Housing Prices

The 2032 Brisbane Olympics will not only deliver an economic boost to trade and tourism but is set to have a big impact on the local property market, according to one economist.

PRD Research chief economist, Dr Diaswati Mardiasmo, has predicted that Brisbane&rsquo;s median house price could increase to $1.7 million by 2023, 2.5 times its current median of $674,738.

The forecast by PRD Research was reached using historical data of house prices following two global events hosted in Brisbane, the World Expo in 1988 and the G20 Summit in 2014.

<img alt="" height="628" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/bide-21-longland-street-newstead-f94e8b1acc183d4e31ebc002ecefc8ef.png" width="1200" />

In the 11 years prior to Expo 88, the Brisbane LGA median house price grew by 278.8 per cent and prices in South Bank and its surrounding suburbs grew by an average 335.3 per cent.

In the year following, house prices grew by a further 29.7 per cent in Brisbane and 19.1 per cent in South Bank and nearby suburbs.

A similar trend unfolded when the city hosted the 2014 G20 Brisbane Summit with property prices surging 112 per cent in Brisbane and 116 per cent in South Bank in the decade before the event.

&ldquo;[H]osting both Expo 1988 and G20 Summit has served the Brisbane property market well,&rdquo; Dr Mardiasmo said.

Applying the same level of growth seen in these events, PRD Research predicts Brisbane&#39;s median house price to rise to $1.7 million by 2033, a year after the Olympics.

Dr Mardiasmo noted there were differences in the pace of property growth in past events, but even going at &ldquo;half-strength&rdquo;, the median house price would reach $1.2 million by 2033.

&quot;The prospect of a $1 million median house price for Brisbane is a real possibility.&quot;

Research by KPMG predicts that hosting the 2032 Games will deliver $8.1 billion in benefits to Queensland including a $4.6 billion economic boost to tourism and trade and $3.5 billion in social improvements such as health, volunteering and community benefits.

Urban takes a look at three residences you could secure in Brisbane to get ahead of the trends.

1. Bide, Newstead 
Developer: Dibcorp Properties 
Two-bedroom apartments from $635,000

[smartcode_project:default project_id=102309 project_image_fid=163979]

Bide is a new residential offering nestled in the heart of Newstead, offering 89 residences.

Designed in collaboration between architects Twohill &amp; James, Lat27 and Wiltshire Stevens Architecture, each apartment has rethought residential living.

&ldquo;Bide embodies the belief that the spaces we inhabit are essential to a balanced life&rdquo;, the project marketing reads.

[smartcode_project:default project_id=102309 project_image_fid=163974]

Among its features include large spacious apartments, open-plan living and dining, balcony space and a study nook in some apartments for working from home.

2. Queens Wharf Residences, Brisbane 
Developer:&nbsp;Far East Consortium 
One-bedroom apartments from $565,000

[smartcode_project:default project_id=13276 project_image_fid=80720]

Situated in Brisbane&rsquo;s historical heart, Queens Wharf Residences&rsquo; atrium entrance on George Street directly connects the CBD through to the riverfront.

The precinct will feature iconic contemporary architecture alongside a collection of beautifully restored heritage buildings, including the Brisbane Printing Office.

The one, two and three-bedroom residences at Queen&rsquo;s Wharf have been curated by&nbsp;Cottee Parker&nbsp;to deliver the most to its residents.

[smartcode_project:default project_id=13276 project_image_fid=80722]

Each apartment features winter gardens with lift and tilt windows, as well as feature views of the city, Botanic Garden or city views.

3. The Coterie, Fortitude Valley 
Developer: Vicland Property Group 
Two-bedroom apartments from $536,080

[smartcode_project:default project_id=6257 project_image_fid=141423]

Vicland Property Group&rsquo;s two breathtaking apartment buildings at Fortitude Valley offers a modern-day sanctuary in an energised urban village.

A prestigious collaboration by&nbsp;Rothelowman&nbsp;and&nbsp;Bruce Henderson&nbsp;Architects delivers residents a range of versatile, open-plan designs and luxury lifestyle offerings.

&ldquo;Designer touches are apparent in every space with the refined treatment of contemporary polished surfaces, textural finishes and confident, monochromatic highlights&rdquo;, the project marketing reads.

[smartcode_project:default project_id=6257 project_image_fid=141415]

With limited apartments remaining, and only 1.5-kilometres from Brisbane&rsquo;s CBD, The Coterie is not one to miss.

The forecast by PRD Research was reached using historical data of house prices following two global events hosted in Brisbane, the World Expo in 1988 and the G20 Summit in 2014. 

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Olympics to grow Brisbane median house price 2.5 times current levels, economist says

ABS has today released the June data for housing approvals which shows that in NSW, the planning system approved 12.7% in less in June than was approved in May. The Council shut down for elections has started.

Urban Taskforce has warned the NSW Government that they faced a real risk that Councils would ease off on approvals in the lead up to what was to be the September elections.&nbsp; Today&rsquo;s data shows that the Government&rsquo;s light touch on Councils has resulted in precisely that.&nbsp; Worse, the Council elections have now been postponed till December and unless someone holds a blow-torch to the Councils and approval bodies, approvals will drop off further.&nbsp;

[smartcode_project:default project_id=31751]

Even prior to the lockdown, the productivity of the planning system had dropped off. Our economy cannot recover with this drop off in performance.&nbsp; Planning reform and approvals now will deliver a pipeline of work for when vaccinations allow our economy to fully re-open.&nbsp; There is an opportunity to catch up &ndash; but it seems that the planning system has slowed up again.

Urban Taskforce calls on the Government to immediately implement the recommendation of the NSW Productivity Commission White Paper.&nbsp; The GSC has set housing targets.&nbsp; It is up to the NSW Government to ensure that Councils meet them.&nbsp; Targets need to be regularly monitored against performance.&nbsp; There can be no excuse for Councils refusing to accept the targets.&nbsp; LGA Housing Strategies must come with sanctions for those Councils that selfishly refuse to contribute to housing supply, resulting in rising new home prices inflicted on those least able to afford them.

[smartcode_project:default project_id=30049 project_image_fid=162884]

The data shows that NSW housing approvals reached their peak in 2015/16 2016/17 and 2017/18 at around 73,000 approvals each year. Then, in the lead up to the NSW State election (2018/19) approvals dropped off to 58,000 and stayed low in 2019/20 with only 48,000, despite &ldquo;fast track&rdquo; schemes and a flurry of DPIE activity.

The total approvals have risen across all of NSW to 59,000 and this is welcome &ndash; but it remains well short of what is needed.&nbsp; The data reveals the problem.&nbsp; Apartment approvals across NSW have dropped significantly (most of these in Greater Sydney) while new separated house approvals have remained relatively flat.

<img alt="" height="444" src="https://s3-ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/pictures/article-images/screen_shot_2021-08-07_at_2.19.12_am.png" width="1180" />

The table above, based on the ABS data, clearly shows that the price escalation is due to a drop off in housing approvals and this is flowing on to a drop off in housing supply.&nbsp;

Further, the time taken to navigate the NSW planning system, even after an approval has been granted, often takes years, adding to risk for the property development industry and additional costs for new home buyers.

The message went out to Councils in 2018 that the NSW Government was going to go soft on them after the Council amalgamation debacle.&nbsp; But the result has been a massive under supply of housing.&nbsp; This will only get worse unless Government can incentivise Councils to deliver an over-supply of new approvals.

Council elections have now been postponed till December and unless someone holds a blow-torch to the Councils and approval bodies, approvals will drop off further. 

ABS housing approvals data spells out why housing prices are going through the roof

The RBA has noted that housing prices had increased significantly in recent months.&nbsp;

&quot;Growth in housing prices had been especially strong for detached housing, particularly in outer metropolitan and regional areas,&quot; according to the RBA.

&quot;This had partly reflected strong demand from first-home buyers and owner-occupiers seeking more space.&quot;

&quot;The momentum in housing price increases had broadened recently to include the largest capital cities and the more expensive segments of these markets, although the increase in overall housing prices in Australia during the pandemic had been more modest than in a number of other countries.&quot;

[smartcode_project:default project_id=95292 project_image_fid=156359]

The minutes did not only single out New Zealand.

The minutes did note cross-country differences in population growth stemming from international border closures.&nbsp;

&quot;In some countries, including Canada, which had experienced high and rising rates of immigration in the years prior to the pandemic, population growth had slowed substantially.&quot;

&quot;In New Zealand, some of the slowdown in population growth had been mitigated by the return of expatriate New Zealand citizens during the pandemic; in turn, it was likely that this had contributed to the increase in housing demand in New Zealand.&quot;

The minutes noted the decline in population growth in Australia had been particularly steep relative to other countries; in the 3 months to September, the Australian population had declined for the first time in several decades as a result of a reversal in net overseas migration.&nbsp;

&quot;However, in countries where net migration had contributed less to population growth in the years before the pandemic, including the United States, population trends had been little changed in recent quarters.&quot;

The minutes also noted that globally, asset prices had been increasing given the low levels of interest rates.&nbsp;

&quot;Housing prices, in particular, had increased strongly in a number of countries in the latter part of 2020 and early 2021.&quot;

&quot;Growth in housing credit had increased in a number of these countries, but it generally remained slower than growth in housing prices.&quot;

It noted that in Australia growth in both housing credit and housing prices had picked up, &quot;but to a lesser extent.&quot;

Annualised growth in housing credit had been around 4&frac12; per cent over the 6 months to February, driven by demand from owner-occupiers.&nbsp;

[smartcode_project:default project_id=3494 project_image_fid=90814]

The minutes noted demand for new housing finance had been strong, and the high level of loan commitments indicated that housing credit growth was likely to increase in the months ahead.&nbsp;

&quot;However, there was no notable evidence of a deterioration in housing lending standards.&nbsp;

&quot;The share of loans with higher loan-to-valuation ratios had increased, but this was in part explained by the larger share of first-home buyers.&quot;

&quot;The share of loans with high debt-to-income ratios had been relatively stable.&quot;

&quot;Members agreed that it would be important to watch carefully for increased risk-taking by lenders and any deterioration in lending standards and larger shares of higher-risk loans.&quot;

The members noted that low interest rates had been one of the factors contributing to the increase in demand for housing, alongside other policies such as government grants.&nbsp;

The latest minutes noted advertised rents had also picked up in a number of capital cities recently, although, as in other countries, housing prices had increased by more than rents.

&quot;Rents and overall conditions in the apartment market in Melbourne, and to a lesser extent in Sydney, remained subdued as the reduction in net overseas migration was still lowering demand,&quot; it noted.

The RBA says the increase in overall housing prices in Australia during the pandemic had been more modest than in a number of other countries

jchancellor

Australia's housing price rises more modest than overseas: RBA

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GUEST OBSERVER
Many housing types are totally at odds with how people live today because people don’t have as many material goods as they used to. 
Those under 30 may not own much at all. Music is digitised and streamed (Sonos, Spotify), treasured photo albums live in the cloud or within applications (Dropbox, iPhoto), tools are pooled (Open Shed), vehicles and rides are shared (Flexicar, BlaBlaCar, Uber), there’s no landline phone or TV cable, kitchen appliances are redundant with the ubiquity of food delivery services (Foodora, Deliveroo) and pets are borrowed (DogVacay, BorrowMyDoggy). 
The young are also likely to be renting their accommodation. Data from the Melbourne Institute of Applied Economic and Social Research reveal that barely 50 percent of Australians lived in a house they owned in 2014. If this trend continues, many of today’s young Australians will never own their own home.
With transformations in digital technologies and housing-price pressures changing living habits, people will not only possess fewer physical objects in the future, but new apartment dwellers will be more likely to occupy less space at a later age. These private domestic spaces are decreasing in size to become more efficient, hopefully more affordable and, for some restless millennials, more desirable.
<h2>Corporatising the co-living model</h2>
One model to emerge in the trend towards downsizing private domestic space is branded co-living spaces. Examples include The Collective (London), Zoku (Amsterdam) and Roam (London, Madrid, Miami, San Francisco, Tokyo, Ubud). In the corporatised co-living model, occupants rent private bedroom space (some bedrooms are as small as ten square metres) on a rolling contract for weeks or months, but share living and working spaces. 
These collective spaces are often programmed with extracurricular activities such as yoga, business workshops, cooking classes and guest talks that promote social exchange between renters. 
Systems of logistics, such as apps and chat platforms, facilitate the sharing of objects and space. Access to the co-living space is granted if you are part of a tribe (students, communes, families or business people). 
One of the global market leaders in co-living arrangements is the Chinese You+. The company has built over ten co-living spaces and claims to house more than 10,000 people across 25 branches. Private bedrooms (with bathroom) range in size from 20 to 50 square metres. The minimum stay is six months at an average monthly rent of A$470. 
At You+, people over 45 are discouraged. Couples with children or those who are anti-social are not permitted. Tech entrepreneurs tend to be given preference.
Subscribing to a co-living or dormitory arrangement such as You+ can mean lower rental costs (relative to renting a single-bedroom apartment on an above-average income), a surfeit of potential friends and a flexible rental contract. For some, this may be a genuinely desirable option. For others it may be the only option in a competitive rental market at a time when there are few affordable housing options.
<h2>Blurring the public-private divide</h2>
As private interior space contracts and shared domestic spaces become more common, the public realm is also changing.
Formerly private activities such as working and communication are occurring more frequently outside of the home, while the public sphere is taking on characteristics of interior or domestic settings: intimate spaces, interior furnishings and finishes, pocket parks, guerrilla gardening. The idea of what constitutes a home may be changing and expanding to consider urban space.
A lot of hyperbole surrounds the branded co-living spaces like You+ that have emerged under the so-called sharing economy – also known as the communal, collaborative, inclusive, gig or social economy. But there is a tension between the realities of the model and the benevolence of the act of sharing. 
At the behest of the property owner, co-living spaces tend to have less fixed furnishings and cheaper construction. They also have more occupants because typical apartment spaces (living room, laundry, kitchen) are compressed. Behind You+ and its ilk there are venture capitalists looking for high returns.
Co-living arrangements are transforming the physical typologies and financial models of housing and are the latest in a long tradition of collective housing arrangements, from the kibbutz to student dormitories to share houses, baugruppen and boarding houses. 
With lone-person households to account for more than a quarter of all Australian households by 2031, according to the Australian Bureau of Statistics, we need to rethink how we build collective and individual space in a denser city that reflects how many people want to live today – and tomorrow. 
We can see that market and societal demands are pushing people towards sharing space, but many co-living arrangements do nothing to improve housing affordability in the long term.
Timothy Moore is PhD candidate, Melbourne School of Design, University of Melbourne and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/timothy-moore-292089" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Reinventing density: co-living, the second domestic revolution

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GUEST OBSERVER
Sydney and Melbourne continue to show solid house price growth while Adelaide, Brisbane and Perth are much weaker.
Even within cities there is divergence, with oversupply in some apartment markets, while detached house markets lack supply.
We forecast national housing price growth to slow from 7 percent in 2016 to 2-5 percent in 2017; trends across and within cities to vary.
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Still cooling, but with divergence across markets
It has always been a misconception to refer to Australia as having one housing market. After all, Australia's population is strewn across a whole continent and each region is affected by different forces. The cycles in Western Australia and Queensland have been driven by mining, while the south-eastern states have larger services sectors.
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Being a currency union, there are clear unifying features, such as the common currency, interest rates and federal fiscal policy and free movement of labour, among other things. As a result, over recent decades, a key rule of thumb has been that mortgage rates drive the national housing price cycle. But this relationship has become more complicated recently, thanks to an unusually large cycle in commodity prices, persistent low global and local interest rates, rising foreign buyer activity, and increased use of prudential settings to tame the lending market.
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A key driver of trends over the past five years has been the rebalancing of growth towards the housing and services sectors, supported by the lower interest rates and AUD following the end of the mining boom. This has driven a substantial ramp-up in housing prices in Sydney and Melbourne since mid-2012, up 66 percent and 49 percent, respectively. Over the same period, housing prices in Brisbane, Adelaide and Perth have risen by only 19 percent, 9 percent and 5 percent, respectively.
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The worrisome pace of Sydney and Melbourne price growth, particularly in 2014 and 2015, motivated a tightening in prudential settings, starting in late 2014, which has seen some moderation in loan growth. As a result, both cities saw housing price growth slow from double-digit growth last year to high single-digit rates this year. We expect low single-digit rates of housing price growth in these cities in 2017, although trends are expected to vary across the apartment and detached house markets.
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A national apartment building boom, which has been part of the rebalancing act, is likely to deliver some oversupply in the Melbourne and Brisbane apartment markets, which is expected to see apartment price falls in these markets. Detached dwelling markets across the country are set to see further price growth, albeit moderating.
 <a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC. 
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Low single-digit rates of housing price growth in 2017 for Sydney, Melbourne: HSBC's Paul Bloxham

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GUEST OBSERVER
Data released showed that new home sales rose by 0.8 percent in April after falling by 1.1 percent in March. 
The number of detached house sales rose by 2.2 percent in April. Multi-unit dwelling sales fell by 1.2 percent in April. 
The home sales data has implications for banks, retailers, developers, building and building material companies. 
What does it all mean?
The latest lift in new home sales essentially doesn’t alter the trend. The housing sector has peaked in terms of activity and is likely to be more subdued over the coming year. It is important to keep in mind that overall new home sales remain healthy, but the macro-prudential measure and resulting tight lending standards adopted by the banks will have a more lasting impact on housing activity.
The focus for policymakers will be the mix of investor and owner occupier loans over the next six months and what happens to house prices. It is clear that housing activity is consolidating with potential home buyers being more circumspect on purchases, given higher home prices and the lift in borrowing costs. The softening in home building should lead to a much more sustainable housing market.
Importantly the pipeline of new home building remains solid and should support an array of sectors and broad- based activity. The latest data doesn’t have a great influence on the next interest rate decision. The Reserve Bank is comfortably on the interest rate side lines for the rest of 2017.
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<img src="https://www.urban.com.au/images/2017/06/02/Screen%20Shot%202017-06-02%20at%2012.40.56%20PM.png" alt="">
What do the figures show?
New home sales
In seasonally-adjusted terms, new home sales rose by 0.8 percent in April after falling by 1.1 percent in March. The number of detached house sales rose by 2.2 percent in April. Multi-unit dwelling sales fell by 1.2 percent in April.
 The Housing Industry Association reported: “Amongst the jurisdictions surveyed, New South Wales (+2.2 percent), Victoria (+14.3 percent) and South Australia (+7.0 percent) all posted improving sales figures for private detached houses in April, while both Queensland (-4.7 percent) and Western Australia (-12.7 percent) recorded falls.”
What is the importance of the economic data?
The Housing Industry Association releases data on the sales of new homes each month. The HIA collects the data each month from a sample of Australia's largest 100 home builders. The survey covers around 14 percent of the home building industry. 
Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>
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Number of detached house sales lift: Savanth Sebastian

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GUEST OBSERVER
Following the end of the mining boom, Australia’s growth has been rebalancing towards housing and the services sectors. The first part of the rebalancing act involved a significant rise in housing prices and housing construction. 
Housing prices have risen by 30 percent since mid-2012, led by Sydney and Melbourne. Most of the rampup in building has been apartments in the major cities. 
The housing market is now cooling, as a result of tighter prudential settings and the boost to housing supply.
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<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.43.29%20AM.png" alt=""> 
Although the housing upswing has been a necessary part of the rebalancing act, it also drove a rise in household debt. The household debt-to-income ratio has risen from 167 percent in 2011 to 186 percent in 2015. Australian household debt levels are among the highest in the world. However, high household debt is not, in itself, a problem, as long as the debt is held by households that can service it. In Australia, the distribution is fairly favourable, with high income earners holding most of the debt.
Institutional features also matter. In Australia’s case, all mortgages are full recourse, significantly reducing the incentive to default. Australia does not have sub-prime mortgages. Australian households also use their mortgage to save, given the tax benefits available for doing so. This has meant that the average mortgage is currently more than 2.5 years pre-paid, leaving households with a significant equity buffer to draw down, if needed. The prudential regulator has also been tightening lending standards over the past 18 months, particularly for investors, reducing the risks involved with the new lending. Loan-to-valuation ratios on new loans have fallen.
We expect housing price growth to remain subdued in coming quarters. We see some risk that apartment prices could fall, given signs of over-supply of apartments, particularly in Melbourne and Brisbane. However, we view these apartment markets as somewhat segmented from the detached housing market. Significant foreign investment in new apartments also limits domestic financial system exposure.
Overall, we see mortgage debt as generally well distributed to households that can  afford to continue to service it and see the financial stability risks as moderate.
Australia’s housing market is cooling 
National housing prices have been broadly steady over the past six months, following strong growth over recent years (Chart 1). 
The slowdown has been most vivid in Sydney and Melbourne, where housing prices have been flat since October, following annual average growth of 10 percent and 6 percent over the previous four years (Chart 2). Housing price growth has been much more modest in the rest of the country at around 3 percent a year over the same period.
Apartment prices have generally risen by less than detached housing prices in recent years, and are slowing down by more than detached housing prices in some of the major markets.
The slowdown reflects a range of factors, including tighter prudential settings, particularly for investors, and rising housing supply. We expect these factors to continue to constrain housing price growth in coming quarters and forecast that national housing price growth will run at low single-digit rates this year and into 2017, following growth of around 10% in 2015 (see Downunder Digest: Australia’s housing market cools, 11 December 2015).
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Household debt has risen, but it’s the distribution that matters
The housing price boom has led to rising household debt. The household debt-to-income ratio has increased from 167% in 2011 to 186% in 2015, mostly led by a pick-up in lending to investors (Chart 3 and 4). This makes Australian household debt levels amongst the highest in the developed world (Chart 5). Of course, given the rise in housing prices, the household debt-to-asset ratio has been more subdued: it has actually fallen from 24% in 2011 to 22% in 2015.
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High household debt levels can make an economy more vulnerable in the face of a shock.
However, it is unusual for the high debt levels, in themselves, to be the driver of a downturn. The US sub-prime crisis was a rare example of this situation. Importantly though, even in the US, it was not the level of aggregate debt that mattered most, but the distribution of debt. In Australia’s case, most of the debt is held by higher income households. Numbers for 2010 showed that, at that time, around 72% of the household debt was held by the top 40% of income earners (Chart 6). Less than 4% of the debt attributed to the lowest 20% of earners.
Australia’s financial system also has institutional features that help to reduce the risk that household debt could become concerning. For a start, all mortgages are full recourse.
Australia’s tax system also favours paying down mortgages ahead of schedule as interest payments and expenses on owner-occupied properties are not tax-deductible. 
The latest numbers suggest that the average mortgage in Australia is currently over 2.5 years pre-paid, leaving households with a significant buffer in the face of the risk of rising unemployment.
Lending standards were tightened as investor borrowing rose
Despite these factors, the strong rise in lending to housing investors through 2013-15 raised concerns that the new lending could increase the risk to the overall mortgage book. Concerns increased partly because the ramp-up in debt was quite geographically concentrated in New South Wales and, to a lesser degree, Victoria, and because the strong investor interest was helping to fuel double-digit housing price growth in these markets (Chart 7).
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<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.48.14%20AM.png" alt="">
As a result of these concerns, the authorities tightened prudential settings. This included: requiring the banks to test new borrowers for a higher mortgage rate than offered; requiring the banks to slow the growth in their lending to investors to below 10% y-o-y; and, requiring the banks to hold more capital (which saw effective mortgage rates rise). Tighter prudential settings have seen a clear pullback in lending to investors (see Chart 7). There has also been a fall in the proportion of lending at loan-to-valuation ratios of over 90% and a decline in ‘interest only’ loans (Chart 8). This should help to reduce the risks associated with recent new lending.
Apartment over-supply presents a risk
To the extent that there are risks, the key focus is on the apartment markets in the major cities. Apartment building has picked up substantially in the major cities (Chart 9). Importantly, our view remains that the national detached housing market is not over-supplied, which means the overall housing market is not yet showing signs of being over-supplied (see Downunder Digest: Australia’s housing supply ramp-up, 9 September 2015). As Chart 9 shows, there has only been a modest rise in construction of detached dwellings in recent years.
<a href="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.49.28%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.49.28%20AM.png" alt="">
The risk of a potential over-supply of apartments is largest in Melbourne and Brisbane, where apartment building has been at record highs as a share of the existing stock (Chart 10). There is also some risk of over-supply in Perth, where apartment building has been strong.
To some degree, the detached and apartment markets are segmented, given the lack of perfect substitutability. For example, buyers of detached dwellings in the suburbs tend to be quite different from buyers of inner-city apartments. So a possible decline in apartment prices, due to over-supply, would not necessarily translate into a matching fall in detached housing prices.
This is particularly the case, given that there has only been a limited pick-up in detached home building in recent years. The tightening of prudential settings and falls in loan-to-valuation ratios also help protect the financial system from any decline in apartment prices as new borrowers would need to see larger price declines before they fell into negative equity.
Strong foreign investor involvement in the major city apartment markets, particularly from China, may also limit the exposure of the domestic financial system to the impact of any falls in apartment prices in these markets. Government approval numbers show that there has been a strong rise in foreign purchases of new dwellings in Australia over the past year (Chart 11).
<a href="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.50.41%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.50.41%20AM.png" alt="">
Many of these purchases are off-the-plan apartments, partly because foreigners are restricted to purchasing newly constructed dwellings.
In its recent semi-annual financial stability review, the Reserve Bank of Australia (RBA) noted that ‘the Australian banking system has little direct exposure to Chinese investors’. Foreign buyers may also have different motivations for purchasing, with some looking to invest in property as a store of value, rather than for speculation. This could limit the willingness of foreign investors to divest, even in the event of some capital losses.
Falling apartment prices could also put pressure on developers’ balance sheets, with many of the apartments having been sold ‘off the plan’. Again, the RBA recently noted that its liaison suggested that ‘settlement failures have, to date, remained uncommon and are generally expected to increase significantly only if housing prices fall substantially’.
Related risk in commercial property
Global demand for commercial property assets has also somewhat displaced Australia’s commercial property market. Commercial property prices have risen well ahead of rents in recent years, as global investors ‘search for yield’ pushes Australian yields down to global levels, which are around historical lows. The ramp-up in commercial property prices (and fall in yields) has come despite office vacancy rates that remain elevated, with particularly sharp increases in Brisbane and Perth.
This could have a bearing on the domestic apartment market as there may be some substitutability between office and apartment buildings. A retreat in commercial property prices could put some downward pressure on apartment prices. However, much like the apartment market, foreign investor involvement in the commercial property sector has been significant, which could limit the risks to the domestic financial system.
Mortgage loan arrears are still falling
Finally, it is worth noting that mortgage loan arrears have continued to fall since their peak in 2011 and are at very low levels (Chart 12). What is most interesting is that arrears continued to decline despite the rise in the unemployment rate over recent years. This is likely to reflect the support from falling interest rates over that period. The recent decline in the unemployment rate should help to support loan servicing and potentially limit concerns about household debt levels.
<a href="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.51.42%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/22/Screen%20Shot%202016-04-22%20at%208.51.42%20AM.png" alt="">
Paul Bloxham is chief economist (ANZ) for HSBC . Daniel Smith is economist. They can be contacted <a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">here</a>.
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Australia’s rising household debt and should we worry? HSBC's Paul Bloxham

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According to the CoreLogic RP Data Stratified Hedonic Index, the most affordable quarter of suburbs recorded annual value growth of 6.6 percent compared to a 6.4 percent rise across the middle market, and a 7.0 percent rise across the most expensive suburbs. 
While the annual figures show the most expensive suburbs recorded the strongest value growth over the past 3 months, value rises have been more uniform and with little difference between the broad value-based segments of the market. 
Across the most affordable suburbs, we’ve seen values move 1.8 percent higher over the March quarter followed by the most expensive suburbs move by 1.7 percent, and the middle market suburbs by 1.6 percent.
<a href="/images/2016/04/21/Screen%20Shot%202016-04-21%20at%201.40.49%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/21/Screen%20Shot%202016-04-21%20at%201.40.49%20PM.png" alt="">
 
Home values across the city increased by 7.4 percent over the past year after annual growth peaked at 18.4 percent in July 2015 Over the past year the most affordable suburbs have seen values rise by 8.0 percent. 
The middle market values are 6.6 percent higher and the most expensive suburbs have recorded value rises of 8.8 percent. 
The annual rate of value growth is slowing across each segment, however the premium end of the market continues to record higher rates of capital gain.
Sydney: Home values across the city increased by 7.4 percent over the past year after annual growth peaked at 18.4 percent in July 2015. Over the past year the most affordable suburbs have seen values rise by 8.0 percent. The middle market values are 6.6 percent higher and the most expensive suburbs have recorded value rises of 8.8 percent.
The annual rate of value growth is slowing across each segment, however the premium end of the market continues to record higher rates of capital gain.
 
Melbourne: Recorded home value growth of 9.8 percent over the past year, down from a recent peak of 14.2 percent in September 2015. 
The most affordable suburbs recorded value rises of 9.7 percent compared to 10.5 percent across the middle market and 10.0 percent across the most expensive suburbs. Growth is fairly steady across the affordable market but slowing across the middle and most expensive suburbs.
Brisbane: Home values increased by 4.5 percent over the past year with the rate of value growth higher than it was a year ago. The most expensive suburbs recorded value growth of 4.6 percent over the past year compared to a 5.1 percent rise across the middle of the market.
The most affordable suburbs saw a 5.7 percent rise. Annual rates of growth are generally trending higher across each segment.
Adelaide: Home value changes have been fairly steady having increased by 3.2 percent over the past year. The most expensive suburbs saw values rise by 3.2 percent compared to a 3.1 percent increase across the middle market and a 2.9 percent increase across the most affordable suburbs.
Across each segment growth is fairly steady with the rate of capital gain holding reasonably firm over the past twelve months.
Perth: The only major capital city to see value falls over the past year, however, the annual rate of decline has started to improve, easing from - 4.1 percent in November 2015 to the current annual decline of -2.0 percent. Across the broad valuation segments, home values have fallen -0.5 percent across the most affordable suburbs, and are -1.5 percent lower across the middle market and 2.1 percent lower across the most expensive suburbs.
Across each segment values are still falling but the rate of decline in values has slowed.
The CoreLogic RP Data Stratified Home Value Index highlights the importance of looking beneath the broad headline figures.
<a href="/images/2016/04/21/Screen%20Shot%202016-04-21%20at%201.42.39%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/21/Screen%20Shot%202016-04-21%20at%201.42.39%20PM.png" alt="">
 
Markets within a city can be performing quite differently to what the over-arching statistics for a capital city market shows, not only across valuation based segments of the market, but also across housing types and geographically.
 Cameron Kusher is research analyst for CoreLogic RP Data. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.
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Home value growth strongest in most expensive suburbs: CoreLogic RP Data's Cameron Kusher

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Earlier this week the Australian Bureau of Statistics (ABS) released their Residential Property Price Indexes for the June 2017 quarter.  
The data confirmed what the CoreLogic Home Value Index has already told us, the rate of growth in the housing market is slowing, particularly so in Sydney.
<a href="https://www.urban.com.au/expert-insights/building/2017-09-21-blogimage1.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/29/2017-09-21-blogimage1.png" alt="">
  Over the June 2017 quarter, the ABS Index shows combined capital city dwelling prices increased by 1.9% while the CoreLogic Home Value Index showed an increase of a lower 1.6%.  
As the above graph shows, the results of both indices are closely aligned.  The CoreLogic data is already available to August and shows a further cooling in the rate of growth over the three months.  
Given this we can expect the trend towards slower growth to hold over the September 2017 quarter.  In fact, the daily movements in the CoreLogic series is suggesting Sydney values trended slightly lower over the first 20 days of September.
<a href="https://www.urban.com.au/expert-insights/building/2017-09-21-blogimage2.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/29/2017-09-21-blogimage2.png" alt="">
  On an annual change basis both indices also indicate a slowing of the rate of growth.  Over the 12 months to June 2017, the ABS reports combined capital city dwelling prices rose by 10.2% while CoreLogic data shows capital city dwelling values increasing by 11.1%.  Over the 12 months to August 2017, CoreLogic data shows that dwelling value growth has slowed to 9.7% and it is expected that the ABS data once available will also show a similar slowing.
<a href="https://www.urban.com.au/expert-insights/building/2017-09-21-blogimage3.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/29/2017-09-21-blogimage3.png" alt="">
  Sydney is showing clearer signs of a slowdown than other capital cities and that is evident in the above chart.  Over the June quarter, the ABS showed a change of 2.3% compared to the CoreLogic series which showed a lower 1.6% change.  The CoreLogic data to August shows increasing evidence of the Sydney market cooling with values having increased by a much lower 0.3%.
<a href="https://www.urban.com.au/expert-insights/building/2017-09-21-blogimage4.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/29/2017-09-21-blogimage4.png" alt="">
 
 The annual series also show signs of softer growth in Sydney with ABS data recording a change of 13.8%, over the 12 months to June down from 14.4% in March.  While the CoreLogic series recorded an annual change to June of 16.4% compared to 15.5% in March. Meanwhile, the latest data for August shows that annual growth in Sydney dwelling values has slowed to 13.0%.
<a href="https://www.urban.com.au/expert-insights/building/2017-09-21-blogimage5.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/29/2017-09-21-blogimage5.png" alt="">
  The above chart shows the annual change in values across each index over the 12 months to June 2017.  Despite being two different methodologies you can see that the rates of change across both metrics are quite similar.  They show strong growth in Sydney, Melbourne and Hobart, reasonably strong growth in Canberra, moderate growth in Brisbane and Adelaide and ongoing declines in Perth and Darwin.
<a href="https://www.urban.com.au/expert-insights/building/2017-09-21-blogimage6.png" target="_blank">Click to enlarge </a>
<img src="https://www.urban.com.au/images/2017/09/29/2017-09-21-blogimage6.png" alt="">
 The CoreLogic Hedonic Index provides a much more timely and granular view of housing market conditions (both geographically and across product types) and the trends are interesting.  It shows a substantial slowdown in growth in Sydney and a more moderate slowing in Melbourne.  It indicates that growth has accelerated in Hobart and has accelerated marginally in Canberra and Brisbane.  
Adelaide values are increasing at pretty much the same rate as they were in June while the declines in Perth and Darwin are greater, quite significantly so in Darwin.
Overall the data highlights the value of having a selection of indices with which to analyse the market.  
It also shows how valuable more timely measures are.  
When you are analysing Australia’s single largest asset class, timely insights are extremely important to allow those participants in the housing market to be able to make accurate decisions in as close to real time as possible.
It’s also a timely reminder that there is no single ‘Australian’ housing market.  
While headline growth rates provide a macro-view on the market, each capital city and region of the country is showing its own unique housing market dynamic which is influenced by local demographic and economic trends as well as supply factors.
Cameron Kusher is head of research for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/" target="_blank">here</a>.
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