The Best of the Best 2018 highlights the top 10 suburbs (house & unit) nationally & across each of the capital cities based on the below criteria:
- All data highlighted is current to November 2018: (Total value of sales to September 2018).
- Median value data: Based on the middle value of all automated valuations across the suburb.
- 12 month change: The percentage difference between the median AVM value in the same period compared 12 months ago.
- Five year change: The percentage difference between the median AVM value in the same period compared 5 years ago.
- Rental rates: Quotes are based on the median across all rental advertisements over the 12 months to November 2018.
- Gross rental yields: Calculated across those properties advertised for rent. The annualised rental listing is divided by the valuation estimate to derive a gross yield for individual properties. The displayed gross yield is the median across the region over the period.
- Total Value of Sales data: The total value of all property transactions recorded over the 12 months to September 2018. Included in the analysis are only those suburbs that had at least 200 dwellings, 20 rental observations, 20 sales with a minimum of 100 AVM observations.
When you dig under the surface you can see that market conditions are as mixed as they have ever been.
Over the 12 months to November 2018, national dwelling values have fallen by -4.1% which is their largest annual fall since December 2011. As the year progressed, the rate of value decline got more rapid, particularly within Sydney and Melbourne. Across the capital cities, dwelling values fell over the past year in Sydney, Melbourne, Perth and Darwin while they rose everywhere else. It is important to note that the annual change in dwelling values to November 2018 was lower than the annual change a year earlier in all capital cities except for Darwin highlighting broad weakness across the market.
Over the past year the annual changes in dwelling values across the individual capital cities were recorded at: -8.1% in Sydney (its largest annual fall since May 1983), -5.8% in Melbourne (its largest annual fall since March 2009). +0.3% in Brisbane, +1.4% in Adelaide, -4.2% in Perth, +9.3% in Hobart, -0.8% in Darwin and +4.0% in Canberra.
Unlike previous housing market slowdowns which have typically been driven by an economic slowdown (such as the last recession or the GFC) or higher mortgage rates, this slowdown has been manufactured via tighter credit conditions while the economy continues to grow and mortgage rates sit at near record low levels. Since financial deregulation began in the mid 1980s access to credit has incrementally become easier, since macroprudential policies began to be implemented from the beginning of 2015, accessing credit has become incrementally more difficult. Investors and interest-only borrowers are having to pay higher mortgage rates, borrowers with small deposits are finding it more difficult to obtain finance as are those with high levels of overall debt while all borrowers are having their expenses more forensically scrutinised before being given mortgages.
The outlook for 2019 is, at this stage, for more of the same. The expectation is that there will be further value falls nationally with these declines largely being driven by Sydney and Melbourne however, value growth is expected to slow or remain stable in most other regions of the country on the back of the tighter credit conditions.
At least initially in 2019 credit conditions are expected to remain tight which will continue to dampen housing market conditions. At the beginning of February the findings and recommendations from the Banking Royal Commission are expected to be handed down and that has the potential to significantly change the mortgage landscape.
To-date the Reserve Bank has not been overly concerned with falling dwelling values largely because it has mostly been contained to Sydney and Melbourne and both cities have seen a substantial run-up in values over recent years. While that may be the case, if the slowing housing market impacts on consumer consumption then we could see a change of tact. Were this to happen, we could see some of the temporary macroprudential measures eased back throughout 2019. Nevertheless the overall expectation is that dwelling values will fall further during 2019 with Sydney and Melbourne experiencing the greatest declines.
We utilise the CoreLogic Home Value Index data across the SA3 geographic level and look at the regions with the largest value gains over the past year and the largest falls. Analysing housing market trends across Statistical Area 3 (SA3) geographies provides a much more granular look at the market, particularly in the smaller states where there are few SA4 regions.
Over the 12 months to November 2018, only 15 SA3 regions nationally have recorded double-digit value growth and 10 of the 15 were in Tasmania. Victoria had three of the 15 and New South Wales and Queensland had one each.
Only 48 SA3 regions recorded value growth of at least 5% over the past year. That means that only 14.3% of SA3 regions nationally recorded an annual rise in dwelling values of 5.0% or more.
The list of the top 50 regions for value growth over the past year is very much dominated by regional areas of Victoria and Tasmanian regions. The list also has a strong slant toward regional areas rather than capital cities. This reflects the fact that as value growth conditions have weakened nationally, the slowdown has been much more rapid across the capital city markets.
The South East Coast region of Tasmania recorded the strongest value growth over the past year. Across the region, dwelling values increased by 16.3% and it was the only SA3 region nationally in which values increased by more than 15% over the past year.
Over the 12 months to November 2018, 23 SA3 regions nationally recorded double-digit value falls. This means that more regions have recorded double-digit falls than those that have recorded double-digit value increases. Over the past 12 months, 55.7% of all SA3 regions nationally recorded value declines.
The list of top 50 regions for value declines over the past year is overwhelmingly dominated by New South Wales with each of the 28 regions in the top 50 located in Sydney. Regions of Victoria, Queensland, Western Australia and Northern Territory also appear on the list.
Over the past 12 months, the Outback-South region of Queensland has recorded the largest decline in values at -15.6%. It was also the only region in which values have fallen by more than 15% over the past year. The Outback-South region is geographically large and includes the major towns of: Longreach, Charleville and Cunnamulla.
The outlook for the housing market is for further weakness. Although the sharp falls of this year (especially in Sydney) are unlikely to continue at their pace over the next year, it would not be a surprise to see that in 12 months’ time additional SA3 regions across the nation have recorded annual value falls. More affordable regional housing markets with healthy or improving economic and demographic conditions are expected to hold up better in terms of growth than the more expensive and weaker capital city housing markets.
There’s no denying that buying a home is a big decision and yet you may be surprised by the number of people who are influenced by factors other than price, resale value and location. From the number of a house to a lick of new paint on the walls, it seems we are influenced by emotion and aesthetic much more than we think. This infographic illustrates the seven psychological factors prospective buyers consider when purchasing a new home.
Over the 12 months to November 2018, turnover of national housing stock was recorded at 4.6%. Over the nine years shown on the chart it was the lowest turnover of stock and was down from 5.3% the previous year. Turnover has been trending lower since it was recorded at 6.3% in mid-2015.