Tim Lawless for Core Logic shares the latest house price figures
Introduction – Best property market – Hobart, Tasmania
Ross Greenwood: Okay, let’s just go now, Tim Lawless from CoreLogic is with me now. Good day Tim, how are you travelling?
Interview – Tim Lawless, head of research at Corelogic RP Data
Tim Lawless: Yes, good evening Ross, I’m very well thanks.
Ross Greenwood: Very very good, thank you. Tell me about how suppose — I don’t think I have Friday’s numbers, but the best performing property market in Australia right now is the surprise. Just explain to people what it is.
Tim Lawless: It’s Hobart and I’m not really that surprised. What we’re seeing at Hobart — Actually, seeing the values rising at 13.6% per annum now, the highest in every capital city. Part of the reason for that is Hobart’s accelerating and it’s rate of capital gains. It’s gathering some momentum, it’s seen more buyers coming down since improving economic conditions and migration rates. It’s very affordable, it’s very early in it’s grave cycle. The other reason is, we’re seeing Sydney slowing down. So, Sydney is no longer the best performing capital city because the market’s losing some steam. Melbourne’s lost a little bit of steam as well, but it seems to be more resilient to a slowdown than what Sydney is.
Ross Greenwood: So, just explain the dynamics as to why a person would go and pay as much money as they’re paying in Hobart right now, when Perth for example, which has had significant falls, though into a lesser extent. I’m concentrating on the Perth market to a certain extent, and the reason for that, the fall from it’s peak has been significant. There’s been a pick up in iron ore prices in recent times. The house prices are becoming relatively close to the Hobart prices, which I think is historically not quite right. If you compare the Perth market now with it’s historic levels as compared with the Sydney or Melbourne markets, it’s the one that seems to me to be out of whack.
Tim Lawless: Well, yes. I probably agree with you. Actually, Perth is down a little bit more than 10% since the market peaked back in 2014. We’ve also seen yields come down because rent and real estate is very soft across the Perth market. We’re just going back to the values you were talking about. The typical house across the Perth market’s now worth about $484,000. Compare it to Sydney, where it’s still over a million dollars.
Melbourne’s are at double Perth’s, you can anything like 820,000. Then you can see there’s quite a substantial differential between the pricing of those cities. We’re actually seeing that, if you look at Perth the annual stalls that we’ve been seeing in values has started to taper away now. We’re still seeing values falling, but nowhere near the same sort of decline we were seeing say six months or 12 months ago. It looks like the market is approaching its floor which is good news for everybody in Perth.
Ross Greenwood: Okay, if we get house prices around the country right now threaten Sydney over the past quarter, you can almost quarterly numbers rather than just he monthly numbers because I can just jump around. Melbourne relatively strong, Brisbane pretty flat, Adelaide pretty flat, Perth going backwards as it has been, Darwin going backwards, Hobart going forwards at a strong rate along with Melbourne as well.
So, this is where people have got to to be conscious of the fact that if you start to slow down house prices and if the number of new homes being built is not rising rapidly, then ultimately if you’ve still got population growth coming into these major capital cities, you’re building up still a longer term problem if you haven’t got a little bit of growth. Those house prices have appeared to some. Not crazy growth, but a little bit of growth because you need more houses being built.
Tim Lawless: That’s exactly right. A few of those reasons is why we’re not expecting Sydney values to fall remarkably. They will probably will track a little bit lower, some modest falls but we’re still seeing mortgage rates going to remain very low. Lot of product demand. We’re still seeing an undersupply of housing, particularly in Sydney. Detached housing especially but also apartments. We’re also still seeing very strong population growth, particularly overseas migration coming into New South Wales. They’re probably just see things that will keep on going to keep the housing markets fairly propped up in Sydney. But Melbourne, not really. We’re still seeing Melbourne as a really strong market. Really strong migration rates. Strong jobs growth as well.
Ross Greenwood: The funny thing is, if you look at the Melbourne and Sydney markets for house prices especially, they’re coming back closer together. There’s around about $200,000 difference, 20% difference between those prices. That also is a pretty good litmus test of the relativities. Over a period of time, you would think that a faster growing population, that Melbourne prices are going to maintain that robustness over a very long time.
Tim Lawless: Yes, you think so. The other key metric is a benchmark which we tend to use is the yield. Melbourne yields are actually lower than what Sydney’s are. The typical house in Melbourne is now averaging just a 2.6% gross yield. Sydney’s are better than at 2.8%. Both are record lows. Both very low which does suggest that rents are out of balance with values. With Melbourne’s yield profile so low, it probably isn’t going to be all that attractive to investors. I wouldn’t be surprised if investors start to look at some of these markets that are really gathering momentum now, like Hobart. Brisbane’s probably another market that’s worth looking at.
Ross Greenwood: The Canberra market has just been fairly solid. I mean it followed Sydney up but it’s remained pretty solid. I mean the third best performing market around the country after Melbourne and Sydney on a title return basis over the year.
Tim Lawless: It is. Canberra went to really bounce back. We’ve seen some pretty decent wages growth across the public sector which is helping Canberra. There’s no of affordability situation across the Canberra market because household incomes tend to be a bit higher as well. Canberra did go through a bit of a slump. Post the 2010 election, there was a lot of news, talk about job shedding which never really eventuated but it did see a bit confidence falling in Canberra which has really bounced back now.
Ross Greenwood: Yes, tell you what, always good to have you in the program. Tim Lawless, the research director at CoreLogic looks after those house price numbers. It just gives you some idea about the relativity about them. We’ll take you through some of those key sales over the weekend a little later on the program with Jonathan Chancellor, but in the meantime, as always Tim, we appreciate your time.
Tim Lawless: Thanks very much.