Is Sydney in a property market crash?

Ross Greenwood speaks to Cameron Kusher, Head of Research at CoreLogic, about the November Home value Index results

Introduction: Is Sydney in a property market crash?

Ross Greenwood:  I want to take you to another subject. That is your house price here. That is probably of more interest to many people right now I would have thought. What you’ve seen is continuing falls in Sydney house prices over the past month. The month of November. But Melbourne prices do continue to rise. The best market right now around the country bar none, to me, Canberra followed by Hobart. They’re the two best housing markets in Australia right now.

That doesn’t necessarily mean that they’re the best for apartments. The best market for apartments would appear to be short-term, at least anyway, Melbourne. Sydney apartment prices continue to rise, though house prices continue to fall. Let’s go to Cameron Kusher. The Head of Research at CoreLogic RP Data, who put these numbers out on the first day of each first month. Cameron, many thanks for your time. The interesting that I’m noting, is as Sydney values, the median prices coming off, still above a million dollars. It’s the Melbourne price that is slowly, slowly catching that Sydney price, isn’t it?

Interview with: Cameron Kusher, Head of Research, Corelogic RP Data

Cameron Kusher: That’s exactly what’s happening. As you said, we’re starting to see that slowdown in Sydney. If we look at the last three months, they saw 0.1% in September, half a percent in October and 0.7% this month. Whereas Melbourne saw half a percent increase the last two months and, actually, in August we also saw a half a percent increase. The market’s not as hot as it was in Melbourne but it’s certainly not seeing those falls like we’re experiencing in Sydney.

Ross Greenwood:  The thing that I always look at, when I look at this particular thing, is the yield. Now the interesting side about is the yield on houses. The rental yield coming back if you’ve rented a house out in Melbourne. A median house. Is about 2.6%. In Sydney now, it’s 2.9%. That previously was flipped the other way, where Sydney yields were lower. That implies that the yield is much higher. Now, if you go to other parts of the country, say, for example, Brisbane, Adelaide, 4.1%. You go to Hobart 5%, Darwin 5.7% because the prices, the values have fallen for such a long period of time. That’s an interesting flip, isn’t? Between Sydney and Melbourne.

Cameron Kusher:  It certainly is. I mean yield is still exceptionally low and that’s a gross figure. When you calculate your net, it’s going to be quite a bit less than that. It is interesting and what we’re starting to see is that rents are still falling in Melbourne. That record lows. Whereas in Sydney, they’re actually lifting a little bit now because we are getting a bit of a pick up in rental growth as they start to fall.

Ross Greenwood:  Then another aspect of this also, is that clearly, Melbourne is growing. We should concentrate on Melbourne. I want to come to Canberra very shortly, but I want to start with Melbourne for the moment. Because though there is growth still there, the trajectory of that growth is starting to ease off. That’s quite clear as well.

Cameron Kusher:  It certainly is. A couple of months ago, the annual rate of growth in Melbourne was about 14.5%. It’s now down to 10.1%. As I said, we’ve seen a number of months where values have increased by 0.5%over the month. If you went back to earlier this year. We were seeing more than 1% growth each month in Melbourne. It’s definitely slowed, but it hasn’t slowed anywhere near the magnitude that we’ve seen in Sydney.

Ross Greenwood:  Then we go to Canberra. Am I I right to say it is the hottest property market in Australia right now?

Cameron Kusher:  Well, over the last quarter, it’s definitely been. I would say it’s probably neck and neck between Hobart and Canberra. Hobart, obviously, over the last 12 months has seen a stronger performance, but more recently, Canberra has been a pretty strong performer. Interestingly, with Canberra though, it’s all really the housing market. Values up 1.2% a month, 1.9% in the quarter, Whereas units have actually fallen by 0.3% over both the month and the quarter. Canberra really being driven by the detached houses rather than units.

Ross Greenwood:  Just take me through other parts of the country. Brisbane price, for example. They’ve really just been pretty steady. They haven’t really dropped off. Some of the apartments prices are now showing a bit of signs of stress, but that had been forecast for quite some time.

Cameron Kusher:  Brisbane. Very flat market. We have seen that rate of growth slow but it’s still positive. Very similar in Adelaide. I think the big news that we got out of the release this month, and the last couple of months, has been the slight improvement in the Perth housing market. Values are still down about 11% from where they were at their peak but the last quarter, we’ve seen values actually increase by 0.3%. We haven’t seen a quarterly increase in the Perth housing market since 2014. Nothing to get too excited about but, obviously, it does look like maybe the worst of the conditions in Perth are now behind us.

Ross Greenwood:  There you go. Maybe go and hunt for a house in Perth somewhere. It could be a nice little investment at that time. Cameron Kusher is the Head of Research at CoreLogic RP Data. Cameron, as always, great to have chat to you on the program.

Cameron Kusher:  Thanks very much, Ross.



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