CoreLogic boss Lisa Claes argues that overall, the future looks healthy amidst the current housing market paradox.
CoreLogic managing director, Lisa Claes argues that overall the future looks healthy amidst the current housing market paradox.
Affordability constraints, strong growth, low turnover and high investor activity - these are just some of the contradictory phrases characterizing the real estate industry today, painting a complex picture of an increasingly paradoxical market.
A multi-speed market
More than half of household wealth is in residential property, making it one of Australia’s most important asset classes. As such, it’s not surprising that real estate is of such interest to policy makers, regulators, financial institutions and consumers alike - and the current growth phase on the back of low interest rates and burgeoning investor appetite has made the housing market a compelling hot topic.
Yet, it’s important to note the diversity of growth across major cities.
Homeowners in Sydney and Melbourne in particular have emerged victorious, with Core Logic data indicating property values have grown by 96% in Sydney and 82% in Melbourne 82% since 2009. This has been influenced by strong service sector growth and job creation. These cities have also been relatively sheltered from the downturn in the resources sector that has seen house prices in Perth and Darwin tracking 10% lower since their 2014 peak.
The homebuyer conundrum
However, growth is not synchronous with turnover. As a result of tightened lending conditions, affordability constraints and rising costs associated with moving house, listings have almost halved in the past 5 years, with Core Logic data showing settlement sales in Melbourne (-21%) and Sydney (-18%) trending lower year on year.
First homebuyers especially have been bearing the brunt of buoyant market conditions, with dwelling values rising faster than incomes. They have to save for a larger deposit, and if they do buy they are quite possibly doing so at the peak of the market. First homebuyers are also in the precarious position of battling affordability while interest rates are low, and having to contend with a further squeeze on household finances when rates inevitably do rise.
It’s not all roses for existing homeowners either, who are increasingly leaning towards renovating or extending their current property rather than splashing out tens of thousands of dollars in stamp duty to up-size. And investors have their own issues to contend with. Dwellings under construction are at an all time high, with a plethora of unit blocks due for completion, and many cities set to carry surplus stock.
The impact is far-reaching. Buyers waiting to complete on their property could be in for a financial shock, as Core Logic data (September 2016) indicates 42% of Brisbane units and 40% of Melbourne units bought off-plan are being valued at less than their contract price. Purchasers may find themselves digging into the wallets to top up their deposit to meet LVR requirements, or risk non-settlement on their unit.
A prevailing market
So, in this complex housing market, what lies ahead? Overall, the future looks healthy. Residential property ownership has long been the great Australian dream, is a key component of personal wealth building and has a significant multiplier impact on economic growth. In spite of the contradictions that are characterizing the market, all indications are that real estate will remain hot property for quite some time.
This article derives from a speech made by Lisa Claes at the Australian Securitisation Forum this month.
Affordability constraints, strong growth, low turnover and high investor activity - these are just some of the contradictory phrases characterizing the real estate industry today, painting a complex picture of an increasingly paradoxical market.
A multi-speed market
More than half of household wealth is in residential property, making it one of Australia’s most important asset classes. As such, it’s not surprising that real estate is of such interest to policy makers, regulators, financial institutions and consumers alike - and the current growth phase on the back of low interest rates and burgeoning investor appetite has made the housing market a compelling hot topic.
Yet, it’s important to note the diversity of growth across major cities.
Homeowners in Sydney and Melbourne in particular have emerged victorious, with Core Logic data indicating property values have grown by 96% in Sydney and 82% in Melbourne 82% since 2009. This has been influenced by strong service sector growth and job creation. These cities have also been relatively sheltered from the downturn in the resources sector that has seen house prices in Perth and Darwin tracking 10% lower since their 2014 peak.
The homebuyer conundrum
However, growth is not synchronous with turnover. As a result of tightened lending conditions, affordability constraints and rising costs associated with moving house, listings have almost halved in the past 5 years, with Core Logic data showing settlement sales in Melbourne (-21%) and Sydney (-18%) trending lower year on year.
First homebuyers especially have been bearing the brunt of buoyant market conditions, with dwelling values rising faster than incomes. They have to save for a larger deposit, and if they do buy they are quite possibly doing so at the peak of the market. First homebuyers are also in the precarious position of battling affordability while interest rates are low, and having to contend with a further squeeze on household finances when rates inevitably do rise.
It’s not all roses for existing homeowners either, who are increasingly leaning towards renovating or extending their current property rather than splashing out tens of thousands of dollars in stamp duty to up-size. And investors have their own issues to contend with. Dwellings under construction are at an all time high, with a plethora of unit blocks due for completion, and many cities set to carry surplus stock.
The impact is far-reaching. Buyers waiting to complete on their property could be in for a financial shock, as Core Logic data (September 2016) indicates 42% of Brisbane units and 40% of Melbourne units bought off-plan are being valued at less than their contract price. Purchasers may find themselves digging into the wallets to top up their deposit to meet LVR requirements, or risk non-settlement on their unit.
A prevailing market
So, in this complex housing market, what lies ahead? Overall, the future looks healthy. Residential property ownership has long been the great Australian dream, is a key component of personal wealth building and has a significant multiplier impact on economic growth. In spite of the contradictions that are characterizing the market, all indications are that real estate will remain hot property for quite some time.
This article derives from a speech made by Lisa Claes at the Australian Securitisation Forum this month.
