Signs of Recovery in Australian Real Estate Market
It looks like the Australian real estate market’s decline has leveled and started to ease in most major cities.
According to the latest report on the Australian residential real estate market by CoreLogic, a property data and analytics provider in Australia, the annual rate of decline in housing values saw continued improvement in October 2019. National dwelling values recorded their fourth consecutive month of growth in October 2019, taking dwelling values 2.9% higher over the quarter. Although house prices are still broadly trending lower on an annual basis, the annual rate of decline has leveled and started to ease in most major cities.
The most expensive properties, which have recorded the largest decline over the last 12 months, are also recording the most rapid recovery.
There’s Money in Real Estate
CoreLogic’s statistics show that residential real estate underpins Australia’s wealth. The local stock market has been very volatile, interest rates on money invested in financial institutions are negligible, making real estate market valued at around $4.7 trillion a very desirable investment source. This is compared to investment in Australia’s stock market of $1.5 trillion and commercial real estate of $1.7 trillion.
Approximately 50% of Australia’s household wealth is held in residential real estate. Residential real estate in Australia comprises over 10 million dwellings with an outstanding mortgage debt collectively of $1.75 billion.
In October 2019, Sydney dwelling values increased by 1.7% and by 5% over the three months to October 2019. Over the past 12 months, though, Sydney dwelling values have fallen 2.5% and are currently 10% lower than their peak in July 2017. Melbourne dwelling values increased by 2.3% in October 2019 and 5.5% in the last quarter. Melbourne dwelling values have fallen 1% over the previous 12 months and are now 6% below their peak in November 2017. Median days on the market in the capital cities are trending lower, at 40 days, as market conditions improve.
The number of dwellings approved for construction nationally has trended lower since 2017. Still, housing demand has seen an increase with growing migration, which has pushed the national population statistics higher with a growth of 1.6% over the last 12 months. First-time homebuyers have been a critical source of housing demand in 2019 due to affordability, less competition from investors, low mortgage rates, and incentives have been given by financial institutions. The market is cautiously optimistic about the outlook for 2020 and looks forward to the return of investor activity, which is yet to rebound.