Property in Australia an Overview

The Australian Property Market Overview

Australian property values still continue to be sluggish although having their best result for twelve months, showing a 0.9 per cent rise nationally to October in 2011. The recent interest rate adjustments by the Reserve Bank should see a marked improvement for 2012. Most housing market tipsters are predicting a modest 3 to 5 per cent increase in prices.

The key to Australian house prices was the rise in mortgage rates from 8 per cent in July 2007 to a peak of 9.6 per cent in mid-2008, a trend which was rapidly reversed by the RBA. The average standard variable mortgage rate bottomed at 5.75 per cent and the RBA has recently embarked on an interest rate loosening cycle. Variable mortgage rates have returned to between 6.49 per cent and 7.5 per cent at November 2011 thanks to improving economic conditions.

While at the macro level Australian property values have proven to be resilient, between each of the mainland capitals the performance of the market has ranged considerably.

Not all capital cities across Australia have recorded improvements in housing values.

Previously Darwin stood out as having provided both the highest capital growth and strongest rental yields. Darwin houses increased in value by 11.5 percent and unit values increased by 9 per cent from November 2009 to October 2010, yet remained flat for the whole of 2011.

The other top performing cities of 2010 were Melbourne and Canberra, in 2011 Melbourne prices were flat while the prices in Canberra increased by 3.2 percent

The median values of houses and units for each Australian mainland capital city of Australia are shown in the table below. Australia’s largest and most populous city, Sydney, has the most expensive housing prices, while the capital of Tasmania, Hobart, has the most affordable housing costs.

State Capital Cities Population Breakdown

Australian Bureau of Statistics Estimate

Median House and Flat/Unit/Townhouse Prices at October 2011

Capital city hot spot picks

The markets that are most likely to record capital growth are those where these “drivers” will be most apparent: suburbs within regions where population growth is strong, housing supply is constrained, transport infrastructure provides efficient commuting options and social and retail infrastructure is conveniently located.

The markets that are most likely to languish will be those that offer a poor value offering and are located away from the “drivers” outlined above.

This year’s RP Data “Hotspot” selections focus on both houses and units and reflect the themes outlined above. The selections are based on “strategic affordability” – those suburbs that represent good value for money and are also strategically located along transport spines and within close proximity to necessities such as working nodes, shopping, schools and social options.

Sydney

Granville – is located within the Parramatta Local Government Area (LGA), approximately 18.5 kilometres from the Sydney CBD. Granville is currently one of the most affordable suburbs in which to purchase a house within a 20 kilometre radius of the Sydney CBD. Significant retail amenity is found close to Granville with a Westfield Shopping Centre nearby in Parramatta and a major home wares centre in nearby Auburn. Granville has some restaurants located within the suburb whilst many more are found nearby in Parramatta and Harris Park.

Rockdale –is situated in the Rockdale LGA, approximately 12 kilometres south of the Sydney CBD. Rockdale is currently one of the most affordable suburbs within its local area, with most surrounding suburbs being significantly more expensive. Rockdale is home to three supermarkets whilst the suburb also has its own shopping centre – Rockdale Plaza – which has a number of major and approximately 50 specialty stores. Rockdale also has an abundance of restaurants and cafes which cater to most tastes and requirements.

Lidcombe –sits within the Auburn LGA and is approximately 14 kilometres west of the Sydney CBD. The suburb represents very good value compared to median house prices within the surrounding area. The closest local retail amenity including supermarkets is found in the adjacent suburb, Auburn where there is a neighbourhood shopping centre.

Riverwood –is located within the Hurstville and Canterbury LGA’s and sits approximately 17 kilometres south-west of the Sydney CBD. The suburb lies adjacent to Salt Pan Creek and when compared to those surrounding suburbs. Riverwood is home to two supermarkets and also has its own local shopping centre, Riverwood Plaza.

Waterloo –is located in the inner city area of Sydney just five kilometres from the CBD, the suburb is actually located in the Sydney City LGA. Waterloo has one of inner city Sydney’s most affordable median house prices and, although most nearby areas are dominated by units, median house prices are much lower than nearby comparable prices. Waterloo has a number of local supermarkets providing convenience retail for locals. The Green Square redevelopment has commenced in the neighbouring suburb Zetland and, upon completion, the local area including Waterloo will reap the benefits.

Melbourne

Brunswick – is located approximately six kilometres north of the Melbourne CBD. Situated within the Moreland LGA, Brunswick shows strong affordability given its location, median prices of surrounding suburbs and prices of properties a similar distance east and south of the CBD. The local area has a number of supermarkets: both independent and large retail chains.

Ashburton – is situated approximately 12 kilometres south-east of the Melbourne CBD. The suburb is located within the Boroondarra LGA and is much more affordable than surrounding suburbs, whilst it enjoys an equivalent if not better location and amenity than many nearby suburbs. Ashburton has its own convenience supermarket facilities situated in the suburb. Major retail facilities are found very close by in Malvern East, with the suburb home to one of Melbourne’s largest shopping centres (Chadstone).

Chadstone –is located approximately 14 kilometres south-east of the Melbourne CBD and is situated in the Monash LGA. Chadstone’s median house price is significantly more affordable than most surrounding areas and in some instances, more than $100,000 more affordable. Chadstone was home to one of Melbourne’s largest shopping centres, however, rezoning over the years has seen the shopping centre now located within Malvern East. Still, it is very close to the suburb and it has a huge range of retail facilities.

Flemington – located four and a half kilometres north-west of the Melbourne CBD. The suburb is well known as the home of Flemington Racecourse and the Melbourne Cup and enjoys close proximity to the Melbourne CBD. Flemington has a couple of independent supermarkets situated on Racecourse Road. The closest major retail centres are located in the Melbourne CBD or within Moonee Ponds at the Moonee Ponds Central Shopping Centre.

Fawkner – is a Melbourne suburb which is located approximately 12 kilometres north of the CBD. Fawkner is situated within the Moreland LGA and the current median price of a house, represents a very affordable median price compared with surrounding suburbs. Fawkner has local convenience retailers located within the suburb. The closest major retail facilities are located relatively close by in Essendon, Tullamarine or Preston.

Brisbane

Margate –is located on the Redcliffe Peninsula approximately 26 kilometres north of the Brisbane CBD. The suburb sits within the newly formed Moreton Bay Regional LGA and, in comparison to suburbs a similar distance from the CBD without the proximity to water, prices are much more affordable. Margate has its own local convenience retail including supermarkets, butchers, bakers etc. Major retail amenity is found within the neighbouring suburb Kippa-Ring, where Peninsula Fair has all the major retailers required.

Keperra – is situated approximately 10 kilometres north-west of the Brisbane CBD. The suburb is a long established residential area and, whilst it is located within the Brisbane LGA, it borders the Moreton Bay Regional Council. The suburb enjoys an abundance of greenery due to it being surrounded by a number of hills and mountains. Keperra has its own shopping centre with many retailers and a Woolworths supermarket, while also being home to a smaller independent supermarket.

Cannon Hill – is located approximately seven kilometres east of the Brisbane CBD and is a long-established residential area. The suburb has significant amenity with a shopping centre and a commercial office precinct within the suburb as well as a number of parks and open spaces. Cannon Hill enjoys the benefit of its own local shopping centre which includes supermarkets, discount stores and specialty shops.

Fairfield – is located in the inner south region of Brisbane just four kilometres from Brisbane CBD. The suburb is highly desirable due to its inner city location, position adjacent to the Brisbane River and the significant supply of open spaces within the suburb and its neighbouring areas. The current median house price is relatively affordable for a suburb so close to the city and which sits adjacent to the river. Fairfield has its own neighbourhood shopping centre including a supermarket.

Kedron – is a long established suburb of Brisbane, situated in the inner north just seven kilometres from the CBD. The current median house price within Kedron represents strong affordability, especially when considering nearby medians and the infrastructure improvements set to be undertaken in the area including the Airport Link and the Northern Busway.

Adelaide

Thebarton – is situated directly to the north-west of the Adelaide CBD and is located within the West Torrens LGA. When compared to surrounding suburb’s and considering the current median house price it represents a very appealing purchasing opportunity especially considering how close it is to the CBD. Thebarton has its own independent supermarket which provides much needed convenience to the local area. The closest major retail amenity is found in the Adelaide CBD where there is a significant supply of retailers. There are few restaurants situated in Thebarton however, the CBD and North Adelaide have a very large supply of restaurants and dining options and both are directly adjacent to Thebarton.

Glanville – is located on the Le Fevre Peninsula approximately 13 kilometres north-west of the Adelaide CBD. Situated within the Port Adelaide Enfield LGA the suburb has a very affordable median house which is much more affordable than most surrounding suburb’s. The closest major retail amenity is also found in Port Adelaide. In coming years local retail will improve dramatically thanks to the significant development being undertaken at neighbouring New Port.

Brompton – is an Adelaide inner city suburb, within the Charles Sturt LGA, located approximately 3.5 kilometres north-west of the Adelaide CBD. The suburb represents strong relative affordability compared with suburbs located an equal distance from the CBD to the south or east. The main location of retail amenity for Brompton is within the Adelaide CBD, home to the state’s largest office market and a vast array of retail amenity. Whilst there is a smaller retail offering located in nearby Welland.

Torrensville – is situated less than three and a half kilometres west of the Adelaide CBD. The suburbs housing market represents strong affordability for an area located so close to a CBD. The suburbs housing market is dominated by properties on small blocks of land which are generally lowset and built from brick and concrete, these properties generally appear to have potential to be renovated. The suburb has the benefit of its own local shopping amenity within Torrensville Plaza which has a supermarket as well as some smaller retailers.

Parkside– is located directly adjacent to the Adelaide CBD (south-east). The suburbs current median house price is comparatively affordable for a suburb so close to the city. The houses are what you would deem typical inner city Adelaide, small houses and cottages on small blocks of land, some are likely to have potential to be renovated. Local retail amenity is found nearby within the Adelaide CBD and other shopping centres are located nearby in Unley, Frewville and Glenside.

Perth

Bassendean –sits on the shores of the Swan River, approximately nine kilometres north-east of the Perth CBD. Located within the Bassendean LGA the suburb’s median house price is much more affordable in comparison to nearby suburb’s and is extremely affordable for a location within a 10 kilometre radius of the Perth CBD. Bassendean has its own supermarket as well as convenience retail amenity within the Bassendean Village shopping centre. The closest major retail facilities are found within Centro Galleria Shopping Centre in Morley.

Thornlie – is situated within the Gosnells LGA approximately 15 kilometres south-east of the Perth CBD. The suburb is extremely affordable with a median house price which sits well below the Perth median and much more affordable than surrounding areas. The suburb is extremely well catered to for retail amenity with Forest Lakes Shopping Centre and Thornlie Square Shopping Centre both located within the suburb, additional facilities are also found in neighbouring Maddington.

Kenwick – is one of the more affordable suburbs of Perth and is located approximately 14 kilometres east of the Perth CBD. Kenwick is situated within Gosnells LGA. Kenwick is within very close proximity to the junction of the Albany and Roe Highways, the Tonkin Highway is also in close proximity to the suburb. These highways afford excellent access to the suburb. It’s not just the access by private vehicle which makes the suburb appealing, Kenwick also has its own train station situated on the Armadale line. Buses also service the suburb via Kenwick Road and Brixton Street.

Cannington – is situated just ten kilometres south-east of the Perth CBD. Located within the Canning LGA the suburb represents good affordability. Cannington is home to one of Perth’s largest shopping centres, Westfield Carousel which includes a Myer, K Mart, Target and cinemas as well as numerous specialty stores and fast food and take-away outlets. Restaurant’s are also in abundance within the local area which caters to most needs and tastes.

Kewdale – is one of the most affordable suburbs located less than ten kilometres from the CBD, Kewdale is situated in the Belmont LGA and sits less than 9.5 kilometres east of the Perth CBD. The suburb enjoys quality access by private vehicle due to the Leach Highway passing through the suburb. Whilst the suburb doesn’t have its own rail station it enjoys close proximity to a number of stations in adjoining suburbs. Kewdale is also located close to the Perth Airport.

Looking towards how the market will perform during 2012

With interest rates now on the decrease and the Federal Government stimulus finished the Australian property market will experience a modest level of growth in the near future.

The markets that are most sensitive to interest rate movements and housing affordability are likely to be dampened the most by the removal of stimulus, including interest rates rising from their emergency lows. Housing demand from first home buyers and lower income households is likely to continue to fall.

The latest housing finance data from the ABS shows there has already been a large jump in investor numbers in the market place and this trend is likely to continue. Investors are very much less price sensitive than first time buyers and in many respects, a rising interest rate environment may cause more investors to become active, taking advantage of the lower level of competition in the market.

Premium priced markets are also likely to swing upwards in value. As the economy and equities markets improve, premium property market conditions are likely to improve also. These markets are much more closely linked with business conditions.

With more prospective first home buyers being blocked from the housing market due to affordability constraints, it is very likely rental demand will continue to place upwards pressure on rental rates. Higher rental rates will translate to stronger yields for investors, fuelling investor demand for Australian housing.