apart from Adelaide and Darwin recording a rise in dwelling values. According to RP Data research director Tim Lawless, the strong result has partially reversed last month’s 1.9 per cent fall and provides a - 0.2 per cent decline in dwelling values over the June quarter.

Mr Lawless said, “With interest rates remaining low for the foreseeable future, it is doubtful that housing values will start to slide, at least not at a macro level. What is more likely is that natural affordability constraints will start to dent buyer demand, as will the low rental yield scenario’s that are very much evident across the largest capital cities of Melbourne and Sydney.”

Other indicators such as clearance rates are holding relatively firm which, according to Mr Lawless, further reinforces the notion that the housing market isn’t set to show a market correction. 

Brisbane apartment prices (to 30 June 2014):

June 2014 - up 0.7%

Quarter - up 1.4%

Year to Date - up 1.7%
Year on Year - up 5.4%
Median price based on settled sales of Brisbane apartments over the quarter - $385,000

McGrath's View of Brisbane

Chief executive of McGrath Estate Agents and founder of the Australasian Real Estate Conference, John McGrath, said residential property in southeast Queensland had years of price increases ahead of it.

“Sydney and Melbourne have a couple of years to go (with price growth) and I think the market here (in Queensland) has three to four years to go of price growth,” he said.

Chinese property investment was also set to become increasingly important to southeast Queensland.

“It hasn’t yet hit southeast Queensland anywhere near the degree I expect it to,” Mr McGrath said. “At this point southeast Queensland has not been explored thoroughly and I think you’ll find huge Chinese buying coming into the Gold Coast and Queensland over the next few years as well.”

Full Story Here.

Values Fall!

From an RP Data Press Release today:

Dwelling values record first month-on-month fall since May 2013 

For the first time in 12 months, dwelling values across Australia’s capital cities showed a monthly fall by dropping 1.9 per cent in May.  Across most of the individual capital cities, dwelling values were also down over the month, led by Melbourne with a -3.6 per cent reduction in values. Over the past three months capital city dwelling values are up 0.7 per cent, the lowest rolling quarterly rate of dwelling value appreciation since the three months ending June 2013.

Over the growth cycle to date, which commenced in June 2012, capital city dwelling values are up 13.9 per cent. According to Mr Lawless, the surge in values has largely been driven by strong market conditions in Sydney (+21.1 per cent). 

“The month-on-month fall in capital city dwelling values is likely due in part to seasonal phenomenon, but may also be indicative of a broader trend towards cooler housing market conditions.   Historically, housing market conditions have softened in April and May as the market rebalances from what is typically a seasonally strong first quarter and also as a results of cooler climatic conditions during the autumn and winter months. Outside of the seasonality, we have been seeing signs that the housing market is at or approaching the peak of the growth cycle.  The rolling quarterly rate of growth peaked in August last year and we have been seeing weaker auction clearance rates since late February when the capital city clearance rate hit 76 per cent,” Mr Lawless said. 

By way of its cycle, Australia’s housing market has shown that a growth phase usually lasts around two years. Mr Lawless said that with affordability becoming more challenging and rental yields substantially compressed across Australia’s two largest cities, we wouldn’t be surprised if the growth trend moderated further over the year. 

A recent deterioration in consumer confidence reported in the Westpac/Melbourne Institute Consumer Sentiment Index shows that this factor may also be playing a role in the winding down of housing market conditions. 

According to the Index, consumer sentiment recently peaked in September last year and has since declined by 16.0 per cent. The May consumer sentiment results showed a significant fall away which can be attributed to the announcements made in the recent Federal Government Budget announcement.

Current investor risk is very much concentrated within the Sydney and Melbourne markets where investor activity has been the most concentrated,” Mr Lawless said. 

www.rpdata.com/indices 

The May RP Data - Rismark home value index results out today confirmed a fall in capital city dwelling values by 1.9% over the month which, according to RP Data research director Tim Lawless, can likely be attributed to both seasonality and more moderate housing market conditions. 

Brisbane apartment prices (to 31 May 2014):

May 2014 - down 1.2%

Quarter - down 0.1%

Year to Date - up 1%
Year on Year - up 3.4%
Median price based on settled sales of Brisbane apartments over the quarter - $385,000

April Index Results from RP Data

Brisbane apartment prices (to 30 April 2014):

April 2014 - up 1.9%

Quarter - up 1.4%
Year on Year - up 2.8%
Median price based on settled sales of Brisbane apartments over the quarter - $382,750.

Likely increased investor activity in Brisbane predicted

From RP Data Press Release:  "Gross rental yields on a typical Melbourne house are sitting at 3.3 per cent and Sydney gross yields are a bit higher at 3.7 per cent. According to Mr Lawless, such a scenario of low yields in these two cities suggests that housing values have moved out of step with rental rates which is likely to dampen some of the investor exuberance we have seen in both of these markets. I wouldn’t be surprised if Brisbane, where home values are much more affordable and rental yields are comparatively healthy, will start to see an increase in investor related demand based on Brisbane’s early stage in the growth cycle and comparatively healthy rental yields,” he said."

Brisbane Apartment Prices Going Backwards

Don't let real estate agents or the News Corporation press (including realestate.com.au) hoodwink you.  The Brisbane apartment market is not booming.  In fact, it is going backwards.  Compared with inflation, not great capital gains.  If you bought at the peak, you are still 5% below, not taking into account stamp duty and real estate agent fees for selling.  So ignore the headlines and look at the detailed actual results (that is, Brisbane apartment prices, and not Australian housing in general or Brisbane house prices).

From RP Data:

"After a flat February result, the RP Data – Rismark Home Value Index finished the March quarter in a strong fashion with dwelling values rising 2.3 per cent over the month to post a 3.5 per cent capital gain over the first quarter of the year. Apart from Perth, every capital city recorded a rise in dwelling values over the past three months. Melbourne posted the highest level of growth at 5.4 per cent over the quarter with Sydney and Hobart also recording a strong result in the March quarter with values up 4.4 per cent and 4.7 per cent respectively.

According to RP Data research director Tim Lawless, half of all Australia’s capital cities are now posting record high dwelling values, with Sydney’s housing market showing the most substantial increase beyond its previous market high."

Brisbane apartment prices (to 31 March 2014):

March 2014 - down 0.7%

Quarter - up 0.3%
Year on Year - up 1.7%
Year to Date - up 0.3%
Median price based on settled sales of Brisbane apartments over the quarter - $368,000.

Is Housing Market Slowing?

From an RP Data press release:

Mr Lawless said we will need to see further months of flat to negative movements before we can confidently say the housing market is slowing. “Our view is that housing market conditions will start to wind down later this year as affordability constraints and low rental yields dampen market conditions. Additionally, with a belief that mortgage rates are likely to start tightening later this year, it may help to quell some of the exuberance we have been seeing,” he said.

Brisbane apartment prices (to 28 February 2014):

February 2014 - up 0.3%

Quarter - up 1.5%
Year on Year - up 3.1%
Year to Date - up 1.1%
Median price based on settled sales of Brisbane apartments over the quarter - $387,000.

Brisbane Update

A video from RP Data regarding the Brisbane property market is here, presented by Tim Lawless.

Brisbane Apartment Market is picking up

The above information has been provided by RP Data.

Brisbane in Early Stage of Growth Cycle

"Rental rates continued to grow at a slower pace than dwelling values and further eroded rental yields across the capital cities. The markets where dwelling values have shown the most appreciation, Melbourne and Sydney, are now showing gross yields for houses below 4 per cent while the typical gross yield on a Melbourne and Sydney unit are higher at 4.2 per cent and 4.7 per cent gross respectively, however, they are lower than in all other capital cities.

According to Mr Lawless, such a yield environment may potentially start acting as a disincentive to investors. 

“With gross yields low in Melbourne, and not a lot better in Sydney, together with the fact that both these markets are well advanced in their growth cycle, it would suggest that investment fundamentals in these markets are waning. It is my view that investors will start seeking out the higher yields of Brisbane where the market is also far earlier in the growth cycle,” he said.

The Brisbane apartment median price is up 2.6% for the quarter and 0.8% for the month, according to RP Data.

Brisbane home prices increasing, but are still behind

Brisbane Apartment Sales Up

According to RP Data, Brisbane unit and apartment sales (that is, the number of sales) is up 16% than the same three month period a year ago.

(click on image to make bigger)

Based on RP Data’s estimates, there were 9,639 Brisbane house sales over the three months to October 2013 and 3,671 apartment sales.

How long does it take for property to double in value?

There is a common saying that Australian property double in value every seven years.  RP Data's recent Pain-Gain report suggests that they doubling takes longer.  And this does not take into account stamp duty and real estate agent's fees.

"Of those homes sold throughout the September 2013 quarter, those held for a short period of time have been much more susceptible to loss. Despite home values having risen over the past year, 17.6% of owners who purchased and sold in the same year, sold at a loss. The greatest proportion of loss making sales has occurred across those homes re-sold after three to five years (20.2%). If an owner wishes to double their initial outlay upon re-sale they generally need to hold the home for at least a decade. 56.2% of homes re-sold between 10 and 15 years after purchase sold for double the purchase price and 94.0% of resales after 15 years were for more than double the initial purchase price."

Brisbane Apartment Capital Growth Summary - December 2013

From RP Data:

Brisbane apartment prices (to 31 December 2013):

Month of December 2013 - up 0.4%

Quarter - up 2.4%
Year on Year - up 3.5%
Year to Date - up 3.5%
Median price based on settled sales of Brisbane apartments over the quarter - $383,000.

Mr Kusher from RP Data said that it is clear that as the market enters 2014 and as values rise across each capital city, the rate of growth will vary greatly. He said that the main challenges in 2014 are likely to be the impact of a forecasted higher unemployment rate, affordability constraints for the more price sensitive sectors of the market (particularly in Sydney, Melbourne and Perth) and whether any regulatory changes will be implemented by APRA and the RBA to cool the near-record high levels of investment activity.

RP Data December 2013 Report

Highlights over the three months to December 2013

• Best performing capital city: Sydney +4.1 per cent 
• Weakest performing capital city: Canberra, -1.3 per cent 
• Highest rental yields: Darwin houses with gross rental yield of 6.0 per cent and Darwin Units at 6.2 per cent 
• Lowest rental yields: Melbourne houses with gross rental yield of 3.4 per cent and Melbourne units at 4.2 per cent 
• Most expensive city: Sydney with a median dwelling price of $655,250 
• Most affordable city: Hobart with a median dwelling price of $330,000

Each capital city housing market recorded positive home value growth in 2013, however, the cities driving the capital growth have been Sydney (14.5%), Perth (9.9%) and Melbourne (8.5%). Brisbane was the only other city to record value growth in excess of 5 per cent (5.1%) with each of the remaining capital cities recording annual value growth of 3.5 per cent or less.

Brisbane – house values have increased by 5.3 per cent over 2013 compared to a 3.5 per cent increase in unit values. Value growth has only slightly outpaced rental growth however it has resulted in gross house yields falling from 4.7 per cent a year ago to 4.6 per cent currently and unit yields easing from 5.6 per cent to 5.5 per cent.

Pain and Gain

RP Data has issued its December 2013 Pain and Gain report, comparing sales prices with the actual purchase price for the same property.  A summary:

"Over the third quarter of 2013 RP Data recorded 69,949 residential property re-sales nationally; of these 11.1% recorded a gross loss from the original purchase price. The gross value of the losses associated with these loss making re-sales totalled $488.1 million. Conversely, 88.9% of all September quarter re-sales recorded a gross profit relative to their original purchase price. The gross profit from these re-sales equated to $12.6 billion.

 Lifestyle regions continue to show the largest proportion of loss making re-sales, particularly within the unit markets as opposed to detached housing markets. Queensland’s Far North has overtaken the Gold Coast to record the largest proportion of loss making re-sales, with 33.9% of all September quarter re-sales transacting at a price lower than what the home was purchased for."

Will property growth come to Brisbane?

The release yesterday of the RP Data and Rismark International October housing market results confirmed a 1.3 per cent rise across the combined capital cities index over the month with the rolling 12 month combined capital cities index growth rate recording its fastest pace in three years.

Rismark CEO, Ben Skilbeck, added that while Sydney has eclipsed its previous cyclical high and Melbourne is near its peak, Brisbane remains 8.4% below its highs. “There is, however, evidence that growth conditions may be spreading to Brisbane."

Brisbane apartment prices (to 31 October 2013):

October 2013 - up 0.6%

Quarter - up 2.3%
Year on Year - up 1%
Year to Date - up 1.6%
Median price based on settled sales of Brisbane apartments over the quarter - $375,000.