June 2019

This is the 14th in a series of articles summarising monthly news and happenings in Sydney real estate, and more broadly.

Not quite in recovery yet

The big news in property values is, as The ABC reports on the last week of the month, a minor increase in property values in Sydney (0.1%), Melbourne (0.2%) and Hobart (0.2%) in June, which is the first increase in value in 2 years. The rest of the country continues its largely slowing decline with no major centres recording a decline larger than 1%. Things aren’t improving overall per se, but the rate they are deteriorating continues to slow.

Tim Lawless, in the Core Logic monthly housing update, noted the previous week that there are a number of recent changes that ‘bode well’ for the housing market. These include a perception of stability in the Federal government, an announcement from APRA that loan serviceability is likely to improve by late June, and the RBA interest rate cut of June 3.

Some of the specific outcomes from the Federal election include:

  • Taxation reform including Negative Gearing changes no longer possible
  • Certainty around Federal budgeting
  • Mortgage broker commissions are no longer in doubt
  • A first home buyer stimulus package is scheduled from Jan 2020
  • Overall confidence in the market has improved

Attribution: ABC News / CoreLogic

Auction clearance rates across the combined capitals reached 60% for the first time in a year, and the Sydney month on month decline in property values was the smallest since March last year at 0.4%. Values are still falling but a lot more slowly than they have been.

Of course, most industry commentators rely on Core Logic analyses, so news is abundantly reflective of this. Tawar Razaghi reports for Domain another article adding to the industry wide perception that ‘things will get better soon’.

For homeowners, the story predicts a 2% to 5% increase in value, with units at the lower end, and houses at the upper end “over the next year”. What degree of optimism powers this speculation is of course unclear and nobody will be held to their predictions should they be either right or wrong.

Lawless notes that unit values are now consistently falling at a faster rate than house values. This is a first for the current downturn and he suggests that the large number of unit constructions are increasing the pool of available options, driving competition. It’s also worth noting as reported in the Real Estate Conversation that the apartment block engineering problems of Mascot Towers, coupled with the Opal Towers cracking have definitely affected buyer sentiment towards single detached dwellings.

Perhaps symbolic of these types of changes, the builder sponsor of the NRL South Sydney Rabbitohs has committed to giving away an unfurnished 1 bedroom Lavender Bay flat at the Rabbitohs verses St. George game on July 26. Current estimates value the flat at over $1m, and the builder will also pay stamp duty. Probably a good solution to not being able to sell it?

Attribution: Domain

Construction Industry Crisis

As if the construction industry didn’t need another axe blade over its head, now the ability for Quantity Surveyors to meet their registration requirements has been cast in doubt with insurers baulking at covering buildings affected by certain types of cladding. After now 3 major fires caused by this particular aluminium cladding (Neo200 in 2019, the Lacrosse building in Victoria in 2014, and the Grenfell Towers disaster in London in 2017 – which claimed 72 lives), perhaps insurers are saying enough is enough.

The Real Estate Conversation reported that construction industry leader such as Master Builders have met in Canberra to discuss this, and claim that without a resolution to the insurance problem the construction industry could completely grind to a halt. If quantity surveyors are not able to meet their registration requirements of insurance, they are not legally able to approve the completion of buildings.

Looking ahead on construction materials and techniques, Jim Malo writes for Domain about how experts on the construction industry are looking ahead to 2030. Some of the predictions are better use of timber and more off-site construction manufacturing. The outcomes of some of the changes include increased efficiency and speed. There was no mention of the aluminium cladding that caused the fires, so hopefully this will have gone the way of asbestos, by then.

72 people died in the Grenfell fire – which was caused by the same type of cladding insurers are refusing to cover; bringing construction to a standstill