New data in for July shows that the Australian property market “weathering the storm” and various positive indicators reflect a more positive outlook from consumers.
Residential property still underpins Australia’s wealth
Despite the doom and gloom in the media, residential real estate is still responsible for 56.3% of the average Australian household wealth according to Corelogic.
The total estimated value of residential real estate is currently $9.8 Trillion. With only $2.2 Trillion of that being indebted, that corresponds to a nationwide Loan to Value Ratio (LVR) of only 22%. When taking out a loan generally your lender is looking for a maximum LVR of 80% else you have to pay Lender’s Mortgage Insurance. With talk of bubbles and property cliffs this really does put it into perspective at a national level.
80% of all main markets show positive growth in last 3 months
The graph below highlights the price change in major capital cities and regions in the past 3 months.
Sydney is leading the charge with an increase in values of 4.9% for the April to June quarter, followed by Brisbane 3.0% and Perth and Regional SA maintaining their strong performance, each with 2.8% growth.
Rolling quarterly change in values on the up in all capital cities except Darwin
Rolling graphs like below are a great way to visualise trends over time. As you can see below all major capital city markets (except Darwin) started to turn the corner a few months ago and are currently on the upward trend, after nearly 18 months of downward motion.
You may also notice that the upward trend has just started to lessen in both Sydney and Perth in the last month or so; it will be very interesting to see where all these markets are in coming months.
Investors starting to return to the market
There is no better indication of future buyer demographics than finance approvals. The graph below shows that both owner occupier and investors financing is increasing slightly – an indication that more buyers could shortly be active.
In the graph on the right below you can see investor financing is back close to the last 5 year average of 34.4%. This is a good sign for the property market in general and for renters as it hopefully means that more investors will start to be active resulting in higher rental stock availability into the future.
Rental yields drop slightly as capital growth outpaces rents
Average yields are up from 12 months ago but down 0.1% from the previous month.