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SQM Research Residential Newsletter - Tuesday 10 September 2019
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Black Dragon's
Words for the Week

"Great joys make us love the world. Great sadness make us understand the world." 

American author Kent Nerburn on 9/11
Real Estate Realities 

NRAS provided $1b 'windfall gain' to property developers: Grattan Institute

A national scheme designed to help low-income renters instead provided a “windfall gain” to property developers of more than $1 billion, new research suggests.

Instead of extending the troubled program, governments should increase rent assistance to tenants on low incomes and build more social housing for those at risk of homelessness, Grattan Institute fellow Brendan Coates said.

The National Rental Affordability Scheme was a Kevin Rudd-era policy that gave annually indexed incentives to developers and investors who charged rents at least 20 per cent below market rate.

It was scrapped in 2014 by Tony Abbott’s Coalition government and the incentives on offer are now drying up as homes hit their 10-year limit, with community housing providers previously warning some renters face homelessness as a result.

Labor proposed a new policy of affordability housing subsidies before its election loss this year.

Developers with grandfathered dwellings still on the program receive about $11,000 of taxpayer money each year, but only provide a typical discount worth about $4000, new Grattan research – to be presented at the UNSW Social Policy Conference in Sydney on Monday – found.

That leaves developers with a gain of about $7000 a year per home, or total gains of at least $1 billion, the report found.

Read More...

CHART OF THE WEEK

Brisbane, Adelaide and Perth House Prices to Nominal GDP

Following on from our recent charts on Sydney and Melbourne housing prices relative to nominal GDP, we bring to you this week, Brisbane, Adelaide and Perth.
 
Brisbane
On our measurement, Brisbane is offering close to fair value. This comes after an extended period whereby there has been a slow wind-down of housing prices relative to incomes. The worst overvaluation recorded was early 2008 whereby the market was 45% overvalued. This occurred as a result of the Brisbane housing boom of 2003 to 2008 – a period where housing prices doubled in just five years. Our expectation for the remainder of this year is that the market will respond to the rate cuts and relative loose credit. We are forecasting a 0.6% rise in housing prices for the current September Quarter and a further 1.5% for the December quarter.



 
Adelaide
Like Brisbane, Adelaide is also offering fair value. Arguably, housing prices to incomes are at the lowest multiple since our records begun in 2002. Going forward we are expecting a flat housing market read for the current September Quarter and a marginal lift in prices (0.2%) for the December Quarter. 

 


Perth
Perth is currently offering the deepest value out of nearly all the capital cities at this point. Indeed, housing prices are now lower compared to where they were over 13 years ago. Clearly the mining downturn has affected the market and then, the restrictions in lending also contributed to the price slide in recent years. But when will the market finally turn? Well, despite all the stimulus thrown at it in recent months, there is no sign as yet. We are forecasting another 1% fall for the September quarter and a flat result for the December Quarter.  However, it should be noted the falling rental vacancy rate.

 
Overall, these three cities are currently offering fair to good value. Of course, that does not mean prices are about to snap up. Nevertheless, we will be watching developments closely.



 
DISTRESSED PROPERTY OF THE WEEK

37 Cardinal Street, St Clair SA 5011

This week’s distressed property is located in the Adelaide suburb of St Clair, about 11.5km north-west of Adelaide’s CBD, close to city and sea.
 
37 Cardinal Street, St Clair is a modern, double-storey Community Title townhouse built in 2015. It is set amongst new homes and apartments in Cardinal Street and has an internal building area of 135 sqm and sits on a 113 sqm block.
 
The lower level has an open-plan kitchen/dining with the living area flowing out to the alfresco dining zone and the upper level has 3 bedrooms with built-in wardrobes and a central bathroom plus an ensuite for the main bedroom.  There are some great features such as 2.7m-high ceilings downstairs, Blackbutt timber flooring, dishwasher, ducted reverse cycle heating/cooling, hideaway-style laundry and a downstairs toilet.  There is also a garage with a remote-controlled door.
 
This townhouse has been on the market since October 2018 – well over
180 days. Currently there are 172 properties listed for sale in postcode 5011 of which 131 are houses and 41 are units.
 
The property was initially listed for sale at $445k to $465k but has now been reduced to $400k to $430k.  It last sold for $425,000 in December 2015.  Based on statistics, you would expect to pay between $450,000 to $520,000 for 3-bedroom homes in postcode 5011. 
 
Overall, Adelaide’s housing market prices continues to improve and postcode
5011 has shown consistent growth with prices for 3-bedroom homes posting a 7.1% increase over 12 months and 1.3% increase over the month, after a 3-year increase of 9.8%.  The area has shown stronger growth than the Adelaide region, where 3-bedroom houses have increased by 4.5% over 3 years.
 
With
asking rents ranging from $325 to $400 per week, investors could earn a gross rental yield of 4.0%. Vacancy Rates for the postcode have been below 3% since 2005 and currently is a very low 0.9%, only 19 properties are listed for rent.
 
This is a low-maintenance townhouse that is perfectly positioned, close to schools, St Clair Shopping Centre and public transport links, including being walking distance from both Woodville and St Clair train stations for a 10 minute commute to the CBD.  Westfield Shopping Centre Westlakes, West Lakes Shore, Grange beach, cafés and boutique lifestyle of Semaphore and Grange are also a short commute away. 


The townhouse is an affordable offering that's worth investigating further.

SQM website features free property data that is now more interactive, easier to navigate and user-friendly, so keep monitoring this market’s growth at SQM Research’s free property data. Also consider the Property Valuation product for more in-depth data and property price estimator.
 

SQM RATINGS NEWSLETTER

Did you know that SQM Research doesn’t only provide residential property data, we also provide research on all asset classes.  We have data and analytics on over 10,000 funds in Australia.  To find out more and to subscribe to our Fund Data tool click here.

If you would like to subscribe to our Ratings Newsletter, click here.  The newsletter provides regular updates on all funds including ratings changes and media releases, and valuable Insights into the point of view of our analysts on a variety of ratings research related topics.  And it’s completely free!
 

SQM RESEARCH HOUSING INDEXES
 
SQM Research Weekly Asking Prices Index
Week ending: 10 Sep 2019   Asking Price     Chg on
prev wk
  Rolling month
% chg
  12 month
% chg
Sydney All Houses 1,291.2 10.9  1.3%  -1.8% 
All Units 693.3 0.6  -0.8%  -2.7% 
Melbourne All Houses 942.9 2.9  0.5%  -2.8% 
All Units 541.4 1.0  0.6%  -1.0% 
Brisbane All Houses 621.7 2.2  0.7%  1.4% 
All Units 370.8 0.7  -0.2%  -2.8% 
Perth All Houses 650.0 -3.0  0.4%  -1.3% 
All Units 380.5 1.6  -0.3%  -2.7% 
Adelaide All Houses 514.2 0.9  0.1%  1.9% 
All Units 298.8 0.3  -0.1%  -1.0% 
Canberra All Houses 823.9 4.2  2.5%  3.7% 
All Units 434.0 2.8  0.6%  4.7% 
Darwin All Houses 592.8 -0.7  0.2%  1.0% 
All Units 352.2 -0.2  -0.4%  -4.2% 
Hobart All Houses 519.6 2.5  2.0%  6.2% 
All Units 319.9 1.1  4.4%  3.8% 
National All Houses 572.7 -4.1  0.7%  0.7% 
All Units 380.7 -7.2  0.9%  2.0% 
Cap City Average All Houses 934.0 5.2  0.8%  -0.8% 
All Units 563.7 3.2  0.1%  -1.7% 

Next update: 17 Sep 2019

SQM Research Weekly Rents Index
Week ending: 4 Sep 2019      Rent         Chg on
prev wk
   Rolling month
% chg
    12 month
% chg
Sydney All Houses 676.2 -3.2  -1.6%  -4.2% 
All Units 497.9 0.1  -0.5%  -3.1% 
Melbourne All Houses 526.5 0.5  -0.2%  0.4% 
All Units 419.8 0.2  -0.5%  2.5% 
Brisbane All Houses 466.3 0.7  0.9%  3.4% 
All Units 376.9 1.1  0.8%  1.6% 
Perth All Houses 436.8 -0.8  1.0%  3.0% 
All Units 338.3 -0.3  -0.5%  4.9% 
Adelaide All Houses 399.8 0.2  0.3%  4.0% 
All Units 312.2 1.8  0.1%  4.1% 
Canberra All Houses 604.3 -1.3  -1.6%  -3.8% 
All Units 458.9 1.1  -0.3%  4.6% 
Darwin All Houses 511.2 3.8  -1.5%  -0.6% 
All Units 375.5 -0.5  1.1%  -6.8% 
Hobart All Houses 441.8 -1.8  -1.4%  8.4% 
All Units 403.7 7.3  1.4%  11.6% 
National All Houses 440.0 2.0  0.0% 0.7% 
All Units 367.0 2.0  0.0% 2.2% 
Cap City Average All Houses 544.0 -1.0  -0.5%  -0.9% 
All Units 439.0 2.0  0.0% -0.2% 

Next update: 12 Sep 2019

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