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SQM Research Residential Newsletter - 
Tuesday 2 February 2021
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Black Dragon's
Words for the Week

"2020 will go down in history for many things. Some of us may have found our niche, some may have loved and some of us may have also lost but 2020 came to also remind us why we should always show love and appreciation to the people around us while we still have the chance.”

Hopal Green, Author

Real Estate Realities 

Aussies committing to new home loans at soaring rates

New home loan commitments have reached record highs as the low interest rate environment and government incentives spur on a flurry of buying activity.

Latest Australian Bureau of Statistics data reveals new housing loans for December soared 8.6% on the previous month, with $26bn added to the nation’s lending book.

The ABS recorded an 8.7% rise in new owner-occupier home loans, while investor-only loans grew 8.2%.

Owner-occupier loan commitments are at the highest level since June 2009, with Victoria having the largest jump.

ABS head of finance and wealth, Amanda Seneviratne said loans for newly constructed properties had more than doubled since June, in part to the implementation of building grants like HomeBuilder.

Read More...

Random Takes on the Housing Market
by Louis Christopher, CEO

 Auctions

The year is opening up with a surge of auction activity. Sydney and Melbourne are holding double the number of auctions on compared to this time last year. Why is this happening?  Firstly, due to last year’s lockdown and in some states, outright closure of the housing market, people were frustrated in being able to settle their various affairs, whether that be buying a first home, changing cities, upgrading, downgrading, selling deceased estates, etc.  Much of this activity could not be done.  But now, with most restrictions lifted and Covid essentially eliminated from the community, people want to complete these activities. And they are also aware that at anytime, restrictions easily be placed on them once more.
 
But it is just as likely that buyers wish to purchase in earnest given the interest rate cuts rates of last year (and late 2019 for that matter) plus the increasing chatter of the market recovery is reminding many buyers to get on with it.  Sellers are also keen to move now given they are likely to fetch a good price and for most of the other reasons mentioned above.  So there is going to be a lot of agreement between buyers and sellers over the next few weeks.
  

A Reminder of our Capital City Forecasts
 

Our bullish base case assumed extension of Job Keeper (or package very similar) plus the extension of quantitative easing (digital money printing). Scenario 2 assumed Job keeper ending as planned and QE ending as planned. Scenario 3 assumed QE extended somewhat combined with surge in jobs creation and the vaccine going well.
 
Based on recent Federal Minister comments, it doesn't look like Job keeper will be extended to any great affect (we wait and see). So increasingly it is a race between Scenarios 2 and 3 right now.
 
Scenario 4 is still in play, particularly after the news that the EU is suspending vaccine distribution until they have their share first. While assurances have been made that we still have a supply source, it does go to show Covid (more so the responses to Covid) remains a fluid and volatile event.
 
In all cases Perth remains our most bullish prediction. A forecast of 8-12% with potentially more on the table if everything goes right in the economy (Scenario 3). As far as I can recall (and as far as the data allows) Perth is a city where the rental market front runs the overall housing market.
 
So what does our data show for the Perth rental market?

 
A massive shortage of rental properties driving up rents by 12% per annum and likely to go up more. No question, this intense level of demand with a simultaneous drip in supply will mean big price gains for 2021. The current lockdown is not likely to change this scenario other than if we see an extended period of lockdown going on for months as what happened with Melbourne.
 
More on our 2021 Forecasts can be found in our 2021 Housing Boom and Bust report, released last December.

 

Melbourne CBD Rental Market has crashed

Speaking of which, I have pointed this out multiple times over 2020 that there were big problems for landlords in our CBDs. We were the first to bring to the attention the surge in CBD rental vacancy rates back in April.  Now its time to look at the score board for it shows the result. Melbourne CBD unit market rents are down 33% over the past 12 months.
 
We know the reasons why. People have been wanting to escape high density locations where outright lockdowns can occur at anytime. Going forward, if we have an extended virus free period, perhaps people might start to come back to the inner urban and city CBD locations, particularly in slight of the massive discounting in rents. You can now rent a 2 bedroom unit in Melbourne CBD for just $400 a week. Its about the same rent compared to what is on offer out in Melbourne’s Eastern suburbs. 
 

Sydney Regions

Over the weekend I conducted radio stint with 2GB’s Chris Smith who also has his own show on Sky News. This one was focussed on what is happening with the Sydney regions. If you have an interest in the various sides to the Sydney housing market, you should enjoy this segment which can be found by clicking here.
 
More info on our various regions covering all of Australia can be found here for free. Just scroll down a little on the link and you will see the drop down menu to all the various regions we have:

 

PROPERTY LISTINGS DECLINE IN JANUARY

by Louis Christopher, CEO

Figures released today by SQM Research reveal national residential property listings decreased in January 2021 by 2.9%, falling from 272,999 in December 2020 to 265,116. Compared to 12 months ago, listings were down by 10.5%.

All capital cities experienced decreases in property listings over the month except for Perth which had a 0.1% increase in listings.  The largest decrease was in Melbourne of 4.7%.

Year-on-year listings also show larger declines for most capital cities with the exception of Sydney and Melbourne, both recording increases of 4.5% and 21.1%, respectively.


New Listings (30 days)

Nationally, new listings (30 days) decreased by a 24.46% over the course of January with 16,234 less properties on the market. Hobart’s new listings decreased by a significant 33.28%, followed by Canberra which decreased by 26.10%.  Sydney recorded the lowest decrease in new listings of 2.42%.

Asking Prices

Capital City asking prices declined by 0.7% for houses but increased 0.2% for units, over the month to 2 February 2021. The new year commenced with unit asking prices at $565,600 and houses $996,800.  

Compared to a year ago, the capital city asking prices posted increases of 2.0% for houses but a decline of 2.1% for units.

Over the month, Melbourne and Canberra were the only capital cities to record decreases in both house and unit prices - 0.4% and 0.2% respectively for Melbourne and 0.2% and 0.7% for Canberra house and unit prices.
 
Perth, Adelaide and Darwin all recorded increases in both house and unit prices over the month to 2 February 2021.

Sydney recorded a decline in house prices of 1.7% but an increase in unit prices of 0.2%.  Brisbane also recorded decline of 0.3% in house prices and an increase of 0.6% in unit prices. Hobart recorded an increase of 0.6% in house prices and decline of 0.5% in unit prices.


Commentary

The month of January traditionally records falls in properties listed for sale as the market is still in a summer holiday mode. This year was no exception. However, when we consider the number of new listings compared to January 2020, there was a material rise in nearly all cities. This finding is consistent with the observed early start to the auction market over January and February.


AUCTION RESULTS for week ending 31 January 2021

Full individual auction results can be found on our website: 



AUCTION LISTINGS* for week ending 7 February 20210


CITY

Saturday

Rest of Week

 

STATE

Saturday

Rest of Week

Link

Sydney 449 83   All NSW 522 182 Auctions in NSW
Melbourne 576 154   All VIC 640 179 Auctions in VIC 
Brisbane 59 38   All QLD 97 107 Auctions in QLD 
Perth 12 8   All WA 12 12 Auctions in WA 
Adelaide 61 31   All SA 61 33 Auctions in SA 
Canberra 35 39   All ACT 35 39 Auctions in ACT 
Darwin 3 3   All NT 5 3 Auctions in NT 
Hobart 0 0   All TAS 1 0 Auctions in TAS

* The above counts of auctions represent most recent known auction dates for the coming week. 
 

DISTRESSED PROPERTY OF THE WEEK

G10/1215 Centre Road Oakleigh South VIC 3167


click to enlarge
 
This near new apartment is located in Oakleigh South approx. 17 km south-east of Melbourne's CBD.  Advertised for $410,000 - $450,000, the property has been on sale since October 2020 and the vendor is eager to sell.
 
Well-located, only seconds to parks, golf clubs and convenience stores, it is also within 6 minutes’ drive to the centre of Oakleigh, 9 minutes to Chadstone The Fashion Capital centre and only 5 minutes to either Huntingdale or Clayton train stations.
 
The apartment comprises 2 well-proportioned bedrooms including a study nook in the master bedroom; a centrally located bathroom; state of the art kitchen with stone bench-top and stainless-steel appliances; European style laundry; plus a spacious dining and living space opening onto a large, east facing private courtyard.  There is also a secure undercover parking with storage cage.
 
Apartments in this postcode have a current price range from $475k to $520k.  Over the last month,
asking prices for 2-bedroom apartments in this postcode have increased by 5.6% after a 6.3% decline over 3 years. 
 

Asking rents had declined 0.8% over 3 years, however, they are now stable over the last month.  Unit asking rents can range from $380 to $400 per week and an implied gross rental yield of 4.2% for units can be achieved.  The vacancy rate in this area is still quite high at 4.9% in December 2020.  Pre-covid, in December 2019, the vacancy rate was a low 1.7%.
 
This apartment would best suit families and owner-occupiers seeking a suburb with good transport links, shopping hubs and close to hospitals, schools and parks and it has been ranked amongst the best suburbs for affordability and liveability.

You can monitor this market with SQM Research’s 
free property data Also consider the SQM Property Explorer product for more in-depth data and property price estimator.


SQM RATINGS NEWSLETTER

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If you would like to subscribe to our Ratings Newsletter, click here.  The newsletter provides regular updates on all funds including ratings changes and media releases, and valuable Insights into the point of view of our analysts on a variety of ratings research related topics.  And it’s completely free!
 

SQM RESEARCH HOUSING INDEXES
 
SQM Research Weekly Asking Prices Index
Week ending: 2 Feb 2021 Asking Price     Chg on
prev wk
   Rolling month
% chg
   12 month
% chg
Sydney  All Houses    1,379.6 6.9  -1.7%  2.3% 
All Units 670.6 0.3  0.2%  -6.5% 
Melbourne  All Houses 1,033.6 -3.0  -0.4%  1.1% 
All Units 574.7 0.2  -0.2%  4.0% 
Brisbane  All Houses 660.3 3.6  -0.3%  2.7% 
All Units 381.4 0.6  0.6%  2.3% 
Perth  All Houses 670.6 -1.7  0.8%  3.1% 
All Units 385.8 1.2  0.6%  2.6% 
Adelaide  All Houses 540.5 2.1  1.6%  2.8% 
All Units 316.7 1.1  0.3%  4.6% 
Canberra  All Houses 820.8 1.9  -0.2%  0.2% 
All Units 472.3 -2.4  -0.7%  7.5% 
Darwin  All Houses 587.1 2.3  1.1%  2.7% 
All Units 369.8 0.7  2.2%  20.0% 
Hobart  All Houses 609.7 -2.0  0.6%  11.3% 
All Units 372.6 -6.1  -0.5%  5.5% 
National  All Houses 639.0 4.2  0.4%  8.5% 
All Units 409.6 0.7  0.5%  5.6% 
Cap City Average  All Houses 996.8 3.1  -0.7%  2.0% 
All Units 565.6 0.0  0.2%  -2.1% 

Next update: 9 Feb 2021

SQM Research Weekly Rents Index
Week ending: 28 Jan 2021     Rent          Chg on
  prev wk
   Rolling month
% chg
   12 month
% chg
Sydney  All Houses     653.6 2.4  3.1%  -6.5% 
All Units 453.8 3.2  2.0%  -9.4% 
Melbourne  All Houses 514.7 -0.7  0.7%  -5.1% 
All Units 377.4 -0.4  -0.1%  -9.8% 
Brisbane  All Houses 477.5 0.5  0.9%  0.8% 
All Units 380.8 0.2  0.1%  1.0% 
Perth  All Houses 499.4 3.6  1.2%  12.7% 
All Units 373.6 0.4  2.0%  10.4% 
Adelaide  All Houses 425.1 0.9  1.2%  5.4% 
All Units 317.6 -1.6  -0.4%  1.7% 
Canberra  All Houses 663.0 5.0  1.1%  4.3% 
All Units 477.7 2.3  0.8%  3.5% 
Darwin  All Houses 583.7 -5.7  -2.2%  25.5% 
All Units 398.9 -3.9  -0.6%  4.9% 
Hobart  All Houses 482.7 -1.7  3.0%  7.1% 
All Units 390.1 2.9  -0.5%  -10.7% 
National  All Houses 492.0 5.0  0.8%  8.8% 
All Units 387.0 -1.0  0.8%  3.5% 
Cap City Average   All Houses 550.0 -1.0  2.0%  -2.1% 
All Units 412.0 1.0  1.5%  -6.6% 

Next update: 4 Feb 2021

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