Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

'Huge fan of your work. Very impressive!' - Scott Pape, The Barefoot Investor, Australia's #1 bestseller.

'Must-read, must-follow, one of the finest analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Business Insider.

'I've been investing 40 years yet still learn new concepts from Pete; one of the finest young commentators' - Michael Yardney, Amazon #1 bestseller.

'The most knowledgeable person on Aussie real estate - loads of good data & charts...most comprehensive analyst I follow in Oz' - Jonathan Tepper, Variant Perception, 2 x NYT bestseller.

Thursday, 23 October 2014

Regional land prices slide (capitals soaring)

13 percent jump in regional land sales to increase housing supply

A tidy increase in the volume of land sales of 10 percent over the last year with an 8.4 percent pick-up in the June quarter according to the Housing Industry Association (HIA).

This bodes well for housing construction and thus the Australian economy over the year ahead.

Land sales are generally reflected in an increase in detached and semi-detached housing construction six months down the track.

Source: HIA

The land sold was largely driven by a substantial increase in the number of regional lots transacted which jumped by +13 percent over the quarter. 

As a general rule, more supply equates to easier prices and as such median regional lot prices declined moderately in the June quarter, although they are still up by 4.1 percent over the past year.

With construction to follow in due course, this cycle is therefore likely to be a weak one for regional Australia, at least in aggregate.

Land values rise in capital cities

However, as you can see from the red line in the chart above, the median lot price of land across Australia has soared over the past year to $205,330.

This very sizeable increase in land prices was driven by capital city lot prices which jumped by another 1.8 percent in the June quarter and 7.4 percent over the past year.

There has been nothing like the same increase in the volume of lot sales in capital cities and this has pushed up capital city new dwelling prices. 

Noted Harley Dale of the HIA:

"We have seen weighted median lot prices in capital cities which well outpaces that for regional Australia".

APM - Q3 property price data

Australian Property Monitors released its price data for the September 2014 quarter which showed house prices declining in Q3 in Brisbane (-1.3 percent), Adelaide (-1.0 percent), Perth (-1.5 percent), Canberra (-1.7 percent) and Hobart (-1.3 percent).

However, the quarterly result was rescued by Sydney house prices which leaped by another 3.8 percent. 

Over the past year national house price growth slowed to only 5.4 percent, a figure which has been skewed significantly higher by 16.6 percent capital growth in Sydney.

(h/t to SQM Research who accurately forecast 15-20 percent annual growth for Sydney way back in September 2013 to widespread scepticism - as it turned out, they were right on the money, which might make folk take a little more notice of their 8 to 12 percent Sydney forecast for the next year). 

Source: APM

APM's unit price data was a similar story with unit prices declining in Q3 2014 in Melbourne (-0.2 percent), Brisbane (-1.0 percent), Perth (-3.3 percent), Canberra (-4.1 percent), Darwin (-3.0 percent) and Hobart (-8.8 percent).

However the falls were offset by a 1.6 percent increase in Sydney where unit prices are 11.5 percent higher over the past year.

Source: APM

2015 outlook

The HIA land sales figures suggest that there will be an exceptionally high volume of housing construction in regional Australia in 2015, which may depress prices in some regions.

SQM's 2015 forecasts, which suggest a strong year ahead for Brisbane and Sydney, we took a short look at here.