Residential

P R O P E R T Y M A R K E T U P D A T E | Summer 2018

Accelerating your wealth through property investment

CONTENTS
N AT I O N A L O U T LO O K . . . . . . . . . . . . . . 1
S Y D N E Y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
M E L B O U R N E . . . . . . . . . . . . . . . . . . . . . . . . . .4
B R I S B A N E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
P E R T H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
A D E L A I D E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
H O B A R T. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
R E S E A R C H E R ’ S N O T E . . . . . . . . . . . . . . 9

National Outlook
The December quarter saw the national markets retract off the back of the slowdown in the large Sydney market. Dwelling
values in the combined capital city markets subtracted -0.5% for the December quarter, being the largest decline since
April 2016. Nationally, dwelling values are 4.2% higher annually, which is down over 50% from last quarter’s results
showing a clear trend of being dragged downwards from the cool-off in the Sydney market.

One area of the market that has seen an increase, however, is the first home buyers sector, primarily in Victoria and New
South Wales. It is theorised this is caused by a decrease in popularity of rent-vesting schemes, as the crackdown on
investment loans by the Australian Prudential Regulation Authority (APRA) in 2017 made it harder to acquire the necessary
finance. Buying a property to reside in, which requires a regular home loan exempt from the tougher APRA guidelines,
presented a more attractive option for first home buyers.

The flow on effect of the tougher APRA guidelines could be seen throughout 2017, with the level of investment
trending downwards, even dipping below 2014 - 2016 levels. With the slowdown of investment in the overheated east
coast markets, it is predicted that APRA regulations will start to ease off in 2018, allowing again for greater investment
opportunities. This will benefit cities such as Brisbane and Perth that haven’t experienced their cyclical upswing yet, as
well as the already moving Hobart market. These markets are likely to experience an increase in demand as they enter the
next stage in their property cycle as confidence buoys the market. Combining a lower supply from less construction with
the lessening of regulations on investment lending, these cities should be primed to benefit from a strong environment
conducive to capital growth in the near term.

KEY POINTS
„„ Rental yields correct amidst dwelling price „„ Continued capital growth in Melbourne although
reduction transactions are declining
„„ Foreign buyers leave the Sydney and Melbourne „„ Perth rental listings trending towards a balanced
market for the cheaper Brisbane alternative market
„„ Investors are still reluctant after APRA „„ Increasing activity boosts Hobart property prices
regulations tightened in 2017
1
 About Momentum Wealth

Momentum Wealth is a research-driven, full-service property
investment consultancy dedicated to helping clients build
multi-million dollar property portfolios.
We offer a premium, advice-driven service helping clients in
the strategic planning, financing, acquisition, development
and management of their residential and commercial
investment properties.
This holistic service offering provides a one-stop shop for
clients to accelerate their wealth and reach their property
investment goals sooner.

Momentum Wealth Research Division

Our in-house research department monitors and completes • Economic output

detailed analysis of Australia’s property markets to identify • Public and private investment
future growth areas.
• Local amenities
To determine the best investment locations, our analysts • Transport nodes
examine a number of macro and micro factors, including, but
• Dwelling types
not limited to:
• Wage growth
• Housing supply and demand
• Population growth Using this intelligence, we’re able to identify properties that
outperform the market allowing our clients to reach their
• Rezoning
investment and financial goals sooner.
• Gentrification

Momentum Wealth services

We provide a holistic service offering for our clients to • Property development

accelerate their wealth through residential and commercial • Property management
property investment, including:
• Development syndicates
• Finance broking
• Unlisted property trusts
• Buyer’s agency

Contact us

For a free consultation to see how we can accelerate your

personal wealth, please contact us on (08) 9221 6399 or at
info@momentumwealth.com.au

2
 Sydney
CRITICAL NUMBERS
DECEMBER QUARTER
2.9%
HOUSE PRICES
0.4%
UNIT PRICES

The well noted slowdown in the Sydney market has resulted in
a declining property price for the December 2017 quarter. The
Sydney median dwelling price reduced -2.1% over the quarter,
softening the yearly growth rate to a mere 3.1% which is well
below the 4.2% national average growth rate. This is quite the
discrepancy to the 10%+ growth rates that the Sydney market
has grown accustomed to. The consolidation in price has seen
one positive for investors, however, with general yields on
the rise due to increasing rental prices and stagnating capital
values. The average yearly rental growth rate in Sydney is 3.0%,
which is pushing rental yields upwards from 3.0% in August
2017 to 3.1% in December 2017. These rental yields are still
very low compared to the national average of 3.6%, but we are
now seeing a more positive trend after yields have dropped
significantly in recent years due to the very strong capital
growth. This is an early sign of the market correcting back to
a state of equilibrium, gravitating away from a market where
buyers speculate on aggressive capital growth to justify steep
mortgage repayments. A market with better balance between
income and capital growth holds better stead for purchasers
in times ahead, which means a continual correction is required
in the Sydney property market. With the Sydney market now
coming off the boil, it is entering into a much needed down
cycle.

Capital City Gross Rental Yields

6.0%

5.5%

5.0%

4.5%

4.0%

3.5%

3.0%

2.5%

2.0%

Aug-17 Dec-17

Rental yields correct amidst dwelling price reduction

Source: CoreLogic, Momentum Wealth Research

3
 Melbourne
CRITICAL NUMBERS
DECEMBER QUARTER
0.6%
HOUSE PRICES
1.8%
UNIT PRICES

The Melbourne market has continued its positive trend, seen through a declining auction clearance rate, with the
recording positive property price growth in the December last recorded rate being 69% in December 2017, down from
quarter once again. The increase was at a modest rate of 75% at the same time last year. There are still positives in the
0.9% which is slightly lower than the September quarter Melbourne market with average days on market at a very
of 2.0%, which shows signs of a slight reduction in market low 31 days, sitting second behind Hobart, showing that
activity. The 2017 annual growth rate for Melbourne was a properties are moving once being listed. Melbourne is in a
strong 8.9%, however the majority of this increase was from transition period where the large price increases seen in 2015-
the first 2 quarters of the calendar year. A steep fall in total 2017 are a thing of the past, but the general market indicators
transactions was evident in 2017 with the annual sales down are still strong with forecasts for moderate growth in 2018 by
-11.2%, showing a decrease in demand which will play its many market commentators.
part in property pricing ahead. This fall in demand was also

Melbourne House Price vs Transaction Numbers

800.0 19000

700.0 17000

600.0 15000

500.0 13000

400.0 11000

300.0 9000

200.0 7000

100.0 5000
Jul-2013

Jul-2014

Jul-2015

Jul-2016

Jul-2017
Nov-2012

Nov-2013

Nov-2014

Nov-2015

Nov-2016
May-2013

May-2014

May-2015

May-2016

May-2017
Sep-2012

Jan-2013
Mar-2013

Sep-2013

Jan-2014
Mar-2014

Sep-2014

Jan-2015
Mar-2015

Sep-2015

Jan-2016
Mar-2016

Sep-2016

Jan-2017
Mar-2017

Sep-2017

Median Price of Established House Transfers ; Melbourne Number of Established House Transfers ; Melbourne

Strong capital growth in Melbourne although transactions are declining

Source: Momentum Wealth Research, ABS

4
 Brisbane
CRITICAL NUMBERS
DECEMBER QUARTER
0.5%
HOUSE PRICES
0.6%
UNIT PRICES

Brisbane’s residential property market continued to tick over in
the last quarter of 2017. Dwelling values increased 0.3% for the
December 2017 quarter, up marginally from the 0.1% increase
in the September 2017 quarter. For the 2017 year the market
increased 2.4%, placing the capital city ahead of the mining-
reliant Darwin and Perth markets, but behind the stronger
east coast markets. One area of improved demand within the
market is the increase of foreign investors. A clear trend has
occurred with foreign buyers moving from the less affordable
markets of New South Wales and Victoria towards the more
enticing Queensland market. Queensland was the only state to
feature an increase in foreign buyers for both new properties
and existing properties individually. Foreign buyers now
account for 11.4% of transactions for new properties within
the state and 6.7% of established properties. The increased
apartment construction over the past 3 years in Queensland
will benefit from this increase in foreign purchasers, as the
predominant dwelling type bought by foreign buyers are
new dwellings and in particular, apartments. It has been
widely theorised that the slowdown of the two largest east
coast markets will benefit the cities surrounding which is now
indicated with the move of foreign buyers, with domestic
buyers set to follow.

Foreign buyers in the new housing Foreign buyers in the established

market housing market
25.0% 10.0%
9.0%
20.0% 8.0%
7.0%
15.0% 6.0%
5.0%
10.0% 4.0%
3.0%
5.0% 2.0%
1.0%
0.0% 0.0%
Australia Victoria New South Queensland Western Australia Victoria New South Queensland Western
Wales Australia Wales Australia

June Quarter 2017 September Quarter 2017 June Quarter 2017 September Quarter 2017

Foreign buyers leave the Sydney and Melbourne Market for the cheaper Brisbane alternative
Source: NAB, Momentum Wealth Research

5
 Perth
CRITICAL NUMBERS
DECEMBER QUARTER
0.1%
HOUSE PRICES
0.4%
UNIT PRICES

The Perth market recorded a marginally positive movement in
average dwelling price for the December 2017 quarter of 0.1%.
Although this increase is very minor, it is the first recorded
positive trend back to a positive growth rate for the Perth
market with the previous quarter recording a -1.3% rate. The
Perth property market finished the 2017 calendar year down
-2.3% as the downturn continued through to the end of the
year, but it is widely speculated that the market has reached
the bottom of the cycle with an upturn in the near future. The
latest positive quarterly growth rate supports this speculation.
The Perth market downturn is often said to have been
caused by a mining slowdown, however, a less publicised
yet fundamental factor was the oversupply brought on by a
construction boom in 2013-2014, when the mining industry
had its heydays and economic confidence was high. This
saw Perth’s stock levels increase, and with falling population
growth in subsequent years, ‘for sale’ listings surged and
the rental market weakened due to rising vacancy rates and
lowering rental rates. A positive trend however has been
seen in the past 18 months with the amount of rental listings
steadily lowering each quarter: the amount of properties
listed for rent peaked in July 2016 at 11,507 and has since
been falling in a linear pattern with consistent drops quarter
to quarter. The current amount on market is 9,333, still well
above the equilibrium level of 4,000-5,000 but inching closer
month by month. As this downwards trend continues, a return
in investor confidence as well as an increase in rental rates
and a lowering in vacancy will help the Perth property market
recover. While the numbers aren’t suggesting the Perth market
is about to boom, they are trending in all the right directions.
The positive final quarter of 2017 is predicted to be the start of
a recovery stage of the market with most forecasters believing
the first quarter of 2018 and the year in general to be back to
positive growth rates.

Perth No. of Properties for Rent

14000

12000

10000

8000

6000

4000

2000

Perth rental listings trending towards a balanced market

Source: ABS, Momentum Wealth Research, CoreLogic

6
 Adelaide
CRITICAL NUMBERS
DECEMBER QUARTER
0.3%
HOUSE PRICES
0.2%
UNIT PRICES

Another small increase in prices for the December 2017
quarter keeps with the trend for the Adelaide property market.
An increase of 0.3% was recorded by CoreLogic for the last
quarter of the calendar year, which mimicked the increase of
the previous quarter. The annual change totalled an increase
of 3.0% for the ever reliable Adelaide market, which has seen
consistent increases without large volatile booms and busts.
The rental market has seen further strengthening with an
annual increase in the rental rate of 3.1%, which places it as
the fourth greatest increase of all capital city rental markets.
The similar growth rate of the rental price and property
values has seen Adelaide maintain a consistent rental yield
over the year of approximately 4.2%, which represents strong
cash flow returns for investors above the combined capital
city average of 3.3%. However this strong cash flow has yet
to entice investors to enter the market with figures showing
that investor activity is still down from the 12 year average.
Additionally, at 28% of the market, it lags far behind the
larger east coast markets where investment is plus 40%. This
reduction beneath the 12 year average is predominantly
due to the stricter investor lending regulations imposed by
APRA to slow down the Sydney and Melbourne markets. The
difficulty in obtaining investment finance hindered most
markets and until regulations are softened, which is predicted
in 2018, the investment portion of the market will continue to
feel the pinch. One reprieve could come from investors who
made significant profits in the Sydney and Melbourne market
and are looking to move west for a more affordable and cash
flow effective market.

South Australia Investor activity

0.45

0.4

0.35
Proportion of investors in the market

0.3

0.25

0.2

0.15

0.1

0.05

Investors are still reluctant after APRA regulations tightened in 2017

Source: ABS, Momentum Wealth Research

7
 Hobart
CRITICAL NUMBERS
DECEMBER QUARTER
3.0%
HOUSE PRICES
3.4%
UNIT PRICES

A second consecutive quarter of positive dwelling value
growth in Hobart has highlighted the small capital city’s
position as the “hot spot” for investment in 2018. A quarterly
dwelling value increase of 3.1% to December 2017 has
followed a strong September quarter of 3.4% which brings
the 12 month growth rate to 12.3%. This far outweighs the
national average of 4.1% and the combined capital city
average of 4.3%, and places Hobart as the top performing
capital city in terms of growth for 2017. The heat up in prices
is off the back of an increase in activity in the market, with
a noticeable jump in settled sales of 3.2% year on year. This
positive growth rate in transactions is in contrast to the
combined capitals average of -6.4%, due to a steep decline in
the larger capital cities of Melbourne, Sydney and Brisbane.
The increased activity in Hobart is arguably due to the level
of affordability the market offers, making it attractive for
investors/owner occupiers in the eastern states to move away
from the heated Sydney and Melbourne markets and purchase
investments/homes in Tasmania. The Hobart rental market is
also performing strongly for these investors with 5.0% yields
recorded for the December quarter and a 9.4% annual growth
rate in rents, making ownership in the area very attractive for
cashflow and growth.

2017 Dwelling Transaction Growth Rates

-5.6%

-11.2%

-8.2%

-0.1%

1.5%

3.2%

2.5%

-6.3%

-6.4%

-4.8%

-12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0%

Sydney Melbourne Brisbane Adelaide

Perth Hobart Darwin Canberra
Combined Capital Cities National

Increasing activity boosts Hobart property prices

Source: Momentum Wealth Research, CoreLogic

8
 RESEARCHER’S NOTE
Renovating and the fear
of over-capitalising
From The Block to Renovation Rumble, national television
has been inundated with renovation shows over the past
few years, making “flipping houses” appear easy and highly
profitable. Upgrading an asset through renovation is a
common strategy amongst professional investors as a way
to secure an increase in rental returns, or a capital growth
jump. Instead of sitting back and waiting for the market
to push capital values, a renovation can artificially create
increased equity. But renovations also come with increased
risk and therefore must be well-considered, well-planned and
thoroughly calculated, or they could very well end up setting
you back in your investment journey.
Renovation projects can vary greatly in size and complexity,
from a simple cosmetic upgrade featuring a paintjob and tidy
up, to a full high specification remodel, common in character
protected areas like Mount Lawley. A simple renovation can
be priced in the low $1000’s, however a large scale renovation
can be upwards of $100,000. Altering cosmetics is one option,
however extensions and large modifications can be as
expensive as the construction of a brand new home.
When planning the renovation it is vitally important to
understand what is demanded in the area, in terms of what
to add to the job list. In many areas an extra bathroom may
increase rental values by $50 per week, or a modest renovation
including a new paintjob, fresh carpets and new cabinetry
9
may increase saleability and price by $30,000 plus. This would
put the owner in a good position income wise and makes the
renovation strategy successful. However, investors must also
make sure to not over-capitalise for the area and add extra
household amenity that is not demanded or expected in the
suburb, such as developing a fourth bedroom in a suburb
where the original three bedroom home is all that is required.
When planning a large scale renovation, it is vital that the
funds invested are returned with adequate profit to pay for
the time and interest costs associated. In some instances
a suburb will have a maximum price point that people are
willing to pay and when the price starts penetrating this
ceiling, potential buyers tend to move to higher rated suburbs
with greater amenity for the same price point. This is often
the case in “affordable” suburbs which are more generally
contained to first home buyers or investors where price is a
major consideration. Perth suburbs with this demographic
include Eden Hill, Gosnells and Rockingham. These suburbs
benefit from a modest cosmetic upgrade which increases the
aesthetics of the property, however converting a 3 bedroom
1 bathroom house to a 4 bedroom 2 bathroom house may
cost upwards of $50,000. It is questionable in a suburb with
an average price of $350,000 that the renovation will add the
extra $70,000 - $100,000 capital value required to warrant the
extension.
This disclaimer governs the use of this report:
All data and results have been independently collated by Momentum Wealth and while all due care has been taken to represent true and
accurate information it may not be a true reflection of the market or audience. You must not rely on the information in the report as an
alternative to professional property investment advice. We do not represent, warrant, undertake or guarantee that the use of guidance in
the report will lead to any particular outcome or result. We will not be liable for any business losses, including without limitation, loss of or
damage to profits, income, revenue, use, production, anticipated savings, business, contracts, commercial opportunities or goodwill from
the use of this report.
All investments carry financial, regulatory and legal risk, investors are advised to do the necessary checks and research on any investments
beforehand.
© Momentum Wealth IP Pty Ltd 2018 used under license by MW Group Communications Pty Ltd. 18-32 Parliment Place West Perth WA 6005.
All Finance Broking services are provided by Momentum Wealth Finance Pty Ltd. Australian Credit Licence 384632. All residential property
services are provided by Momentum Wealth Property Pty Ltd. Licenced Real Estate and Business Agent in WA TC53788.
Acknowledgments: Australian Bureau of Statistics, CoreLogic, Reserve Bank of Australia, Real Estate Institute of Tasmania, Victoria State
Government.