Housing Stock

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GUEST OBSERVER
Anyone questioning the health of the economy needs to be pointed in the direction of the home building sector. More homes are being built than ever before, with almost $44 billion of work currently in the pipeline.
There are signs that activity is topping out – but at high levels with a record amount of work to be completed.
Investors should display a healthy degree of caution because there is a huge amount of new housing stock to be absorbed over the next few years. Rental vacancy rates need to be watched closely.
The monthly consumer confidence data has lost relevance given that a weekly version is released with a similar sampling regime. As noted yesterday, confidence has fallen over recent weeks due to financial market volatility and a lower Australian dollar.
<a href="/images/2016/01/21/Screen%20Shot%202016-01-21%20at%209.19.26%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/01/21/Screen%20Shot%202016-01-21%20at%209.19.26%20AM.png" alt="">
What do the figures show? 
Building starts
Dwelling starts (commencements) rose by 0.5 percent in the September quarter after a 0.2 percent increase in the June quarter. Work started on a record 215,053 new dwellings over the year to September, up 13.4 percent on the previous year.
At present a record 194,252 homes are under construction.
Across Australia, starts in the September quarter rose in five states: NSW (up 2.4 percent); Victoria (down 3.8 percent); Queensland (down 1.0 percent); South Australia (up 1.2 percent); Western Australia (up 1.7 percent); Tasmania (down 20.7 percent); Northern Territory (up 17.4 percent); and the ACT (up 0.7 percent).
In the year to September, dwelling starts were higher than the decade average in all the states &amp; territories except for South Australia (down 2.9 percent). Starts were at record highs in NSW and Victoria.
Dwelling starts in NSW in the year to September were 60.7 per cent above the decade average.
The value of commercial building starts edged up from $28.88 billion to $28.95 billion in the year to September. The annual total of commercial building starts is near 9-year lows.
<a href="/images/2016/01/21/Screen%20Shot%202016-01-21%20at%209.20.29%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/01/21/Screen%20Shot%202016-01-21%20at%209.20.29%20AM.png" alt="">
Consumer sentiment:
The Westpac/Melbourne Institute index of consumer confidence fell by 3.5 percent in January after falling by 0.8 percent in December. The confidence index is up 4.3 percent on a year ago.
The current conditions index fell by 5.1 percent while the expectations index fell by 2.4 percent.
Four of the five components of the index fell in January:
<ul>
<li>The estimate of family finances compared with a year ago was down by 9.4 percent;</li>
<li>The estimate of family finances over the next year was downby 2.3 percent;</li>
<li>Economic conditions over the next 12 months was down by 5.0 percent;</li>
<li>Economic conditions over the next 5 years was up by 0.39 percent;</li>
<li>The measure on whether it was a good time to buy a major household item was down by 1.7 percent.</li>
</ul>
State sentiment levels: NSW (up 3.3 percent), Victoria (down 1.0 percent), Queensland (down 3.1 percent), Western Australia (up 3.5 percent) and South Australia (down 3.0 percent).
Job market outlook: The Westpac-Melbourne Institute Unemployment Expectations Index rose by 0.7 percent in January but was 5.3 percent below its value a year ago.
The ‘time to buy a dwelling’ index rose by 13.9 percent to the highest reading since May 2015.
What is the importance of the economic data?
Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. According to Melbourne Institute: “The survey of consumer sentiment was first undertaken in 1973 and was conducted on a quarterly basis until 1976, a six-weekly basis from 1976 to 1986, and has been conducted monthly ever since.” Confident consumers may be more inclined to spend, especially on major items.
The Australian Bureau of Statistics releases data on dwelling commencements (starts) each quarter. The figures provide guidance on future construction activity. If construction begins on new houses or apartments, it signifies work for building trades.
What are the implications for interest rates and investors?
Strong home building activity will support the economy over the next 12-18 months. As a result, CommSec expects no change to interest rate settings in coming months.
There could be an ‘ingestion’ problem as residential projects get completed. If investors can’t find tenants, new homes may be put up for sales, depressing home prices.
<a href="/images/2016/01/21/Screen%20Shot%202016-01-21%20at%209.24.15%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/01/21/Screen%20Shot%202016-01-21%20at%209.24.15%20AM.png" alt="">
Craig James is the chief economist at <a href="https://www.comsec.com.au/default.aspx" target="_blank">CommSec</a>.
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Our record number of home construction: Commsec's Craig James

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EXPERT OBSERVER
The national housing market has just experienced its largest downturn in dwelling values since at least the 1980s.
The fact that values nationally fell by less than 10% speaks to the ongoing strength of the housing market over the past 40 years which has culminated in Australia being one of the most expensive places in the world in which to buy property.
Since the federal election in May, there have been ongoing signs of improving market conditions.
This has been driven by a number of factors including: an unexpected win by the Coalition in the federal election which removed uncertainty about changes taxation policies relating to investment, two 25 basis point cuts to interest rates, tax cuts for low income earners and an easing of some of the previous lending restrictions that were in place.
While there are clear signs of improving conditions, many point to the fact that the very low volume of sales in the market indicate that the recovery is not real or unsustainable.
While that could very well prove to be true if/when stock levels rise, the truth of the matter is that in a downturn, sales volumes typically fall and subsequently, the early stages of a housing recovery are usually characterised by low volumes of sales.
<img src="https://www.urban.com.au/images/2019/8/23/CL%20Recovery%201.JPG" alt="">
The above chart shows the monthly volume of settled sales for dwellings nationally, together with the rolling three month change in dwelling values nationally. The dotted line represents 0% change, so anything below means that values are falling and anything above is indicative of growth. What becomes quite clear from the data is that when values are declining, sales volumes typically fall and increasing values typically leads to higher volumes.
What is also evident is that the market doesn’t respond immediately, when values start rising, initially at least, it isn’t necessarily occurring in concert with a rise in sales volumes. Even recent examples in the 2009 and 2011 market recoveries show this to be the case.
This is precisely what is occurring at the moment, specifically in Sydney and Melbourne where housing conditions are improving following a sharp downturn.
<img src="https://www.urban.com.au/images/2019/8/23/CL%20Recovery%202.JPG" alt="">
Another way to look at how a housing market recovery starts out with low sales volumes is the auction market.
Coming out of the Global Financial Crisis (GFC), values nationally started to lift in January 2009. Equally, the above chart shows how auction clearance rates bounced however, this bounce occurred with very low volumes of auctions taking place.
Equally, the housing recovery which started in early 2012 saw a relatively low number of auctions occurring right through until early 2013. It is a similar story right now with auction clearance rates having bounced higher since the middle of May, yet the volume of properties going to auction remaining quite low.
<img src="https://www.urban.com.au/images/2019/8/23/CL%20Recovery%203.JPG" alt="">
Finally, you can only really take to auction or purchase what is available for sale. One of the major reasons why transaction volumes remain so low is because there is very little actually available for sale. The number of new listings nationally (new listings are anything not previously advertised for sale over the past 6 months) are the lowest they’ve been at this time of year for many years and are -18.9% lower than they were last year.
Total listings are also lower than they’ve been at this time of year for many years and are -4.4% lower than they were a year ago.
Auction volumes have certainly fallen much more than volumes in the general market however, as housing market conditions have softened, vendors have become much more selective about which properties are appropriate to be taken to auction.
Notwithstanding that, as we have seen in the past you can’t say that an increase in dwelling values is not sustainable just because the volume of stock either selling or going to auction is low.
Ultimately, you can only transact that which is actually available for sale and at this point there is not a lot of stock available for sale. Of course as we enter spring that may change and a higher volume of stock for sale may prove to snuff out any increases in housing values but at this stage the improving trend is quite real.
CAMERON KUSHER is the head of research for the Australian branch of CoreLogic
Kusher regularly posts on the <a href="https://www.corelogic.com.au/news" target="_blank">CoreLogic website</a>.
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The signs of a market recovery: CoreLogic's Cameron Kusher

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The community housing group SGCH has secured a $60 million loan from Australia's Clean Energy Finance Corporation (CEFC) to upgrade the environmental credentials of its existing housing stock and build an additional 200 homes.
The first of the new dwellings will be built in the Sydney suburb of Peakhurst.
It the first time the CEFC has funded residential property, chief operating officer Meg McDonald said. The CEFC is keen to further investment in the residential property sector.
Last November, SGCH secured a $61 million, three-year facility with Westpac Bank to build 275 houses in the Sydney metropolitan area for low-income key workers in sectors such as childcare. 
The latest funding permits SGCH to build better-designed dwellings in Peakhurst that will cost up five per cent more upfront, but which would repay that within five years.
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SGCH secures $60 million CEFC housing loan

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Highest and lowest turnover of housing stock: Lowest turnover over the past 12 months in resource towns while lifestyle markets and new housing areas seeing higher levels of turnover
Research out today by CoreLogic shows that over the past year a shortage of properties coming to market for sale is beginning to impact on property market conditions with most capital cities and major regional areas of the country affected. Added to this, affordability constraints appear to be preventing some market segments from being more active.
Over the 12 months to June 2016, just 4.9% of total dwelling stock nationally transacted. Based on this figure it would take around 20.5 years for the total national housing stock to turnover.
According to CoreLogic property market analyst Cameron Kusher, the low turnover rate also highlights why price-based measurements such as median prices are not the most reliable for tracking value movements across the housing market given that so little of the total housing stock actually transacts in any given year.
Note: A turnover figure is different to the often quoted average hold period figure. Turnover looks at the proportion of total stock which is selling while the hold period calculation looks only at those homes transacting and measures the length of time between sales. The two figures highlight that there are properties which transact on a more regular basis while there are others which rarely sell.
For today’s summary, CoreLogic highlights the 25 council areas nationally that had the lowest turnover of housing stock over the year to June 2016.
<a href="/images/2016/09/29/lowest%20stock%20turnover.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/09/29/lowest%20stock%20turnover.jpg" alt="">
Mr Kusher said, “What is immediately noticeable is the prevalence of regions linked the resources sector. These areas have been characterised as having plenty of properties for sale but few people actively looking to buy. As a result, in some of these regions only a small overall proportion of housing stock has actually transacted.”
For this analysis, CoreLogic also identified 25 council regions to record the greatest turnover of housing stock over the past year across coastal and lifestyle markets. It also includes a number of council areas where there has been significant housing supply additions over the year.
Mr Kusher said, “The increased level of turnover in lifestyle markets indicates that the popularity of purchases in these markets has returned after many years in the doldrums.”
<a href="/images/2016/09/29/highest%20stock%20turnover.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/09/29/highest%20stock%20turnover.jpg" alt="">
“We’re anticipating that turnover will remain low in mining towns due to a lack of willing buyers. On the other hand, new housing areas and lifestyle markets are expected to continue to see relatively high levels of turnover throughout the coming year.”
 
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Shortage of properties coming to market for sale impacting on conditions: CoreLogic

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Melbourne has over 6.5 percent less fresh listings than it had at the same time last year, while Adelaide and Brisbane aren't too far behind.
Sydney's new 8,300 listing represents a 0.4 percent increase in fresh stock to their market compared to a year ago.
Click here <a href="https://www.propertyobserver.com.au/images/2018/3/14/properties_listed.jpg" target="_blank">to enlarge.</a>
 
 <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/2018/3/14/properties_listed.jpg" alt="">
Sydney's overhang still comes from last year, with 26,800 total listings showing a 22.5 percent increase on how many listings they had last year.
Hobart is still well short of stock with dwellings flying off the shelves. They're 34.5 percent down on total number of listings from this time last year.
In total there are nearly 30,000 new listings, down 3.2 percent from this time last year.
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jrobinson-rf4aSBido9

Melbourne's fresh listings well down while Sydney still sees major overhang from 2017

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Mernda has experienced the biggest stock decrease over the past year according to Investar.
Investar suggests the stock for sale has decreased by 79%, from 500 houses this time last year to its current 102 offering.
The suburb's median house price sits on<a href="https://www.urban.com.au/news/10692-mernda-vic" target="_blank"> $480,000</a>, according to CoreLogic. 
Investar puts it the suburb median rental at $365 a week.
A three bedroom Goulburn Street house has been listed for sale with $600,000 hopes (pictured below).
Close to the upcoming Mernda train station, the 79 Goulburn Street home comes with three bedrooms, kitchen with Caesar stone waterfall benchtops, and open plan meals/family area.
 Further benefits include ducted heating, split system cooling and alarm system with security cameras.
<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/2018/2/26/70%20goulburn%20st.jpg" alt="">
A Mernda four bedroom house has been sold for $751,500 earlier this month (pictured below).
Situated within walking distance to parklands and within easy access to schools, supermarkets and train station, <a href="https://www.realestate.com.au/sold/property-house-vic-mernda-127488198" target="_blank">the 20 Chicory Street</a> home comes with large formal lounge/theater room, hostess kitchen with euro appliances, and large family room.
<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/2018/2/26/20%20chicory%20st.jpg" alt="">
Another three-bedroom house was sold for $610,000 last year (pictured below).
It was sold by Rod Taylor and John Kalpakis form Ray White. 
<a href="https://www.realestate.com.au/sold/property-house-vic-mernda-126709370" target="_blank">The 15 Heals Road house </a>comes with three bedrooms, formal lounge and double steel garage.
<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/2018/2/26/15%20heals%20road.jpg" alt="">
The new Mernda Train Station and proposed town centre are within walking distance.
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Mernda sees biggest stock decrease in Victoria

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Australia national new apartment market is set to show signs of recovery in 2019, according to the Urbis Q4 Apartment Essentials Report.
They found with new stock coming in and sales experiencing speed bumps, national apartment sales as a percentage of available stock surveyed has dropped to a new low of 7.7% in quarter four.
"We’ve seen fluctuating results around the country," said Clinton Ostwald, Director at Urbis. 
"In many markets, buyers are soaking up the existing completed stock as the brakes have been put on new launches.
"In other markets, new projects are still being launched to market, replenishing the supply and leading to steady sales.
"Sales rates have been dropping for the last two years, so it’s no surprise that 2018’s results were lacklustre in comparison to 2017."
The report found in Sydney, sold stock averaged 21% of available supply throughout each quarter in 2017 but that dropped by 5.5% in 2018.
Melbourne and the Gold Coast followed suit, with a smaller drop of roughly 4% over the same period.
However Brisbane and Perth, the markets that have seen the least new stock enter, have actually seen slight increases percentage of stock sold in 2018.
Urbis said "it’s not the stock crisis we imagined one year ago".
"Lower levels of new stock entering the market has continued to replenish the slow sales throughout 2018, with 24,000 new apartments launching throughout the year," said Ostwald. 
Melbourne had the most built over 2018 with roughly 11,244 new apartments entering the market, while Sydney placed second in the country with 4,810 new apartment launches.
Brisbane remained an outlier with no new launches in the quarter, however the report noted that "the first half of 2019 will likely bring over 1,000 new apartment launches for the sunny city".
Apartment approvals are at their lowest in the history of Urbis’ Apartment Essentials, sitting at 4,576 in quarter four 2018. 
"We need to keep an eye on supply levels as ongoing population growth, particularly on the East Coast, will quickly take up available supply," said Ostwald.
"This may result in a housing supply shortage in the next 12 to 18 months as we are also seeing fewer completions in the greenfield house and land market."
46% of total sales for 2018 were attributed to owner occupiers.
Interstate investors accounted for 19% of sales, up 10%.
Local state investors, who previously accounted for 30% of the market in 2017, dropped down to 17% in 2018, in line with foreign investors.
7.7% of the surveyed available stock was sold in the December quarter across the five markets:
The national weighted average sale price was recorded at $705,226 for Q4.
Average apartment sale price:
<ul>
<li>Sydney – $899,793</li>
<li>Melbourne – $656,739</li>
<li>Brisbane – $831,884</li>
<li>Perth – $602,524</li>
<li>Gold Coast – $715,032</li>
</ul>
The most popular apartment sales were two-bedroom, two-bathroom apartments, making up 47% of total sales.
Across the cities the highest selling product types were:
<ul>
<li>Sydney – One-bedroom, one-bathroom apartments – 48%</li>
<li>Melbourne – Two-bedroom, two-bathroom apartments – 44%</li>
<li>Brisbane – Two-bedroom, two-bathroom 53%</li>
<li>Perth – Two-bedroom, two-bathroom – 41%</li>
<li>Gold Coast – Two-bedroom, two-bathroom – 66%</li>
</ul>
The report found 25% of actively selling apartments are in presales, 49% are under construction and 26% are recently built.
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