Australian residential market on the road to recovery
Australian residential market on the road to recovery
14 April 2013
Sydney, 9 April 2013 – Improvement in sales volumes offer a strong signal that the Australian residential market is in the early stages of recovery according to the latest Residential MarketView report from CBRE.
Pre-conditions now exist for the market to move into a growth cycle, a clear departure from the period of decline over the previous three years.
Commenting on the report, CBRE’s Regional Director of Residential Valuations, Tom Edwards, said; “A low interest rate environment, modest improvement in building approvals, an increase in population growth, improving rental yields, expanding buyer enquiry levels, sales volumes improving and recent equity market growth are all necessary for a market geared towards recovery”.
However previous significant property growth cycles are unlikely to be seen again in the immediate future, according to the CBRE report, with strong capital growth over the short to medium term being capped by the market’s conservative gearing appetite.
“Households will remain focused on debt reduction rather than expanding property holdings which would drive stronger capital growth,” Mr Edwards said.
In Sydney, vacancy rates have returned to low sub-2% levels, well below the generally accepted equilibrium rate of 3%, which highlights the low base from which vacancy rates have trended in Sydney recently.Following a long period of relatively low building activity in Sydney, approvals are showing upward growth.
Sam Reilly from CBRE’s Global Research and Consulting team said; “Current residential building activity in Sydney is gradually increasing from the subdued conditions experienced during and after the GFC.This is partly in response to stable economic conditions but also as a result of supply shortage that was difficult to rectify due to a challenging planning regime and problems associated with obtaining credit”.
In Victoria, buyer activity in the residential market has been negative over the past two years, however sales volumes and price performance is starting to improve.In Melbourne, this increase has been most prevalent in auctions, with a surge in listings and strong clearance rates pointing to a notable improvement in buyer activity.Clearance levels have increased to 70% for the period over late February, while the same period in 2012 saw levels around 50%.However signs of a recovery in price growth have not been so evident with CBRE’s MarketView report highlighting that buyers remain well informed about realistic pricing levels and cautious about taking on high levels of debt.
Buyer activity has also improved in South East Queensland, despite the challenges that have been posed by recent flooding and other natural disasters.
“Despite this improvement, indications of capital growth remain largely absent, although the lower price brackets in SEQ markets are reporting better levels of buyer enquiry and increased levels of stock shortages as demand improves,” Mr Reilly said.
The MarketView also highlights that coastal markets in SEQ are beginning to stabilise after an extended period of very low buyer activity.The Gold Coast and the Sunshine Coast are also seeing a slowdown of mortgagee-in-possession (MIP) sales occurring.
“Vendors are no longer under as much financial stress and therefore are not being forced to release stock to an already depressed market,” Mr Edwards said.
In Perth, economic growth remains strong with a sustained, albeit gradual improvement in the residential sales market. Rental growth has also continued, with improving levels of investor demand due to low interest rates and stable levels of buyer confidence.The tight vacancy rate, amongst the lowest across the country, is also relevant, with resource related spending assisting to boost population growth and pressure supply levels.
“This is a relatively strong contrast to most other residential markets across Australia where employment outlooks are subdued,” Mr Edwards said.
The Adelaide residential market continues to suffer from low levels of buyer confidence, with South Australia facing a relatively subdued economic growth outlook.Conditions are not conducive to a major recovery for either capital growth or sales volumes, with growth sitting well below the national average.
In Canberra, affordable entry level apartments are outperforming the remainder of the market, with the announcement of the Federal Election so far having little effect on buyer activity.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website atwww.cbre.com.au.