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By the end of 2015 the estimated value of Australian housing
reached $6.4 trillion, dwarfing the value of other asset
classes. By comparison, the value of all superannuation funds
combined was $2.3 trillion – almost three times smaller – and
the value of all listed stocks on the Australian Securities
Exchange was $1.6 trillion – four times smaller than housing.
Residential land and housing comprises more than half of all
household wealth in Australia; it’s no wonder why there is so
much attention given to the housing market and the direction
home values are heading.
2015 appears to have marked a turning point in housing market
conditions across Australia, with the pace of capital gain losing some
steam over the final months of the year. After capital city dwelling
values increased by 9.0% over the first three-quarters of 2015, the
final quarter saw dwelling values slip 1.4% lower. The weaker result
was largely attributable to a slowdown in housing market conditions
in Melbourne and Sydney where growth rates have previously been
nation-leading over the past two cycles. Sydney values were down
2.3% over the December quarter and the value of Melbourne housing
dipped by 1.9% over the quarter. The strongest growth conditions
across the capital cities over the December quarter were found in
Brisbane where dwelling values rose by 0.9% over the quarter.
Conditions are as diverse as they have ever been from region to
region, with dwelling values moving lower over the past year across
four of the eight capital cities. Sydney and Melbourne were the only
markets to record double digit growth over the 2015 calendar year
while values were down in Perth (–3.7%), Darwin (–3.6%), Hobart
(–0.7%) and Adelaide (–0.1%).
The performance of housing markets can always be tied back to
the interplay between supply and demand. On the demand side,
we have seen housing finance become more challenging to obtain
during the second half of 2015, particularly for investors. As a result
there have been fewer investors in the marketplace and a lower
overall pace of credit growth. Additionally, affordability challenges,
particularly in Sydney where the median house price is approaching
$1 million, are likely to be preventing some segments of the market
from buying. Slower population growth is also affecting the level of
demand for housing.
On the supply side, the number of new dwellings approved for
construction moved through record highs during 2015. The surge in
approvals, a large proportion of which were medium to high density
apartments, will show up in record levels of construction during 2016,
resulting in the largest amount of new housing supply on record.
If the recent trends are anything to go by, the housing market in 2016
is likely to be quite different to the market of 2015. Interest rates are
likely to be the constant between years, remaining at their historic
lows, which will continue to provide stimulus for home buying as well
as debt reduction and investment. Conditions overall may not be
as buoyant as what was recorded last year; however, the housing
market cycles provide a chance for rents and values to rebalance and
opportunities relevant for both buyers and sellers will likely become
apparent in markets outside of the previous growth centres.
A tale of two markets
Note: ‘this year’ = December 2015, ‘last year’ = December 2014
* Based on postcode median house sale prices for 12 months to end December 2015.
Adelaide
Darwin
Houses
Units
Median Price
$440,000
$350,000
Growth
–0.3% 1.4%
Days on Market
44
this year
48
this year
48
last year
56
last year
Discounting
–5.8%
this year
–6.1%
this year
–3.0%
last year
–5.0%
last year
Houses
Units
Median Price
$540,000
$506,200
Growth
–3.7% –3.3%
Days on Market
80
this year
96
this year
69
last year
81
last year
Discounting
–8.6%
this year
–12.9%
this year
–5.8%
last year
–7.2%
last year
Perth
Houses
Units
Median Price
$525,000
$425,000
Growth
–3.8% –3.5%
Days on Market
53
this year
70
this year
40
last year
46
last year
Discounting
–6.9%
this year
–8.5%
this year
–5.4%
last year
–5.5%
last year
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