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Quarterly Economic ReviewThe Australian Residential Property
Market and Economy
Released May 2018
The Australian Residential Property
Market and Economy
Introduction 3
Housing Market 4
Mortgage Lending 11
Housing Supply 17
Demographic Overview 20
Household Finances 22
National Accounts 25
Inflation 26
Consumer Sentiment 27
Conclusion 28
About CoreLogic 30
Disclaimers 31
Contents
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The Australian Residential Property
Market and Economy
Nationally, dwelling value growth has stopped in its
tracks, in fact, over the first quarter of this year,
national dwelling values have fallen by -0.5%.
Although the quarterly rate of decline has slowed
compared to recent months, it was the largest fall in
values over a first quarter of the year since 2016. Over
the 12 months to March 2018, dwelling values
increased by 1.2% which was much lower than the
9.1% a year earlier and the slowest annual rate of
growth since December 2012.
The slowdown in dwelling value growth is occurring in
most capital cities, with Brisbane and Hobart the only
two cities to have recorded value falls to-date. Sydney
is leading the recent slowdown with values falling by
-3.9% from their peak while Perth (-10.8%) and Darwin
(-21.6%) have been in decline for a number of years,
the falls in Melbourne (-0.7%), Adelaide (-0.4%) and
Canberra (-0.2%) have been fairly minor to-date.
The decline in dwelling values across most capital
cities is interesting. A fall in values in Sydney and
Melbourne is somewhat understandable given surging
values over recent years which have led to
deteriorating housing affordability and record low rental
yields. Furthermore, investors were a key driver of
demand and increased regulation leading to higher
interest rates have led to a slowing of demand from this
segment. But outside of Sydney and Melbourne values
have not really surged nor have investors comprised a
larger than normal proportion of market activity. The
recent weakness is likely linked to overall housing
market sentiment and tighter credit policies impacting
on other capital city markets.
While capital city markets may be seeing weaker
housing conditions, regional markets, particularly those
in lifestyle areas close to capital cities are faring much
better. Geelong is now experiencing a faster rate of
annual growth than Melbourne. Annual growth in
Illawarra, as well as Newcastle and Lake Macquarie is
stronger than that of Sydney. The Gold and Sunshine
Coasts have recorded stronger annual value growth
than Brisbane. It seems that many of those who have
seen the value of their properties rise substantially in
Sydney and Melbourne over recent years may be
cashing out and moving to lifestyle markets where
housing costs are much lower than those in these
capital cities. Additionally, the more affordable price
points are likely seeing demand ripple away from
Sydney and Melbourne as buyers look to purchase
within their budgets.
The past few years have been characterised by high
rates of population growth nationally and a heightened
level of new housing construction activity, particularly
for units. The construction boom has facilitated an
increase in dwelling accommodation however, it has
also occurred at the same time as historic high levels of
investment activity in the housing market, with
investment largely focused within Sydney and
Melbourne. Residential developers have ramped up
the construction of new dwellings, supported by strong
demand for their stock, with much of this demand
coming from investors that have been attracted by the
strong capital gains on offer in Sydney and Melbourne,
as well as tax deductibility of investment costs. Over
the period Australia has also seen a sharp rise in the
level of foreign investment in housing stock. More
recently investment has slowed due to a combination of
credit rationing and higher mortgage rates for investors
as well as those not paying down the principal on their
mortgage. This has also occurred in line with a slight
pull-back in new housing construction. Although both
investment and construction activity has slowed both
remain substantially higher than long-term average
levels.
CoreLogic previously had concerns that heightened
levels of new housing construction and investor
participation would cause rents to fall. The latest data
indicates that although rents are still higher over the
year the rate of growth is slowing. In fact, the first
quarter of this year was the weakest first quarter for
rental growth in Sydney since 2009 and the weakest in
Melbourne since 2012. While rental growth is slowing
in most capital cities, a lack of supply is leading to
surging rents in Hobart.
Low mortgage rates have not been enough to avoid
recent dwelling value declines. While affordability is
stretched in Sydney and Melbourne and falls are
somewhat understandable, tighter new mortgage
policies are likely a key driver of the housing market
weakness. With a Royal Commission underway into
banking it is reasonable to expect that getting a new
mortgage is set to become even more difficult. Given
this, it is reasonable to anticipate that values are likely
to continue to decline over the coming quarters,
particularly in Sydney and Melbourne where mortgage
demand is strongest. What will be interesting to view is
the extent to which any weakness in Sydney and
Melbourne infects other housing markets across the
country.
Introduction
$7.5 trillion $2.5 trillion $1.9 trillion $0.972 trillion
Value of Residential
Property
Value of Australian
Superannuation
Value of Listed Equities Value of Commercial
Real Estate
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-2.1%
5.3%
1.3% 1.7%
-2.4%
13.0%
-7.5%
2.9%0.8%
2.6%1.2%
-10%
-5%
0%
5%
10%
15%
Change in dwelling values,12 months to March 2018
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%Quarterly and annual change in national dwelling values
Quarterly change Annual change
The Australian Residential Property
Market and Economy
► National dwelling values fell by -0.5% over the first
quarter of 2018, following a -0.3% fall over the
previous quarter.
► Combined capital city dwelling values fell -0.9%
over the quarter while combined regional areas saw
values increase 1.1%.
► Both capital city and regional markets are recording
slower quarterly growth than they were a year ago
► Values were lower over the quarter in Sydney
(-1.7%), Melbourne (-0.5%), Adelaide (-0.4%),
Perth (-0.2%), Darwin (-0.1%) and Canberra
(-0.2%) while they were unchanged in Brisbane and
higher in Hobart (+3.4%).
► Over the past 12 months, national dwelling values
increased by +1.2% with combined capital city
values +0.8% higher and combined regional market
values up +2.6%.
► Annual value growth nationally was the slowest it’s
been since December 2012 and combined capital
city value growth is the slowest it’s been since
November 2012.
Housing Market
► Since the annual rate of dwelling value growth
peaked at 10.4% in May 2017, the rate of growth
has now slowed to 1.2%.
► Both the combined capital cities and the combined
regional markets have recorded slower annual
value growth over the past 12 months than the
previous 12 months when values were up 10.1%
and 5.2% respectively.
► While Hobart recorded the strongest annual value
growth of +13.0%, Melbourne was the only other
capital city in which values rose by more than 5%
(+5.3%).
► The other cities in which values increased over the
year were: Brisbane (+1.3%), Adelaide (+1.7%) and
Canberra (+2.9%).
► Dwelling values were lower over the year in Sydney
(-2.1%), Perth (-2.4%) and Darwin (-7.5%).
► In each capital city except for Perth and Hobart, the
annual change in dwelling values to March 2018
was lower than the annual change to March 2017.
► Over the March 2018 quarter, Sydney house values
were -2.1% lower and unit values were down -0.9%
while over the year houses were -3.8% lower and
units were +1.9% higher.
► Melbourne house values fell -0.6% over the quarter
but were +4.9% higher over the past year while
units values were unchanged over the quarter and
+6.6% higher over the year.
National dwelling values declined by -0.5% over the first quarter of 2018
Hobart was the only capital city to record double-digit value growth over the 12 months to March 2018
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
0.9%
8.4%
5.2% 6.1%
1.5%
18.7%
-2.3%
7.5%
4.1%
7.9%
4.8%
-5%
0%
5%
10%
15%
20%
Total returns over the 12 months to March 2018
The Australian Residential Property
Market and Economy
House values in Brisbane were unchanged over the
March 2018 quarter and were +1.8% higher over the
past year. Unit values were -0.5% lower over the
quarter and -1.4% lower over the year.
Over the March quarter, Adelaide house values fell -
0.5% and unit values increased +0.5%. Over the past
12 months, house values were +2.0% higher and unit
values were unchanged.
Perth house values increased by 0.2% over the quarter
but were -2.3% lower over the year. Unit values were -
2.2% lower over the quarter and -3.1% lower over the
year.
House (+3.4%) and unit (+3.6%) values were higher
over the quarter in Hobart and rose +13.4% and
+10.8% respectively over the past year.
Darwin house values increased by +1.8% over the
quarter while unit values fell -3.9%. Over the year,
house values were -6.0% lower and unit values were -
10.5% lower.
Canberra house values were unchanged over the
quarter and +3.7% higher over the year while unit
values were -0.7% lower over the quarter and +0.4%
higher over the year.
Annual total returns from housing are the lowest
they’ve been since October 2012
► The 4.8% total return from housing over the past 12
months is the lowest annual return since October
2012.
► Annual total returns across the combined capital
cities were recorded at 4.1%, the lowest returns
since September 2012.
► Total returns across the combined capital cities
were recorded at 7.9% over the past year, their
lowest returns since May 2015.
► Hobart was the only capital city in which double
digit returns were generated over the past 12
months.
► While returns were positive in all capital cities
outside of Darwin (-2.3%) each city other than
Hobart and Perth have recorded a fall in total
returns over the past year.
► Sydney’s total returns have fallen from +19.3% a
year ago to just +0.9%, the lowest they’ve been
since April 2009.
► Over the past five years, total returns nationally
have been recorded at 10.7% p.a. while Sydney
(13.7% p.a.), Melbourne (12.6% p.a.) and Hobart
(12.0% p.a.) have generated much higher returns,
while returns in Perth (2.9% p.a.) and Darwin (1.0%
p.a.) have been much lower.
Housing Market
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
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91.1% 89.3%
19.3%20.9%
4.5%
39.6%
-1.6%
31.1%
63.0%
22.9%
53.3%
-20%
0%
20%
40%
60%
80%
100%
Change in dwelling values,January 2009 to March 2018
67.8%57.7%
20.7% 18.2%1.1%
37.1%
-10.3%
16.6%
45.8%
19.7%
39.6%
-20%
0%
20%
40%
60%
80%
Change in dwelling values over the current growth phase to March 2018
The Australian Residential Property
Market and Economy
► Following a decline of -6.5% between June 2010
and February 2012, national dwelling values have
increased by 39.6% since that time to March 2018.
► The chart below shows the increase in home
values across the current phase in each capital city
with Sydney and Melbourne recording a
substantially higher level of growth than all other
capital cities.
► Considering that Hobart has recorded the third
highest rate of growth at just 37.1%, with most of
that growth over the past two years, it is clear that
this growth phase has been very much focused on
Sydney and Melbourne.
► Outside of the two major capital cities and Hobart,
values have increased by 20.7% in Brisbane,
18.2% in Adelaide and 16.6% in Canberra.
► Over the period, Perth has recorded a value
increase of just 1.1% while Darwin values are
-10.3% lower.
► Interest rates are usually named as the catalyst for
such strong growth, but all cities have the same
interest rates, yet Sydney and Melbourne have
substantially outperformed all other capital cities.
As we further dissect the housing market it is clear
that demographics, investment concentrations and
labour markets are a big driver of Sydney and
Melbourne’s strength.
Housing Market
Growth in Sydney and Melbourne over recent years has eclipsed all other capital cities
► In 2008, during the financial crisis, capital city
dwelling values fell by -7.9% between March 2008
and January 2009 but with lower interest rates and
first home buyer stimulus dwelling values began to
rise thereafter.
► As has been the case with the most recent growth
phase, since the global financial shock it has been
the two largest capital cities that have seen
substantial value growth while other capital cities
have recorded relatively moderate increases in
values.
► The relative strength of the Sydney and Melbourne
economies, strong migration into those cities and a
relatively low supply of stock available for sale has
supported this growth in dwelling values while
these conditions have generally not been apparent
in other capital cities.
► Note that although Sydney and Melbourne have
recorded the strongest growth over this period,
values are now falling in both of these cities with
declines more rapid in Sydney.
► Outside of Sydney and Melbourne growth has
generally been minimal over the period.
Since value falls in 2008 housing market growth conditions have been significantly skewed towards Sydney and
Melbourne
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
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0
10,000
20,000
30,000
40,000
50,000
60,000
70,000Monthly number of settled dwelling sales
Monthly sales 6 month average
$1,033,892
$828,720
$534,676
$460,946
$488,003
$444,613
$482,996
$675,582
$695,328
$369,548
$570,249
$756,557
$574,388
$382,887
$330,572
$403,331
$349,904
$337,708
$431,026
$575,798
$340,692
$515,180
$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000
Sydney
Melbourne
Brisbane
Adelaide
Perth
Hobart
Darwin
Canberra
Combined capitals
Combined regions
National
Median house and unit values as at March 2018
Units Houses
The Australian Residential Property
Market and Economy
► At the end of March 2018, the national median
value of a house was recorded at $570,249 and the
median unit value was $515,180, a gap of 10.7%
► When you split the results individually to the
combined capital cities and combined regional
markets the gap between house and unit values is
wider in the capital cities (20.8%) and narrower in
the regional markets (8.5%).
► Across the individual capital cities, the premium for
houses over units is recorded at: 36.7% in Sydney,
44.3% in Melbourne, 39.6% in Brisbane, 39.4% in
Adelaide, 21.0% in Perth, 27.1% in Hobart, 43.0%
in Darwin and 56.7% in Canberra.
► In dollar terms the gaps between house and unit
prices are recorded at: $277,335 in Sydney,
$254,332 in Melbourne, $151,790 in Brisbane,
$130,374 in Adelaide, $84,672 in Perth, $94,708 in
Hobart, $145,288 in Darwin and $244,556 in
Canberra.
Housing Market Overview
Houses continue to show a premium over units across the country
► It is estimated that over the 12 months to March
2018 there were 472,123 settled dwelling sales
nationwide.
► Compared to sales over the 12 months to March
2017, the number of transactions was -6.8% lower.
Annual sales are tracking -13.7% lower than the
recent peak recorded over the twelve months
ending July 2015.
► The combined capital cities recorded an estimated
297,062 settled sales over the year which
accounted for 63% of total sales nationally.
► Capital city transactions were -8.1% lower over the
past year than the previous year while regional
market transactions were down -4.6%.
► Across the individual capital cities, the annual
change in transactions was recorded at: -9.8% in
Sydney, -11.1% in Melbourne, -9.7% in Brisbane,
+1.3% in Adelaide, +1.9% in Perth, -6.1% in
Hobart, -1.5% in Darwin and -10.0% in Canberra.
► Note that these figures only count settled sales; off-
the-plan sales will typically settle upon completion
of the project, at that time these sales will be
counted at their contract date.
► Given this, it is expected that recent years of sales
activity will be revised higher once these
settlements occur.
Settled sales transactions have continued to trend lower
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0
10
20
30
40
50
60
70
80
90
Combined capital cities days on market
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
Combined capital cities vendor discounting levels
► Vendor discounting measures the difference
between the initial list price and the ultimate selling
price of properties which sell by private treaty for
less than their original list price.
► Vendors that sold their homes below the initial list
price are currently discounting them by 5.7%.
► The current level of discounting across the
individual capital cities is recorded at: 5.3% in
Sydney, 4.5% in Melbourne, 5.1% in Brisbane,
6.0% in Adelaide, 8.2% in Perth, 5.2% in Hobart,
11.0% in Darwin and 4.0% in Canberra.
► Melbourne, Brisbane and Adelaide were the only
capital cities in which discounting levels are
currently lower than they were a year ago.
The Australian Residential Property
Market and Economy
Housing Market Overview
Discounting levels have continued to reduce over recent months
► The days on market figure measures the average
time from the first listing date to the contract date
for properties sold by private treaty.
► Combined capital city homes are currently taking
an average of 50 days to sell compared to 46 days
at the same time a year ago.
► Note a seasonal spike is observed at this time of
year each year.
► At an individual capital city level, the typical days on
market is recorded at 43 days in Sydney, 30 days
in Melbourne, 73 days in Brisbane, 62 days in
Adelaide, 74 days in Perth, 28 days in Hobart, 82
days in Darwin and 56 days in Canberra.
► The typical days on market has reduced over the
past year in Adelaide (-1 day), Perth (-6 days),
Hobart (-27 days), Darwin (-15 days) and is
unchanged in Melbourne.
► In Sydney, Brisbane and Canberra homes are
taking longer to sell than they were a year ago, up
14 days, 11 days and 18 days respectively.
The length of time it takes to sell a home is slightly higher over the past year
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
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3.5%
3.7%
3.9%
4.1%
4.3%
4.5%
4.7%
4.9%
Gross rental yields, National
0%
2%
4%
6%
8%
10%
12%Annual change in national dwelling rents
The Australian Residential Property
Market and Economy
Housing Market Overview
► Rental rates increased by 1.1% over the March
2018 quarter and were 2.2% higher over the past
year.
► Combined capital city rents were 1.0% higher over
the quarter and 1.9% higher over the year, while
combined regional market rents were 1.2% higher
over the quarter and 3.1% higher over the year.
► The March 2018 quarter recorded slower growth
than the same quarter in 2017 (1.5%).
► Annual rental growth is now the slowest it has been
since May of last year.
► Over the quarter, rents fell in Darwin (-0.3%) and
increased in Sydney (+0.5%), Melbourne (+1.2%),
Brisbane (+1.1%), Adelaide (+1.0%), Perth
(+1.7%), Hobart (+5.0%) and Canberra (+2.3%).
► Over the past 12 months, rental rates fell in Perth
► (-1.3%) and Darwin (-1.6%) and increased in
Sydney (+1.7%), Melbourne (+3.5%), Brisbane
(+0.6%), Adelaide (+2.2%), Hobart (+11.7%) and
Canberra (+4.2%).
Rental growth has started to slow over recent months, particularly within Sydney and Melbourne
► At the end of March 2018, the gross rental yield
nationally was recorded at 3.7%, 3.4% across the
combined capital cities and 4.9% across the
combined regional markets.
► Houses (3.5%) have lower gross yields than units
(4.2%) nationally as well as across the combined
capital cities (3.2% vs. 3.9%) and combined capital
regional markets (4.8% vs. 5.2%).
► Across Australia, gross rental yields have softened
over recent years however, they have started to lift
marginally over recent months.
► Throughout the individual capital cities, gross rental
yields are currently recorded at: 3.2% in Sydney,
2.9% in Melbourne, 4.4% in Brisbane, 4.3% in
Adelaide, 3.9% in Perth, 5.0% in Hobart, 5.8% in
Darwin and 4.6% in Canberra.
► Gross rental yields are currently higher than they
were a year ago in Sydney, Darwin and Canberra
however, yields have firmed in most cities over
recent months.
► With rental growth remaining firm in most areas and
value growth slowing we expect to see some
further increases in yields over the coming year.
With dwelling values falling and rents continuing to rise, rental yields have started to lift
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Quarterly Review | September 2017
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permitted. The information is deemed reliable but not guaranteed.
$0
$2
$4
$6
$8
$10
$12
$14
Bill
ion
s
Monthly value of owner occupier housing finance commitments by type
Construction of dwellingsPurchase of new dwellingsRefinance of established dwellingsPurchase of established dwellings
Source: CoreLogic, ABS
$0
$5
$10
$15
$20
$25
Bill
ion
s
Monthly value of housing finance commitments, National
Owner occupier Investor
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
Mortgage Lending
► There was $33.5 billion in housing finance
commitments in February 2018 to Australian
lenders.
► The total value of housing finance commitments
increased by 1.0% in February 2018 and was 2.1%
higher year-on-year.
► The $33.5 billion in commitments was split between
$21.5 billion to owner occupiers and $12.0 billion to
investors.
► The value of owner occupier housing finance
commitments (including refinanced loans)
increased by 1.3% over the month and was 7.2%
higher year-on-year.
► Finance commitments to investors increased by
0.5% in February however, they were -5.9% lower
year-on-year.
► The ongoing changes to lending policies for
investors has led to less mortgage activity across
this segment however, stamp duty concessions in
NSW and Vic for first home buyers and low interest
rates continues to support demand from the owner
occupier segment.
Housing finance commitments to owner occupiers are trending higher as commitments to investors trend
lower
► In February 2018, the $21.5 billion in owner
occupier housing finance commitments was split
between: $2.0 billion for construction of dwellings,
$1.2 billion for purchase of new dwellings, $6.5
billion for refinancing of established dwellings and
$11.8 billion for purchase of established dwellings.
► Owner occupier lending has been rising on the
back of increases in lending for all sectors over the
past year except for refinances.
► Year-on-year, finance commitments were higher for
construction of dwellings (+6.4%), purchase of new
dwellings (+28.1%), refinancing of established
dwellings (+6.5%) and purchase of established
dwellings (+6.0%).
The value of lending to owner occupiers is trending higher
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000Monthly number of owner occupier first home buyer finance
commitments
Source: CoreLogic, ABS
$0
$2
$4
$6
$8
$10
$12
$14
$16
Bill
ion
s
Monthly value of investor housing finance commitments by type
Construction of dwellings Purchase of established dwellings
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
Mortgage Market
► In February 2018 there was $12.0 billion in housing
finance commitments to investors, consisting of
$1.2 billion for construction of dwellings and $10.8
billion for established housing.
► Lending for construction of dwellings rose over the
month (+9.1%) and year (+18.0%) while lending for
established dwellings fell over the month (-0.4%)
and year (-8.0%).
► The value of investor housing finance commitments
had been easing on the back of higher mortgage
rates to investors and other policy constraints
restricting lending to this segment.
► As at February 2018, the value of investor housing
finance commitments was -17.8% below its historic
peak.
► Although the value of lending to investors has
fallen, investors accounted for 44.5% of the total
value of new finance commitments (excluding
refinances) in February which was well above the
long-run average share of 34.3%.
► New South Wales and Victoria have seen
heightened levels of investor borrowing over recent
years with New South Wales’ much higher than
Victoria’s level, and the recent increases in
mortgage rates to investors, as well as tighter
lender credit policies, are most likely to impact on
demand within those markets where investors have
been most active.
Lending to investors is well below its peak but significantly higher than long-term levels
► Data on owner occupier housing finance
commitments to first home buyers shows that there
were 8,782 commitments in February 2018.
► Although February is a seasonally slower period of
the year, the volume of commitments were 4.8%
higher over the month and 33.1% higher than at the
same time last year.
► A big driver of the rebounding first home buyer
numbers has been the removal of stamp duty for
first home buyers under certain price thresholds in
NSW and Vic from July 1, 2017.
► Comparing the number of first home buyer
commitments to last year across the states shows
volumes are higher in NSW (+103.3%), Vic
(+38.6%), Qld (+3.8%), SA (+17.8%), Tas (+2.2%),
NT (+26.8%) and ACT (+177.7%) and are lower in
WA (-0.1%).
Owner occupier first home buyer finance commitments have surged higher over recent months
© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property
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$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
Bill
ion
s
Quarterly value of new interest-only mortgages
Source: CoreLogic, APRA
0%
5%
10%
15%
20%
25%
30%
Monthly proportion of new mortgages on a fixed rate home loan
Source: CoreLogic, ABS
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000Average owner occupier loan size, monthly
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
Owner occupier average loan sizes have eased over
recent months but are higher over the year
The average new mortgage size to owner occupiers
was recorded at $382,200 in February 2018.
Average mortgage sizes have fallen over the each of
the past two months however, they are 8.1% higher
year-on-year.
First home buyer average loans sizes are $327,700 and
have increased by 6.1% over the year
Non-first home buyer average loan sizes sit at $394,100
and have increased by 9.3% year-on-year.
The majority of owner occupiers take out a variable rate
mortgage
Housing finance data reveals that in February 2018,
14.4% of owner occupier mortgage commitments were
for fixed-rate loans.
At its absolute peak, in March 2008, approximately one
quarter of mortgages were on a fixed rate.
Variable rate mortgages are clearly preferred by
Australian owner occupiers, again this data is not
published for investors.
The falling proportion of new mortgages on a fixed rate
is likely reflective of the fact discounted variable
mortgage rates are cheaper than fixed rates and
mortgage rates are expected to remain low for some
time.
The majority of mortgages being on a variable rate
means that when the RBA change the cash rate setting
or lenders adjust mortgage rates, it has an almost
immediate impact on household finances.
Interest-only lending is comprising a much smaller
proportion of new mortgages
The Australian Prudential Regulation Authority (APRA)
reported that over the December 2017 quarter there
was $15.272 billion in new interest-only mortgage
lending.
The $15.272 billion in new interest only lending was an
historic low (data is available from March 2008).
The $15.272 billion of new lending for interest-only
purposes represented an historic low of 15.2% of total
new lending and is much lower than its peak of 45.6%
of lending in June 2015.
APRA has regulated that lenders can’t lend more than
30% of total new lending to interest-only purposes.
Although there was no real rebound in interest-only
lending over the quarter some lenders have started
reducing mortgage rates for interest-only products
which could lead to a bit of a rebound over the coming
quarters.
Mortgage Market
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
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0%
10%
20%
30%
40%
50%
60%
Proportion of total new mortgage lending by loan to valuation ratio band
Less than 60% 60% to 80% 80% to 90% Greater than 90%
Source: CoreLogic, APRA
$170,000
$190,000
$210,000
$230,000
$250,000
$270,000
$290,000
Average outstanding mortgage balance
Source: CoreLogic, APRA
The Australian Residential Property
Market and Economy
Average outstanding mortgage balances rose by 4.1%
over the year to December 2017
► The average outstanding mortgage balance was
recorded at $266,500 as at the end of 2017 which was
4.1% higher over the year.
► Interest-only mortgages had the highest average
outstanding amount at $348,500, up 3.0% over the
year.
► Mortgages with an offset facility also had an above
average outstanding amount ($316,000) having risen
by 1.9% over the past year.
► The average outstanding balance on a reverse
mortgage has increased by 5.9% over the past year to
$104,900.
► Low-documentation mortgages had an average
outstanding balance of $196,700 which has increased
by 2.3% over the past year.
► Other non-standard mortgages have seen their
average outstanding balances fall by -1.2% over the
year to $185,300 at the end of December 2017.
► While outstanding mortgages amounts are edging
slightly higher, they remain substantially lower than
current prices indicating that, on average, mortgagees
have significant equity in their properties.
Mortgage Market
The share of lending with a loan to value ratio (LVR) above 90% increased slightly over the December 2017
quarter
► According to APRA there was $100.329 billion in new
mortgage lending over the December 2017 quarter.
► $27.646 billion worth of new mortgage lending over the
quarter was for loans with an LVR of 60% or less which
accounted for 27.6% of all new mortgage lending for the
quarter, its highest share since June 2013.
► Loans with an LVR of between 60% and 80%
accounted for 51.6% of all new lending over the quarter
at $51.780 billion.
► An historic high 79.2% of new mortgages over the
quarter had an LVR of less than 80%.
► 13.6% of lending over the quarter was for loans with an
LVR of between 80% and 90%, at a total of $13.694
billion.
► Just $7.209 billion was lent for mortgages with an LVR
of more than 90% over the December 2017 quarter.
► With fewer new mortgages being written with high LVR’s
it reflects a more conservative approach to mortgage
lending being taken by lenders.
► Mortgages with LVR’s above 80% also typically incur
lenders mortgage insurance (LMI) and a reduction in
higher LVR lending likely indicates reduced demand for
this product.
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
0%
5%
10%
15%
20%
25%
30%
35%
Annual change in total housing credit, National
Owner occupier Investor
Source: CoreLogic, RBA
Residential Real Estate Underpins Australia’s Wealth
Number of
dwellings
10.0 million
Outstanding
mortgage debt
$1.74 trillion
Household wealth
held in housing
52.1%
Total
sales p.a.
472,123
Gross value of
sales p.a.
$302.7 billionSource: CoreLogic, ABS, RBA, ASX
The Australian Residential Property
Market and Economy
Mortgage Market
► The total value of outstanding mortgage credit,
according to the RBA, was $1.74 trillion in February
2018, with the value outstanding having almost
doubled over the past decade.
► Housing credit advanced by 0.5% in February with
investor credit (0.2%) advancing at a slower pace
than credit to owner occupiers (0.7%).
► Over the month, both owner occupier and investor
credit recorded an acceleration in their expansion.
► Over the 12 months to February 2018, housing
credit has advanced by 6.2% which was its slowest
growth since May 2014.
► Owner occupier housing credit increased by 8.1%
over the year to February 2018, its fastest rate of
expansion since November 2016.
► Investor credit expanded by 2.8% over the year, its
slowest rate of annual growth since October 2016.
The annual change in investor housing credit has slowed substantially over the past year
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
Quarterly Review | September 2017
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000Quarterly dwelling commencements, National
Houses Units
Source: CoreLogic, ABS
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000Monthly dwelling approvals, National
Houses Units
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
Housing Supply
► In February 2018, 18,671 dwellings were approved
for construction nationally.
► Approvals fell by -6.2% over the month and they
were -3.1% lower year-on-year. After peaking in
August 2016, the number of approvals in February
2018 was -13.7% lower.
► 10,251 of the total approvals in February 2018
were for houses with approvals tracking 2.3%
higher over the month and 6.1% higher year-on-
year.
► Despite being higher over the month and year,
approvals in February 2018 were -5.7% lower than
their recent peak.
► Unit approvals were -6.2% lower over the month,
► -3.1% lower over the year and -29.5% off their
peak.
► Looking at annual data, approvals are lower over
the year in Sydney (-11.2%), Brisbane (-3.0%),
Perth (-10.4%), Darwin (-47.0%) and Canberra
► (-26.0%) and are higher in Melbourne (4.3%),
Adelaide (5.8%) and Hobart (35.8%).
► It remains to be seen how many of these approved
new properties will be built given slowing housing
market conditions and generally tighter financing
arrangements for both investors and developers.
Approvals for houses and units have eased from their recent highs but remain at elevated levels
Dwelling commencements for units are now in a clear downwards trend
► 52,641 dwellings commenced construction over the
December 2017 quarter which was -5.0% lower than
over the previous quarter and -8.3% lower than the
December 2016 quarter.
► In terms of commencements for new construction, there
were 289,038 new houses and 23,150 new units which
commenced construction.
► New house commencements were 0.7% higher over the
quarter and 0.7% higher year-on-year while new unit
commencements fell by -11.7% over the quarter and
were -17.7% lower year-on-year.
► Throughout the states and territories commencements
were lower relative to the same quarter last year in
NSW, Vic, Qld, SA, NT and ACT and were higher
elsewhere.
► With approvals now lower than they have been over
recent times and an increasing number of projects being
delayed or withdrawn, particularly in the high-rise unit
space, it is expected that there will continue to be fewer
commencements over the coming quarters.
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Dec-87 Dec-92 Dec-97 Dec-02 Dec-07 Dec-12 Dec-17
Quarterly number of dwellings under construction, National
Houses Units
Source: CoreLogic, ABS
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000Quarterly dwelling completions, National
Houses Units
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
Housing Supply
► There were 218,842 dwellings under construction
at the end of December 2017 consisting of: 66,331
new houses, 150,237 new units and 2,274 existing
dwellings (renovations).
► The number of new houses under construction fell
by -0.1% over the quarter and are 36.8% higher
than their long-term average.
► The number of new units under construction was
-1.3% lower over the quarter and 276.2% higher
than its long-term average.
► Dwelling approvals and commencements have
eased over recent months but remain elevated
which should result in heightened volumes of
dwellings under construction over the coming
quarters
► Across the individual states the data shows that
while the number of dwellings under construction
has started to fall, noticeably so in Vic and Qld, in
NSW the number of units under construction has
continued to climb.
► The heightened level of unit construction in
particular, will take a number of years to work its
way through to completion.
Dwelling completions continue to fall as fewer new projects come through the pipeline
► 51,484 dwellings were completed over the
December 2017 quarter which was -1.2% fewer
completions than the previous quarter and -12.2%
fewer than the December 2016 quarter.
► The data consisted of 27,470 new house
completions and 23,405 new unit completions.
► New house completions were -2.5% lower over the
quarter and -2.9% lower over the year with
completions at their lowest level since the March
2016 quarter.
► New unit completions were also at their lowest level
since March 2016 and they were -0.2% lower over
the quarter and -20.4% lower over the year.
► Completions were lower over the year in each state
and territory except for South Australia.
► There remains a substantial number of dwellings
under construction which should ensure that
completions continue to remain elevated for some
time however, they are likely to drift lower over
time.
The volume of stock under construction remains at near record-high levels
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Quarterly number of dwellings approved for construction but not commenced, National
Houses Units
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
Housing Supply
A record high number of dwellings are approved for construction but are yet to commence
► There was 46,359 dwellings approved for
construction that had not yet commenced as at the
end of the December 2017 quarter which was a
record-high and 22.0% higher than over the
previous quarter.
► This figure consisted of 11,807 new houses
awaiting commencement and 33,776 new units not
yet commenced.
► The number of houses not yet commenced has
trended higher over the past two quarters and is
now at its highest level since September 2011 while
the number of yet to be commenced units spiked
higher over the quarter to reach a record high.
► The number of dwellings awaiting commencement
across the states and territories are: 21,340 in
NSW, 11,446 in Vic, 5,701 in Qld, 4,266 in SA,
2,299 in WA, 416 in Tas, 216 in NT and 675 in
ACT.
► The number of dwellings awaiting commencement
is at an historic high in Vic and SA and close to
historic highs in NSW and Qld.
► With the housing market now slowing and tighter
lending conditions it is expected that at the very
least, an elevated, if not increasing number of
projects which have been approved for construction
will be delayed or withdrawn.
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Components of annual population change, National
Natural increase Net overseas migration
Source: CoreLogic, ABS
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%Annual change in national population
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
Demographic Overview
The annual rate of national population growth has steadied recently
► It was estimated that at the end of the September
2017 quarter, the national population was
24,702,851 persons.
► Australia’s population increased by 1.6% or
395,613 persons over the 12 months to September
2017.
► While net overseas migration has accelerated,
natural increase has slowed
Net overseas migration is the main driver of the strong rate of population growth
► Population growth nationally is comprised of net
overseas migration as well as the natural increase
in the population (births minus deaths). State-
based migration also includes net interstate
migration which cancels out at a national level.
► Net overseas migration was recorded at 250,127
persons over the 12 months to September 2017
which was 15.4% higher than at the same time in
2016 and at its highest level since September
2009.
► Natural increase fell by -4.0% over the year and
was recorded at 145,486 persons.
► The national rate of annual population growth
peaked at 2.2% in December 2008 when the
population increased by 459,504 persons over the
quarter, of which net overseas migration was
recorded at 315,687 persons.
► Although the rate of population growth and
overseas migration has slowed relative to the 2008
peak, it remains elevated and is much higher than
in most other developed countries throughout the
world.
Victoria remains the population growth powerhouse of the nation
► The population of New South Wales increased by
1.6% or 123,105 persons over the 12 months to
September 2017. The annual population increase
was 5.5% higher over the year and slightly lower
than its record high.
► Victoria’s population increased by a nation-leading
2.4% over the 12 months to September 2017 with
the population increasing by 147,424 residents
over the year. The total change in population over
the year was 1.2% higher than over the previous
year.
► With an increase of 81,271 persons over the year
to September 2017, Queensland’s population
increased by 1.7% over the year. The 81,271
person increase in population was the greatest
annual population increase for the state since June
2013 and 18.8% higher than the population
increase a year earlier.
► South Australia’s population increased by 10,799
persons over the 12 months to September 2017
resulting in a population growth rate of 0.6%. The
10,799 person increase in population was slightly
higher than the previous quarter but -3.4% lower
than over the previous year.
► The population of Western Australia increased by
22,032 persons or 0.9% over the past year.
Although Western Australia is seeing a historically
slow rate of population growth, the state’s annual
change in population lifted (from a low base) by
33.0% over the past year.
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
-20,000
0
20,000
40,000
60,000
80,000
100,000
120,000
Annual number of net overseas migrants by states and territories
NSW Vic Qld SA WA Tas NT ACT
Source: CoreLogic, ABS
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
NSW VIC QLD SA WA TAS NT ACT
Change in population over the 12 months to September 2017
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
► The Tasmanian population increased by 3,289
persons or 0.6% over the 12 months to September
2017. The 3,745 increase was the greatest annual
population increase since December 2010.
► Northern Territory’s population increased by just 73
persons over the 12 months to June 2017, a
-92.7% decline on the increase a year earlier.
► In the Australian Capital Territory, the rate of
population growth was recorded at 1.8% over the
past year resulting in an increase in population of
7,165 persons.
Demographic Overview
More than three quarters of net overseas migration has been into NSW or Vic
► Most of those people immigrating to Australia
continue to choose to settle in either NSW or Vic
with net overseas migration over the past year
recorded at record highs of 98,762 persons in NSW
and 88,521 persons in Vic.
► NSW accounted for 39.5% of net overseas
migration nationally and Vic accounted for 35.4%.
If you add in the 12.5% in Qld, the three most
populous states accounted for 87.4% of national
net overseas migration.
► With net overseas migration of 98,782 persons over
the past year, New South Wales recorded its
greatest volume of net overseas migrants on record
and the number was 17.3% higher compared to the
previous year.
► The net overseas migration of 88,521 persons into
Victoria over the past year was the greatest number
on record and 15.3% higher than the previous year.
► Queensland’s net overseas migration was recorded
at 31,374 persons over the past year which was
14.1% higher than the number of overseas
migrants at the same time a year earlier and the
highest number since March 2014.
► Over the past year there were 11,263 net overseas
migrants to South Australia which was 4.6% higher
than the number a year earlier.
► Net overseas migration to Western Australia is well
below historic peaks however, the 13,800 net
migrants to the state over the past year was 7.7%
higher than over the previous year and the greatest
number since December 2014.
► Net overseas migration for Tasmania was recorded
at 1,948 persons which was 45.8% higher than a
year earlier and its highest annual number since
September 2009.
► The 940 net overseas migrants to the Northern
Territory over the past year was 8.7% higher than
the number over the previous year but still well
down on recent levels.
► The Australian Capital Territory had net overseas
migration of 3,492 persons over the past year
which was 45.0% higher than the number over the
previous year and the highest number since
December 2009.
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
Annual number of net interstate migrants by states and territories
NSW Vic Qld SA WA Tas NT ACT
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
Demographic Overview
Queensland continues to lead the pack for net interstate migration
► The net outflow of New South Wales residents to
other states and territories was recorded at 16,433
persons over the past year, its greatest decline
since December 2012.
► Victoria recorded a net gain from interstate
migration of 16,926 persons, that figure has now
fallen for two consecutive quarters.
► Net interstate migration to Queensland was
recorded at 19,324 persons over the past year, its
greatest increase since June 2008. Annual net
interstate migration to Queensland now leads the
nation and has increased over each of the past 11
quarters.
► South Australia recorded a loss of 5,847 persons
over the past year due to net interstate migration
which was the lowest annual outflow of residents
from the state since December 2015.
► After annual net interstate migration peaked at
11,425 persons in September 2012, Western
Australia has recorded a loss of 11,581 residents
over the past year, which is a slightly lower net loss
than the record-high annual loss two quarters
earlier.
► Net interstate migration to Tasmania saw a net gain
of 1,000 residents over the past year, which was its
strongest net inflow since June 2009.
► The net loss of 3,710 residents from the Northern
Territory over the past year was its greatest outflow
on record.
► The Australian Capital Territory has recorded a net
inflow of residents from other parts of the country of
321 persons over the past year, which was its
lowest inflow since September 2016.
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0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
Ratio of household and housing debt to disposable income, National
Household Housing
Source: CoreLogic, RBA
3%
5%
7%
9%
11%
13%
15%Mortgage rates for owner occupiers over time
Standard variable Discounted variable 3 year fixed
Source: CoreLogic, RBA
The Australian Residential Property
Market and Economy
Household Finances
Mortgage rates have been lifted despite the cash rate holding at record lows
► At their March 2018 meeting, the RBA kept the
official cash rate on hold at 1.5%.
► The cash rate has now had its longest period of
stability, remaining unchanged since August 2016.
► For an owner occupier, average mortgage rates are
currently recorded at: 5.20% for a standard variable
mortgage, 4.50% for a discounted variable
mortgage and 4.15% for a three year fixed rate.
► For investors, current average mortgage rates are:
5.80% for a standard variable mortgage, 5.10% for
a discounted variable mortgage and 4.40% for a
three year fixed mortgage.
► Mortgage premiums for investors have only been in
place for two and a half years and were introduced
in response to the heightened level of purchasing
by this market segment.
► Investors on variable mortgage rates are now
typically paying 60 basis points more than owner
occupiers (and premiums are even greater for
interest-only mortgages) which is a significant
contributor to the slowing mortgage demand.
Gross household and housing debt continues to rise to new record highs
► The national ratio of household debt to disposable
income was recorded at 188.6% in December
2017, up from 187.3% the previous quarter and
180.7% a year earlier.
► The 188.6% ratio of household debt to disposable
income is largely made up of housing debt which
has a record-high ratio of 138.9% up from 137.5%
the previous quarter and 133.2% a year earlier.
► Of the 138.9% ratio of housing debt to disposable
income, 105.4% is owner occupier debt (also a
record-high) leaving 33.5% to investors.
► Although household and housing debt is at historic
high levels, the ratio of total interest payments to
disposable income sits at 8.9% for total debt and
7.2% for housing debt, both of which have edged
slightly higher of late, yet also indicating that lower
interest rates have improved serviceability which is
at levels last seen in early 2003.
► The high level of housing and household debt
makes households much more sensitive to any
changes in mortgage rates.
► Also remember that this is a national view; home
owners that have either had their mortgage for
many years or have no mortgage are likely to be in
a stronger position while recent buyers may be in
much higher levels of debt.
© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property
rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
0%
1%
2%
3%
4%
5%
6%
Annual change in wage price index, public and private sector, National
Private sector Public sector
Source: CoreLogic, ABS
0%
200%
400%
600%
800%
1000%
1200%Ratio of household and housing assets to disposable income
Household Housing
Source: CoreLogic, RBA
The Australian Residential Property
Market and Economy
Household Finances
While housing and household debt are at record highs, the ratio of household and housing assets to
disposable incomes is also at near record highs
► As at the end of the December 2017 quarter, the
ratio of household assets to disposable income was
recorded at 961.5% and the ratio of housing assets
to disposable income was recorded at 525.3%
► A year earlier these ratios were recorded at 923.2%
for household assets and 504.6% for housing
assets, indicating that asset values have risen at a
faster pace than debt.
► It is undeniable that households are heavily
indebted, largely due to housing however, the
macro view is that these assets have a significantly
higher value than the debt held against them.
► Of course the macro view does not show what is
occurring in individual properties or locations,
households that have recently taken out large debt
(such as a mortgage) and those who own homes
where values have fallen over recent years are
likely to be in a much weaker position than these
figures indicate.
► Furthermore, were asset values to start falling, it is
unlikely that the debt would decline at an equivalent
rate.
Annual wage growth has increased slightly but wage rises remain sluggish
► The ABS wage price index showed that over the 12
months to December 2017, the Index increased by
2.1%, slightly higher than their historic low of 1.9%
in June 2017.
► Separating the data into private and public sector
wages shows that private sector wages increased
by 1.9% over the year and public sector wages
were 2.4% higher.
► The ABS has been producing this dataset since
late 1997 and the growth in wages for both the
private and public sector is only slightly above
historically low levels.
► Lower wages growth impacts on a household’s
ability and willingness to spend more, particularly
on items such as rent and other non-essential
spending.
► The low rate of growth in wages appears to have
not had any impact on the growth in dwelling
values, but is likely a key driver of weak retail
spending and a softening in household saving and
increasing indebtedness.
© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property
rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Dec-82 Dec-87 Dec-92 Dec-97 Dec-02 Dec-07 Dec-12 Dec-17
Household saving ratio, National
Source: CoreLogic, ABS
0.3%
0.6%
0.1%
-0.3%
0.0%
-0.4%
-0.1%
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
Publicconsumption
Privateconsumption
Private capitalformation
Public capitalformation
Investories Exports Imports
Contributions to quarterly change in GDP, December 2017 quarter
Source: CoreLogic, ABS
-4%
-2%
0%
2%
4%
6%
8%
10%
Quarterly and annual change in GDP
Quarterly Annual
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
National Accounts
The Australian economy grew by 0.4% over the final quarter of 2017
► The national economy expanded by 0.4% over the
December 2017 quarter to be up 2.4% over the
year.
► The 2.4% annual increase is down from 2.9% the
previous quarter and remains below long-term
average levels.
► Per capita GDP was unchanged over the quarter
and just 0.8% higher over the year highlighting that
headline GDP is expanding more rapidly than it is
for individuals.
► Nominal (or inflation adjusted) GDP rose by 0.8%
over the December 2017 quarter to be 3.5% higher
over the year.
► The total output of the national economy over the
12 months to June 2017 was $1.717 trillion.
► Although Australia’s economy continues to expand,
the rate of growth remains well below the long term
average, particularly on a per capita basis.
Consumption from both the public and private sectors drove economic growth over the December 2017
quarter
► Over the December 2017 quarter, the percentage
point contributions to GDP growth were: +0.3%
from government expenditure. +0.6% from
household expenditure, +0.1% from private capital
formation, -0.3% from public capital formation,
0.0% from inventories, -0.4% from exports and
-0.4% from imports.
► Looking at the annual change in the value of these
components: government expenditure rose 4.9%,
household expenditure rose 2.9%, private capital
formation rose 2.8%, public capital formation rose
1.5%, exports increased by 0.8% while imports
increased by 6.6%.
Household saving ratio increased over the quarter but remains well below recent levels
► According to data in the National Accounts, the
household saving ratio was recorded at 2.7% over
the December 2017 quarter.
► The household saving ratio has now been below
10% for 22 consecutive quarters.
► Given that interest rates, are so low, as are risk-
free returns, it is little surprise to see that
households are saving less and are increasing
borrowings however, sluggish wage growth is
probably also contributing to households saving
less.
© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property
rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
-3.5%
-3.4%
-0.1%
0.5%
0.6%
1.0%
1.9%
2.6%
2.9%
3.3%
4.2%
7.0%
-6% -4% -2% 0% 2% 4% 6% 8%
Clothing and Footwear
Communication
Furnishings, Household Equipment and Services
Food and Non-alcoholic Beverages
Recreation and Culture
Insurance and Financial Services
All Groups
Education
Transport
Housing
Health
Alcohol and Tobacco
Annual change in the components of CPI, March 2018
Source: CoreLogic, ABS
-2%
0%
2%
4%
6%
8%
10% Annual inflation, National
All groups Avg of trimmed mean and weighted median
RBA's target range
Source: CoreLogic, ABS
The Australian Residential Property
Market and Economy
Inflation
Both headline and underlying inflation remains below the RBA’s target range
► Although official interest rates remain at their lowest
levels since the 1960s, inflation remains stubbornly
low.
► Headline inflation increased by 0.4% over the
March 2018 quarter taking it 1.9% higher over the
12 months to March 2018.
► Headline inflation was within the RBA target range
a year ago but has slipped lower over the past four
quarters, it has been below 2% annually for 13 of
the past 14 quarters.
► The RBA’s preferred measures of underlying
inflation; the trimmed mean and weighted median
both increased by 0.5% over the March 2018
quarter.
► The trimmed mean was 1.9% higher over the year
and the weighted median rose 2.0% resulting in
underlying inflation increasing 2.0%.
► The 2.0% increase in underlying inflation was the
first time it had reached 2% since December 2015.
Costs associated with alcohol and tobacco, health and housing are escalating at the fastest rate
► Inflation is being dragged lower by substantial
annual declines in the cost of clothing and footwear
(-3.5%), communication (-3.4%) along with more
moderate falls in furnishings, household equipment
and services (-0.1%).
► The components of CPI that have recorded the
greatest increases over the 12 months to March
2018 were: alcohol and tobacco (7.0%), health
(4.2%) and housing (3.3%).
► Across the remaining sub-groups the annual
increases have been recorded at: 2.9% for
transport, 2.6% for education, 1.0% for insurance
and financial services and 0.6% for recreation and
culture and 0.5% for food and non-alcoholic
beverages.
© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property
rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
0.8%
1.8%
2.2%
2.6%
2.7%
3.2%
3.3%
9.3%
10.0%
11.7%
0% 2% 4% 6% 8% 10% 12% 14%
Rents
Maintenance and Repair of the Dwelling
Other Housing
Property Rates and Charges
New Dwelling Purchase by Owner Occupiers
Water and Sewerage
Housing
Utilities
Gas and Other Household Fuels
Electricity
Annual change in components of housing CPI, March 2018
Source: CoreLogic, ABS
60
70
80
90
100
110
120
130 Monthly consumer sentiment, National
Source: CoreLogic, Westpac-Melbourne Institute
The Australian Residential Property
Market and Economy
Inflation
Electricity, utilities and gas costs power housing costs higher
► The housing component of CPI has the greatest
weighting, reflecting the fact that housing costs
tend to comprise the greatest proportion of
household budgets.
► No housing expenditure classes recorded a fall
over the past year.
► Costs associated with: rents (0.8%), maintenance
and repair of the dwelling (1.8%), other housing
(2.2%), property rates and charges (2.6%), new
dwelling purchase by owner occupiers (2.7%) and
water and sewerage (3.2%) increased at a lower
annual rate than the housing expenditure class.
► Electricity (11.7%), gas and other household fuels
(10.0%) and utilities (9.3%) costs increased well in
excess of the other housing costs.
Consumer Sentiment remains at a slightly more optimistic than pessimistic setting
► The Westpac-Melbourne Institute Consumer
Sentiment Index was recorded at 102.4 points in
April 2018.
► When consumer sentiment is above 100 points it
indicates that consumers are more optimistic than
pessimistic.
► Consumer sentiment has now been more positive
than negative for five consecutive months, the last
time sentiment was positive for such a sustained
period was in February 2014.
► Despite the recent increase, sentiment has
remained at a fairly neutral setting over recent
years indicating that consumers are neither overly
optimistic nor pessimistic at this time.
► The components of the Index indicate respondents
are still more pessimistic about family finances over
the past year and economic conditions over the
next five years however, respondents now have
greater confidence about their finances and the
economy over the coming year.
© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property
rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
The Australian Residential Property
Market and Economy
After a number of years in which dwelling values have
been increasing at a rapid rate, value growth has now
slowed with values falling over recent months. The
rapid growth in values over recent years has very much
been focused on the Sydney and Melbourne housing
markets.
The strength in value growth across Sydney and
Melbourne has been supported by a number of factors.
Low mortgage rates have encouraged borrowing. In-
turn, investors have had a very strong appetite for
purchasing properties in our two largest capital cities.
Population growth and migration in particular has been
very strong into both New South Wales and Victoria
which has created additional housing demand.
Furthermore, job creation has been much stronger in
these two states than it has been elsewhere over
recent years.
Over the past few years, the banking regulator has
tightened lending policies and this, along with
deteriorating housing affordability, has been a major
contributor to the recent falls in dwelling values. Unlike
in 2016 when the rate of value growth in the housing
market had slowed, the Reserve Bank has not cut
official interest rates which previously supported a
rebound in growth despite the tighter lending policies.
Over recent years, dwelling values had risen at a rate
well above household income growth which made it
more difficult for those that don’t already own a home
to save a big enough deposit to purchase.
Subsequently, first home buyer participation has been
hovering around historic low levels. Since the
beginning of July, the NSW and Vic governments have
removed stamp duty for first home buyers under certain
price thresholds. This has resulted in a substantial
increase in first home buyer demand in each of these
states at the same time as we are seeing a cooling of
demand from the investor segment.
Since late 2017, dwelling values have been falling in a
number of cities, most notably Sydney and Melbourne,
which have also been the two cities in which values
have increased at the fastest pace over recent years.
The slowdown in housing market conditions is being
driven by higher-valued dwellings while lower valued
stock is holding its value much better. This is most
likely linked to first home buyer incentives and stamp
duty concessions which are supporting demand across
the lower valued housing stock.
Sydney and Melbourne have both recorded declines in
dwelling values over recent months with larger declines
recorded in Sydney. After many years of strong growth
in values, affordability has deteriorated and a
substantial source of housing demand, investors, have
slowed. Both cities are also seeing a higher number of
properties being advertised for sale than they have
over recent years with the increase much greater in
Sydney. As a result, potential purchasers have more
choice which means that the urgency to buy has
reduced. Recent monthly data indicates the rate of
value decline has slowed however, we would anticipate
further moderate value declines over the coming
months.
Brisbane is experiencing value growth which is slower
than it was a year ago. While values continue to rise
they are doing so at a slow pace. Population growth
and job creation in Queensland is accelerating and this
may lead to greater housing demand and slight
acceleration in value growth over the coming months.
Adelaide values have declined over recent months and
the city has recorded only moderate increases in
values over recent months. With slow population
growth and, until recently, sluggish jobs growth,
Adelaide may continue to be a fairly flat to slightly
falling housing market over the coming months.
Perth’s housing market has endured a fall in values in
excess of 10% over recent years. The market has
been heavily impacted by the end of the mining boom
with many residents migrating out of the state and job
losses over recent years. Although values are still
declining there has now been a rebound in job
creation, fewer properties listed for sale and an
increasing number of sales. While this is unlikely to
result in any substantial value growth over the short to
medium term, we do expect relatively stable housing
market conditions over the coming months.
Hobart has recorded the strongest growth in dwelling
values for more than a year now and is the only capital
city in which values have increased at a double-digit
rate over the past year. Hobart is experiencing a lack
of housing stock to both buy or rent and increasing
demand which is creating significant pressure on both
values and rents. There seems little risk of these
pressures abating in the short term however, value
growth may slow a little over the coming months.
Housing values in Darwin are more than 20% lower
than their peak and have been falling for a number of
years now. The local economy remains weak with job
numbers falling over the past year and many residents
leaving for other parts of the country. Sales volumes
remain quite low and have fallen over the year.
Although conditions remain soft across many reference
points, the quarterly rate of decline has been improving
since August last year.
Canberra dwelling values have fallen marginally over
the past couple of months. On an annual basis, value
growth has slowed from where it was a year ago.
Transaction volumes have fallen sharply over the year
while at the same time job creation and migration to the
ACT has accelerated. Although values have fallen
recently, fairly flat conditions are anticipated over the
coming months.
Conclusion
© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property
rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
The Australian Residential Property
Market and Economy
In CoreLogic’s view the value falls in the housing
market, which became much more prevalent over the
first quarter of 2018, are likely to persist, albeit the rate
of decline may slow.
The drivers of the expected weaker housing market
conditions include.
The near record-high pipeline of housing stock
currently under construction, the majority of which are
units, will be completed over the coming years. There
is already evidence suggesting that in certain areas
and markets settlements are taking longer and
valuations are coming in below or at the purchase
price. Recent data also shows that approvals and
commencements are no longer at peak levels however,
approvals in particular, have rebounded over recent
months and the number of dwellings approved but not
yet commenced is at an historic high level. There will
still be many new properties built because so many are
currently under construction however, it is clear that
settlement of these projects is likely to become
increasingly challenging. Furthermore, it will be
interesting to see just how many of those new projects
in the pipeline get built.
With a relatively high proportion of off-the-plan unit
valuations coming in below the original contract price in
certain cities, if the decline is less than or similar to the
deposit amount it is unlikely buyers would walk away.
If the differential between contract price and completion
valuation grows we may see an increasing number of
buyers unable or unwilling to settle their contract.
Overall we expect dwelling value growth to continue to
slow in 2018. As we have seen over previous cycles,
housing market conditions will continue to vary
significantly from region to region and across housing
types.
While the headline figures are set to weaken due to
weaker housing conditions in the two largest cities,
regional markets in particular, are seeing much
stronger housing demand and subsequent value
growth. This is a trend which is expected to continue
over the coming quarters as buyers seek lifestyle
properties at a lower cost than the major capital cities.
Should the strong jobs growth and migration continue,
Brisbane is potentially the most likely candidate for a
further improvement in housing market conditions over
the coming quarters.
The ongoing Royal Commission into the banking sector
is likely to be an overall negative for the housing
market. As issues continue to come to hand it is likely
to make getting a mortgage more difficult and
potentially impact on the confidence of borrowers.
Conclusion
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rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
Granular Data and Analytics Driving Growth in your Business
CoreLogic produces an advanced suite of housing market analytics that provides key insights for
understanding housing market conditions at a granular geographic level. Granular data is often used for
portfolio analysis and benchmarking, risk assessments and understanding development feasibility and
market sizing. It gives industry professionals valuable modules which provide essential analytics and
insights for decision making and strategy formation within the residential property asset class. We can
tailor reports to suit your business requirements.
Call us on 1300 734 318 or email us at [email protected] or visit us at www.corelogic.com.au
The Australian Residential Property
Market and Economy
CoreLogic Australia is a wholly owned subsidiary of
CoreLogic (NYSE: CLGX), which is the largest property
data and analytics company in the world. CoreLogic
provides property information, analytics and services
across Australia, New Zealand and Asia, and recently
expanded its service offering through the purchase of
project activity and building cost information provider
Cordell. With Australia’s most comprehensive property
databases, the company’s combined data offering is
derived from public, contributory and proprietary
sources and includes over 500 million decision points
spanning over three decades of collection, providing
detailed coverage of property and other encumbrances
such as tenancy, location, hazard risk and related
performance information.
With over 20,000 customers and 150,000 end users,
CoreLogic is the leading provider of property data,
analytics and related services to consumers, investors,
real estate, mortgage, finance, banking, building
services, insurance, developers, wealth management
and government. CoreLogic delivers value to clients
through unique data, analytics, workflow technology,
advisory and geo spatial services. Clients rely on
CoreLogic to help identify and manage growth
opportunities, improve performance and mitigate risk.
CoreLogic employs over 650 people across Australia
and in New Zealand. For more information call 1300
734 318 or visit www.corelogic.com.au
About CoreLogic
Market Scorecard: Monitor and measure performance
of an individual office or a Franchise brand month on
month through a detailed view of the Real Estate
Listing and Sales market share across Australia. With
the ability to gather market share statistics within your
active market this product is designed to identify the
competing brands and independents at a suburb,
postcode, user defined territory and State level. Easily
locate growth opportunities and market hotspots
allowing you to view the performance of the established
offices in these new areas of interest.
Market Trends: Detailed housing market indicators
down to the suburb level, with data in time series or
snapshot delivered monthly. CoreLogic’s Market
Trends data is segmented across houses and units.
The Market Trends data includes key housing market
metrics such as median prices, median values,
transaction volumes, rental statistics, vendor metrics
such as average selling time and vendor discounting
rates.
CoreLogic Indices: The suite of CoreLogic Indices
range from simple market measurements such as
median prices through to repeat sales indices and our
flagship hedonic home value indices. The CoreLogic
Hedonic index has been specifically designed to track
the value of a portfolio of properties over time and is
relied upon by Australian regulators and industry as the
most up to date and accurate measurement of housing
market performance.
Economist Pack: A suite of indices and indicators
designed specifically for Australian economic
commentators who require the most up to date and
detailed view of housing market conditions. The
economist pack includes the CoreLogic Hedonic
indices for capital cities and ‘rest of state’ indices, the
stratified hedonic index, hedonic total return index,
auction clearance rates and median prices.
Investor Concentration Report: Understanding
ownership concentrations is an important part of
assessing risk. Areas with high investor concentrations
are typically allocated higher risk ratings due to the
over-representation of a particular segment of the
market. Through a series of rules and logic, CoreLogic
has flagged the likely ownership type of every
residential property nationally as either owner
occupied, investor owned or government owned.
Mortgage Market Trend Report: CoreLogic is in a
unique position to monitor mortgage related housing
market activity. Transaction volumes, dwelling values
and mortgage related valuation events all comprise our
Mortgage market trend report which provides an
invaluable tool for mortgage industry benchmarking
and strategy.
© Copyright 2018 | RP Data Pty Ltd trading as CoreLogic Asia Pacific (CoreLogic) and its licensors are the sole and exclusive owners of all rights, title and interest (including intellectual property
rights) subsisting in this publication including any data, analytics, statistics and other information. All rights reserved. No reproduction, distribution, or transmission of the copyrighted materials is
permitted. The information is deemed reliable but not guaranteed.
The Australian Residential Property
Market and Economy
In compiling this publication, RP Data Pty Ltd trading
as CoreLogic has relied upon information supplied by a
number of external sources. CoreLogic does not
warrant its accuracy or completeness and to the full
extent allowed by law excludes liability in contract, tort
or otherwise, for any loss or damage sustained by
subscribers, or by any other person or body corporate
arising from or in connection with the supply or use of
the whole or any part of the information in this
publication through any cause whatsoever and limits
any liability it may have to the amount paid to
CoreLogic for the supply of such information.
Queensland Data
Based on or contains data provided by the State of
Queensland (Department of Natural Resources and
Mines) 2015. In consideration of the State permitting
use of this data you acknowledge and agree that the
State gives no warranty in relation to the data
(including accuracy, reliability, completeness, currency
or suitability) and accepts no liability (including without
limitation, liability in negligence) for any loss, damage
or costs (including consequential damage) relating to
any use of the data. Data must not be used for direct
marketing or be used in breach of the privacy laws
South Australian Data
This information is based on data supplied by the
South Australian Government and is published by
permission. The South Australian Government does
not accept any responsibility for the accuracy or
completeness of the published information or suitability
for any purpose of the published information or the
underlying data.
New South Wales Data
Contains property sales information provided under
licence from the Land and Property Information (“LPI”).
CoreLogic is authorised as a Property Sales
Information provider by the LPI.
Victorian Data
The State of Victoria owns the copyright in the Property
Sales Data which constitutes the basis of this report
and reproduction of that data in any way without the
consent of the State of Victoria will constitute a breach
of the Copyright Act 1968 (Cth). The State of Victoria
does not warrant the accuracy or completeness of the
information contained in this report and any person
using or relying upon such information does so on the
basis that the State of Victoria accepts no responsibility
or liability whatsoever for any errors, faults, defects or
omissions in the information supplied.
Western Australian Data
Based on information provided by and with the
permission of the Western Australian Land Information
Authority (2015) trading as Landgate.
Australian Capital Territory Data
The Territory Data is the property of the Australian
Capital Territory. No part of it may in any form or by any
means (electronic, mechanical, microcopying,
photocopying, recording or otherwise) be reproduced,
stored in a retrieval system or transmitted without prior
written permission. Enquiries should be directed to:
Director, Customer Services ACT Planning and Land
Authority GPO Box 1908 Canberra ACT 2601.
Tasmanian Data
This product incorporates data that is copyright owned
by the Crown in Right of Tasmania. The data has been
used in the product with the permission of the Crown in
Right of Tasmania. The Crown in Right of Tasmania
and its employees and agents:
a) give no warranty regarding the data's accuracy,
completeness, currency or suitability for any particular
purpose; and
b) do not accept liability howsoever arising, including
but not limited to negligence for any loss resulting from
the use of or reliance upon the data.
Base data from the LIST © State of Tasmania
http://www.thelist.tas.gov.au
Disclaimers