SYDNEY PROPERTY CALM BEFORE THE STORM: SQM
Happy New Year to you all and here’s wishing 2018 will be a great and productive one.
Speaking of productive, finding a property bargain in Sydney these days involves a bit of digging but it is still possible – at least for the next few months. According to SQM Research, the current lull in the property market still has some way to run before prices start to rise again in late 2018.
Its Housing Boom and Bust Report states that Sydney’s median house prices will increase 4% to 8% over 2018. This follows an expected 6% to 8% rise in 2017 compared with 2016. However, much of 2018’s increase is expected to occur in the latter months of the year.
Much of the current slowdown is attributed to the restrictive investor lending policies implemented by the banks and it is this that will determine if and when prices rise again later this year. The restrictive policies followed new measures announced by the Australian Prudential Regulation Authority (APRA) in March 2017 around residential mortgage lending that were designed to curb investor borrowing.
SQM research director Louis Christopher says Sydney will record a soft market in the first half of this year but prices will recover in the second as banks start to increase the amount of investment lending.
“There have been reports of banks’ investment lending ratios being under the maximum thresholds allowed, so we can expect a rise as banks increase investment lending up to this limit,” Christopher says.
He adds APRA’s action came in earlier than expected, which meant the Sydney housing market was cooling sooner than expected.
Sydney prices to lag other cities
Sydney’s 2018 growth prediction of 4%-8% is below the rises expected for other capitals, in particular Hobart, which is set to record price growth of 8%-13% this year. Melbourne prices are expected to lift by an average of 7% to 12% while Brisbane property is set to increase by 3% to 7%.
SQM’s research also shows Canberra’s growth will be between 5% and 9% while Adelaide’s will be 0% and 4%.
And while Sydney’s prices are in a lull, Christopher doesn’t expect the situation to turn into a severe downturn. “Accelerated population growth rates in Melbourne and Sydney have enabled the cities to avoid severe property downturns,” he says. “However, housing affordability will likely continue to deteriorate in 2018 with growth in property prices still outpacing wages growth.”
AIRBNB BEDS DOWN AUSTRALIAN PRESENCE
Where once property investors sought long-term tenants, now they are increasingly considering whether to list their property on Airbnb.
And many have decided to do just that. A recent Deloitte Access Economics report found that Airbnb clients were contributing $1.6 billion to the Australian economy while supporting more than 14,000 jobs. The report also found Airbnb hosts across the country earned a median income of $4920 in 2015-16.
According to figures from AirDNA – which crunches the numbers based on Airbnb data – one Sydney operator took in $5.3 million in the year to October 2017 from 247 properties. A host in Byron Bay made $3.7 million across 40 properties in the same time period. The average Airbnb host in Sydney apparently makes $11,150 per listing annually.
NSW has in excess of 40,000 Airbnb listings with 25,000 in Sydney alone.
Meanwhile, AirDNA CEO Scott Shatford says Airbnb is increasingly becoming the domain of property management companies, despite starting out as a platform for individuals to share a spare room, apartment or house.
A BIT OF PAIN WITH YOUR GAIN
CoreLogic’s quarterly Pain and Gain report, showed the gross value of properties resold at a profit over the September 2017 quarter was $17.7 billion – far outweighing resale losses, which amounted to $453.8 million.
The report tracks home sales across Australia and shows the proportion of sales being sold at a profit versus those sold at a loss.
Sydney led the way for profit-making units as 98.5% were sold for a profit over the September quarter. This compares to 60.5% of units in Perth, which were sold for a profit.
On a national level, only 7.9% of houses resold for a loss compared with 12.2% of units. Capital cities showed similar results with 5.9% reselling at a loss compared with 10.5% for units.
Melbourne was the capital city with the shortest median hold time for profit-making houses at 8.5 years while Sydney had the shortest median hold time for profit-making units – 6.7 years. And the Sydney suburb of Hunters Hill was the place to hold property. It had a 100% success rate for profit-making sales.
RBA CONFIRMS HOUSING SLOWDOWN
The December minutes from the Reserve Bank of Australia confirmed what we all knew – that conditions have eased in the established housing market, and most noticeably in Sydney. Prices have been declining while auction rates have been falling.
Housing credit growth also eased slightly over the latter half of 2017 as growth in lending to owner-occupiers slowed and growth in lending to investors stablised at a lower level than in the first half of the year.
According to RBA governor Philip Lowe, the easing in housing credit growth had been accounted for by the major banks, which had been more affected by the need to restrain interest-only lending to comply with the supervisory measures announced earlier in the year.