Australian Property Market Update: June 2019

Welcome to my Australian property market update for June of 2019 where we dive into the housing data as well as look at the news and things that may have an effect on the property market.

2 Properties to Financial Freedom Strategy

0:00 – Introduction
0:53 – Major changes that have happened
4:00 – Looking globally
4:46 – Potential global recession looming
6:33 – Let’s jump into the data. Dwelling values down 0.5% last month
8:03 – Sydney is declining faster than Melbourne – -0.5% vs -0.3%
8:34 – Monthly changes of the capital cities
9:53 – Changes from peak of the capital cities
11:00 – It’s been 19 months of national decline
11:43 – Transaction numbers remain lower than average
12:46 – Rental growth continues to slow
14:15 – Rental yields are growing significantly
15:16 – Day on market are currently dropping
15:57 – Monthly value or new finance commitments are trending downways
16:40 – Lowest cash rate since the 1960’s
17:15 – Percentage of interest only loans has plummeted since 2017
18:02 – Sydney housing data
20:22 – Melbourne housing data
21:08 – Brisbane housing data
23:05 – Adelaide housing data
23:58 – Perth housing data
25:48 – Hobart housing data
27:25 – Darwin housing data
28:43 – Canberra housing data
29:54 – Do I think the bottom has hit?

2 Properties to Financial Freedom Strategy

Martin North + John Adams YouTube

Martin North’s YouTube

Recommended Videos:

Australian Property Market Update: May 2019

2 Properties to Financial Freedom

Transcription:

Ryan 0:00
hey you amazing humans and welcome to my australian property market update for june of 2019 where we’re gonna dive into some of the data behind the australian housing market look at what’s happening in the current market as well as what are some of the changes that have taken place which could affect the property market and property prices so if you’re looking at investing in property or if you’ve already invested in property it’s very important to keep your finger on the pulse and this will help you do that obviously i don’t have a crystal ball i’m looking at the data just like you are not a fancy economist or anything like that but i’ll look at it see what i can learn from it see what trends we’ll be watching you can follow along and obviously make your own assumptions from the data this isn’t financial advice but this is something that i love to do each and every month to keep on top of things so without further ado let’s talk about some of the recent changes that have happened in australia which could affect the property market it’s pretty rare that we have this much news and one monthly update but we did just have the federal election and obviously liberal got in or liberals stayed in labor did have some proposed changes to negative gearing for purchases of existing properties or new purchases of existing properties to basically remove the negative gearing benefits in that as well as reduce the capital gains tax discounts for investors as well so this was seen to likely have a negative impact on the australian housing market and so given that liberals got in that is now out the window and not going to happen at least for this term of government so that has definitely put confidence back into the market in terms of investors just not having that potential negative coming through liberal have also offered a new first homebuyers scheme where first homebuyers can purchase a property with just a 5% deposit but how much this is going to affect the market is pretty unclear because it is limited to just 10,000 people per year i believe and those borrowers still need to actually be able to qualify for a loan so not sure exactly whether or not this is going to have a positive impact of that definitely doesn’t seem to be like a negative we’ve also got some changes with apa and how the banks assess people for loans so previously banks would look at people at a 7.25% interest rate i think it was and to say can you afford this loan at 7.25% now obviously there’d be very few people that actually paying 7.25% a lot of people are paying in the three percents the 4% maybe 5% but they’re being assessed on this higher level so abra is now saying that they’re going to change that from that fixed 7% or 7.25% to two and a half percent above the base rate so this may mean that it will give people a boost in their borrowing capacity and people who have gone to try and borrow in the past that said sorry you can’t afford a loan might just scrape through and be able to borrow or i know clients who have been able to borrow but just not enough to get the property that they wanted and may be able to get a little bit more so that may mean more people are in the market there’s also anecdotal evidence that the banks are starting to loosen their lending assessments or loosen how harsh they are when it comes to lending money so nothing i guess has really formally come through that but there have been videos out there and people talking that were rejected for loans before the election that are now being approved for loans post election so obviously more people being able to get loans means more people in the market we also have rba cutting the cash rate at the start of june by 0.25% it looks like the banks will be passing all on most of this on to people as well meaning mortgages will be more affordable so a lot of news on the local scale looking globally before we go ahead and jump into the data is obviously a much more complex situation and much more complex but something overarching to keep in mind is that if the rba is dropping the cash rate that is not necessarily a good thing while it might sound like a good thing for the housing market they’re only going to be dropping the cash rate if the economy is struggling and that’s going to try and boost the economy but we’re getting into very low territory 1.25% at the moment not that far to go until we’re at negative interest rates as well so yeah cutting interest rates while it might sound good might mean that our economy isn’t as strong as we thought and so that’s something to think about especially given other indicators as well

that there may be a global recession looming now remember we haven’t really had a global recession since back in 2008 and there are some signals now that indicate that in the next one two maybe three years that a global recession may hit as well. So there’s a lot of overarching things that you need to think about. I’m not an economist,

go and talk to them or go and follow their sort of stuff. I’ll leave links below to john adams and Martin North who talks about it. So we’re about to jump into the data. But I just want to say that to say that globally, there’s so many things that can happen. And while we’re looking at these trends in local data, something major could happen globally, which would then have a huge impact on the data and wouldn’t necessarily follow trends. And so there’s always things to think about when it comes to investing, there’s so many things that can happen, I don’t have a crystal ball. So we’re about to jump into the data here. But as you’ll see, we are currently still in a decline, and currently still in turbulent times in the Australian property market. So it’s really important that if you are going to invest, you do have a strategy that can work in turbulent times, Gone are the days where you can just invest and get guaranteed capital growth, your property’s going to double in seven years, that is definitely not clear, which you’ll see as you look at the data. So it’s very important to have a strategy that is going to work in this current climate. If you’re interested in a strategy that can work in these times go to onproperty.com.au forward slash two properties. And I’ll link up to that in the description down below. And you can learn about the two properties to financial freedom strategy, where you can invest in Metro markets and get positive cash flow as well. It’s quite a low risk strategy. So go ahead, check that out, if you want. But now let’s jump into the data here. Okay, grab your caffeine for a little pick me out because the housing market is still shahara. In decline, nationally, housing values have fallen by 0.5% for the month of May. So we’ll be looking at amazing data. Now you have to remember that the election happened in mid May, or just after mid May the RBA rate cuts were in early June. So we don’t have the data base of that. And then the changes that are coming through, they’re coming through in June as well. So the positive stuff we talked about is kind of late May or happening in June. So the data won’t reflect that. So down 0.5%. As we can say, and I’ve been talking about this for months now, we have this continuing of a slowing in the rate of decline. So the rate of decline was actually the slowest. It’s been since back in May of 2018. So a year ago now, so we’re continuing to see this decline. If we look back, this shot not showing as much data in this video. But if we look back here in 2010, and 11, we did see the rates slow, have a slight positive and then go back into an extended period of decline. So this slowing rate of decline here, we want to get it back to zero to see a stabilized market and then hopefully grow. But it’s no guarantee that if we get to zero, it won’t go back down. So this is something to watch. And this is obviously a positive sign. Seeing that slowing rate of decline in the market. Something really interesting is here. Sydney is actually declining faster than Melbourne. So Sydney peaked earlier than Melbourne so has been in decline for longer, and actually went down 0.5% for the month where Melbourne only went down 0.3%. So I’m not sure exactly what to make of that Sydney has had larger drops than Melbourne and is still dropping faster than Melbourne. So that’s really interesting to see. And that one will be interesting to watch as well. If we have a look at the monthly change every single capital city is in decline, with the exception of Adelaide, which went up by 0.2% over the month. Also interesting and something we’ll touch on later in the episode is that Brisbane is down 0.5% core logic continue to talk about the fundamentals of the Brisbane market being much stronger than other capital cities. And I guess this is an indication of how broad spread the downturn in the market is how much lending criteria and people having trouble getting lending has affected the market. And so seeing president drop 0.25% is very interesting, given it didn’t have the run up that Sydney and Melbourne had, but it’s dropping at the same rate as Sydney at the moment. Perth and Darwin, which have been in decline for roughly five years now continue to drop bigger than any other capital city with Perth being down 1% down and being down at 1.6% and Hobart, which was continuing to grow despite Sydney and Melbourne going down despite everywhere else being relatively flat Hobart was continuing to grow but is now in its second month of decline. declining 0.4% so it does look like the run in Hobart is now over. If we look at the change from peak This is really interesting as well Sydney down now nearly 15% from its peak martin north who has a great youtube channel which i’ll link up down below talks about how yes this is an average of sydney and while 14.9% is the average some areas are being hit way harder than that with drops of over 20% which is going to put a lot of people into negative equity in those areas so some areas have dropped a lot more than 20% some areas have dropped less than this 15% that’s just an average melvin’s down 11.1% since its peak brisbane is down 2.4% since its peak so not as big drop as sydney and melbourne obviously and then perth is down nearly 20% since its peak and remember that’s taken five years basically to get there darwin down nearly 30% hobart down 1.3% now since its peak and basically every single capital city is down since its peak so we’re definitely in a well established and i guess in trench downturn in the australian market at the moment which we can see in this graph here is now been 19 months of decline of the australian dwelling value so down 8.2% nationally since its peak 19 months ago so over a year and a half ago something interesting in this graph is that capital cities are down 10.1% whereas regional areas are only down 3% and have only been in decline for a year versus 20 months of the capitals so interesting to see that the capitals have declined so much more than regional areas is that because regional areas are much more affordable is that because they didn’t grow as much in the lead up to 2017 i’m not exactly sure on that one an interesting statistic here is that transaction numbers remain lower than a year ago and well below the decade average due to significant falls in settled transactions across australia’s two largest cities so you can see here the monthly sales with a six month moving average is down significantly over the year so less properties and now transacting there’s less changeover of properties less sales are taking place which obviously can be a negative thing i think we talked about it in the last video when you’re not getting as many sales and then you get a buildup of properties that are listed for sale then obviously the demand to supply gets really out of whack where you have so much supply and not enough demand for buy think in last month’s video which i will link up down below we saw that there’s actually not as many listings coming to the market as well so we’re not at that panic selling stage just as yet but yeah we can see that transaction numbers remain quite low and well below the decade average i talk a lot about positive cash flow properties and the two properties to financial freedom strategy so i think looking at rental growth is really interesting as well and we can see here that rental growth continues to slow largely due to falls in sydney and slowing rental growth elsewhere so here we can see the rate of rental growth and we can see at some periods rental growth is extremely high over eight to 10% this was back in 2008 then we’re saying you know around four to 6% basically rental growth is below the 1% mark at the moment and we can see here that annual change in dwelling rents we can say darwin and sydney in the negative in terms of rents in sydney i have just recently rented a new place and i can definitely attest to the fact that it was so easy to get a rental here for a much more affordable price than it may have been a couple of years ago when the competition was higher and we can see that we’re still having rental growth in other areas hobart up 4.9% over the year obviously hobart continuing to have a strong run and is now in decline so i’m sure we’ll start to see that slowdown brisbane melbourne adelaide all around that 1.4 1.5% perth is actually growing in rental value up 2.5% over the year even though dwelling values are down nearly 10% so that’s something really interesting to see that the rental market does move differently to the actual value of properties and that’s shown really clearly here with rental yields growing quite significantly so even though rental growth is slower the drop in purchase price of properties means that the rental yields going to be higher so we can see about two years ago in may of 2017 was around that 3.7 3.8% nationally and has now jumped up to about 4.1% and you can see here for the major capital cities darwin has the highest rental yield average at 6% which is incredibly high this is not the only thing to go off you obviously want to look at vacancy rates as well but 6% does that mean that we so many positive cash flow opportunities they’re not saying down is a good place to invest but they’re very high rental yields hobart at 5.3% camera at 4.9% brisbane next add 4.6% and then melbourne and sydney at 3.7 and 3.5% being the lowest of the nation capitals this is something that i really want to keep track of and i have been talking about is that the days on market are currently dropping so the time that it takes to sell a property is actually getting shorter now this is generally a positive sign when you’re looking at properties we’re still obviously in a decline so they’re not really at super healthy levels yet but noticing this trend that days on market actually going down and have been going down for the past couple of months is a positive sign that may indicate that we are reaching nearer to the bottom of the market so we’ll need to continue to watch that and we’ll go into that in more detail as we look at the individual cities couple of things to touch on in regards to lending before we jump into the individual cities is that the monthly value of new high housing finance commitments continues to trend lower so we’ve got here owner occupier lending which is kind of looking like it may be stabilizing but really it’s on a downward trend and then investor lending on a clear downward trend as well that doesn’t seem to be stopping so less new monthly housing finance commitments means that the market is less likely to grow basically obviously as debt grows and more people are getting finance commitments that means there’s more people in the market looking to purchase property and because that is that is trending lower that is obviously not a good sign but we do have the rba cutting the cash rate and so down from 1.5% to 1.25% which is actually the lowest that it’s been since the 1960s so very very low cash rate at the moment and it may take some time for that changing cash rate to actually affect the data again that’s just happened in early june so it’s not represented in this data but housing credit is expanding at a historically slow pace as was said due to due in large to much tighter credit conditions and we can see here i just thought this was fascinating look at the percentage of mortgages in interest only terms and look at that grow from 2008 up to you know 2015 and then look at that just plummet all the way down from 45.6% of new loans being interest only down to just 15.8% i had them all around december of 2018 for that one so it’s just so interesting to look at that that slow growth up and then that massive jump down so most people are on principal and interest loans or most people who are getting new loans are on principal and interest so we’ll have that done let’s jump in and start looking at the individual city so we’re going to go ahead and start with sydney so let’s start with sydney sydney down another 0.5% since the last month now again the rate of decline of sydney is actually slowing even though it still has quite a high rate of decline so we have a look here over the last three months is down 2% last 12 months is down 10.7% the average annual gross annual growth for the past decade at 5.1% so down nearly 15% since its peak something we’re going to look at in more detail is the time on market and the trends with that so we can see that it’s a negative trend since this time last year but we’re also going to have a look at this spreadsheet here that i’ve made and so we can actually see the trend we can see may april march 2019 here we can see that the trend is actually days on market are getting less which is generally a positive sign for a market we can see that they were back in 2018 they were much lower around 3331 days they’re now much higher so they’re still in an unhealthy range but they’re moving in the right direction in terms of days on market which could indicate that the bottom is coming close we’ve also got vendor discount going from 7.1% down to 6.9 down to 6.7% so we’re going to look at two things when we’re looking at this we’re going to look at the trend and we’re going to look at the level so you got to look at the days on market are they healthy vendor discount is it healthy as well as what trend is it moving in so for example if we look at hobart in 2018 when it was peaking you can see that days on market are extremely crazy low nine days on market 11 days on market vendor discount also extremely low around the 3% mark so that’s one thing that you want to look at is the health of it as well Well as the trend compare that to somewhere like Darwin, which had the biggest drop in this month, and you’re looking at over 7%, vendor discounts, and days on market over 75 days, which is not obviously not as healthy, as you would like to see. So you’ve got to look at the levels of those things. And you’ve got to look at the trends of it as well. Next, moving on to Melbourne. If we go ahead and have a look at Melbourne down 0.3% for the month, down at 1.7%, over three months 9.9% over 12 months, and now down over 11% since its peak, if we have a look at the time on market for Melbourne, we can say it’s 44 days, vendor discount is 6.3%. So slightly better than Sydney. And what is the trend for this one, we can say it’s gone from 61 days to 43 to 44. And vendor discounts gone from 6.6 to 6.2 to 6.3. So no clear trend there for the Melbourne market at the moment, but probably not in that positive stage. Next looking at Brisbane corelogic goes on to talk about Brisbane saying that unit values actually Rose 0.1% over the month. Obviously Brisbane went down 0.5% over the month. So that shows you the difference between units and houses. So you need to look at different trends depending on what you’re actually investing in the saying this actually breaks the trend of falling values for units. The oversupply as that has weighed down the Brisbane unit market has been mostly absorbed due to the combined factors of less construction activity together with rising population growth. However, Brisbane unit values remain 12.5% below their 2010 Peak. So Brisbane unit values peaked in 2010, which was what nine years ago. So shows you the difference of if you invested in houses in Brisbane versus a unit you will get a very different result. They say with migration rates lifting supply under control and generally healthy levels of housing affordability, the Brisbane housing market fundamentals are looking healthier than most capital cities most looking healthier compared to most other capital cities. And so Brisbane was down 0.5% over the month, down 1.4% over three months and down 2.3% over 12 months or down 2.4% since its peak, so definitely hasn’t had the huge decline that Melbourne and Sydney have had. In terms of time on market, we’re looking at 55 days and vendor discount at 5%. So we can see here for the trend that the time on market trend is getting less going from 68 days in March to 60 days in April 255. In May, but the vendor discount trend is not quite clear 4.8% and 4.7 now 5%. So no clear signals there on the Brisbane market. So that’s something that we’ll need to continue watching next looking at Adelaide, so Adelaide was the only capital city that grew which grew 0.2% over the last month. So over the last three months, it’s still down 0.2% over the last 12 months, it’s up 0.4%. So basically stagnant there. And you can see the average annual growth over the past decades 2.1%. So not massive annual growth over the last decade for Adelaide. Time on market is no surprise that it’s probably healthier than you know Sydney at 43. And vendor discount is 5.3%. So why Adelaide is growing unsure. If we look at the days on market trend that’s moving shorter. If we look at the vendor discount trend, it’s basically stagnant at the moment, and it’s not as healthy as what it was a year ago for Adelaide. So next moving on to Perth, which has been in an entrenched downturn for about five years now. It actually went down to 1% over the last month, so last three months down 1.8% last 12 months down 8.8%. And overall since its peak is down nearly 20% really interesting here is to see the average annual growth over the past decade, decade, 10 years of minus 0.5%. So actually negative growth over a decade period, which is again, why I stress positive cash flow so much you can do your research, you can try your best but sometimes you just don’t get the growth. And if you’re going to spend a decade owning a property and it’s not going up in value, I would definitely want to be making money through the cash flow and having my tenants pay off that property for me. So I’m still making a profit and not just relying on capital growth. So I’m saying that in Perth, obviously Perth, Perth and Darwin have been different to the other capital cities and had long Areas of decline. But what’s the say that can’t happen to other capitals as well. So having a strategy where you can make money, even in long, stable markets where you’re not getting that capital growth, I think, Well, for me personally, is going to be very important in my strategy, because you just can’t rely on capital growth, it’s never a guarantee there. And if we look at time on market, 57 days, vendor discount 6.9%, so not really healthy levels there, but we are seeing that the days on market is going from 72 to 62 to 57. And the vendor discount has gone on, I made a mistake there with basically gone from, it’s basically stagnant at 6.9%, or around about that, Mark. Now, let’s look at Hobart, which obviously continued to have a strong run up despite Sydney and Melbourne. Going backwards, it continued decline climb, but it’s now in its second month of decline down 0.4% was 0.5% for this month, I think is 0.4%. Over three months, down 0.7% 12 months, it’s still in the positive. But I do actually expect this to eventually turn negative as we as we have more months of decline for the Hobart market. So time on market 28 days has been a discount 4.3% so much healthier than other capital cities. But the trend is moving in. Well, the wrong direction from a year ago. But strangely, it’s actually dropping over the last couple of months from 34 to 32 to 28 days, vendor discount holding steady, they’re at 4.3%. So this is again, why you look at you look at pieces of data, but then you’ve got to look at it in its whole context. Okay. Hobart had a great run up. Hobart has potentially peaked. We were looking a year ago, it was pretty crazy with time on market being nine days and 11 days for properties. So that kind of indicates a frenzy to me being that low. So even though we’ve got the days on market trend lowering, is that enough to actually prop up the market and stop it from declining, not necessarily. So you’ve got to look at everything with a grain of salt, you got to look at everything within the larger context there. So that is Hobart, you may have a different opinions to me, you may look at the data differently to me, which is absolutely fine. Next, let’s look at Darwin, which again is not a great story has been in decline for about, you know, five years now had the biggest decline of any capital city down another 1.6%. And as we can see, just continuing to be in decline, not sure why it’s declining. so incredibly compared to the other capitals, especially given that it’s down about 30% since its peak, we can see over the last three months down 3.3% of last 12 months down 8.6%. And the average growth over the past decade is actually in negative 2%. territory. Tyler market 67 days window discount 7.1% that may be the worst in the nation at the moment. Yeah, it is. So not really positive signs for Darwin at the moment. Again, that trend as with basically all the capital cities at the moment, is that the days on market is lowering. vendor discounts gone from 7.8% to 7.1%. But it’s kind of you know, 7% still quite high and 67 days on market still quite high and the highest in the nation. So despite the fact that dollar has gone down 30% since its peak doesn’t look like boom times ahead for Darwin. No, it doesn’t. Lastly, let’s go ahead and have a look at Canberra. So where are we here, Canberra, we can see that Canberra over the last three months is actually up 0.2% tomans up 2.4% and average annual growth over the past decade is 2.8%. But you know, quite quite stagnant Canberra, I guess quite saying that everywhere. 2.2 point 4% over two months actually good for the current current market compared to Sydney being down 10% Melbourne being down nearly 10% Brisbane being down 2%. So being up 2% is actually obviously outperformed the rest of the market time on market of 44 days, we’re no discount quite low at 3% in Canberra. And so we can see here, time on markets gone from 56 to 42, then back up to 44 days. And vendor discounts actually increased from 2.7 up to 3%. So no clear trend there for camera. So obviously just looking at the data here. It’s up to you how you read into this and what you believe this means, but I hope that this has been really interesting to look at. I hope that you’ve enjoyed sitting down with me and looking at the data looking at some of them. major changes that have happened in the market. As you can see, we’re still currently in turbulent times I, personally, if I was looking at investing, do I think that the bottom has hit and that we’re going to grow next month? Not necessarily. I think Martin North kind of summed it up pretty well, with obviously, there’s some positive things happening with the election and confidence alarm around liberal getting in the changes with Abra. And the interest rate that may provide a small bump, but I think we’re in for turbulent times ahead. So I don’t think that indicates that we’re at the start of a massive boom, I could obviously be wrong. But I do think it’s very important to have a strategy that’s going to work in these hard times, if you are going to be investing. So I wish you the absolute best out there, I will continue to do these monthly updates, please give it a like if you like this, which helps YouTube, share it with more people out there so more people can keep a pulse on the market. Don’t forget to subscribe to the channel as we got new, new videos coming out five times a week, a lot of educational content walkthroughs of property investments and things like that. So subscribe to the channel so you can get updates on those. Lastly, if you do want to check out that two properties to financial freedom strategy, I will link up to it down below. Or you can go to onproperty. com. au forward slash two properties and download a report there that really explains that strategy in detail so you can understand it. And I’m also going to link out to last month’s monthly update what I’m going to link up to the video that I did with Ben Everingham, the buyer’s agent, where we talk about their two properties to financial freedom strategy in detail if you want to know more details about it. So I’ll link up to those videos go and check out whichever one you’re more interested in. I wish you the absolute best in your property investment journey and until next time, stay positive