Tim Lawless from CoreLogic RP Data talks about the Home Value Index Results for April
Student Fees and Housing Affordability
Ross Greenwood: Welcome back to Money News right around the country. I can tell you that the Education Minister, Simon Birmingham, is set to deliver a speech at 7:00 PM this evening. In regards to more costs for students for higher education, universities and other tertiary education. I have received an embargoed copy of that speech. I can tell you that pretty much confirms many of the reports that have already come out that have speculated that there will be increases in university fees. When that speech is beginning to be delivered by Simon Birmingham, the Education Minister, we’ll give you the full details of that in around 20 minutes time.
The other key that is going through right now in the budget is in regards to houses and housing affordability. With reports in the Australian Financial Review today that one part of the federal budget could include some form of salary sacrifice tax deductibility for people who are saving for the deposit for their first home. The question is whether that will work to give first-home buyers a go or simply give them a slightly shorter period of time with which to save an increasingly difficult deposit.
But at the same time, today being the first of May, the house price numbers come out for the month of April from Core Logic. Now the Core Logic home numbers today, show that the median house price in Sydney, say for example, in April, was $990,000. That was up by 0.2% but overall dwellings were flat. Apartment prices fell 1.2%. In Brisbane, for example, apartment prices fell 3.1%. House prices rose 1% to a median price $514,000 and overall, dwellings up by 0.6 of a percent. In Canberra, a good example is at overall dwelling prices down 2.8%. House prices fell 3.1% though unit prices rose by 1.7% during that period of time.
So, it does show with more red numbers around the place that there is perhaps some indication that the prices are starting to cool. Unit prices in Melbourne, in the month of April down by 0.9%. The author of this research is the Director of Research at Core Logic, Tim Lawless, who is on the line right now. Many thanks for your time, Tim.
Tim: Good evening, Ross.
Ross Greenwood: Does Australia have a fundamental problem that needs to be addressed by government in regards to house prices?
Tim: Well, housing affordability, I think, it’s been well accepted that there is certainly an issue across Australia. But more specifically, it’s a Sydney-centric issue and to a lesser extent, it’s a Melbourne issue.
Ross Greenwood: So, does that require government to intervene? To perhaps make that saving for a deposit tax-deductible or is it simply a case, as you seem to be even showing in these numbers here, that there is moderation in some areas of housing right across the country and that ultimately it will sort itself out.
Tim: I’m not sure if housing affordability will sort itself out. But at least we’re seeing some hints that the marketplace is slowing down. For housing affordability to improve in Sydney for example, we’d need to see mortgage rates fall a lot further than where they are or we’d need to see housing prices fall to allow first-home buyers an easy entry point to save up for a deposit. You know, 20% deposit on a million dollars is a substantial savings.
I think the government’s talking about some of the right things. But remember, that’s allowing first-home buyers to a salary sacrifice is a demand side fix. We also need to see a lot more attention around the supply side. Getting more detached housing into the marketplace rather than high-rise units, I think has got to be some area of focus, as well.
Ross Greenwood: That means that our cities get bigger. That means more infrastructure. That means more emphasis on government actually spending some money and doing more and that’s going be a feature potentially of the Victorian budget that gets handed down this week. It’s also certainly been a focus of New South Wales even Queensland, talking about these types of things. So, unless you get that infrastructure, you really do not get, if you like, the pressure of many of the outer suburbs in regards to transport, even sewage. A range of different areas, it might take some pressure off the house prices all round.
Tim: That’s so important. Look at Sydney once again as the most unaffordable housing market. There are plenty of areas around the fringe, the outer metro area fringes of Sydney that are very affordable. Central Coast is another good example. But they’re simply undesirable to a lot of the population because they’re not well linked to where people work or people play, where their families are. So, I think that the infrastructure spend, from a federal level as well as the state government level, it’s really important to unlock a lot of that affordable housing.
Hot Property Markets
Ross Greenwood: Okay. I picked up a couple of things from your report today. And in particular, one of the things I did spot, the median house price in Sydney at $990,000 so just under a million, now that median house price does move up or down depending on the month. But the fact that that has moved up implies to me that during the month of April there might have been some more expensive houses overall put on to the market. Does that start to imply that some of the smart money might be seeking to get out of the housing market while the going is good and while there is a shortage of properties and there are buyers around the place?
Tim: I think we’re certainly seeing some sentiment changing in the markets. The fact that clearance rates were trending lower over the first three weeks of April and then bounced higher at the end of the month does maybe suggest to me that we are seeing some vendors adjusting their pricing expectations. Maybe seeing a hint of the marketplace is approaching its peak or even maybe moving through it at the moment.
If I was a vendor in Sydney at the moment, and I was sitting on a large amount of equity and looking to sell my property, I think selling it right now is probably a good idea. Considering we are seeing quite a number of indicators now that the marketplace, after five years of quite spectacular growth, is probably approaching its peak.
Ross Greenwood: The other market I want to concentrate on is Brisbane. And the reason for that is there has been a significant amount of apartment building in Brisbane. That is well documented. But now those apartment prices have been coming off for quite some time. So, year on year, year to date, for the last quarter and indeed for the last month where it seems to have accelerated the price falls in apartments. But at the same time, if you go to house price, detached house prices, they continue to show moderate growth. In other words, that modest growth that they’re seeing in the house prices is certainly not a reflection of what’s taking place in the unit market.
Tim: No, this is really a reflection of the type of stock that’s being constructed at the moment. While we’re going through this construction dwelling– the dwelling construction boom is very much largely biased towards high-rise apartments. Which of course are very much with investment buyers, as well. We’re not seeing anywhere near the number of detached dwellings being built around our key, large capital city markets. In fact, the latest data from the ABS showed that for the first time ever, apartments outnumbered detached houses for the number that had been completed over the most recent quarter.
While we are going through this supply boom, absolutely, it is biased toward apartments. I think, once again going back to affordability. More Australians still want to have a backyard, they want to have a Hills hoist and we’re not seeing that supply coming in to the market.
Canberra Property Market
Ross Greenwood: And I don’t know whether there’s an aberration or not but I mean, you look at that Canberra market, it’s been rock solid, almost a mini version of Sydney in some ways, over the past two years. And yet, all of a sudden, out of nowhere, there is a price fall of 3.1% in April. You got any feeling as to why that might have taken place?
Tim: Yes, that’s probably a bit more noise than anything else. You look at the trends over the three months prices in Canberra by nearly 2% they’re up by 9% over the past 12 months. So, I wouldn’t be surprised if that blip that we’ve seen in April is more volatility than anything else. Because we’ve been seeing the trend in Canberra is kicked off relatively recently, it’s not like Sydney or Melbourne where value has been growing for five years. It has been accelerating, sure, for the last 18 months. But I’d be surprised if we saw sustained negative movements across the Canberra market.
Ross Greenwood: There you have Tim Lawless, the Director of Research at Core Logic with those latest house price numbers. Trying to explain a little bit of that. We’ll come back and have more analysis of that housing market and the affordability. Plus, take your calls a little later on the program. I can tell you the Education Minister Simon Birmingham is right now detailing increases in university fees. We’ll come back and play you a little bit of that a little later in the program. In the meantime, Tim we appreciate your time here on Money News.
Tim: Thanks, Ross.
Source: Today Money Minute/Ross Greenwood