This week we look at how the remainder of Australia’s capital markets have performed over the first two quarters of 2018.
Brisbane’s housing market has held strong in comparison to Sydney, median dwelling values have grown by 1.2% in the first 2 quarters – outpacing the national average. Population growth has been the main driver in the market, as the city supports some of the strongest population growth per capita in Australia, particularly in terms of net interstate migration.
Oncoming supply throughout 2018 has been significantly lessened, due to a combination of rising building costs and international investment restrictions. The Rider Levett Bucknall (RLB) crane index records construction activity throughout Australia’s main economic hubs. According to the RLB crane index, the number of residential cranes in Brisbane have reduced by 18% over the last 12-month period. This environment of lessened oncoming supply has resulted in strengthening of the rental market, as the city experienced an average rental growth of 1.3% throughout the first 2 quarters of 2018.
The Brisbane market is expected to be driven over the midterm by a significant infrastructure pipeline. Currently, the city has over $21 billion worth of public and private works within a 5 km radius of the city centre alone. These works are set the bolster the Brisbane economy by providing primary employment to the trade and engineering industries, while offering reusable public amenity for the labour force.
After much controversy around the rebound of the Perth market early 2018, the WA capital has proven that there is still a way to go before it proves to be a feasible investment. Median house prices across the city have fluctuated around $500,000, over the first 2 quarters of 2018 – now at a level -12.3% lower than peak 2014.
Overall dwelling values have fallen a further 1.3% over the past 12 months, signifying the instability of the residential sector. This market performance is reactive of Perth’s economic volatility. Market sentiment and employment are still weak, off the back of the cooling of the resources sector. Until we can see growth and stability return to Perth, combined with positive market sentiment, the market will remain under our radar.
Canberra’s market has leveraged off of Sydney’s strong growth for the past 5 years, with average house prices rising to a record high of $690,000. High income earners and the public service sector have been a contributor to Canberra’s performance. The city holds some of the highest average household incomes in Australia, which has aided in driving capital growth and rental performance since 2014.
This performance, however, seems to be dampening. Dwelling values have fallen -0.2% over the last 3 months, while unit values are -1.1% lower than quarter 4, 2017. A combination of Sydney’s stagnation and strained affordability are expected to create a slowdown in the Canberra market over the midterm.
When assessing a macro market’s feasibility, we always conduct a deep analysis of its key market drivers. These elements allow a market to remain stable and grow over a long term holding period. We always have our finger on the pulse, to help our clients make the most informed decisions.