House Prices

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<p><span>New dwelling prices are rising again in China, just about..</span></p>
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<div>The Chinese economy - and industrial production in particular - has clearly been slowing, with "official" GDP growth set to fall below 7 per cent.</div>
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<div>There is some sign of an upturn in credit growth. </div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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New dwelling prices rising in China: Pete Wargent

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<div>The ABS will soon release its latest dwelling prices data for Q2 2015, which is always an interesting series to analyse.</div>
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<div>Market forecasts are calling for a +2.4% gain on a national basis, with Sydney driving most of the gains.</div>
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<div>Westpac is looking for an even more bullish +4% which would take annual price growth all the way up to +9.1%.</div>
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<div>The data series also provides some interesting data on dwelling supply. </div>
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<div>Of course, the ABS series lags somewhat, but it is worth noting that CoreLogic RP Data's Daily Home Value Index is no longer a sea of green, with prices now down for the quarter and for the year in both Adelaide and Perth.</div>
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<div><span>Home values are also declining in Darwin.</span></div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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Dwelling prices update due: Pete Wargent

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<div>Sydney house prices rose by a more sedate +3.2% in the September quarter to be up by +21.7% over the year to a median price of $1,032,422 reported <em>Domain</em>.</div>
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<div>This followed on from a much faster +8.4% boom in Sydney house prices over the June quarter. </div>
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<div>Sydney's median unit price increased by a little over $10,000 to $673,182 over the September quarter. </div>
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<div>Meanwhile, Brisbane's median house price increased from $493,227 to $497,143 over the three months to September.</div>
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Sydney boom slows in Q3: Pete Wargent

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<span style="line-height: 1.3em;"> </span><span style="line-height: 1.3em;">South Australia has headaches, not least in the form of Whyalla where the town's major employer is suspended from trading on the securities exchange having failed to guide its steelworks back to break even over recent years, despite continually cutting costs and capex, and having unveiled a recapitalisation proposal back in February that has now been rejected.  </span>
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<div>Steel company Arrium Limited (ASX: ARI), which employees thousands of workers and has an export port facility at Whyalla, has been stuck in a trading halt and has been suspended from official quotation, with the company staring down a possible bankruptcy or a likely voluntary administration and its last traded share price at only 2.2 cents.<br><br><div class="separator"><a href="/images/2016/04/8/ARI.jpg" target="_blank">Click to enlarge</a></div>
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<div class="separator"><em><span style="text-decoration: underline;">Source: ASX</span></em></div>
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<div>It was announced to the ASX this week, in the euphemistically graceful way of these things, that the Chief Financial Officer of the company has resigned "to pursue other interests", while the company attempts to refinance its massive and unsecured $2.8 billion debt burden.<br><br>
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<div>Whyalla already felt the pain of OneSteel shedding jobs last year and further cuts were made by OneSteel this week, with approximately 1,000 jobs lost in Whyalla since the beginning of last year as South Australian unemployment spiked to a 14 year high. </div>
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<div>Given that Arrium employs about 10 per cent of Whyalla's working population, the potential closure of the steelworks could rip the local community apart, having a more devastating impact than the closure of Holden upon South Australia, potentially resulting in related job losses variously estimated at between 3,000 and 4,000 (Arrium has about 10,000 employees in total, and the possible closure of the steelworks itself would directly account for 1,100 jobs). </div>
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<div>These are desperate numbers for a town with a population of only 22,000, and any such closure would inevitably result in an exodus or population outflow from the region. Let's sincerely hope that doesn't happen, though at present the outlook seems bleak.<br><br><strong><span style="text-decoration: underline;">Property market decimated</span></strong>
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<div>Median house prices have reportedly fallen sharply in Whyalla, while there have been few takers for attached dwellings, resulting in a crushing of unit prices.<br><br>
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<div>It was reported this week that more than a billion dollars has been wiped off the value of Whyalla's property market in recent years - from $2.7 billion to $1.5 billion - as homeowners flood the market with for sale boards (though quite how those figures are derived given that so few dwellings have actually transacted is open to question). </div>
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<div>This may sound like catastrophising, but vacancy rates are threatening to go through the roof, with scores of properties listed for rent in Whyalla and hundreds more in surrounding suburbs.<br><br>
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<div><em><span style="text-decoration: underline;">SQM Research</span></em></div>
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<div>Note that the dynamics described above have transpired while Whyalla's official unemployment rate is still relatively speaking quite low, at 7.2 per cent  as at December 2015.</div>
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<div><strong><span style="text-decoration: underline;">Slow house sales</span></strong></div>
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<div>In truth it is very challenging to get an accurate read on housing market prices, since although there are now hundreds of properties listed for sale, comparatively very few of them have been selling. </div>
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<div>Looking at some specific examples suggests that if outright panic isn't on the cards yet, it may not be that far off if Arrium does shut up shop. As noted above, hopefully this proves not to be the case. </div>
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<div>By way of one example, following a few false starts and 372 days - more than a year - on the market, this house finally sold for $140,000, 36.4 per cent less than it was originally listed for. </div>
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<div>Other examples suggest that prices may now be down by about a quarter over the last couple of years, but this statistic is essentially useless to individual prospective sellers, since it really all comes down to the asset in question and whether a willing buyer can be found.</div>
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<div>While Arrium's steelworks fate is not yet decided, unfortunately this is becoming an all too familar story with regards to these small towns and cities that are so heavily reliant on a small number of employers.</div>
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<div>No doubt it's great if you can buy at the beginning of a resources boom and nimbly sell before the peak, but if you miss the precise turning points these markets have the potential to become frightfully thin and illiquid, and there may be nobody to even rent your property to, let alone sell it.</div>
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<div><strong><span style="text-decoration: underline;">Share indices</span></strong></div>
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<div>Another related graphic from the RBA Chart Pack worth looking at is the Australian share price indices chart. Note that the y axis here is presented on a log scale - the swan dive in the resources index since its peak has been nothing short of breathtaking.</div>
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<div>To a certain extent the resources index has been reflected the fortunes of property markets in resources heavy regions, albeit not coterminously.<br><br>Sure, if you got in to the resources penny dreadfuls in 2000 and sold out in 2007 then you'd say that the resources minnows and micro-caps are the best thing since sliced bread, but over the longer term the self-sustaining industrials and financials triumph.<br><br>Yes, I get the counter-arguments, if you bought a house in Whyalla for $150,000 in 2000 today it "could" be worth double what you paid for it, assuming you can find a willing buyer (i.e. a "when to" investment rather than a "how to" investment).<br><br>That said, looking at actual resales of like-for-like properties shows that price performance has not been as smart as suggested by median prices (which are distorted by development).<br><br>Unfortunately many property investors hopped on to the mining boom bandwagon around 2012 egged on by seminar groups and promoters, and are somewhat more precariously placed as voluntary administration looms large for Arrium.<br><br>Don't get me wrong, I hailed from a depressed steel city myself, and the last thing anyone with a heart wants to see is a single job lost. But the steelworks is not viable, and it appears likely to close without government handouts, and as such the housing market is wobbly to say the least.</div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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Whyalla wipeout on the brink (redux): Pete Wargent

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<p>EXPERT OBSERVATION</p>
<p>All capital cities recorded a rise in residential prices in the March 2020 quarter, led by Sydney (+1.9 per cent) and Melbourne (+2.1 per cent). </p>
<p>The two largest cities both recorded gains of more than +10 per cent over the year, taking the weighted average capital city price +7.4 per cent higher over the year to March.</p>
<p>Most of the COVID restrictions were rolled out in March, so there was little impact on the price charts by capital city. </p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/6/17/PW2.jpg" alt=""></p>
<p>Sydney houses and attached dwellings both recorded quarterly gains.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/6/17/PW3.jpg" alt=""></p>
<p>The mean dwelling price rose to a record high at an estimated $690,200.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/6/17/PW4.jpg" alt=""></p>
<p>The number of dwellings was an estimated 10,485,700.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/6/17/PW5.jpg" alt=""></p>
<p>The value of Australia's dwelling stock hit a record high, with a preliminary estimate of $7.23 trillion.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/6/17/PW6.jpg" alt=""></p>
<p>The ratio of dwelling stock to GDP increased to 3.79x, but was still just below 2017 levels.</p>
<p><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2020/6/17/PW7.jpg" alt=""></p>
<p>This is a high figure in global terms, but plenty lower than, say, Hong Kong.</p>
<p><em><strong>Pete Wargent</strong> is the co-founder of AllenWargent property buyers and a best-selling author and blogger<strong style="font-size: 12.16px;"> </strong></em></p>
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Average capital city dwelling prices hit record high: Pete Wargent

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<span style="line-height: 1.3em;">In the United Kingdom, Rightmove released it August 2015 House Price Index, which showed an average asking price for UK homes of <strong>£292,484</strong> and for London homes of </span><span style="line-height: 1.3em;"><strong>£606,826.</strong></span>
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<div>The result translated to the usual fall in August asking prices, with the index not being seasonally adjusted.</div>
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<div>However, Rightmove reported that the August decline of -0.8% was the smallest decline for the month of August in the eight years since before the credit crunch in 2007.</div>
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<div>Since 2007 the average August decline has been as great as -1.5%, with the decline having been more than 2% on three occasions in 2008, 2009 and 2014.</div>
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<div>A major driver of the supply-demand imbalance was identified as a significant 8% year-on-year fall in the number of sellers, which has become something of a vicious circle for UK property markets. </div>
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<div><strong><span style="text-decoration: underline;">Transaction costs</span></strong></div>
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<div>According to data reported by Lloyds Bank only 151,000 many Britons moved house in the first half of 2015 compared to some 327,000 in the first half of 2009. </div>
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<div>Buyers reportedly have been concerned about the costs of moving as well as being unable to find somewhere which they want to buy.</div>
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<div>Stamp duty in the UK is levied on transactions above <span>£125,000 and therefore rising prices naturally leads to bracket creep and more buyers on the lower rungs of the ladder being captured in the taxable bracket.</span>
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<span><br>The stamp duty on UK purchases above </span><span>£575,000 is an absolutely ridiculous 10%. Properties bought for more than</span><span> </span><span>£1.5 million are whacked with an even more ridiculous top rate of 12%, though of course even this has not stopped the campaigning for ever more punitive taxes.</span>
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<div><span>If you do somehow decide to stay in Britain, the inheritance tax takes care of most of the rest at 40% rate, another ingenious tax, death duties having accounted for the demolition of an estimated one sixth of Britain's country homes in the 20th century. </span></div>
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<span>Unsurprisingly the prevailing crazy rates of stamp duty act as a particular disincentive to relocate within the South East of England where most transactions (69%) fall in to the 5% bracket for sales greater than </span><span>£</span><span>250,000. </span><span>In London the equivalent figure is even higher at 89%.</span>
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<div>We have heard similar reasonings given by buyers and vendors in Australia, whereby stamp duties have acted as a disincentive for homeowners to move, and have in turn also led towards more investors adopting a trusty "long term buy and hold" mentality.</div>
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<br><strong><span style="text-decoration: underline;">Asking prices</span></strong>
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<div>The Rightmove House Price Index data from May 2003 to August 2015 is charted below for the United Kingdom and for London.</div>
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<div>UK average asking prices were up by +6.4% over the past year, while London prices were +9.7% higher.</div>
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<div><span>Given that the data is not seasonally adjusted, below is the same data for UK asking prices with a 12mMA trendline. </span></div>
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<span>Below is the data charted for London where asking prices appear to have consolidated above </span><span>£600,000 having come in above that threshold for the past three months.</span>
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<div>The strongest performing London Boroughs have included Greenwich where average asking prices have surged by 18% over the past year, spurred on the back of Crossrail activity. </div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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Strongest UK August market since 2007: Pete Wargent

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<div>Data from the Urban Development Institurte of Australia (UDIA) revaled that median lot prices in Sydney have increased by +49.4 percent in only the past three years. </div>
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<div>The increase in 2015 alone was $100,975 or +22.9 percent. to $440,725.</div>
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<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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Sydney land prices up 50 percent in 3 years: Pete Wargent

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<p><span>The list of the most exclusive suburbs in each state reiterates just how much more expensive real estate is in Sydney relative to the rest of the country.</span></p>
<p><span>Sydney is by far and away the nation’s most expensive housing market. To put this into some perspective we have looked at the top decile of selling prices over the three months to January 2016. A decile simply divides a group into ten equal parts. What this means is if there were 20 sales over the three months and we lined the sales up from lowest to highest we would take the 18th price as a representation of the most expensive segment of the market.</span></p>
<p><span>Over the three months to January 2016, the 90th percentile price of a house in the city was $1.5 million and the 90th percentile unit price was $980,000.  Over the same period, the two capital cities with the next highest 90th percentile house price was Melbourne at a still high but much lower $1,050,000.  This highlights just how much more expensive housing is in Sydney and to a lesser degree Melbourne is relative to other capital cities.  As an example the next highest 90th percentile price is Perth at $870,000.</span></p>
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<h3>90th percentile price of houses and units 3 months to January 2016</h3>
<p><a href="/images/2016/04/15/2016-03-21--img1.jpg" target="_blank">Click to enlarge</a></p>
<p><img src="/images/2016/04/15/2016-03-21--img1.jpg" alt=""></p>
<p>There is also a large difference between the cost of premium housing in capital cities and non-capital cities.  The 90th percentile house price across the combined capital cities is $1,010,000 compared to $675,000 in combined regional markets.  Similarly, 90th percentile unit prices are $830,000 in the combined capital cities compared to $600,000 outside of the capitals.  This data points to the fact that non-capital city areas are the great un-tapped resource for more affordable housing.  Of course employment opportunities in these areas are the main factor holding back the regional areas of the country.</p>
<p>The table below highlights the five most expensive suburbs for both houses and units in each state.  The data is based on median values and we have only included suburbs that had at least 10 sales over the 12 months to January 2016.<br><br></p>
<h3>Suburbs with most expensive median values, January 2016</h3>
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<p><img src="/images/2016/04/15/2016-03-21--img2.jpg" alt=""></p>
<p>The Sydney premium becomes very evident when we look at the most expensive suburbs in each state based on median values.  The data shows the 5 most expensive suburbs for houses in NSW (all of which are in Sydney) all have a median value of more than $4 million.  In comparison, the most expensive suburbs for houses in Vic and WA are more than $3 million, in SA it is more than $2 million, in Qld, NT and ACT it is more than $1 million and in Tas it is less than $850,000.</p>
<p>Similarly for units, all of the 5 most expensive suburbs in NSW (Sydney) have a median values of more than $1 million.  Tennyson in Brisbane is the only other suburb outside of Sydney with a median unit value of more than $1 million.</p>
<p>There is a large premium for housing in our largest city.  Of course the city also has an abundance of waterfront homes which contributes to the higher overall cost of housing.  While employment opportunities remain significant in Sydney and employers limit the opportunities for workers to work remotely we would expect that a substantial Sydney premium will remain.  Elsewhere housing is generally much more affordable but of course not everyone has a choice when it comes to potentially leaving Sydney and heading to another area of the country where housing is cheaper.</p>
<p><em>Cameron Kusher is research analyst for CoreLogic RP Data. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.</em></p>
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Sydney’s premium suburbs are much more expensive than anywhere else: Cameron Kusher

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<p>I'm not yet clear whether there has been a revision to the Residex house price index methodology.</p>
<div>But, for what it's worth, here are the latest median prices, which have now been disclosed.</div>
<p>The Sydney median house price hit a new high of $1,117,500 in December 2016.<br><br>The Sydney median unit price increased to a new high of $725,500.</p>
<p>Click to enlarge</p>
<div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/10/RESI1.jpg" alt=""></div>
<p><br>The median unit price rose by 7.4 percent in 2016, while the median house price increased by 7.1 percent.</p>
<div>One of the metrics I've been tracking has been the change in Sydney unit prices when priced in Chinese yuan terms. </div>
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<div>As you can see in the chart below, Sydney unit prices have increased by only 15 percent since this cycle began for offshore Chinese buyers. </div>
<p><a href="https://www.propertyobserver.com.au/images/2017/02/10/RESI2.jpg" target="_blank">Click to enlarge</a></p>
<div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/10/RESI2.jpg" alt=""></div>
<p> </p>
<div>Rising prices have therefore not been much of a deterrent for Chinese buyers.</div>
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<div>However, regulatory measures have been.</div>
<div> </div>
<div>Upon discussion this week with developers in Brisbane, it's clear that activity from China has, if not halted, slowed up dramatically since last year. </div>
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<div><strong><span style="text-decoration: underline;">Rates on hold</span></strong></div>
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<div>In other news, there were few surprises in the Reserve Bank's Monetary Policy Decision, whereby the official cash rate was left in hold at 1.50 per cent.</div>
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<div>The RBA expects reasonable growth in the economy in the December quarter, and expects growth to remain at around 3 per cent over the next couple of years. </div>
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<div>The real cash rate now sits just below zero.</div>
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<div class="separator"><a href="https://www.propertyobserver.com.au/images/2017/02/10/REAL%20CASH%20RATE.jpg" target="_blank">Click to enlarge</a></div>
<div class="separator"><img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/10/REAL%20CASH%20RATE.jpg" alt=""></div>
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<em>PETE WARGENT is the co-founder of </em><a href="https://allenwargent.com/"><span class="s2"><em>AllenWargent</em></span></a><em> property buyers (London, Sydney) and a best-selling author and </em><a href="https://petewargent.blogspot.com/"><span class="s2"><em>blogger</em></span></a><em>. </em>
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Sydney median prices rose in 2016: Pete Wargent

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<p><span>It has been interesting to track economic data over the past few years, watching the Sydney economy outperform across most metrics.</span></p>
<p><span>Small wonder that the Sydney housing market has also forged ahead so strongly since 2008.</span></p>
<p><span>The New South Wales economy is powering Australia's economic growth, with ANZ's stateometer now showing the Premier State both above trend and accelerating across a range of economic indicators, from labour market conditions to house prices.</span></p>
<p><a href="/images/2015/10/22/NSW.jpg" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/10/22/NSW.jpg" alt=""></span></p>
<p> </p>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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