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Price Predictor Index Spring Edition: Units Thriving

Hotspotting

Release Date: 09/19/2024

Queensland Tops, Victoria Drops show art Queensland Tops, Victoria Drops

Hotspotting

It’s long been the case that the two most populous states, New South Wales and Victoria, have attracted the highest levels of property investment – just by sheer weight of numbers. But Victoria has lost its spot among the big two of property investment and is now being overtaken by Queensland. Meanwhile, Queensland now leads the nation is overall real estate transactions, including purchases by both home-buyers and investors. This is despite Victoria having a population of 7 million, versus 5.5 million in Queensland. It provides further evidence that investors are deserting Victoria...

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Rents Aren't Plummeting — Don't Be Misled! show art Rents Aren't Plummeting — Don't Be Misled!

Hotspotting

Whenever I’m asked for my rules for successful investing, I usually begin my response with this: Rule One – stop reading newspapers. Expressed in a more 21st Century context, stop treating media soundbites as research. People who base their investment decisions on the white noise in news media are running the risk of making very bad moves in the market. My observation of the content of news media coverage of residential real estate is that there is far more misinformation than real, accurate, reliable information. In modern media it’s all about clickbait and I find repeatedly that the...

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Local Economy Fuels Property Boom show art Local Economy Fuels Property Boom

Hotspotting

At Hotspotting we believe real estate markets are local in nature and are subject to the strength or weakness of the local economy. While economists cling to their kindergarten theory that markets are essentially driven by interest rates, the stark differences in local markets across Australia suggest that there is something more powerful in play. If it were true that high interest rates mean prices will fall, then everywhere in Australian would have falling property prices in 2024, which is what major bank economists and others like them predicted at the start of the year. The reality that...

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Property Powers Australia’s Wealth Surge show art Property Powers Australia’s Wealth Surge

Hotspotting

Household wealth in Australia keeps rising and it’s residential property that’s responsible. The latest figures from the ABS show that overall household wealth has increased for the seventh consecutive quarter. It rose a further 1.5 per cent in the June quarter to a record $16.5 trillion, driven primarily by property assets.  Total household wealth is now 9.3 per cent higher than it was a year ago, driven by residential land and dwellings. Of the 1.5 per cent rise in the June quarter, 1.3 percentage points was attributed to residential property – our homes and investment properties....

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Buying New v Buying Established Webinar Replay show art Buying New v Buying Established Webinar Replay

Hotspotting

Everyone seeking real estate in desirable locations has the same complaint: the lack of stock. Home buyers, investors, buyers’ agents and selling agents are all being frustrated by the shortage of listings of properties for sale – particularly quality options. Leading national buyers’ agency Adviseable says a partial solution for buyers is to consider building from scratch rather than buying an established property. The tactic has many advantages – and one or two problems as well. Alex Dutt of Adviseable says deciding whether to buy an established property or to go down the new...

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Think Twice: Negative Gearing Myths show art Think Twice: Negative Gearing Myths

Hotspotting

In my experience, most people who have a loud view about scrapping negative gearing are people who can’t explain what it is, how it works, why it’s bad and how ending it would solve all the problems in the housing industry. Mostly, what’s in play with this issue is THE POLITICS OF ENVY – that nagging feeling some people have, that others are doing better than they are, or are receiving benefits that they are not, and therefore need to be squashed. As a famous Indian guru once observed, some people try to be tall by cutting off the heads of others. Contrast that with the views that are...

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Rising Rents, Real Reason show art Rising Rents, Real Reason

Hotspotting

Politicians and journalists love to scapegoat and demonise, particularly with issues impacting housing markets – with property investors always a popular target. Australia’s love of scapegoating is one of the reasons the nation seldom resolves any of the key issues it faces. Politicians hold press conferences, they stage inquiries, they bring on royal commissions, they make announcements – but the recurring theme is looking for someone to blame and to vilify – preferably someone other than themselves. In real estate, investors and related issues like negative gearing are blamed for all...

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Rental Crisis Deepens show art Rental Crisis Deepens

Hotspotting

How long could we reasonably expect governments to take, to sort out a problem like the rental shortage? I ask the question because we have had the problem of a shortage of options for tenants in Australia – and the consequent steep rises in rents - for a very long time. And it keeps getting worse, not better. The latest data from SQM Research shows that, nationally, the vacancy rate got a little worse last month, dropping from 1.3% in August to 1.2% in September.  Three of our capital cities have vacancies well below 1%. And in six of the eight capital cities, vacancies stayed the same...

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Stop the Distraction: Negative Gearing Isn’t the Real Issue show art Stop the Distraction: Negative Gearing Isn’t the Real Issue

Hotspotting

There is one thing that Australian politicians are really good at – possibly the only thing - and that is diverting attention from the real issues and scapegoating others for the problems that they, the politicians, have caused. Right now, the core issues impacting Australian households include the housing shortage, the high cost of creating desperately needed new homes, the chronic rental shortage and the reality that rents keep on rising. It’s noteworthy that the recent AGM of the Commonwealth Bank reported that they have had to provide emergency payment arrangements to 132,000 customers...

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Albo's Housing Hypocrisy show art Albo's Housing Hypocrisy

Hotspotting

Australia is struggling with a number of crisis situations – a cost-of-living crisis, a housing affordability crisis and a rental shortage crisis. Our beloved Prime Minister Anthony Albanese has declared on many occasions how much he cares about the plight of ordinary Australians in dealing with these issues. But, as the old saying goes, actions speak louder than words – and that is particularly relevant to our elected representatives who love to stand before the media cameras and declare their concern for the people but fail to match their words with appropriate actions. So, let’s look...

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The new Spring edition of The Price Predictor Index provides emphatic confirmation of the most compelling trend in Australian real estate: the escalating demand for apartments and their challenge to houses on capital growth performance.

We have been speaking about the rise and rise of apartments for the past 18 months and there is a growing body of evidence which confirms that more and more buyers are opting for attached dwellings: units, apartments and townhouses.

Our analysis of sales activity data for the latest quarter for the Spring edition of The Price Predictor Index reveals that this trend is dominating markets across Australia.

For example, there is a stark contrast in the Sydney market. In simple terms, unit markets are pumping and house markets are not - and the market share of attached dwellings continues to rise.

In most of the Greater Sydney areas where sales activity is strong, it’s the unit markets that are most active. Outer ring house markets are generally subdued, suggesting that those seeking affordable options are choosing apartments and townhouses.

The dominance of attached dwellings in Sydney market performance can be seen in various metrics. While 45% of locations with house markets have positive (rising, recovery, consistent) rankings in this analysis, 67% of unit markets are positive.

This coincides with further evidence that a growing share of dwelling sales in the Greater Sydney market are attached dwellings. Comparing the June Quarter results for the past four years, the market-share of units was 48% in 2021, 50% in 202, 52% in 2023 and 54% in 2024. There’s a pretty clear pattern emerging there.

Sydney’s experience, with attached dwellings outperforming detached, is part of a strong national trend that is also evident in other cities and some of the regional jurisdictions.

In the Brisbane City LGA, elevated demand for units is driving overall activity. In Melbourne, which overall continues to under-achieve, a key exception is provided by inner-city unit markets. And Canberra is experiencing a similar scenario.  

While just over half of Canberra markets overall have positive ratings, 78% of unit markets have rising, recovery or consistent classifications based on sales activity trends. Of the 36 unit markets in our Canberra analysis, only 3 have negative ratings. 

While only 35% of house markets are classified as rising markets, 61% of unit markets in Canberra have this rating.

Affordability is likely a major driver of this trend. Canberra has a median house price close to $1 million (PropTrack data), higher than Melbourne and Brisbane. But its median unit price is $605,000, notably cheaper than Melbourne, Brisbane and Sydney, and on a par with Adelaide. The market share of units is rising year by year and attached dwellings now account for 44% of dwelling sales in Canberra, compared to 41% in 2021.

In booming Perth, the strongest markets in Perth now are well-located locations with a major presence of attached dwellings. 

While the most popular house markets for home buyers and investors (mostly those at the affordable end of the market) are a little less buoyant than earlier in the Perth up-cycle, the focus is switching for affordable units.

Perth started this boom with a reputation as the most affordable capital city housing market. After a couple of years of stellar price growth, that’s no longer the case. Perth is now well above Hobart and Darwin with its median house price and challenging Adelaide. 

Perth now has a median house price of around $800,000, but its median unit price is in the low $500,000s, still well below that of Hobart and Adelaide. 

When the bargain suburbs have house medians above $500,000, the big attraction that caused the stampede starts to fade. So now buyers in Perth, increasingly, are looking at unit markets, which are less competitive than the house markets.

So now units are capturing a growing market-share in Perth, similar to the scenarios in Sydney, Melbourne, Brisbane and Canberra.

And units are out-performing.

In the new Spring edition of the Price Predictor Index, 29% of Perth house markets are3 classified as rising but almost 50% of unit markets are ranked as rising, based on trends with sales activity.

Clearing, the trend with more and more buyers opting for attached dwellings over detached houses, is gathering momentum.

It’s a major paradigm shift in Australian real estate – and at Hotspotting we believe this trend is here for the long term.