The Property Planner’s Monthly Market Update – December 2021
1. Dec index results
A. National values
- Australian housing values increased a further 1.00% in December, after 1.3% in November, 1.49% in October, 1.51% in September and 1.5% in August and 1.6% in July.
- 22.2% higher over the past 12 months, down from 22.1% last month
- Above 20% – Hobart 28.1%, Brisbane 27.4%, Sydney 25.3%, Canberra 24.9% and Adelaide 23.2%
- Brisbane overtakes Sydney for annual growth
- Melbourne on 15.1%, Darwin 14.7%, and Perth 13.1% – all lower than the previous month.
According to CoreLogic’s research director, Tim Lawless:
- Brisbane and Adelaide, along with regional Queensland, are the only broad regions where there is no evidence of value growth slowing just yet.
- “These regions show less of an affordability challenge relative to the larger capitals, as well as better support for housing demand with Queensland, in particular, showing strong interstate migration.
- On the other end of the spectrum, momentum has slowed quite sharply in Melbourne and Sydney dwelling markets, with both cities recording the softest monthly reading since October 2020.
- “A surge in freshly advertised listings through December has been a key factor in taking some heat out of the Melbourne and Sydney housing markets, along with some demand headwinds caused by significant affordability constraints and negative interstate migration,”
- After leading the upswing, it is clear the upper quartile of the housing market is now leading the slowdown. Across the combined capitals, upper quartile dwelling values were up 2.6% in the December quarter compared with a 3.7% rise across the lower quartile and broad middle of the market
B. Month Highlights
Growth over November
- National – 1.0%
- remains positive across all capitals except Melbourne
- Combined capitals – 0.6% after 1.1% last month
- Combined regionals – 2.2% after 2.2% last month
- Brisbane – 2.9% after 2.9% last month
- Adelaide – 2.6% after 2.5% last month
- Hobart – 1% after 1.1% last month
- Canberra – 0.9% after 1.1% last month
- Darwin – 0.6% after negative 0.4% last month
- Perth – 0.4% after 0.2% last month
- Sydney – 0.3% after 0.9% last month
- Melbourne – negative 0.1% after 0.6% last month
- National – $709,803
- Combined capitals – $793,658
- Combined regional – $542,646
- Capitals –
- Sydney – $1,098,412
- Canberra – $894,338
- Melbourne – $795,108
- Hobart – $694,261
- Brisbane – $683,552
- Adelaide – $569,551
- Perth – $528,551
- Darwin – $498,168
- Nationally, dwelling rents increased by 9.4% over the 2021 calendar year. Unit rents were up 7.5% over the year compared to the 10.1% lift recorded in house rents
- Rental growth trends across the unit sector have generally been milder than houses, with unit rentals being disproportionately affected by stalled overseas migration as well as domestic rental preferences shifting away from higher-density options through the pandemic.
- However, these trends are starting to change as rental affordability diverts demand back towards the unit sector.
- “In Melbourne, where unit rents fell by -8.5% between March 2020 and May 2021, higher density rental markets are now recording a faster rate of growth than houses, with Melbourne unit rents recording a 1.6% quarterly increase compared to the 0.9% rise seen in house rents,”
- The tightest capital city rental market over the year has been Darwin, where dwelling rents rose 15.2%.
- Conditions have eased a little over the second half of the year, with annual rental growth moving through a peak of 22.3% over the 12 months ending August.
- Although rents have surged across the northernmost capital, Darwin’s rental index remains 7.6% below its 2014 peak; a legacy of the 26.3% decline in rents recorded between March 2014 and December 2019.
- With national housing values recording an annual rise of 22.1% compared with a 9.4% rise in rents, rental yields have decreased as a natural consequence.
- Gross rental yields fell to a new record low across Australia, reaching 3.2% in December. The lowest yields, by some margin, remain in Sydney (2.4%) and Melbourne (2.7%), however, with the exception of Perth and Darwin, every capital city is recording record low yields.
3. Vacancy rates
- Vacancy rates have dropped even further to 1.5% in November, after reaching a 10 year low of 1.6% in October.
- Melbourne has the highest vacancy rate, but this steadily improves again, hitting 3.2%, down from 3.3% in October and 3.5% in September.
- Sydney with second-highest vacancy at 2.6%, no change from the previous month.
- Then Brisbane 1.3%, dropping slightly from 1.4% in October and September.
- Darwin up to 0.9% in November, after 0.7% in October and 0.6% September.
- Canberra 0.8% – no change over the last 3 months.
- Perth – 0.6% – no change
- Adelaide dropping to 0.5% after 0.6% the previous month
- Hobart – now down to 0.3%, from 0.4% in October and 0.5% in September.
- Advertised inventory finished the year 24.7% below the five-year average
- Nationally, the number of new listings added to the Australian housing market through December was 21.4% above the five-year average, demonstrating strong vendor confidence amidst quick selling times and high auction clearance rates. This is because Vic and NSW came out of lockdowns and more vendors placed stock on the market.
- As new listings surged higher through spring and early summer, buyers have benefitted from more choice and reduced urgency. This confidence has not been universal, with listings trends varying from city to city.
- Melbourne was the only city to finish the year with inventory levels above the five-year average, while Sydney listings were only 3.9% below average.
- At the other end of the scale, Brisbane and Adelaide’s advertised supply remains around 35% below the five-year average.
- “The number of homes available to purchase has been a key factor underlying the trend in housing values. Cities where advertised stock levels are above average or close to normal, such as Melbourne and Sydney, have shown a more obvious slow down relative to cities with persistently low advertised supply, like Brisbane and Adelaide,”
5. Consumer sentiment – time to buy a dwelling
Time to buy a dwelling index
- This index has been hovering at low 80’s to high 90’s over the last 5 months
- Dropped to 81.9 points in December, after 91.1 points in November, 83.3 points in October, 96.7 points in September, 88.9 in August, and July 96.9 points.
Comments from Westpac Melbourne
- The December print confirms the downward trend in this index since late last year as affordability continues to be squeezed in all markets.
- All states recorded significant index declines in December.
- We suspect the affordability issue, which appears to have been an increasingly important factor since the Index peaked last November 2020 (now down 38%), may now be starting to weigh on price expectations as well.
6. Lending indicators
- Rose 6.3% for Housing overall – which is the highest growth rate since January 2021. November is when credit costs started rising.
- Same as October for Owner-occupier, up slightly from 67.1%
- Same as October for Investors, down slightly from 32.9%
- First home buyers fell 0.95% after falling 4.8% in October, 1.9% in September, 4.9% in August, 7.6% in July, and falling 7.8% June
New loan commitments
- % of Owner Occ – 67.9%
- % of Investors – 32.1%
- % of first-time buyers (as % of owner occ) – 25.2%
Investors up to 32.1%, creeping up from 31.74% September, 30.85% August, 29.11% in July. Still below levels where APRA stepped in at 46% in 2015
- Unemployment rate decreased back to 4.6%, back in line with September after increasing to 5.2% in October. The trough of unemployment was 4.5% in August.
- All states bar TAS and NT saw a reduction in unemployment.
- Underemployment rate decreased to 7.5% after rising to 9.2% in September and 9.5% in October.
- VIC leading the reduction by 4 pts and Sydney with 3.2 pts following the end of lockdowns.
- Participation rate steadily increased to 66.1%, after 64.7% in October and 64.5% in September
- Participation rate increasing for all states, except NT.
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