Quarterly Market Insights - March 2018 Quarter

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Quarterly Market Insights March Quarter 2018Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 59991TABLE OF CONTENTS…
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Quarterly Market Insights March Quarter 2018Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 59991TABLE OF CONTENTS Foreword04VICTORIA Market Overview08New Communities12Apartments and Townhouses18Development Sites22QUEENSLAND Market Overview26New Communities28Apartments and Townhouses34Julian Coppini Chief Operating Officer j.coppini@oliverhume.com.auNanjingCHINA ShanghaiWelcome to Oliver Hume's March Quarter 2018 Market Insights ReportFuzhou2018 promises to be an important year for the Australian property market with the residential sector across the nation at varying stages of the market cycle.The output of this market intelligence and insights is a competitive advantage for our clients, buyers and all those who we interact with daily.Some markets are reaching a turning point following years of exceptional price growth and activity levels, while others continue to set new records.This report is the latest instalment of our regular Quarterly Market Insights series which is an example of how our research goes behind the numbers to provide you with the latest market insights.With Australia now experiencing record population growth and the economy continuing to strengthen it is important to understand what comes next and to understand the evolving and rapidly changing property market landscape.DarwinI am sure this update will be a valuable resource for you in better understanding the market and planning for the future.NORTHERN TERRITORY QUEENSLANDOliver Hume has a thorough understanding of the Australian residential property market. Our understanding has been built up over several decades of experience and from dealing with both buyers and sellers of property at all stages of the market cycle. Importantly, our team of specialist economists, real estate analysts, mathematicians and others work hard to analyse current and emerging market trends using both proprietary data and a wide range of other information sources.WESTERN AUSTRALIABrisbaneGold CoastSOUTH AUSTRALIA NEW SOUTH WALESPerthSydney Adelaide CanberraVICTORIA MelbourneTASMANIA Hobart4Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 5999Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 59995MARCH QUARTER 2018VICTORIAVICTORIA George BougiasMARKET OVERVIEWHead of Research g.bougias@oliverhume.com.auUnemployment Rate - Victoria 7.57AS UNEMPLOYMENT MOVES TOWARDS LEVELS REGARDED AS ‘FULL EMPLOYMENT’... LABOUR MARKET AND OVERALL ECONOMIC SENTIMENT SHOULD CONTINUE TO IMPROVE HELPING TO UNDERPIN RESIDENTIAL DWELLING DEMAND.6.5Victoria’s Strengthening Economy to Underpin Growth65.5Victoria’s land markets continue to be driven by strong property market fundamentals helping to sustain buyer demand.Victoria’s level of unemployment in April 2018 was 5.3% (on a seasonally adjusted basis), below the national average of 5.6%.The Melbourne and Geelong markets remain buoyed by record population growth.In April 2018, Victoria recorded the second highest level of trend employment (up 2,100 persons) after New South Wales (up 9,400 persons).In 2016-17 Melbourne had the largest population growth of all Australian capital cities (125,400) with growth exceeding Sydney (101,600) and more than double that of Brisbane (48,000). Melbourne also recorded the fastest population growth over the period (2.7%), greater than Brisbane and Sydney (both 2.0%) and significantly more than the national average for all capital cities (1.9%). Melbourne’s land prices continue to increase although price growth now appears to be slowing as affordability constraints are becoming increasingly important. The reduction in lot size continues, helping to alleviate affordability somewhat, while also meeting the needs of a diverse group of buyers including first home buyers, singles, couples and families with children. Continued economic growth is increasingly a major driver.54.54 Mar-2013Mar-2014Mar-2015Victoria Unemployment Rate (Seasonally Adjusted)Mar-2016Mar-20175-Year AverageMar-2018Source: ABS, Oliver Hume Research.However, sluggish wage growth remains a key challenge with most economists expecting wage growth will remain low. This will cap accessibility to finance especially in the context of continued land price growth. Labour force participation continues to climb reaching levels well above that achieved in recent decades. Greater labour force participation will help underpin demand in the residential land market. As unemployment moves towards levels regarded as ‘full employment’ (around 5.0%), labour market and overall economic sentiment should continue to improve helping to underpin residential dwelling demand.Participation Rate - Victoria 80%75%70%65%60%55%Importantly, interest rates are expected to remain low with any increase now expected sometime away.50%45%8Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 5999Male Female OverallOverall Participation RateMar 2018Mar 2016Mar 2014Mar 2012Mar 2010Mar 2008Mar 2006Mar 2004Mar 2002Mar 2000Mar 1998Mar 1996Mar 1994Mar 1992Mar 1990Mar 1988Mar 1986Mar 1984Mar 1982Mar 1980Mar 197840%Higher levels of government investment and consumer spending, supported by dwelling investment, are ensuring economic growth remains robust and unemployment continues to decline.Source: ABS, Oliver Hume Research.Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 59999New Communities MarketVICTORIAMARKET OVERVIEW (cont.)Population Growth Remains RobustVICTORIA’S POPULATION HAS NOW EXCEEDED 6.3 MILLION PEOPLE.Victoria’s population growth continues to exceed expectations. Victoria’s population growth in the year ending 30 September 2017 was 147,000 (2.4%) representing over a third of Australia’s population growth (37%). Victoria’s population has now exceeded 6.3 million people. W h i l e i n te r s t a te m i g r a t i o n remains important, overseas migration remains the main driver of population growth and the residential land market.The trends observed in the second half of 2017 extended into the March quarter 2018 with continued price growth and volumes remaining below recent peaks.However, increased competition between developers and buyers’ preferences for more affordable stock, including smaller lots, has seen price growth slow.Lower sale volumes are due to a range of reasons including fewer lots being offered to the market by developers and decreasing affordability.This suggests prices are now softening and that we might be approaching the market’s peak. Nevertheless, market conditions remain robust with clearance rates remaining at record highs and time on market remaining at record lows.In the year ending 30 September 2017, net overseas migration to Victoria increased by 15.3% (11,700 people) to exceed 88,000 people. Net interstate migration was nearly 17,000 remaining at near record highs with the state attracting people from across the country."...CLEARANCE RATES REMAINING AT RECORD HIGHS AND TIME ON MARKET REMAINING AT RECORD LOWS."Despite higher land prices Melbourne’s relative affordability, especially when compared to Sydney, remains a key driver of overseas and interstate migration and underlying residential demand.Buyers born in India, China, Vietnam, Sri Lanka and Philippines are amongst the most important and growing buyer segments.New Lots Sold and Available - Metropolitan Melbourne Annual Population Growth (Year ending September 2017)5,00070%4,5002.5%60% 4,0002.0%50%1.5%40%3,000 2,50030%2,000 1.0%20% 1,500 10%1,0000.5%0%10Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 5999Sold Available on MarketPercentage SoldMar 18Feb 18Jan 18Dec 17Nov 17Oct 17Sep 17Aug 17Jul 17Jun 17May 17Apr 17Mar 17Feb 17Jan 17Dec 16Nov 16Oct 16NTSep 16SASource: ABS, Oliver Hume Research.Aug 16TASJul 16WAJun 16NSWMay 16QLDApr 16ACTMar 16VICNational Population GrowthFeb 160%Jan 160Source: Oliver Hume Research.Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 599911Percentage SoldNumber of Lots3,500Active Projects - Metropolitan Melbourne and Greater GeelongVICTORIA Gerrard EllisNEW COMMUNITIESDirector g.ellis@oliverhume.com.auPaul Ciprian Director p.ciprian@oliverhume.com.auMITCHELLPROJECT AND CORRIDOR DATATHE MARCH QUARTER 2018 SAW A DECREASE IN THE TOTAL NUMBER OF SALES ... FROM THE PREVIOUS QUARTER.Active ProjectsTotal Lots ReleasedThe number of active projects in Victoria grew to a total of 177 in the March quarter 2018, representing a 4.1% increase from the previous quarter.Lots released onto the market fell in the March quarter 2018 by nearly 4%.WHITTLESEAHUMEMELTONMarch Quarter 2018March Quarter 20181774,5964.1% from previous quarter3.8% from previous quarterMELBOURNEWYNDHAMGREATER GEELONGPORT PHILLIP BAYCARDINIATotal SalesTotal UnsoldThe March quarter 2018 saw a decrease in the total number of sales by 15.4% from the previous quarter.The number of lots remaining unsold at the end of the March quarter 2018 increased by 13.5% from the previous quarter.March Quarter 2018March Quarter 20184,4711,77615.4% from previous quarter1213.5% from previous quarterOliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 5999CASEY GEELONGNumber of Projects:1-56-10 11-15 16-20 21-25 26-30 31-35Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 599913Lot PricesVICTORIANEW COMMUNITIES (cont.)THE MEDIAN LOT PRICE IN METROPOLITAN MELBOURNE NOW SITS AT $314,000.The median lot price in metropolitan Melbourne is now $314,000.Overall, price growth is now softening as affordability constraints become more important and competition intensifies between developers.Median prices increased by 4.1% in the March quarter 2018 to be around 23% higher over the year.Historically there has also been a strong relationship between residential land and established markets.Land remains relatively affordable in Melbourne's western region while the south-east remains the most expensive market.With the established market now slowing it is to be expected that the greenfield market will also moderate over the short to medium term.Lot Sizes ACROSS METROPOLITAN MELBOURNE, LOT SIZES SHRUNK BY 1.2% ON AVERAGE OVER THE QUARTER AND BY 4.8% COMPARED WITH THE FIRST QUARTER OF 2017.Lot sizes continue to decline across metropolitan Melbourne. Across metropolitan Melbourne, lot sizes decreased by 1.2% on average over the quarter and by 4.8% compared with the first quarter of 2017.In addition to smaller lots for the traditional house and land package, estates are increasingly including medium density products to cater for preferences. METRO MELBOURNE23.1%Large reductions were observed in Melbourneâ&#x20AC;&#x2122;s south-east, where prices are highest, suggesting affordability constraints are leading buyers to purchase smaller lots.Annual GrowthCARDINIA41.2% Annual Growth4.1%9.0%CASEYHUME27.6%28.6%Annual GrowthAnnual Growth0.5%1.5%Quarter GrowthQuarter GrowthQuarter GrowthQuarter GrowthMELTONMITCHELLWHITTLESEAWYNDHAM41.6% Annual Growth1.6% Quarter Growth45.1% Annual Growth10.2% Quarter Growth33.2%19.2%Annual GrowthAnnual Growth5.4%5.3%Quarter GrowthQuarter GrowthMedian Land PriceMetropolitan Melbourne - Change in Median Lot Sizes Sold (March Quarter 2018)4.0%Metro Melbourne2.0%Cardinia0.0%Casey-2.0%Wyndham-4.0%Melton-6.0%Hume $333,888-8.0%Whittlesea $333,000Metro Melbourne Quarterly Change 14Cardinia Annual ChangeCaseyWyndhamMeltonHumeWhittleseaMitchellSource: Oliver Hume Research.Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 5999 $314,000 $344,500 $375,000$316,000 $280,438Mitchell$280,000 Metropolitan Melbourne Median PriceSource: Oliver Hume Research.Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 599915VICTORIANEW COMMUNITIES (cont.)PURCHASER PROFILES First Home Buyer Segment FallingFirst Home Buyer Market Shares March Qtr 201750%June Qtr 201749%September Qtr 201749%December Qtr 201746%March Qtr 201845%Source: Oliver Hume Research.Continued price growth continues to challenge first home buyers (FHBs). The market share of FHBs in the metropolitan Melbourne greenfield market has declined this year despite significant policy commitment by the both Federal and State Governments. These trends are part of the broader decline in affordability and home ownership we have observed in recent decades.Greenfield land developers have been adjusting with an increased focus on offering smaller lots to the market with an increasing number of townhouse and other medium density product being offered. This smaller lot product is attracting a range of market segments including FHBs, renters and others finding it difficult to enter the market. In addition, downsizers and empty nesters are also increasingly attracted to this type of product.Over the past two decades home ownership rates have generally decreased in all age categories except those aged 65+.Sales Volume by Country of BirthPrevious Living Circumstances - Wyndham 1%8%17%1. Australia2%43% 48%Lots >300sqmYear ending March 2018Lots <300sqm53%45.7%2. India34.8%3. Phillipines5.6%12.6% from previous quarter8.5% from previous quarter2.3% from previous quarter4. Sri Lanka5. China6. Pakistan28%Owner-OccupierRentingLiving with ParentsOtherSource: Oliver Hume Research.4.2% 0.8% from previous quarter3.2% 0.2% from previous quarter2.0% 0.7% from previous quarter Source: Oliver Hume Research.16Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 5999Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 599917VICTORIA Christine McCollamAPARTMENT AND TOWNHOUSESGeneral Manager | Apartments c.mccollam@oliverhume.com.auMARKET OVERVIEWINNER AND MIDDLE RING TOWNHOUSES CONTINUE TO REMAIN POPULAR WHILE TOWNHOUSES IN GROWTH AREAS AND BEYOND (GENERALLY 20KM FROM THE CBD) ARE NOW EMERGING AS INCREASINGLY POPULAR.Owner-Occupiers Filling The Void Melbourneâ&#x20AC;&#x2122;s medium and highdensity market is transitioning following the peak of the apartment supply cycle and the significant increase in overall property prices observed in the current cycle. Demand for medium density continues to increase as many buyers are priced out of the (separate) housing market. These buyers are opting for low maintenance dwellings with a land component. Inner and middle ring townhouses continue to remain popular while townhouses in growth areas and beyond (generally 20km from the CBD) are now emerging as increasingly popular. In terms of buyer segments, townhouses and other mediumdensity forms of accommodation remain popular with owneroccupiers and, increasingly, with investors with this product often well-located in terms of transport infrastructure, access to employment, retail and other amenities.The recent decision by the Australian Prudential Regulatory Authority (APRA) to remove the 10% annual cap on investor housing credit growth may provide some stimulus to the market overall but especially the medium density market given the higher yields on this type of product and the lower entry price. Apartment market conditions remain the softest with the market continuing to digest the above average levels of dwellings delivered in the recent supply cycle. Nevertheless, various indicators suggest underlying demand and broader market conditions for apartments are now improving. These indicators include tentative signs of an upswing in apartment prices and continued declines in inner city market vacancy rates.Median Unit and Apartment Prices - March Quarter 2018 Median PriceAnnual GrowthQuarter GrowthMetro Melbourne$607,0008.8%2.4%Inner Melbourne$600,5004.2%0.3%Middle Melbourne$674,0008.6%1.6%Outer Melbourne$518,50013.4%2.3%Source: Real Estate Institute of Victoria (REIV).18Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 5999Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 599919West and North Melbourne LivabilityVICTORIAAPARTMENT AND TOWNHOUSES (cont.)West and North Melbourne are increasingly important markets continuing to see both medium and high density development. Demand drivers include prime location with proximity to the CBD, access toSUBURB SPOTLIGHT WEST MELBOURNE / NORTH MELBOURNEemployment, excellent transport and infrastructure, local retail and entertainment amenities, whilst providing a mix of lifestyle and dwelling options.Median $/m2 ComparisonOne BedroomActive Projects Two BedroomNorth Melbourne31NORTH MELBOURNEThree BedroomWest Melbourne21CombinedWEST MELBOURNE$0 West Melbourne$2,000$4,000$6,000$8,000$10,000$12,000Source: Oliver Hume Research.North MelbourneMedian Price ComparisonSource: BCI, Oliver Hume Research.Median Size ComparisonTwo BedroomWest MelbourneNorth Melbourne51517373110986474One Bedroom20One BedroomTwo BedroomThree BedroomCombinedThree BedroomCombined $0 Source: Oliver Hume Research.Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 5999West Melbourne$200,000 North Melbourne$400,000$600,000$800,000$1,000,000$1,200,000$1,400,000Source: Oliver Hume Research.Oliver Hume Quarterly Market Insights - March Quarter 2018 | oliverhume.com.au | +61 3 9669 599921VICTORIADEVELOPMENT SITE HIGHLIGHTSDEVELOPMENT SITE TRANSACTIONSValue Rate Per Hectare (Millions) - 2017 and 2018 Y.T.D.Competition For Greenfield Sites Remains High Apart from the general factors influencing property markets, competition for greenfield sites is also driven by conditions in the inner and middle ring medium and high-density markets both of which are substitute markets for some greenfield developers. It is worth recalling that the Melbourne apartment market, especially in the inner city, remains weighed down by the dual challenges of retail finance availability (that is, investors are increasingly unable to obtain finance off-the-plan purchases) and developers are unable to get the required number of sales to secure funding. Although the Australian Prudential Regulation Authority’s recent decision to remove the 10% investor loan growth benchmark may see a partial rebound in investor activity, there are few factors of sufficient weight to suggest the apartment market will return to more balanced conditions in the short or medium term. In addition, the medium density development site market continues to undergo a resurgence, itself driven by a shift in developer a t t e n t i o n fr o m t h e i n n e rcity apartment market and by fundamental shifts in consumer demand and demographics (for example: the retreat of investors and emergence of owner-occupiers, the move to lower maintenance dwelling options, ageing and downsizing).However, here too competition for medium-density sites (and middlering apartment projects more broadly) remains intense. This is especially the case for well-located sites with access to transport infrastructure and amenities. Melbourne’s greenfield market remains a key focus for both domestic and overseas developers with the latter attracted to the city’s continued strong economic and population growth, international status as a gateway city to the rest of the Australia and, importantly, rapid growth in lot prices observed in recent years. Overseas developers represent a large and increasing buyer segment in the greenfield market despite various challenges such as stricter capital measures from the Chinese Government. While Melbourne remains a key focus, overseas developers are increasingly considering options outside of Melbourne and Sydney, for example in large regional cities and in Queensland, as their confidence and understanding of other markets increases.These factors include record population growth, the greenfield market’s
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