Australian Property Market Update

The Australian (east coast) property market continues to deliver mixed performance, with more of the same of recent times, namely Brisbane and to a less extent Sydney continuing to grow, whilst Melbourne continues to lag. Specifically, Brisbane dwelling values increased 3.8% in the three months to July (and a whopping 16% in the last 12 months), Sydney dwelling values increased 1.1% (5.6% in the last 12 months) and Melbourne values went mildly backwards -0.9% (and flat for the last 12 months).  

Corelogic release a table which compares the value of dwellings in the three capital since the onset of Covid (approaching four and a half years ago!) – and it’s here that the varied results really stick-out – with Brisbane outperforming Melbourne over this period by 4.5 times! 

Source: Corelogic 

As we have discussed in previous updates, diagnosing the disparity in results is not a straightforward exercise, in part because the population growth dynamics in Melbourne continue to grow stronger than (or better) Brisbane and Sydney. What we do know from first-hand experience with our clients is that many investors are selling in Melbourne due to increased taxes and compliance regulations (and many more are no doubt comparing the recent underperformance of Melbourne dwelling values and calling time on their investments). Based on our own clients, we’ve seen an increase in selling activity of about 50%, and whilst the available data of investors selling is not great, what we do know is that Melbourne currently has an imbalance between available listings and the number of sales (i.e. we have more people wanting to sell vs. wanting to buy). Again, the below figure from Corelogic shows this best with Melbourne the only city to have more new property listings than sales (5,000 odd more listings than sales over the last three months). No doubt many of the increased listings are being driven by property investors selling. In the short-term, it’s hard to see this imbalance ending.  

Put another way Melbourne has only four buyers for every five sellers, whereas in Sydney and Brisbane there are slightly more buyers than sellers (and in Brisbane there are very low overall stock levels – less than half what Melbourne has) .  

Source: CoreLogic 

So, the 64,000 dollar question is – Is Melbourne now cheap and, therefore, a good time to buy?  

One way to answer this question is to compare the median price in Melbourne relative to Brisbane and Sydney. The price premium between Melbourne and Sydney (i.e. how much more expensive is Sydney relative to Melbourne), is the highest it’s been in 20 years at 75% more expensive. Similarly, the median price in Brisbane is now higher than Melbourne, which hasn’t occurred in over 16 years. So yes, on these metrics Melbourne is historically “cheap”. 

Source: LongView Data Analytics  

The follow up question then becomes has anything structurally changed that means historical pricing comparisons are no longer relevant? This one is harder to answer – on the headline numbers it’s hard to mount a case for what has changed, given key economic metrics – Victorian GDP, unemployment rates, population growth, infrastructure development, etc all relatively robust (again when compared to NSW and Queensland).  

What has changed is the Victorian public finances are in very poor health and as mentioned above, Victoria has what is arguably the most onerous property investor regulations in the country, so investors are steering clear. This is backed up by lending data which shows new investor lending in Victoria is about 1/3 lower than NSW and Queensland 

So in summary, in the long-term Melbourne is likely presently “cheap”.  The problem is, how long is long-term! (answer no-one knows). 

Rental Growth Weakening 

After a very long-run of strong rental growth across the country there are signs that this is weaking quite rapidly. Whilst monthly data should always be taken with a grain of salt, Brisbane median rental prices went mildly backways (0.1%) in July and Melbourne posted its weakest growth rate (0.3%) in two years.  

LongView Homes Investment Fund hits 50 Properties

Finally, it would be remis of us not to mention that our Shared Equity Fund (also called LongView Homes Investment Fund) – will hit a major milestone in the month of August with 50 properties in the Fund. Many of you will no doubt have seen various materials about the fund over the last year and we’re thrilled to have several Longview Property Management clients already as fund investors. 

What’s been especially rewarding this year is both the quality of properties in the fund (avg. property price $1.7m, with an equal mix of properties across Melbourne, Sydney, Brisbane and Gold Coast – all of which have great property fundamentals), but also the clients that our investors have been able to help – whether that’s to buy their own home, via our Buying Boost product or to release the equity they already have in their homes, via our HomeFlex product. We have an increasing number of clients using the fund to compliment their existing property investments or in some cases selling underperforming properties to re-invest the proceeds in the LongView fund, alongside other investments. If you haven’t taken the chance to review the offering, I strongly advise you do. As always, we’re happy to meet with you to discuss not only the fund but the overall performance of your property holdings.