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Livewire: Are the worst of Australia’s property falls behind us?

Property downturn 

I discussed whether the property market downturn has been and gone with the good people at Livewire Markets.

Check it out here (or click on the image below):

Dwelling supply crashes to decade lows

Building falling over

Total dwelling commencements crashed -11.8 per cent lower to decade lows at 40,700 in the June quarter.

Maybe this wasn't entirely unexpected after a surge during the HomeBuilder period, but in the context of record population growth it's a bit alarming.

Notably starts for attached dwellings - units, townhouses, and apartments - have been running at depressed levels for over a year now.

More concerningly, with many builders going bust - another big developer went into compulsory administration in Western Australia this week - the dwellings in the pipeline are being delivered at a slower pace too.

Completions plunged to 41,670 in the June quarter. 

The number of dwellings under construction remains high, despite declining from 243,500 in September 2022 to 241,000.

However, there are question marks about how far advanced many of the projects actually are.

Dwelling completions of around 40,000, after netting out demolitions and obsolete stock, is adding enough housing for about ¼ million people per annum, while population growth has been running at nearly 3 times that level of late. 

Tim Lawless of CoreLogic sums up up some of the root causes of the malaise:

Over the past decade, there has been a series of policies in place to constrain lending to investors, from APG 223, crackdowns and restrictions on interest-only and investment lending, and the banking Royal Commission, for example,

In that context, it's not too surprising to see rental vacancies hitting all-time lows. 

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I presented a webinar yesterday where one of the participants with an interest in the mortgage broking industry noted that there's been a campaign to return the lending assessment buffer down to a more 'normal' setting of 2.5 percentage points.

However, as far as I can tell it doesn't seem as though that idea will get much traction until inflation is back down towards the target range.

Interestingly banks are competitive and there's a willingness and appetite to lend, but under current settings dwelling construction isn't going to be keeping pace with demand. 

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In other news, job advertisements fell by -2 per cent in September to 272,900, on a seasonally adjusted basis. 

The cycle peak saw 303,000 job advertisements listed - 15 months earlier, in June 2022 - and things have been gradually easing ever since. 

Source: IVI, Jobs & Skills Australia

Both Victoria and New South Wales recorded a significant year-on-year slowing in advertisements.

This is what you need to know about Building & Pest inspections

Property Podcast

Amy and I discussed everything you need to know about Building and Pest inspections - in half an hour.

Tune in here (or click on the image below):

You can also watch the video version at YouTube here:

Rental vacancies to plumb record lows in October

Rentals hit emergency lows

It had seemed that rental vacancies were levelling out a bit, although there's always a seasonal element to rental markets in Australia.

However, rental vacancies dropped again in September at the national level, driven by renewed declines in Sydney and Melbourne.

Source: SQM Research

Moreover, rental vacancies have continued to drop over the first 3 weeks of October, and are now at all-time lows.

Louis Christopher from SQM Research reported:

Source: SQM Research

Capital city asking rents were up +16 per cent over the year, and don't appear to have slowed. 

The fastest growth in rents was seen in Sydney, and for units. 

The full media release is here.

Housing prices recover, but...

Prices rebound, but where?

Housing prices at the national level have now fully recovered their downturn according to the latest PropTrack data.

There's a bit more to this story, though.

The underperformance of the capital city units market since the 2016 construction boom has become even more marked through the pandemic, as more folks rushed to the regions for space and fresh air. 

This may well now reverse, however, with regional unit prices now looking to have done their dash, and prices rolling over. 

Construction costs for medium-density units have soared by around 50 per cent over the past three years.

This will likely underpin price growth for capital city units over the next few years, in the face of record high population growth...that's my thinking. 

We're actually already seeing this in the blue chip suburbs of Brisbane, for example. 

Latest property market trends (ausbiz)

ausbiz TV

I joined Danielle Ecuyer on ausbiz TV to discuss all the latest property market trends.

Tune in here (or click on the image below):

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An interesting media release is due out tomorrow, with SQM Research set to report surprising declines in rental vacancy rates across almost all outer-regional areas.

Overall, the national rental vacancy rate declined further to 1.1 per cent in September, down from 1.3 per cent a couple of months earlier. 

Sydney's rental vacancies are trending down again, and at 1.3 per cent the rental vacancy rate appears set to take out the lowest levels since the global financial crisis. 

Source: SQM Research

At the macro level this isn't too surprising - it's just too hard for so many investors to make the current settings work. 

2 sense: Builders losing money, desperate Aussies turn to tiny dwellings as shortage bites

2-Sense

This week, Batesy and I discuss the malaise in the construction sector, and the increasing use of granny flats to tackle the housing shortage. 

Tune in here (or click on the image below):

There's also a video version on YouTube here (or below):