News & Media

December 2017 Newsletter

SEASON'S GREETINGS  

The Charles+Stuart team would like to wish everyone season’s greetings and a happy and healthy 2018.  According to the Chinese calendar, next year is the Year of the Dog, which apparently bodes well for moving residence. It will be interesting to see if this becomes evident in the housing market!

PROPERTY MARKET SAFE AS HOUSES: QBE OUTLOOK  

House prices are expected to surge across Australia’s major cities over the next three years, but a glut of apartments is likely to see unit prices fall, contributing to an overall improvement in home affordability. That’s the prediction of QBE in its Australian Housing Outlook  2017-20 report, produced with consultancy BIS Oxford Economics.

For Sydney, which experienced 12 per cent growth in house prices in the 2016-17 financial year, prices are expected to fall by 0.2 per cent by 2020, with the median house price dropping to $1.15 million from $1.178 million.

Unit prices in Sydney are expected to fall by 4 per cent, largely attributed to reduced investor demand due to tighter investor lending standards.

But while unit prices are expected to soften, the sector will play a growing influence on Australia’s property market over the coming decades, said QBE Lenders’ Mortgage Insurance CEO Phil White.

“With so many Australians priced out of the housing market, the Australian dream of owning property is increasingly turning to high and medium density apartments,” he said. “Units contribute to a greater share of the market as changing lifestyles and affordability dictate property choices.

“Encouragingly, that dream should become a reality for more Australians, with improving affordability overall.”

Across the nation, units account for 46 per cent of all residential construction.

The report forecasts that Sydney, Melbourne, Adelaide, Perth and Darwin will become more affordable in the next three years, while Hobart and Canberra are expected to become less affordable to June 2020.

The report also shows that first home buyer loans fell by less than 1 per cent in 2016-17, however in the three months to July 2017, 13 per cent more loans to first home buyers were approved compared with the  previous year.

POPULATION GROWTH

Around 6.5 million people will need to be housed over the next 15 years, Mr White said.

“The forecast population growth raises questions about whether our property market will have us on track to meet short, medium and long-term population challenges,” he said. “Careful planning for housing stock and infrastructure is imperative.”

SYDNEY: AT A GLANCE

  • House prices to flatten to 2020 to $1,150,000.
  • Units expected to decline 4% to reach $760,000 at June 2020.
  • Forecast higher interest rates and lower loan-to-value ratios for investor lending expected to limit ability for investors to enter the market.
  • This is expected to put downward pressure on unit prices as investors retreat from the market.
  • Conversely, first home buyers could put price pressure on units as they continue to take advantage of the recently introduced exemptions on stamp duty across  the state.

BOOSTING HOUSING SUPPLY WON'T FIX AFFORDABILITY ISSUE, REPORT STATES

Simply boosting the number of homes in Sydney is unlikely to fix the housing affordability crisis. That’s the finding of new modelling from two academics from Australian National University.

The research, Australia’s first published regional analysis of housing demand and supply, took into account changing demographics and building types, and analysed 15 years’ worth of census data and building approvals. It also compared the underlying demand with actual supply to estimate the housing ‘gap’.

The analysis has identified a long-term oversupply of housing in many inner Sydney suburbs but how despite this surplus, property prices have surged over the past five years. The findings imply that new policies to improve affordability are needed.

"If, as this report suggests, housing in Australia is not in short supply, then we need to find alternative explanations for house-price growth,” the report says. It goes on to say that the explanation would direct policy in applying levels capable of affecting housing affordability.

The modelling indicated that inner-Sydney’s statistical region has accrued a "significant surplus" of 5,900 dwellings relative to population growth since 2001. Based on Department of Planning figures, a record 37,608 new houses were completed in Sydney during the year to March. That is nearly three times more new dwellings compared to the figures in 2008 and 2009.

Overall, the Australian housing market was shown to have an oversupply of 164,000 dwellings between 2001 and 2017.

One of the report’s authors, Dr Ben Phillips, said that often the behaviour of property prices at the regional level has “nothing to do” with underlying fundamentals for housing demand. This includes population growth. He said that housing is an asset, and assets do not constantly reflect the fundamental underlying value.

“The standard line of governments and industry seems to be that housing supply is a big problem in Australia,” Dr Phillips said. “No doubt there are some areas where it is. But, overall, we don’t see the housing shortage that’s often talked about. In fact, we see that there is a surplus.

“If this research is right, it suggests we’ve built enough dwellings, and there’s not likely to be any great gain in building more houses in addition to what’s required.”

Dr Phillips added that he does not believe housing supply has made a significant contribution to housing price growth. “The surplus is not particularly substantial but certainly suggests that housing supply in and of itself is probably not the primary driver of house-price growth in Australia.”

To read the report, go to http://csrm.cass.anu.edu.au/sites/default/files/docs/CSRM_1%3A2017_Housing_Supply.pdf  

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