Market Update: November 2011

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Market update

November 2011

Market snapshot
Australian capital cities, September 11
Darwin Houses: down -0.3% over quarter Units: down -0.7% over quarter Median house price: $450,000 Median unit price: $410,000 Gross rental yields: 5.3% (houses) / 5.8% (units)

Brisbane Houses: down -1.8% over quarter Units: up 3.2% over quarter Median house price: $435,000 Median unit price: $365,000 Gross rental yields: 4.8% (houses) / 5.4% (units) Perth Houses: down -1.2% over quarter Units: down -1.1% over quarter Median house price: $455,000 Median unit price: $386,000 Gross rental yields: 4.5% (houses) / 4.9% (units) Sydney Houses: down -1% over quarter Units: down -0.4% over quarter Median house price: $552,000 Median unit price: $458,000 Gross rental yields: 4.4% (houses) / 5.2% (units) Canberra Houses: up 0.9% over quarter Units: down -5.6% over quarter Median house price: $535,000 Median unit price: $420,000 Gross rental yields: 4.8% (houses) / 5.6% (units) Hobart Houses: down -6.4% over quarter Units: down -4.8% over quarter Median house price: $334,000 Median unit price: $262,000 Gross rental yields: 5.2% (houses) / 5.4% (units)

Adelaide Houses: down -1.1% over quarter Units: up 0.7% over quarter Median house price: $385,000 Median unit price: $319,000 Gross rental yields: 4.2% (houses) / 4.8% (units)

Melbourne Houses: down -2% over quarter Units: down -2.9% over quarter Median house price: $485,000 Median unit price: $423,000 Gross rental yields: 3.8% (houses) / 4.3% (units)

* Hobart data is based on August 11 results Source: rpdata.com - Rismark

Home values are down across all capital cities over the year
Across the capitals, property values have fallen by -3.4% over the past year. Hobart (-9.1%) and Brisbane (-6.1%) have been the weakest markets over the past year. Sydney and Canberra have been relatively stronger performers with values down -1.2% and -1.6% respectively.
2.0%
Annual change in dwelling value

Annual change in capital city property values

0.0%
-2.0% -1.2% -1.6%

-4.0% -6.0%
-8.0%

-3.4%

-3.4%

-3.7%

-4.4%

-5.1% -6.1%

-10.0%
Sydney Canberra Australian Adelaide Capitals Darwin Melbourne Perth Brisbane

-9.1%
Hobart+

+ Note Hobart figures are based on August 2011 data


Source: rpdata.com - Rismark

All capitals in the red over the last three months


Capital city home values fell by -1.3% over the three months to September 2011. For the first time in a long time Brisbane and Perth have outperformed the capital city benchmark over the quarter.

Quarterly change in capital city property values


Quarterly change in dwelling value

0.0% -1.0% -0.3%

-0.7%

-0.8%

-0.9%

-2.0% -3.0% -4.0% -5.0% -6.0% -7.0%


-8.0%

-1.2%

-1.3%

-1.3% -2.0%

-6.6% Darwin Adelaide Sydney Canberra Brisbane Perth Australian Melbourne Capitals Hobart+

+ Note Hobart figures are based on August 2011 data


Source: rpdata.com - Rismark

Sydney house prices remain the most expensive of any city


Sydney house prices are the highest of all capital cities and Hobart houses remain substantially more affordable than the other capitals. Across the combined capitals, median house prices were $465,000 and units $415,000 over the three months to September 2011.

Median house and unit prices September 2011


Hobart+
$262,000

Adelaide Brisbane
Darwin

$334,000 $319,000

$385,000 $365,000

Median unit price Median house price

Perth Australian Capitals


Melbourne

Canberra Sydney
$0 $100,000 $200,000

$435,000 $410,000 $450,000 $386,000 $455,000 $415,000 $465,000 $423,000 $485,000 $420,000

$535,000 $552,000

$458,000

$300,000 Median price

$400,000

$500,000

$600,000

+Note Hobart figures are based on August 2011 data


Source: rpdata.com - Rismark

Darwin has been the standout performer over the past five years
Capital city property values have increased at an average annual rate of 5.0% during the five years to September 2011. Over the past 10 years capital city property values have increased at an average annual rate of 6.5%, indicating more subdued growth conditions over the second half of the decade.
10.0%
Avg annual value growth last five years

Average annual change in property values past five years to September 2011
9.3% 8.2%

8.0% 6.7%

6.0% 4.1%
4.0% 2.0%

5.5%

5.0%

4.3%

3.0% 0.8%

0.0%
Perth Hobart+ Sydney Brisbane Canberra Adelaide Melbourne Darwin Australian capitals

+ Note Hobart figures are based on August 2011 data


Source: rpdata.com - Rismark

Values are down -3.4% across the combined capital cities benchmark over the past year
Annual growth in capital city dwelling values most recently peaked at 14.2% in March 2010. Since that time the annual rate of change in dwelling values has fallen to -3.4% in September 2011. Home values across the combined capital cities are currently -3.6% below their peak.

25.0%
20.0%

Annual change in dwelling values combined capital cities

15.0%
10.0%

5.0%
0.0%

-5.0%
Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

Source: rpdata.com - Rismark

Sales volumes remain relatively stable in recent months


Estimated sales volumes were -13% below the five year average in August 2011. With consumers remaining more pessimistic than optimistic, the likelihood of a significant improvement in sales transactions in the short-term remains unlikely. Interest rate cuts may lead to an improvement in buyer numbers going forward.

National volume of house and unit sales monthly vs. 5 year average
70,000

National

5 yr average

60,000
Monthly sales volumes

50,000
40,000

30,000
20,000

10,000
0 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Note: the last five months of sales volumes are modelled based on historic levels of revision Source: rpdata.com

On a quarterly basis the decline in home values has improved slightly in September
Over the last quarter property values across the combined capital cities fell by -1.3% compared with a quarterly fall of -1.4% over the three month period ending August. On a quarterly basis, capital city home values have been falling right throughout 2011.

9.0% 7.0% 5.0% 3.0% 1.0% -1.0% -3.0%


Sep-01 Sep-02 Sep-03

Quarterly change in cap city home values

Sep-04

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Source: rpdata.com - Rismark

Regional housing markets continue to outperform the combined capital cities


Capital city markets have generally recorded a superior performance with regards to changes in home values compared with housing markets outside the capital cities. Over the three months ending September 2011, house values across the combined capital cities fell by -1.6% compared with a -1.3% fall across the combined Rest of State markets.
5.0% 4.0%
3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0%

Quarterly change in capital city house values vs. Rest of state house values
Capital city Rest of State

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Source: rpdata.com - Rismark

10

Capital growth has now started falling in Sydney on an annual basis


Property values have increased by a total of 16.9% since the start of 2009. Over the past year, Sydney property values have fallen by -1.2%, the lowest fall in house values of any of the capitals.

25.0%
20.0%

Annual change in dwelling values Sydney


Combined capital cities Sydney

15.0%
10.0%

5.0% 0.0%
-5.0%

-10.0%
Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

Source: rpdata.com - Rismark

11

Sydneys estimated volumes have recorded a slight improvement over recent months
Estimated transaction volumes are running -2% below five year average levels. Compared to other cities, sales activity in Sydney is relatively strong.

Sydney volume of sales and five year average


14,000

Sydney

5 yr average

12,000
Monthly sales volumes

10,000
8,000

6,000
4,000

2,000
0 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Note: the last five months of sales volumes are modelled based on historic levels of revision Source: rpdata.com

12

Capital growth in Melbourne home values continues to decline


Since the beginning of 2007, property values in Melbourne have increased by a total of 45.1%. Over the last 12 months, Melbourne values have fallen by -4.4% and values fell by -2.0% over the quarter.

30.0% 25.0% 20.0%


15.0% 10.0% 5.0%

Annual change in dwelling values Melbourne


Combined capital cities Melbourne

0.0% -5.0% -10.0%


Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

Source: rpdata.com - Rismark

13

Melbourne transaction volumes remain below average


Melbournes estimated sales volumes are currently -8% below the five year average and continue to ease. The slowdown in sales activity is inline with the slowdown in growth in Melbourne home values.

Melbourne volume of sales and five year average


12,000 10,000 8,000

Melbourne

5 yr average

Monthly sales volumes

6,000 4,000 2,000


0 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Note: the last five months of sales volumes are modelled based on historic levels of revision Source: rpdata.com

14

Brisbane at the bottom? Value growth starts to improve on an annual basis


Since the start of 2008 Brisbane home values are down by -2.7%. Brisbane home values have fallen by -6.1% over the twelve months to August 2011 however, the losses have eased in recent months and there was a slight improvement in values over September.

40.0%
35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0%

Annual change in dwelling values Brisbane


Combined capital cities Brisbane

0.0% -5.0% -10.0%


Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

Source: rpdata.com - Rismark

15

After a surge of buyer activity in July, Brisbane transaction volumes have once again weakened
Estimated sales volumes in Brisbane are -35% below the five year average in Brisbane following a surge in July due to the change in stamp duties payable on owner occupied properties which came into affect on August 1. Volumes have been below five year average levels since mid 2009.

Brisbane volume of sales and five year average


9,000 8,000
Monthly sales volumes

Brisbane

5 yr average

7,000 6,000

5,000 4,000 3,000 2,000 1,000


0 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Note: the last five months of sales volumes are modelled based on historic levels of revision

Source: rpdata.com

16

Adelaide values show an improvement over September


Adelaide, together with Brisbane was the only capital to record an improvement in dwelling values over September, up 0.5%. Adelaide consistently recorded a superior rate of capital gains from late 2002 until late 2008. Since the start of 2008, Adelaide property values have increased by 6.3%. Over the past year, property values have fallen by -3.4%.
30.0% 25.0% 20.0%
15.0% 10.0% 5.0%

Annual change in dwelling values Adelaide


Combined capital cities Adelaide

0.0% -5.0% -10.0%


Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

Source: rpdata.com - Rismark

17

Adelaide sales volumes continue to remain well below five year average levels
Adelaides estimated sales volumes are currently -22% below the five year average. As capital gains have transitioned out of the market, sales volumes have also fallen.

Adelaide volume of sales and five year average


3,500

Adelaide

5 yr average

3,000
Monthly sales volumes

2,500
2,000

1,500
1,000

500
0 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Note: the last five months of sales volumes are modelled based on historic levels of revision

Source: rpdata.com

18

Declines in Perth property values have eased over recent months


Perth has been one of the weakest performing capital city markets over the last year with values falling by -5.1%. On an annual basis, Perth property value growth peaked at 45.1% during July 2006. In recent months the decline in values has eased across the city.
50.0%
40.0%

Annual change in dwelling values Perth


Combined capital cities Perth

30.0%
20.0%

10.0% 0.0%
-10.0%

-20.0%
Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

Source: rpdata.com - Rismark

19

Perth sales volumes improve over recent months however, transactions remain at low levels
The Perth property market has been consistently weak for most of the last five years, resulting in a strong downward trend in the five year average volume of sales. Estimated Perth sales volumes are -4% below the five year average after 2 consecutive months of improving buyer numbers.

Perth volume of sales and five year average


7,000

Perth

5 yr average

6,000
Monthly sales volumes

5,000
4,000

3,000
2,000

1,000
0 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Note: the last five months of sales volumes are modelled based on historic levels of revision

Source: rpdata.com

20

Darwin home values outperformed by the capital city benchmark


Darwin has consistently outperformed the national market since mid 2004. Property values have recorded a strong run-up in recent years, with annual gains averaging 9.3% between August 2006 and August 2011. Over the last 12 months property values have fallen by -3.7%.
30.0% 25.0% 20.0%
15.0% 10.0% 5.0%

Annual change in dwelling values Darwin


Combined capital cities Darwin

0.0% -5.0% -10.0%


Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

Source: rpdata.com - Rismark

21

Estimated Darwin sales volumes show a sharp fall in August


Current Darwin sales volumes are estimated to be -25% below the five year average. With values declining in Darwin for the first time in a long time we expect that the weakness in sales activity is likely to persist.

Darwin volume of sales and five year average


500

450
Monthly sales volumes

Darwin

5 yr average

400
350

300 250
200 150

100
50 0 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Note; the last five months of sales volumes are modelled based on historic levels of revision

Source: rpdata.com

22

Values fall in Canberra however, the city continues to outperform the benchmark
Apart from a period of exceptional growth between 2002 and 2004, the Canberra market performance has closely mirrored the capital gains recorded across the combined capital cities. During the 12 months to September 2011, Canberra property values have fallen by -1.6%.

35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0%
Sep-01 Sep-02

Annual change in dwelling values Canberra


Combined capital cities Canberra

Sep-03

Sep-04

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Source: rpdata.com - Rismark

23

Estimated volumes in Canberra slide as value growth also slows


Estimated sales volumes in Canberra are currently -20% below the five year average. With value growth continuing to slow there may be further weakness in sales volumes over the coming months.

Canberra volume of sales and five year average


1,600 1,400
Monthly sales volumes

Canberra

5 yr average

1,200 1,000 800


600 400 200 0 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Note: the last five months of sales volumes are modelled based on historic levels of revision

Source: rpdata.com

24

Hobart values continue to underperform after strong growth prior to 2007


Hobart is well and truly the countrys most affordable capital city housing market with a median house price of $334,000 and a median unit price of $262,000. Over the most recent year to August, property values in Hobart have fallen by -9.1% making it the nations weakest performing capital city housing market.
70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0%
Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Annual change in dwelling values Hobart


Combined capital cities Hobart

* Note Hobart figures are based on August 2011 data


Source: rpdata.com - Rismark

25

Hobart sales volumes sit well below the five year average level
The estimated volume of sales across the city is -15% below the five year average, highlighting the low level of buyer demand across the Hobart housing market.

Hobart volume of sales and five year average


800 700
Monthly sales volumes

Hobart

5 yr average

600 500 400


300 200 100 0 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Note: the last five months of sales volumes are modelled based on historic levels of revision

Source: rpdata.com

26

Premium sector of the market continues to show the greatest weakness


Across the past year, the broad middle market has been the most resilient to falls in value down -2.8% followed by the most affordable market (-3.2%) and the premium sector has been the weakest with values down -6.4%.

25.0% 20.0%
15.0% 10.0%

Performance of top 20% of suburbs vs. middle 60% vs. bottom 20%
Most affordable 20% Middle 60% Most expensive 20%

5.0% 0.0%
-5.0%

-10.0%
Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11
27

Source: rpdata.com - Rismark

Rents and yields improving as values fall across most regions


Across the combined capital cities weekly rents sit at $446/week for houses and $432/week for units. Capital city rents have increased by 4.5% for houses and 4.4% for units over the past 12 months. Rental yields have been showing some improvement due to falls in home values and modest rental increases.

Capital city rental rates and yields


$460
$440
Average rental rate - dwellings
Avg rental rate all dwellings Avg gross yield - Houses Avg gross yield - Units

5.5%
5.3% 4.9% 4.7% 4.5% 4.3%
Avg gross rental yield
28

$420
$400

5.1%

$380
$360 $340

4.1%
3.9%

$320
$300

3.7%
3.5%

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Source: rpdata.com - Rismark

Sydney, Brisbane and Perth the only markets to record a rental rise of any magnitude
Sydney Houses Units Houses Units Houses Units Houses Units Houses Units Houses Units Houses Units Houses Units Houses Units Annual Change % $ 5.9% $31 5.4% $26 1.9% 0.9% 4.8% 8.4% 0.9% 4.4% 10.1% 6.8% 0.8% -2.0% -0.3% -0.6% -3.5% -6.3% 4.5% 4.4% $7 $3 $18 $28 $3 $14 $39 $27 $4 -$10 -$1 -$3 -$12 -$18 $19 $18 Five year change % $ 5.5% $128 6.8% $144 6.2% 6.9% 4.9% 6.8% 4.2% 5.0% 8.7% 7.8% 8.8% 9.8% 5.1% 4.6% n.a. n.a. 5.8% 6.8% $103 $102 $86 $103 $65 $70 $147 $135 $189 $173 $110 $82 n.a. n.a. $110 $121

Across the combined capital cities weekly rents sit at $446/week for houses and $432/week for units. Capital city rents have increased by 4.5% for houses and 4.4% for units over the past 12 months. Rental yields have been showing some improvement due to falls in home values and modest rental increases. Over the last five years capital city house rents have increased at an average annual rate of 5.8% and units by 6.8%. Over the past five years, house and unit rents have increased at a faster rate than property values, a trend we expect will continue. Rental vacancies remain low across most capitals which is likely to see further upwards pressure on rental rates.

Melbourne

Brisbane

Adelaide

Perth

Darwin

Canberra

Hobart

Combined caps

* Note Hobart figures are based on August 2011 data


Source: rpdata.com - Rismark

29

Average time on market increases over the month but still below recent peaks
Average days on market, houses
70 60
50

40 30 20 10 0 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

This yr: 56 days Last yr: 46 days

Average days on market, units


60 50 40 30 20 10 0 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11

This yr: 54 days Last yr: 43 days

Source: rpdata.com - Rismark

30

Discount levels fall suggesting vendors are setting more realistic asking prices
Average vendor discount, houses
0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% -8.0%

This yr: -6.4% Last yr: -5.8%

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

0.0% -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% -8.0% -9.0%

Average vendor discount, units This yr: -6.1% Last yr: -6.0%

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Source: rpdata.com - Rismark

31

Clearance rates below 50% for most of the last six months
Auction clearance rates are well below levels recorded at the same time last year when around 60% of auctions were clearing. The weak clearance rate highlights that market conditions favour the buyer with little competition amongst active buyers and no urgency around making a purchase decision.

Weighted average clearance rate

90%
80% 70% 60% 50% 40% 30%

Capital city clearance rates and auction volumes


Number of auctions Clearance rate

3,000 2,500
2,000
Auction volumes

1,500
1,000 500

20% 10% 0%
Feb 09 May 09 Aug 09 Nov 09 Feb 10 Jun 10 Sep 10 Dec 10 Mar 11 Jul 11 Oct 11

Source: rpdata.com

32

The number of properties advertised for sale has increased to record levels
More than 306,000 properties are currently advertised for sale across the country compared with about 230,000 homes being advertised for sale at the same time last year (+33%). The climb in total listings is being driven by slower market conditions not an influx of new listings given newly advertised properties being added to the market are around -9% lower than at the same time last year.
350,000

Number of properties advertised for sale nationally


Total listings New listings

300,000 250,000 200,000 150,000 100,000


50,000 0

Jan 07

Sep 07

May 08

Jan 09

Sep 09

May 10

Jan 11

Sep 11

Source: rpdata.com

33

Inflation is starting to ease however, headline inflation remains outside of target range
All groups inflation increased over the June 2011 quarter to an annual rate of 3.5%, while the RBAs preferred measure, the average of the weighted median and trimmed mean is recorded at 2.5% over the year, right in the middle of its medium term target range. The easing in inflation has largely removed the threat of any interest rate rises over the medium term.
7.0 6.0
Annual change in CPI (%)

Consumer Price Index


All groups Avg of weighted median and trimmed mean

5.0

4.0
3.0
Reserve Bank's Target Range

2.0
1.0 0.0 -1.0

Sep-97

Sep-99

Sep-01

Sep-03

Sep-05

Sep-07

Sep-09

Sep-11

Source: ABS, rpdata.com

34

Inflation is starting to ease however, headline inflation remains outside of target range
Inflation was strongest across the food and non-alcoholic beverages category which has a significant impact on household budgets as it is an item which is regularly being purchased. The recreation and culture and furnishings and household equipment and services components of CPI were the only two groups that recorded a fall over the year.

Annual change in CPI Groups


Food and non-alcoholic beverages Education Insurance and financial services Transport Housing Health All groups Alcohol and tobacco Clothing and footwear Communication Recreation and culture Furnishings, household equipment and services -2.0% 6.4% 5.8%

4.5% 4.3% 4.2% 3.7% 3.5% 3.0%


1.2% 0.6%

-0.1% -0.5%
0.0% 2.0% 4.0% 6.0% 8.0%
35

Source: ABS, rpdata.com

Higher electricity, utilities, water and sewerage costs driving the cost of CPI housing higher
Housing CPI rose by 4.2% over the year. CPI for electricity (12.5%), utilities (10.1%), water and sewerage (8.6%) and gas and other household fuel (6.0%) all rose at a rate well above inflation.

Annual change in Housing CPI and sub-groups


Electricity Utilities Water and sewerage Gas and other household fueld Property rates and charges 6.0% 5.2% 8.6% 10.1% 12.5%

Rents Housing Other housing


Maintenance and repair of the dwelling New dwelling purchase by owner-occupiers 0.0% 2.3% 1.8% 2.0% 4.0% 3.5%

4.6% 4.2%

6.0%

8.0%

10.0%

12.0%

14.0%

Source: ABS, rpdata.com

36

Standard variable mortgage rates remain at 7.8% but for how much longer?
Mortgage rates have remained on hold for 11 months now and have moved once in the last 17 months. Despite the fact that headline inflation is outside of the RBAs target range underlying inflation was very low over the September quarter suggesting that the RBA may cut rates to help stimulate the economy. 3 year fixed rates loans are currently 6.6%.
10.0% 9.0% 8.0% 7.0% 6.0% 5.0%

Standard variable mortgage rates


18.0%
16.0% 14.0% 12.0%

Standard variable home loan interest rate

10.0%
8.0% 6.0% 4.0%

Oct-61

Oct-66

Oct-71

Oct-76

Oct-81

Oct-86

Oct-91

Oct-96

Oct-01

Oct-06

Oct-11

Long term

4.0%
Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11

Source: RBA, rpdata.com

37

Unemployment rate recorded a slight fall over September


The national unemployment rate was recorded at 5.2% in September, down from a revised 5.3% in August. Employment participation rates sit at 65.6%.

National unemployment rate


Unemployment Rate
Moving annual average

12%
10% 8% 6% 4% 2%
Unemployment Rate
38

Sep-81

Sep-84

Sep-87

Sep-90

Sep-93

Sep-96

Sep-99

Sep-02

Sep-05

Sep-08

Sep-11

Source: ABS, rpdata.com

Jobs growth remains positive however, full-time employment is slowing sharply


During the last year to September, full-time employment increased by 50,200 persons compared with an annual increase of 299,300 over the same period in 2010. Part-time employment increased by 70,200 persons over the last year.

Annual change in no of employed persons (,000)

400.0 300.0 200.0

Annual growth in full-time and part-time employment


Full-time employment Part-time employment

100.0
0.0

-100.0
-200.0 Sep-01 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11

Source: rpdata.com, ABS

39

Consumer confidence improves in September and again in October however, pessimism still prevails
The index of Consumer Sentiment was recorded at 97.2 points in October 2011, up a total of 8.5% over September and October. Despite the fact that sentiment improved over the month respondents remained more pessimistic than optimistic with the Index remaining below 100 points.
130
Consumer Sentiment Index

Consumer sentiment index


Six month rolling average

120 110 100 90

80
70 60 Oct-91 Oct-93 Oct-95 Oct-97 Oct-99 Oct-01 Oct-03 Oct-05 Oct-07 Oct-09 Oct-11

Source: Westpac-Melbourne Institute, rpdata.com

40

Housing transaction volumes unlikely to improve significantly until the consumer mindset improves
There is a fairly strong correlation between consumer sentiment and sales volumes. With sentiment weak we would expect sales volumes to remain at low levels.

140

Consumer sentiment index vs. sales volumes (Syd, Mel and Bris)
Consumer Sentiment (LHS) Sales vols (Syd, Mel and Bris) (RHS)

30,000 25,000

120
100 80

20,000
15,000

60

40
20 0 Oct-91 Oct-93 Oct-95 Oct-97 Oct-99 Oct-01 Oct-03 Oct-05 Oct-07 Oct-09

10,000 5,000 0 Oct-11

Source: Westpac-Melbourne Institute, rpdata.com

41

First home buyers and non-first home buyers remain relatively inactive
During August 2011, first home buyers accounted for just 15.3% of all owner occupier finance commitments up from a low of 14.9% in July 2011. Non first home buyer activity also remains quite subdued despite the modest rises recently.

70,000
Monthly finance commitments

Housing finance commitments FHB vs. non FHB


Non FHB FHB

60,000 50,000

40,000
30,000

20,000
10,000 0 Aug-93 Aug-96 Aug-99 Aug-02 Aug-05 Aug-08 Aug-11

Source: ABS, rpdata.com

42

Investor activity remains reasonably flat


The total value of investor finance commitments during August 2011 was $6.3 billion, -1.8% lower than at the same time last year. Owner occupiers committed to $14.5 billion, 6.4% higher than at the same time last year, largely due to an uplift in non first home buyers.

Housing finance commitments investors vs. owner occupiers


Owner Occupied Investment

18 16 14
Value of Commitments ($billion)
43

12
10 8

6
4 2 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11

Source: ABS, rpdata.com

When refinances are excluded, finance commitments are extremely subdued


Over the 12 months, total owner occupier refinance commitments have increased by 20.8% while all other owner occupier commitments have fallen by -0.1% (from an already low level 12 months ago).

60,000
50,000
Finance commitments

Housing finance commitments refinances vs. non-refinances


Refinances Total excluding refinances

40,000 30,000 20,000

10,000
0

Aug-93

Aug-95

Aug-97

Aug-99

Aug-01

Aug-03

Aug-05

Aug-07

Aug-09

Aug-11
44

Source: ABS, rpdata.com

Big jump in dwelling approvals over August but can it be sustained?


Total dwelling approvals are -5.5% lower in August 2011 than they were in August 2010. Overall, dwelling approval numbers have not changed a great deal over the past 2 decades despite a ramp up in population growth.

Total dwelling approvals


20,000
Total dwelling approvals Total dwelling approvals (6 month rolling avg)

18,000

16,000
14,000 12,000

10,000
8,000 Aug-91 Aug-93 Aug-95 Aug-97 Aug-99 Aug-01 Aug-03 Aug-05 Aug-07 Aug-09 Aug-11

Source: ABS, rpdata.com

45

Big jump in dwelling approvals over August but can it be sustained?


Total dwelling approvals are -5.5% lower in August 2011 than they were in August 2010. Private sector house approvals are down 9.5% year on year. Private sector unit approvals are up 12.4% year on year.

12,000 10,000 8,000 6,000 4,000 2,000

Private sector house approvals vs. unit approvals

Private house approvals (rolling 6 mth avg)

Private unit approvals (rollng 6 mth avg)

0 Aug-91 Aug-93 Aug-95 Aug-97 Aug-99 Aug-01 Aug-03 Aug-05 Aug-07 Aug-09 Aug-11

Source: ABS, rpdata.com

46

Population growth is easing but remains well above long-term averages


The slowdown in population growth is largely the result of a fall in net overseas migration. With the increased quota for skilled migration, as well as the likelihood of more 457 visas, we are likely to see population growth once again start to increase. Natural increase remains at near record levels.
90,000
Natural Increase

Components of national population growth


Net Overseas Migration

Quarterly change in population

80,000 70,000

60,000 50,000 40,000 30,000


20,000 10,000 0 Mar-83 Mar-87 Mar-91 Mar-95 Mar-99 Mar-03 Mar-07 Mar-11
47

Source: ABS, rpdata.com

Although population growth is slowing, the supply of new dwellings has been insufficient
As population growth took-off during 2005, there was not a sufficient increase in the supply of new building approvals. The latest projections from the National Housing Supply Council suggest that the housing undersupply is likely to be around 228,300 dwellings in 2011.

120,000 100,000 80,000 60,000 40,000 20,000 0 Aug-91

Dwelling approvals vs. population growth


Total quarterly dwelling approvals Quarterly change in population growth

Aug-95

Aug-99

Aug-03

Aug-07

Aug-11

Source: rpdata.com, ABS

48

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