Expert commentary

Australia’s cities policies are seriously inadequate for tackling the climate crisis

Residential sector

Last week was the busiest auction week since the pre-Easter spike, as 3,229 auctions were held across the combined capitals, while the volume of auctions held this week was up 11.2% compared to this time last year. Corelogic has more…  

Although the property market has weakened since last autumn’s boom, agents said that steady auction clearance rates around the 60% mark are characteristic of a normal market. Domain has more…  

The AFR reported that Sydney house prices have dropped by 1% through May, which is the largest monthly decline since January 2019. AMP Capital’s chief economist Shane Oliver said that if the pace of the price drop continues to accelerate at this rate, then this year’s house price decline could be 10% or greater. (10pc drop in Sydney house prices in sight after 1pc fall in May, Nila Sweeney, 31/05/22) 

House prices in Melbourne, Sydney and Canberra decreased the most, and prices in the ACT were down for the first time in three years. PopTrack data showed that Adelaide and Brisbane were the strongest performing capitals over the month of May. Read more…  

The Australian reported that sellers still control the market despite price growth slowing to 2.08% nationally in the first four months of the year. PopTrack’s director of economic research Cameron Kusher said that a pullback in demand coupled with a higher supply of new stock contributed to slowing sales activity. (Heat coming out of property market as buyers push back, Mackenzie Scott, 29/05/22)

OTHER KEY HEADLINES

1. CoreLogic Home Value Index records first national fall since September 2020, as declines accelerate across Sydney and Melbourne in May - Corelogic 01/06/22 
2. Melbourne house prices drop for first time in two years, PropTrack Home Price Index shows - Realestate 01/06/22 
3. Sydney home prices fall for second straight month amid ‘market fatigue’ and rising rates - Realestate 01/06/22 
4. Melbourne, Sydney Hardest Hit as National House Prices Fall - Urban Developer 01/06/22 
5. Is it easier to buy a home now than it was a year ago? – The Sydney Morning Herald 02/06/2022

Commercial sector

Offices

The AFR reported that Melbourne has the best performing office market nationally, and that sublease availability across the five biggest capital cities decreased by 30% in the first four months of the year. (Space race as tenants snap up cheap sublets and majors switch strategy, Martin Kelly, 01/06/22)  

The AFR reported that logistics landlords may be in the best position for assessment of green credentials, while the biggest risks and opportunities are faced by office-tower owners. This verdict came from UBS data which compared the ESG risks and opportunities faced in Australia’s commercial property market, as increasing attention turns to sustainability efforts. (Logistics landlords in front as green risks rise, Nick Lenaghan, 01/06/22) 

Across all commercial property sectors nationally, rent collected by day 30 of the month has increased from 83.0% in January to 87.1% in April. Commo has more…  

Hospitality
The Australian reported that extreme staff shortages in the hospitality industry have forced multiple venues to operate restaurants, pubs and bars on reduced hours. Merivale hospitality group’s operations manager Frank Roberts said that skilled migrants were needed to revive the sector, else it would suffer the losses of a post-pandemic state for years to come. (Pub owners say labour shortages are hitting the booming sector, Lisa Allen, 01/06/22)  

Construction & development

The AFR reported that the average cost of a new house rose by a record $76,715 in April, as supply chain and labour shortages increased home building costs. BIS Oxford Economics senior economist Maree Kilroy said that strong building cost growth will continue into the next financial year, given the huge backlog of work and high commodity prices. (Home building costs jump $76,000 from a year ago, Michael Bleby, 31/05/22) 

Tuesday’s ABS figures revealed a continued slump in the number of new building approvals, with a 2.4% fall in April on top of the 19.2% decrease in March. UDIA national president Maxwell Shifman said that building approval figures are a real-time indication of the health of the economy. Read more…  

The Australian reported that alongside the $30mn injection provided by Metricon’s owners, other investors are being sought which prompted Commonwealth Bank to double its Metricon lending facility. Labeled a “too big to fail” situation, large construction industry losses are substantial due to fixed-priced contracts that have been injured by rising materials costs and supply delays. (Construction woes: banks played a role in a half-built house of cards, Robert Gottliebsen, 29/05/22) 

The AFR reported that the booming market for construction equipment has pushed up prices of second-hand diggers, bulldozers and loaders above the cost of new assets. This price increase was attributed to globally constricted supply chains, changes to insolvency laws and the boost given by JobKeeper payments during the pandemic. (Diggers and loaders sell over the odds as used equipment market surges, Michael Bleby, 01/06/22)  

 

OTHER KEY HEADLINES
1. Housing Approvals Down 32pc as Market Softens - Urban Developer 31/05/22 
2. Two more Qld builders collapse, as Metricon gets $30m injection - the Australian 28/05/22 
3. ‘A fragile sector’: Bank bosses warn on construction risks – The Age 31/05/22 
4. CapitaLand Investment swoops on Bondi Junction hotel project – The Australian 02/06/22  
5. Building Commissioner Warns Developers to Listen Up – Urban Developer 30/05/22 

Finance sector

The Urban Developer reported that the City of Melbourne will sell off four of its properties, as the council grapples with a $19.5mn hole in its budget at the close of the third quarter. This is $10mn more than the forecasted budget deficit for the quarter, as the impact of Covid-19 continues to plague the city’s revenue streams. (City of Melbourne Divests Properties, Delays Projects, Taryn Paris, 01/06/22) 

The AFR reported that home-owners who purchased in Sydney or Melbourne these past few months face a heightened risk of falling into negative equity if they bought their properties with a low-deposit mortgage. AMP Capital chief economist Shane Oliver said that people who fall into a negative equity position could find themselves in that position for a long time. (Negative equity risk rises as house prices fall in 307 Sydney suburbs, Nila Sweeney, 01/06/22)  

A study has found that tenants spend more on energy bills than homeowners as rental properties are less efficient to heat and cool. Domain has more…  

The Urban Developer reported that a major commercial real estate lender is calling on state governments to waive stamp duty fees in an effort to kick-start the residential apartment market. Currently Western Australia is the only state to offer a full stamp duty rebate on off-the-plan apartments valued at less than $500,000, while apartments over $600,000 get rebates of 50%. (Waive Stamp Duty, State Governments Urged, Ralph Nicholson, 01/06/22) 
 

OTHER KEY HEADLINES
1. Property evolution as Labor drives housing and green agenda - the Australian 25/05/22 
2. Australian Taxation Office targeting landlords and property investors who do the wrong thing - Realestate 24/05/22 
3. Australia’s housing ‘crisis’ is going to get worse and Anthony Albanese needs to urgently step up, property groups say - Realestate 23/05/22 
4. WA prepares for renting revolution by slashing taxes to entice BTR development - Realestate 25/05/22 
5. Albanese’s property story goes from one form of public housing to another - Domain 23/05/22