RESIDENTIAL MARKET REVIEW

Transcription

1 RESIDENTIAL MARKET REVIEW S E P T E M B E R Q U A R T E R

2 RPM REAL ESTATE GROUP IS VICTORIA S MOST SUCCESSFUL RESIDENTIAL DEVELOPMENT SALES, MARKETING AND ADVISORY AGENCY. WE SPECIALISE IN SALES WITHIN MASTER- PLANNED COMMUNITIES, MEDIUM AND HIGH-DENSITY DEVELOPMENTS, GREENFIELD AND INFILL DEVELOPMENT SITES AND INTERNATIONAL INVESTMENT SALES. WE ADVISE OUR CLIENTS ON ALL ASPECTS OF THE SALES PROCESS FROM SITE DUE DILIGENCE, ACQUISITION, PLANNING AND RISK MITIGATION THROUGH TO PRODUCT MIX, PRICING, LAUNCH, SALES AND SETTLEMENT. OUR RESEARCH-BACKED STRATEGIES DELIVER HIGHER REVENUES AND SALES RATES, AND BETTER RETURNS FOR OUR CLIENTS.

3 OVERVIEW WITH CONTINUING ACUTE LOW VACANCY RATES, RESIDENTIAL INVESTMENT THE RENTAL MARKET IN MELBOURNE AND GEELONG REMAINS ON A LONG-TERM UPWARD TREND. RENTS HAVE SHOWN POSITIVE GROWTH OVER THE PAST TWO YEARS TO THE END OF SEPTEMBER QUARTER 2018 IN BOTH DETACHED HOUSES AND APARTMENTS. The inner and middle rings of Melbourne recorded the highest growth over the past two years, with rates of between 3.8% and 8.0%. The exception was four-bedroom houses in the middle ring, which showed a modest gain of only 0.9% over this period. The outer ring of Melbourne saw slightly lower gains overall, though still remaining at or above the inflation rate. Like the outer ring, Geelong has recorded positive results across the board with gains of between 1.5% and 3.4% over the past two years. Q 3 R E S I D E N T I A L M A R K E T R E V I E W S E P T E M B E R Q U A R T E R

4 MEDIAN RENTS Units and apartments underperformed when compared to the growth recorded for detached houses. Both the inner and middle rings of Melbourne, and across all bedroom numbers, have seen average rental gains of between 1.6% and 5.2% per annum. The exception was three-bedroom dwellings in the inner ring, which recorded a per annum loss of 2.7% over the past two years. This can be attributed to this dwelling type constituting low levels of rentals, and therefore can fluctuate excessively. This is highlighted by a $58 rental increase taking place over the past 12 months but still showing an overall loss. In the outer ring, other dwellings performed strongly with average annual gains of between 1.6% and 3.8% over the past two years. More robust gains have been recorded in Geelong, which has seen strong demand for rentals along the foreshore from both professional couples and students attending nearby universities. Overall, average gains across the two years to September 2018 ranged between 2.6% and 4.9%. House Bedrooms Sep-17 Jun-18 Sep-18 Change from previous year 2 Year Average Annual Gain INNER 2 $525 $565 $550 $25 4.9% 3 $645 $675 $700 $55 8.0% 4 $800 $800 $838 $38 5.7% MIDDLE 2 $376 $378 $390 $14 5.4% 3 $423 $423 $430 $7 3.8% 4 $550 $570 $560 $10 0.9% OUTER 2 $340 $340 $350 $10 4.6% 3 $370 $380 $380 $10 2.7% 4 $420 $430 $420 $0 1.2% GEELONG 2 $290 $310 $310 $20 3.4% Units & Apartments 3 $350 $350 $350 $0 1.5% 4 $410 $420 $420 $10 2.5% Bedrooms Sep-17 Jun-18 Sep-18 Change from previous year 2 Year Average Annual Gain INNER 1 $370 $380 $380 $10 2.7% 2 $480 $500 $500 $20 3.2% 3 $618 $675 $675 $58-2.7% MIDDLE 1 $320 $330 $330 $10 1.6% 2 $400 $400 $400 $0 2.6% 3 $500 $510 $510 $10 5.2% OUTER 1 $263 $240 $240 -$23 2.0% 2 $335 $333 $333 -$3 3.8% 3 $385 $400 $400 $15 1.6% GEELONG 1 $210 $220 $220 $10 4.9% Source: REIV 2 $290 $300 $300 $10 2.6% 3 $380 $380 $380 $0 3.0% 4 RPM REAL ESTATE GROUP

5 OVERVIEW From the June quarter to the September quarter 2018, most regions recorded slightly higher vacancy rates over the period. Despite improving, they all remain below the acceptable level of 3%, reinforcing the consensus there is no oversupply of stock in the market. This being the case, rental growth has been sustained, providing appealing yields for investors. For those investing in the outer and regional areas, in general land VACANCY RATE Melbourne Sep-17 Jun-18 Sep-18 2 Year Average Gain Inner Total Inner (0-4km) Inner (4-10km) Middle (10-20km) Outer Total Outer (20+km exc. Mornington Peninsula) Outer (Mornington Peninsula) Melbourne Total Geelong Source: REIV value appreciation tends to be the driving force in the earlier stages. However, with vacancy rates at acute levels, rental yields for detached houses for outer and regional areas tops the list. Due to significant capital gains seen in both detached houses and other dwellings over the last five years, rental yields have been below long term levels. Rental growth has not kept up anywhere near the level seen in capital gains. Nevertheless, with prices moderating particularly in other dwellings rental yields have picked up over the September quarter 2018, and more so from this time last year. Regional areas of Victoria continue to achieve the highest yields due to lower purchase prices, coupled with robust rental prices given regional areas are traditionally tightly held. YIELDS Houses Sep-17 Jun-18 Sep-18 Inner 2.08% 2.30% 2.54% Middle 2.11% 2.13% 2.29% Outer 2.88% 2.83% 2.93% Metro 3.45% 2.49% 2.65% Regional 4.04% 3.72% 4.00% Units Sep-17 Jun-18 Sep-18 Inner 4.03% 4.15% 4.26% Middle 3.11% 3.11% 3.17% Outer 3.50% 2.56% 2.70% Metro 3.54% 3.71% 3.70% Regional 4.22% 4.26% 4.44% Source: REIV, RPM Q3 RESIDENTIAL MARKET REVIEW SEPTEMBER QUARTER

6 OUTLOOK MEGAN TAYLOR MANAGER, PROPERTY MANAGEMENT While the number of first home buyers have increased, tighter lending criteria has made it increasingly difficult to enter the market and therefore many remain renting. Coupled with continuing high population growth, vacancy rates have remained at acute levels. With supply generally sitting well below demand levels, rents have continued to increase. These positives provide key incentives for investors to enter the market, albeit in the face of increasing lending headwinds. Renters will be in a more favourable position come the 1st July 2020 with new rental regulations coming into play (see next section). The changes, however, could discourage some investors when these changes become enforceable, as property investors may feel they have less control over their investment. IN ADDITION, WITH A LIKELY CHANGE OF GOVERNMENT AT THE FEDERAL LEVEL AND INDICATIONS THAT A LABOR GOVERNMENT WILL OVERHAUL NEGATIVE GEARING AND CAPITAL GAINS, SOME INVESTORS WILL ATTEMPT TO GET INTO THE MARKET SOONER RATHER THAN LATER. THIS COULD CAUSE A SHORT TERM SPIKE IN BOTH PRICES AND ACTIVITY AS SEEN WHEN CASH INCENTIVES WERE OFFERED TO FIRST HOME BUYERS IN THE LAND MARKET. 6 RPM REAL ESTATE GROUP

7 LAND MARKET INVESTOR INSIGHTS RPM surveys every buyer on our clients estates These two cohorts have traditionally invested in The increasing share of professional couples buying in the greenfield market. The following illustrates demographic and purchase intent changes amongst this cohort based on surveys from the September quarter 2018 compared to the same quarter in Both local and overseas investors remain a prominent part of the greenfield market, with one third of all land sales being bought by an investor up from a quarter the same period a year earlier. This highlights the attractiveness of the land market to investors from both a capital growth and rental yield perspective. one and two bedroom apartments in the inner and middle rings given the lower entry price. However, positive gains in the land market coupled with wellpriced entry level house and land packages has resulted in the share of couples increasing from 13% in the September quarter last year to 29% for the same period this year. in the land market underpin the fundamentals of the sector. It not only reflects steady short to medium term gains, but more importantly, stable long term gains. This is important, as this generation is more likely to invest personally or through a self-managed super fund (SMSF) as opposed to redirecting additional income or savings into their traditional superannuation. In recent years the country of origin of investors has predominantly been Australia and India, which combined comprised 76% of all investors in the While the widely regarded view that high income family households prefer to invest in detached houses still holds, the above average yields achieved in the land market over the past couple of years has made the greenfields a more accessible option for couples, and to a lesser extent singles. THE LARGER FAMILY UNIT STILL REMAINS THE MOST PROMINENT COHORT AT 63%, DESPITE FALLING FROM 79% THIS TIME LAST YEAR. September quarter last year. This fell to 67% this quarter, due to the decline in the share of Indian buyers, down from 46% in the September quarter 2017 to 29% this quarter. A higher presence of Chinese investors (10%) was also recorded. Q3 RESIDENTIAL MARKET REVIEW SEPTEMBER QUARTER

8 SEPTEMBER 2017 SEPTEMBER 2018 Investor Owner-Occupier Investor Owner-Occupier OWNER OCCUPIER VS INVESTOR 23% 77% 33% 67% CURRENT HOUSEHOLD TYPE HOUSEHOLD NUMBER OF PEOPLE COMBINED AGE Group/Friends 0% Single 7% Couple 13% Family 79% + 7% 46% 23% 19% 4% 60+ 2% % % % % Group/Friends 0% Single 8% Couple 29% Family 63% + 7% 33% 18% 29% 13% 60+ 3% % % % % Cambodia 1% Italy 3% COUNTRY OF PERSON 1 & 2 TOP 10 Pakistan 2% Malaysia 2% Iraq 2% Nepal 2% Philippines 4% China 5% Sri Lanka 6% Australia 30% India 46% Iraq 3% Fiji 3% Sri Lanka 3% Nepal 3% Croatia 3% Bangladesh 5% China 10% India 29% Australia 38 % 8 RPM REAL ESTATE GROUP

9 NEW RENTAL LAWS PASS Victorians are renting more now than at any stage A sample of these reforms are: in the state s history, and for longer. In an attempt to rebalance the market, the Victorian Government Allowing animals to be kept in any Providing for faster reimbursement where has undertaken a comprehensive review of the rented premises renters have paid for urgent repairs Residential Tenancies Amendment Bill The review sought to ensure that the Act still meets the needs of Victoria s renters. In August this year, the Victorian Parliament passed the Residential Tenancies Amendment Bill The reforms are largely based on the reality that a growing proportion of Victorians are priced out of home ownership, making them likely to rent for longer periods of time. The Bill includes more than 130 reforms designed to improve protections for a diverse population of renters, while ensuring those who provide rental housing can still effectively Allowing renters to make minor modifications to a rental property without prior consent Bolstering security of tenure and ending no fault evictions by removing the no specified reason notice to vacate, and restricting the use of end of the fixed-term notices to vacate to the end of an initial fixed term agreement Establishing a non-compliance register to blacklist residential rental providers and agents who fail to meet their obligations Taking into account median rent in the area over 1 calendar month as bond, instead of a set amount Enabling automatic bond repayments, which will be available to a renter within 14 days where the parties are not in dispute Requiring mandatory pre-contractual disclosure of material facts, such as an intention to sell the rental property, or the known presence of asbestos manage their properties. Providing for the early release of bonds Prohibiting misleading or deceptive conduct with the consent of both parties to the inducing a person into renting a property. tenancy agreement The new regulations will not take effect until the Restricting solicitation of rental bids by 1st July residential rental providers and agents This information has been sourced from Providing for annual, instead of bi-annual, rent increases A full list of reforms can be found on the Engage Vic website. Q3 RESIDENTIAL MARKET REVIEW SEPTEMBER QUARTER

10 OUR TEAM MEGAN TAYLOR MANAGER, PROPERTY MANAGEMENT RHEANNE LONG SENIOR PROPERTY MANAGER WARRICK MAK PROPERTY MANAGER - INTERNATIONAL warrick@rpmrealestate.com.au RPM REAL ESTATE GROUP

11 DISCLAIMER Although all reasonable care has been taken in the preparation of this document, RPM Real Estate Group Pty Ltd takes no responsibility for the accuracy of the information contained herein. It is recommended that all the information be verified if it is to be used for commercial purposes.

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