We hope everyone had a great break and the New Year has started well. We are all very excited about what lies ahead for the property market this year. There are signs everywhere that the market should be a strong one. Interest rates seem to have settled providing much needed confidence to home buyers and investors, construction costs are stabilising and banks are now competing a lot harder for our business. Rents have continued to increase which is encouraging 1st home buyers to enter the market and investors who are starting see higher rental yield. Migration will also be strong in 2024, putting further pressure on demand. While we expect supply to increase we would be very surprised to see supply to outstrip demand, particularly for good quality properties.
The strength of the market is not just our opinion as we are seeing some pretty clear signs of market strength. From a national perspective prices increased 8% for 2023 and we do not see this abating. In fact we believe Melbourne could see above average growth in 2024 as it lagged the other states given the length of our covid lockdowns. From an investor perspective we found it particularly interesting that investor borrowing across Australia is up 18% over the last 12 months, according to the most recent data from the Australian Bureau of Statistics. This is also an encouraging sign for the market.
However, there are some fairly big geopolitical issues that we can not ignore with the Ukraine war, Gaza and Taiwan tensions. Any escalation here would have a pretty big impact on all investments. However, property is often more resilient given everyone needs a roof over their heads and there is always cashflow with rentals.
In this months newsletter we provide some regular insights from Corelogic, a property management update, some property purchases in December and our tip of the month to be decisive.
Once again we wish all our readers a safe and prosperous 2024!
Insights
Source: Corelogic 2024
Each month the CoreLogic Research team puts together a Housing Chart Pack, with all the latest stats, facts and figures on the residential property market, such as the combined value of residential real estate, sales volumes, and the trend in new listings.
“This was the smallest gain in our national monthly HVI since values started rising in February,” said Tim Lawless, CoreLogic’s research director. “After monthly growth in home values peaked in May at 1.3%, a rate hike in June and another in November, along with persistent cost of living pressures, worsening affordability challenges, rising advertised stock levels and low consumer sentiment, have progressively taken some heat out of the market through the second half of the year.”
Despite the annual 8.1% increase, the year was punctuated by diversity, with the annual change in housing values ranging from a 15.2% surge in Perth to a -1.6% fall across regional Victoria.
One of the main trends through the year has been the widening disparity in the rate of home value growth across the capital cities.
Other highlights from the January Housing Chart Pack include:
- The value of residential real estate was an estimated $10.3 trillion at the end of December, which was relatively steady on the previous month.
- Both the combined capital city dwelling market and the regional dwelling market saw a rise of 1.5% in the December quarter.
- The growth trajectory for housing values across the combined capitals has broadly slowed since late May. However, the pace of growth remained relatively steady through the four weeks ending January 10th.
- Perth led capital growth performance in the greater capital city markets. In the 2023 calendar year, Perth home values increased 15.2%. Perth dwellings also had the strongest quarterly growth of the capital city dwelling markets, rising 5.1%.
- In 2023, CoreLogic estimates there were 488,898 sales nationally. This is -2.8% lower than in 2022, but sales are now trending slightly higher than the five-year average.
- The median time it takes to sell a capital city home was trending lower through 2023, but moved slightly higher in the December quarter to 29 days. The median selling time for regional Australian dwellings is 41 days, which is up from 36 days a year ago, but remains well below the pre-COVID average.
- Discounting rates also narrowed in 2023 as selling times reduced. Across the capital cities, the median vendor discount shrank from -4.3% in the December 2022 quarter to -3.5% in the December quarter of last year. Towards the end of last year, there was a slight deterioration in the median vendor discount.
- As with the capital growth trend, the final clearance rate across the combined capital cities market trended lower at the end of 2023. In the four weeks ending 17 December, the average final clearance rate was 58.9%. This was down from 62.5% at the end of November, though still higher than the 55.1% average recorded in the same period of 2022.
- Dwelling approvals increased 1.6% in November, driven by a 7.2% increase in the more volatile unit segment. Approvals trended a little higher over 2023, but remain relatively low overall. For the past six months, monthly dwelling approvals have averaged 13,760 a month, below the decade average of 17,254.
Source: Core Logic
Property Management Update
Australian rent values increased a further 0.6% in the month of December, taking the national annual increase to 8.3%. Annual growth in rent values has accelerated slightly, from the 8.1% increase recorded in the 12 months to October.
Gross rent yields have moved slightly higher nationally in the past few months. This is due to the slight slowdown in the pace of capital gains against a slight uptick in rent value increases through the December quarter.
What a month January has been for our team leasing 7 of the 7 properties that we had advertised.
Whilst we have renters vacating which makes properties available for new renters, we do not have enough supply for the demand of housing.
Each open home held this month had record numbers through and received multiple applications. All of our properties leased in January leased after one or two open homes.
Increased investor activity will obviously help to re balance the rental shortage we are experiencing. With more investors’ support, we would hope to see a less challenging year ahead for renters.
Record low rental vacancy rates meant that finding a rental home for many was very hard and sometimes even impossible. With just a touch more than 1% of rental properties available to rent across our capital cities last year, it seen many challenged to find a place that they could call home.
The shortage of available homes has led to a surge in weekly rents. In capital cities, rents increased by approximately 13% over the past year, putting many renters under increased financial pressure.
We pride ourselves on our honest open communication and the strong relationships we build with our rental providers and renters alike.
If you feel that you may benefit from our boutique property management service, please give us a call on 03) 9818 4499 to have a confidential chat. It may be time for a change.
Property Purchases
Although over the last two months supply has been very low, we have been able to deliver some great results for our clients.
Here are a few purchases below:
Home Buyer – Hawthorn
After looking at a number of potential options for clients looking to move from Interstate to Melbourne, the auction of a property in Hawthorn provided the perfect opportunity. Offering 3 bedrooms in a very quite street, yet only a short walk to all shops and amenities this ticked all the boxes. With an auction just before Xmas, there was no activity and this was passed into us. We were able to use all our research and skills to negotiate a great outcome for our client well below their budget, allowing funds to further update the property.
Investor – Balwyn
This was purchased for a client who had previously purchased an investment property but wanted to wait for the prefect opportunity. We patiently assessed a number of options before this one presented off market. With renovated options selling $500k + over the price we were able to negotiate on this 2 bed + study single level villa this provides excellent value add. As well as strong market growth given its position and being only 1 of 2 on the block with a large land element.
Home Buyer – Kew
This property was bought to us by a client wishing to secure a home that accommodated their mother and family. With a separate wing of the home this was a perfect option. The only challenge was they required a long settlement and had to compete with other interested parties. Once again we were able to use our negotiation skills and were able to lean on our agency relationships to get this one over the line. A happy client.
First Home Buyer – Hawthorn East
This client had received a notice to vacate for their rental and they had a short window to see if they could purchase a property with a limited budget. Not only did we hit the brief but we secured a property $50k below their budget. Situated in Hawthorn East and offering great views of the CBD, including a car space and storage cage this was secured privately only a couple of days prior to Xmas. A great outcome.
Tip Of The Month:
Be Decisive
As we head in 2024 it is important that you follow through with your new years resolutions. If it is to buy property, do your research and be prepared to make a decision and step forward. Doing so will;
Guide Action: Decisions provide a clear direction, guiding our actions and behaviour toward a specific outcome or goal.
Facilitates Progress: Decision-making propels us forward, enabling progress and growth by choosing the best course of action among alternatives.
Defines Priorities: Decisions help prioritize tasks and allocate resources effectively, ensuring focus on what truly matters.
Builds Accountability: Making decisions fosters accountability, as individuals take ownership of their choices and their consequences.
Shapes Future: Decisions influence the trajectory of our lives and organizations, playing a key role in shaping our future experiences and opportunities.
Opportunity to learn: Even if mistakes are made you will have the opportunity to learn from the experience.
So make 2024 the most decisive yet!
