As we move past the halfway point of 2020, the Australian property market continues to bounce back from earlier COVID-19 restrictions. As you’ll notice in the property clocks below, pretty much almost every major market has moved around the clock, demonstrating the unpredictability of the market at the moment.
In this month’s Month in Review by Herron Todd White, every residential team of theirs was given a hypothetical budget of $700,000, and asked how this money could be best invested in their areas. It’s created a report that provides excellent market relativity across the country, and it gives us an interesting insight into how they believe the markets will progress over the coming months.
As always, please note that the July Month in Review actually looks back over June, so some measures mentioned are no longer current (ie. NSW and Victoria are now seeing restrictions in some areas that were not present in June).
With auction numbers increasing across the state, New South Wales is showing strong signs of recovery from COVID-19-associated lockdowns and restrictions. Auction numbers have been steadily increasing and the number of auctions is “now inline with the same period last year”, according to the report. Clearance rates are lower than last year, but still far above than the previous quarter, highlighting how government incentives are incentivising some buyers to get back into the market.
Despite activity increasing, according to CoreLogic the number of new properties listed for sale is down 6.6% on this time last year, while the number of total listings is down 21.2%. This lack of stock is likely insulating prices somewhat, although the data is showing that prices are beginning to decline slightly.
With a $700,000 budget, there are a few different areas that buyers should be considering, according to the report. Western Sydney (particularly Parramatta, Blacktown, Liverpool and new house and land estates) is definitely the place to buy, particularly if you’re a first home buyer who has a smaller budget. As the report highlights, it’s not difficult to find a home for sub-$650,000 in a great location in these locales. You’re going to have some issues finding property in areas like inner Sydney or Byron Bay, unsurprisingly, although you could possible scoop up an apartment if you look for stock that down-on-their-luck investors are looking to offload. Homes under $700,000 in the Sutherland Shire sell like hot potatoes (even under current market conditions), so while there may not be a lot of options in this area it’s not impossible to find something quite nice. Coffs Harbour and Clarence Valley are great options if you’re looking for larger homes or farmland at this price point. In the Newcastle region, you could buy two homes and still come in under budget in some areas (Woodberry is the chosen pick in the report).
Of course, next month’s report will discuss the effect the localised lockdowns have had on the New South Wales market as a whole and in those regions in particular.
Current market conditions are changing day-on-day in Victoria, particularly Melbourne. Strict lockdowns have caused the market to retreat from its previous bounce-back, although the full force of this has yet to be felt. The Melbourne CBD has been hardest hit, with the rental market in this region taking the brunt of a lack of tenants due to travel restrictions. Many landlords in the region are being characterised by HTW as “nervous”, as a strain on their mortgage repayment abilities is a significant issue in the CBD.
Herron Todd White are also reporting that they are seeing quite a number of nomination sales in the CBD market. A nomination/nominee sale is when someone who has purchased a property can transfer to another purchaser or nominee prior to settlement. When a purchaser cannot settle, the purchasers will be given the opportunity to find a new purchaser to have the contract transferred in their name and finalise the settlement. This generally happens due to the buyer not having access to funds to settle (mostly due to banks not approving loans or other government restrictions for capital outflow). With coronavirus also impacting the rental market, purchasers of these properties have less incentive to settle on these apartments, which will also result in them forfeiting their original deposits.
However, if you are looking buy, then now is a great time in Victoria. The CBD area has an increasing amount of stock on the market, with apartments in sought-after areas like Southbank and the Docklands a feasible option for someone with a smaller budget. It is truly a buyer’s and renter’s market for those looking in these areas. Buying a rather nice home for under $700,000 is an option in a number of suburbs including Officer, Clyde and Berwick, although you may only be able to afford an apartment in areas such as Cheltenham. Ringwood, Warrandyte, Mitcham are great options if you’re looking in the inner/outer-East area, while Glenroy and Melton are where you should be looking if you want a slightly larger home. Geelong is ideal for first home buyers who want to buy house and land (and have money left over for a pool), while in Mildura $700,000 will get you a higher value range property. Mount Gambier is the place to head if you want something central, but on a larger lot. Warrnambool may be slightly out of reach if you’re looking for higher-end character homes, although some smaller properties can be snapped up if you keep your eye out.
With restrictions now fully eased and no COVID-19 outbreaks, many are saying that Queensland is the place to buy. The easing of restrictions has seen an increase in listings and more activity at open homes. HTW note that they have, however, yet to see evidence of changing transaction volumes or price movements. That said, it is worth noting that Brisbane’s economy remains well placed for the future given the state’s low infection rate and slow-but-steady opening of businesses. For this reason, many investors are eyeing the region. The coastal apartment markets (particularly) have taken some noticeable hits though, with rental return down over several areas including Surfers Paradise.
$700,000 can get you into most places in Brisbane. Sought-after suburbs such as Hendra and Clayfield do have entry-level pre- and post-war homes on offer at this price point, although you may not have much money left over for renovations. Areas including Gordon Park, Stafford and Kedron are a highly attractive option according to the report: “we [HTW] consider this a very strong market sector at present with good capital growth potential. If you have the money and are keen to invest, put these suburbs on your shortlist”.
It’s a similar story throughout the state. On the Gold Coast you could go slightly over the $700,000 to buy a beachfront apartment in areas like Main Beach, while in Ashmore you could easily get a three- or four-bedroom home under the budget. On the Sunshine Coast, take a look at Shelly Beach, Moffat Beach, Kings Beach and Pacific Paradise for beachfront properties within the budget, and investors should keep an eye out for apartments with beachviews in these locales because they tend to rent well year-round. The world is (mostly) your oyster in Rockhampton, Gladstone, Emerald, Cairns and Mackay if $700,000 is your upper budget limit. You will easily be able to find upper-end homes in a well-regarded suburb, or a number of smaller homes in up-and-coming areas (a great option for investors). You should also be able to grab a nice acreage lot in the Darling Downs region for under $700,000, which is great for families looking to move out from the city.
Although the South Australia is seeing a very high unemployment rate, the market is beginning to rebound with restrictions continuing to ease. On the back of strong market activity in the latter part of 2019, the market has remained resilient under pressure, generating a 0.4% increase in dwelling values in May. Auction data for the week ending 21 June indicated a clearance rate of 65% from 41 auctions; at the same time last year, the clearance rate was 53% from 106 auctions. The Herron Todd White reports that data suggests that stock levels are low as vendors remain reluctant to dip their toes back into the market whilst buyer activity remains strong. This is on the way down (slightly) as the Hedonic Price Index suggests that property values have entered the initial stages of a decline cycle.
In Adelaide, the median house price of $480,000 means $700,000 goes a long way. This price point is considered to be representative of the middle and inner rings where suburban median house prices range between $600,000 and $800,000. Owner-occupiers and cashed up investors are most active at this price point with low interest rates making a $700,000 purchase more accessible to the broad market. Gross yields of 4% are typical at this price level, which is considerably below the 7-9% achievable in the outer ring. What this market lacks in rental return is made up for in capital gains as the inner and middle rings have historically been the best performing for capital gains.
It’s a good time to be an investor in Perth. Real Estate Institute of Western Australia (REIWA) data has revealed that Perth’s rental stock decreased by 17% in May to 4,676, the lowest recorded monthly figure since November 2013. This is in stark contrast to the east coast, where rental stock is increasing day by day. It is also a 38% decrease compared to the same time last year for Perth, which is a great indicator of how strong the market is. REIWA president Damian Collins expects that the median rent is likely to remain stable until the end of the year as the Residential Tenancies (COVID-19 response) Act 2020 only allows new rentals to charge increased rents.
For the eleventh quarter in a row, Western Australia has been announced as Australia’s most affordable state to live in according to the latest Real Estate Institute of Australia’s Housing Affordability report. This may be part of the reason the state continues to attract owner-occupiers and investors alike. The state is currently seeing a spike in demand for vacant land due to state and federal government building stimulus packages, and according to the HTW report there is “renewed activity in the established market as well with agents reporting very low listing numbers in established areas and a sense of urgency is lurking under the surface”.
If you want to spend $700,000 on your future home or investment property, there are a couple of spots to spent the money. The Herron Todd White report singled out Bull Creek as a great option if you’re looking for a spot where property values are likely to increase. Willetton, which is 18 kilometers south-east of the Perth CBD, is worth the look if you want a larger three- or four-bedroom home. Coogee is usually out of reach for buyers in the $700,000 price bracket, however it has become more affordable over the past two years with entry-level homes usually coming in under the budget limit.
Being the first state/territory to completely eradicate COVID-19, the Northern Territory has already begun its economic recovery but property is still taking a while to bounce back. When considering the pipeline coming forward, the HTW report notes that appraisals are significantly down and the current activity is from pre-COVID-19 stock. Vendors requiring a result are still motivated towards sale, however for many the COVID-19 interruption has postponed planning to later in 2020 with a more cautious wait ans see outlook. In a positive for the market, long term residential tenancies have remained relatively firm. The larger agencies have indicated that requests for rent reduction remain quite low and rental arrears have not spiked. The short term tenancy market is very poor though, as holiday makers have “evaporated from the local scene” according to the report.
A $700,000 budget delivers a wide range of property types to interested parties. Everything from three-bedroom apartments in the Darwin CBD to four-bedroom houses in Muirhead to your dream home in Humpty Doo are an option right now. The market is in a great position for buyers who plan on buying low and selling high (as much as this can be predicted, anyway).
The local Canberra housing market has continued to be quite stable. There are still active market participants, however there are lower sales listings available. The apartment market has continued to experience a long period of strong supply and weakening demand. This has contributed to wider sale price fluctuations. Investors are approaching the market with more hesitancy with the residential tenancy moratorium on evictions in place. The territory is also seeing a large number of sales going through with extended settlement periods.
The Herron Todd White report says that with a “lazy $700,000”, there are a number of options throughout the ACT. Belconnen is a great location if you’re looking to be close to the CBD but also want to be close to nature (Lake Ginninderra is located in the suburb). Cook is the HTW pick of the region, due to the strong capital growth the suburb continues to experience. As they say “buy the worst house on the best street”, and then jazz it up later on.
Tasmania seems to be recovering well at the current point in time. The HTW report highlights the fact that COVID-19 seems to have had a limited impact on the property market in the northern suburbs (Hobart, Launceston, etc) in particular, with the days on market remaining steady. The rental market has also remained steady, which is another promising factor.
The majority of properties in Tasmania do not exceed $700,000. At this price point, it would be easy to grab a rural acreage property or a heritage-listed house close to the Hobart CBD. For investors, grabbing two apartments within your budget limits is the recommended route according to the report (try areas like Brighton).
What do you think about this outlook? Let us know in the comments below.