Australian Residential Property Market
        Key Drivers and Trends

               September 2010
Demand and supply-side drivers

  Australia’s population growth is placing upward pressure on
  house and land prices.

  ...
Diagnostic Framework
Market Trend #1                                           Annual Population Growth
                                       ...
Market Trend #2                                 Annual Housing Construction
                                              ...
Market Trend #3                        Housing Supply Shortage
                                                    Current...
Market Trend #4                                                         Median House Prices
                              ...
Market Trend #5                                            Median Land Allotment Prices
                                  ...
Market Trend #6                                                  Average Land Allotment Sizes
                            ...
Market Trend #7                                                           Total Bank Lending
                             ...
Market Trend #8                             Reserve Bank Official Cash Rate
                                              ...
Market Trend #9                                                Average Annual Earnings
                                   ...
Market Trend #10                                                 Housing Debt per Capita
                                 ...
Market Trend #11                                             Annual Rental Increases
                                     ...
Conclusion                             No price relief anytime soon



  Fundamental to providing sufficient levels of aff...
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Australian residential property market trends and drivers

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A review of the major drivers and factors influencing the Australian residential property market.

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Transcript of "Australian residential property market trends and drivers"

  1. 1. Australian Residential Property Market Key Drivers and Trends September 2010
  2. 2. Demand and supply-side drivers Australia’s population growth is placing upward pressure on house and land prices. There is a scarcity of urban land suitably located to employment, transport and essential services. The willingness and capacity of people to borrow funds has increased, resulting in unprecedented levels of housing debt. The rising cost of home ownership will continue to place further upward pressure on rents.
  3. 3. Diagnostic Framework
  4. 4. Market Trend #1 Annual Population Growth 1990-2009 500K +2.1M +3.0M 400K 300K 200K 100K 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Natural Increase Net Migration Source: Australian Bureau of Statistics, Cat. No. 3010.0, June 2010
  5. 5. Market Trend #2 Annual Housing Construction Dwelling Completions, 1990-2009 250K +1.4M +1.6M 200K 150K 100K 50K 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 New Housing Stock Demolition and Replacements Source: Australian Bureau of Statistics, Cat. No. 8752.0, July 2010
  6. 6. Market Trend #3 Housing Supply Shortage Current Estimates Greenfield developments are constrained by scarcity of land suitable for subdivision within close proximity to employment and transport. Infill developments are constrained by the time and cost of assembling suitable sites including demolition costs and managing community opposition. With demand growth tracking at above 200,000 dwelling formations per annum, the current housing supply shortage will continue to widen by at least 50,000 dwellings per annum.
  7. 7. Market Trend #4 Median House Prices by Major City, 2002-09 $700K Strong growth in established house prices since 2008 coincides with strong population growth and a lower cost of borrowing $600K $500K $400K $300K $200K 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sydney Melbourne Brisbane Adelaide Perth Source: Australian Bureau of Statistics, Cat. No. 6416.0, August 2010
  8. 8. Market Trend #5 Median Land Allotment Prices By Major City, 2001-2008 $400K $350K Perth values driven by the mining boom $300K $250K $200K $150K Melbourne has the most affordable land of all mainland capital cities $100K $50K 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sydney Melbourne Brisbane Adelaide Perth Source: Urban Development Institute of Australia, The 2009 UDIA State of the Land, Canberra 2010
  9. 9. Market Trend #6 Average Land Allotment Sizes By Major City, 2001-2008 Square metres 750 Housing allotments have gotten progressively smaller 700 650 600 550 500 450 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sydney Melbourne Brisbane Adelaide Perth Source: Urban Development Institute of Australia, The 2009 UDIA State of the Land, Canberra 2010
  10. 10. Market Trend #7 Total Bank Lending 1990-2010 $1,000B Lending for housing has tripled since 2000. Housing now accounts for 55% of all lending $750B $500B $250B 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Housing Commercial Personal Government Source: Reserve Bank of Australia, July 2010
  11. 11. Market Trend #8 Reserve Bank Official Cash Rate 1990-2010 Percent 20.0 In 2009, interest rates fell to emergency lows in response to the Global Financial Crisis 15.0 10.0 5.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: Reserve Bank of Australia, July 2010
  12. 12. Market Trend #9 Average Annual Earnings 1994-2010 $60,000 Since May 2000, average earnings have increased 58% but Australians are having to work longer and harder for it $50,000 $40,000 $30,000 $20,000 $10,000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: Australian Bureau of Statistics, Cat. No. 6302.0, August 2010
  13. 13. Market Trend #10 Housing Debt per Capita 1990-2010 $50,000 Housing debt per capita has more than tripled since 2000 $40,000 $30,000 3.3x $20,000 $10,000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: Reserve Bank of Australia, July 2010
  14. 14. Market Trend #11 Annual Rental Increases by Major City, 2001-10 15.0% Perth values driven by the mining boom 12.0% 9.0% 6.0% 3.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sydney Melbourne Brisbane Adelaide Perth
  15. 15. Conclusion No price relief anytime soon Fundamental to providing sufficient levels of affordable housing is the provision of land suitable for urban development. The costs and risks of converting land for residential use in response to rising demand pressures pose major challenges for urban planners and developers alike. The economic cost of under-investment in public infrastructure and associated services will be felt by private individuals in the form of higher house prices, greater housing debt and higher levels annual rent inflation.
  16. 16. About Dimensional Edge Dimensional Edge is a professional services firm providing clients with location intelligence and GIS application services. Our expertise spans economic, market and spatial analysis, through to GIS development, training and support. We also help clients build the business cases, submissions, methods and data sources to strengthen their market and customer interactions. To learn more, visit www.dimensionaledge.com.

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