Insight T h e S t a t e o f V i c to r i a ’ s H o u s i n g M a rk e tOpteon Research August 2011 Dwelling Prices Page 1 Demand Page 2 Supply Page 3 WELCOME Outlook Page 4 The Opteon Property With Australia’s economic recovery faltering, possible interest rate rises, falling clearance rates and deteriorating housing affordability; buyer sentiment has Group is Australia’s weakened in recent times. However, with low unemployment levels, tight rental largest truly national vacancy rates and new housing starts remaining below underlying demand, house independent property prices should be supported from falling significantly in the short term. services group. Dwelling Prices This document contains Over 2010, Victorian house and unit prices rebounded strongly after two consecutive years of modest growth. According to the Victorian Valuer-General, the median house the latest research from price increased by 16% to $420,000 in 2010 with the unit median price rising 12% to Opteon. reach $400,000. Much of these house price increases were as a result of fiscal and monetary stimulus with dwelling price growth now showing signs of softening. Richard Jenkins The total number of dwellings transacted over 2010 in Victoria declined by 21% Research Manager compared to 2009, its lowest level since 1996, as affordability continued to deteriorate. Key points: • Dwelling price growth now showing signs of softening. • Although median house price increased in the June quarter, they remain below their peaks of December 2010. • Housing finance levels appear to be recovering from the impact of the natural disasters of early 2011. • Owner-occupier finance remains near 11-year lows. • Prices of Victorian first home mortgages returning to record heights. • Victorian dwelling commencements recorded in 2010, 28% higher than 2009 levels. • Victorian residential vacancy rate still low. • Shortage of housing stock should underpin house prices in short term. • Residential rents and yields expected to grow.T: 1300 786 022 F: 03 5223 2309 E: firstname.lastname@example.org W: www.opteonproperty.com.au Value made visible
Insight Opteon Research August 2011 Page 2 The latest ABS house price index Annual Capital Growth (%) Victorian House & Unit Price Growth showed that national house prices 25% fell by 0.1% in the June 2011 quarter; to be 1.9% lower over the 12 months. The ABS house price 20% index has now recorded three quarterly declines in the past four 15% quarters. The decline in house prices was most likely driven by the weakening consumer confidence 10% with living costs continuing to rise. House prices have fallen over the 5% past 12 months in all capital cities except Hobart and Canberra. Compared to the Residex and 0% RPData house price measurements, 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 similar results were found, with Houses Units 2000-04 average 2005-11 average house price growth easing over the Source: Valuer-General / Opteon Property past six months. Within Victoria, house prices fell by 2.5% in the March quarter but remain 1.1% higher than the corresponding date the previous year. Over the past five years, house prices in Victoria have out-performed all other capital cities with the exception of Darwin. Latest results from the Real Estate Institute of Victoria also indicate that 2011 has been a mixed year to date. Although the median value for houses in Melbourne rose over the June quarter to reach $590,000, the current median price remains below its peak of $601,500 recorded in December 2010. As at the June 2011 quarter the median price for Melbourne units was $474,000. Demand Australia’s housing finance continued to increase, with finance approvals having risen by 4.4% in May, taking the total rise over the past two months to 9.1%. Housing finance levels appear to be recovering from the impact of natural disasters over the Australian summer with the value and number of loans approved at their highest level since December 2010. Despite the increased levels of April and May, finance to owner-occupiers remains near an 11-year low. Australian Housing Finance Approvals Billions $140 $120 $100 $80 $60 $40 $20 $0 May-02 May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 First Home Buyers Investors Upgraders Source: Australian Bureau of Statistics / Opteon PropertyT: 1300 786 022 F: 03 5223 2309 E: email@example.com W: www.opteonproperty.com.au Value made visible
Insight Opteon Research August 2011 Page 3 By purchaser type, despite first home buyer activity rebounding strongly in May, the number of first home purchasers is just 1.6% higher than 12 months ago. Currently, first home buyer finance accounts for 15.4% of all housing finance approvals, well down from their peaks of 2009 but close to long term averages. Investor housing finance also rose in May, but levels remain substantially down over the year. In contrast, upgrader (non first-home buyer and investor) housing finance activity contracted over the month and remains 4.5% below 2010 levels. By State, housing finance grew in most states, with growth in Queensland still subdued following the summer floods, while finance approvals in Victoria increased by 2.6%. Victoria continues to remain attractive for first home buyers with 27.7% of first home buyer finance occurring in the State, above its population share. Whilst incomes have risen and house prices have eased, affordability pressures remain. Victorian first home mortgage levels are returning to record heights. The average new mortgage in Victoria increased to $281,400 in May, 1.5% higher than April. Supply Despite not being a “resource” state, in recent years Victoria has achieved solid economic growth. In many ways one of the State’s key successes was in attracting more people, with population growth lifting to its strongest pace in four decades. In order to keep up with this strong population growth, new dwelling commencement levels are running at record levels despite the overall slowdown in the housing market in Victoria. New Victorian dwelling commencements reached 58,706 homes in 2010, 28.6% higher than those achieved in 2009. Even though dwelling commencements levels showing signs of having peaked in the short term, dwelling supply remains below Victoria’s underlying housing demand, based on current population growth levels. People Victorian Population & Housing Growth Dwelling Completions 140,000 70,000 120,000 60,000 100,000 50,000 80,000 40,000 60,000 30,000 40,000 20,000 20,000 10,000 0 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Vic Annual Population Growth (LHS) Vic Annual Dwelling Completions (RHS) Source: Australian Bureau of Statistics / Opteon Property The Real Estate Institute of Victoria reported an overall vacancy rate of 1.7% in Victoria at March 2011 with the Melbourne vacancy rate also at 1.7%. Melbourne’s vacancy rate has been below 2.5% since May 2005. By precinct, Inner Melbourne (0-10 kilometre radius of the CBD) recorded a vacancy rate of 1.6%. Middle ring suburbs recorded a vacancy rate 1.8%, with the Outer Melbourne region vacancy rate sitting at 1.9%. As at March 2011, Regional Victoria’s residential vacancy rate remains very low at 4% with several regions, including Bendigo, Warrnambool and Mildura recording vacancy rates below 1.0%. Data from the Victorian Department of Human Services showed that in the first quarter of 2011, the Metropolitan Rent Index increased by 3.9% over the year, below the long term average of 5.7%. While the Regional Rent Index as at the March quarter increased by 6.6% for the year, above it’s long term average of 5.5%.T: 1300 786 022 F: 03 5223 2309 E: firstname.lastname@example.org W: www.opteonproperty.com.au Value made visible
Insight Opteon Research August 2011 Page 4 Looking further ahead, although Victorian dwelling approvals remain at high levels most Opteon Property Group forward indicators of Victorian housing construction activity suggest building is likely to (Opteon) comprises 25 of ease over 2011 and 2012. The share of units and apartment building approvals has the most respected and steadily grown over the past decade and now sit at their highest ever levels, accounting for 40.5% of all housing building approvals in Victoria. Inner Melbourne based established valuation developments dominate Victorian apartment building approvals accounting for more than firms in Australia, is 44% of apartment approvals across the State. wholly Australian owned and, uniquely, services all populated areas across all States. We combine the expertise of our local people with the power of our Australia-wide network. Opteon Property Group provides property valuations, services and advice to a range of clients including governments, major lenders, corporations and trusts, individual property owners, investors and developers. Outlook For more information on this report or other The unsustainable house price growth of the early 2000’s has slowed to average levels research areas please with the Victorian residential market further softening in 2011. Prestige property in contact Richard Jenkins particular has experienced a slowdown in activity over the past six months. While the Australian economy has lost some momentum recently, Australia’s medium-term using the details below. prospects are solid albeit mixed across the country. Rising household incomes stemming from low unemployment levels along with the domestic economy strengthening, healthy population growth (albeit not as strong as it was) and a shortage of housing stock are expected to help underpin house prices in the short term. However, stretched housing affordability with households’ capacity to drive dwelling price growth by being able to borrow more has been impacted by higher interest rates and rising prices for other household expenditure. Some price declines may occur in areas that are experiencing oversupply with the Inner Melbourne precinct of particular concern. Nonetheless, in the absence of a major economic shock it is expected that house price growth will remain muted, rather than fall significantly over the next 18 months. Dwelling completions are now expected to have peaked in 2010 but despite population Opteon (Victoria) Pty Ltd growth moderating recently, Victoria’s underlying housing balance remains tight with trading as Opteon rental levels expected to continue to rise. With dwelling prices forecast to remain stable, ACN 140 547 600 low residential vacancy rates and deteriorating housing affordability, increased rental demand should result in yields rising over the next 18 months. 222a / 757 Bourke St, Docklands VIC 3008 T 1300 786 022 Contact: Richard Jenkins—Research Manager F 03 5223 2309 E email@example.com E firstname.lastname@example.org Contact: Chris Knight—Residential Director W www.opteonproperty.com.au E email@example.comDisclaimer: The information contained in this report is provided in good faith and has been derived from sources believedto be reliable and accurate. However, the report is not intended to be comprehensive or render advice and thereforeOpteon (Victoria) Pty Ltd does not accept liability for its contents.Reproduction of this report in whole or in part is not Value made visiblepermitted without prior consent.