The Hastings district has seen a big drop in average house sale prices for August. Pictured is a residential street in Hastings. Photo / Warren Buckland
The average house sale price across the Hastings district has dropped to its lowest amount in 19 months, according to the Real Estate Institute of NZ.
However, one real estate expert says because the district
When Darwin couple Leslie and Sylvia Green started looking for an investment property in order to eventually downsize, they did not expect to find it in only a matter of weeks.
- Property prices rose in Darwin but fell in every other capital in August, CoreLogic data shows
- Despite that, it is still Australia’s most affordable capital, with a median dwelling value of $512,531
- The conditions are attracting strong investor and buyer interest but squeezing renters
But in Darwin’s thriving property market, it was barely a month before the couple had locked in a relatively affordable one-storey property in the northern suburb of Moil.
It took just two more weeks to secure a tenant.
“[It’s been] amazingly quick,” Mr Green said.
“Everything’s worked for us.”
According to figures released by property data provider CoreLogic this month, Darwin is the only capital city in Australia where dwelling values are rising.
Capital city prices dropped 1.6 per cent nationally in August, in the biggest decline since 1983.
Darwin bucked the trend, with values up 0.9 per cent for the month.
It also saw the strongest quarterly growth of any capital at 2.3 per cent, with Adelaide and Perth the only others to record increases.
And yet the data shows that Darwin remains the most affordable capital to buy – a title it has held for several years – with a median dwelling value of $512,531.
Darwin real estate agent Derek Hart said those conditions meant the local market is “absolutely booming” at the moment.
“It’s been the best I’ve seen in 14 years of selling, where you’re getting more sales, more activity all through the market,” he said.
‘An investor’s dream’
With rising rents and more affordable properties compared to other capitals, experts say the situation is a boon for investors.
CoreLogic head of residential research Eliza Owen said the city was attracting strong investor interest, including from interstate, with units especially in demand.
“It’s kind of an investor’s dream – to not only be getting capital growth in the value of the home, but rising rental income from that home as well,” she said.
Mr Hart said conditions were also good for buyers.
“Those first-home buyers … they know that their rent is going to go up, so [they think] ‘let’s get into the market [and] stop paying someone else’s mortgage’,” he said.
The Greens agreed, saying while they had been thinking about downsizing for some time, the current state of the market had influenced their decision to buy now.
“The interest rate is really poor, the rental market here is still very good, so the sensible thing was to buy something,” Ms Green said.
“It made a lot of practical, common sense, to do this now.”
Pressure grows on renters
The trends are not good news for everyone.
As rents and sales prices continue to grow, experts say renters and prospective buyers at the lower end of the market are struggling to keep up.
Mike Byrne, regional coordinator with affordable housing peak body NT Shelter, said Darwin renters were being squeezed with price hikes of up to $100 a week or $150 a fortnight.
Combined with other cost-of-living increases, he said soaring rental values were cutting into some people’s emergency savings.
“It’s more affordable compared to other states, but that doesn’t mean it’s affordable. It just means it’s not the worst,” he said.
“A lot of people are paying over 40 per cent, 50 per cent of their income just to have a roof.”
And there is little relief in sight for renters.
CoreLogic head of research Tim Lawless said Darwin’s rents were rising at 6 to 7 per cent per annum, and so far showed no sign of slowing down.
“Vacancy rates are around the 1 per cent mark, and chances are, as we see overseas migration picking up … we probably will start to see rents rising even further from here,” he said.
“So for tenants, it’s not great news.”
More growth forecast
With some major infrastructure projects in the pipeline and a growing population, experts predict that rather than following other capitals into price decline, Darwin property values should keep rising or hold steady in coming months.
“I think it will be the case the Darwin marketplace does hold reasonably firm and outperforms the rest of the capital cities,” Mr Lawless said.
“It’s not uncommon for Darwin to be a counter-cyclical market. Previously housing values were falling where most other regions around the country were recording rises in values.
“Now it’s completely the opposite, and we are seeing Darwin housing values still rising, while most of the country is recording a fall in values.”
As they finish the renovations at their new property in Moil, the Greens have the same outlook.
“Everything’s selling around here, and there’s a queue for rentals,” Ms Green said.
“I think it’s a good time to buy.
“I don’t see Darwin going down.”
Usually falling house prices coincide with weakness in the economy that has central banks cutting rates. Photo / Getty Images
House prices in Australia are falling at their fastest rate since the 1980s.
Since peaking in April, values are down by 3.5 per cent nationally, according to data collected by CoreLogic.
It’s the fastest
Women at the top
The war in Ukraine could have long-term economic impacts for New Zealand, Treasury economists warn. Photo / Bloomberg
A Treasury note has warned the long-term consequences of the war in Ukraine could be with the world for a long time in the form of lower growth, higher food prices, more government spending and
A retreat from globalisation
Higher inflation and interest rates
Slower economic growth
Pending and new home sales both fell in the US in July to multi-year lows, while the slump in Australia is raising the risk of a recession. Home values in London are flat or falling in almost half of the city’s boroughs, and the property downturn in China is testing whether the central bank can stick to its stimulus-lite strategy.
Elsewhere, key measures of US growth diverged in the first half of the year and inflation-adjusted spending rose at a sluggish pace last month. In the UK, officials are thinking outside of the box to solve the nation’s energy crisis.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
US consumer spending rose at a sluggish pace in July, even while Americans got some relief on prices, indicating the economy is feeling the pinch from the highest inflation in a generation. Even though the Fed’s headline inflation figure eased, wages and salaries rose a robust 0.8% in July, which may spur further concerns about inflation becoming entrenched in the economy.
The government’s main measures of US growth pointed in different directions in the first half of 2022, adding to the ongoing debate on the health of the economy. Inflation-adjusted GDP, or the total value of all goods and services produced in the economy, decreased at a 0.6% annualized rate in the April to June period. However, the other, lesser-known official measure of economic growth — known as gross domestic income — simultaneously climbed at a 1.4% rate.
US pending home sales fell in July for the sixth time this year to the lowest level since the start of the pandemic, extending the housing market’s sharp downturn as high borrowing costs sideline prospective buyers. Separate data showed sales of new homes fell in July for the sixth time this year to the slowest pace since early 2016.
Ideas that were once unthinkable are starting to gain traction among experts looking at how to solve the UK’s energy crisis. Suggestions from politicians, former ministers, energy analysts and economists echoing the solutions of the 1970s include nationalizing industry, fixing prices, rigging wholesale energy markets and even telling industry to shut down.
The end of cheap money. Soaring energy prices and crippling inflation. A recession on the horizon. For the UK housing market, that toxic mix is fueling concern that a sharp correction is on its way.
Taiwan’s export orders unexpectedly contracted in July as demand from Chinese customers plunged, and officials are now warning of further declines to come. A 22.6% decline in orders from China and Hong Kong — which, combined, are the second-largest source of demand after the US — was the main driver of the surprise fall, ministry data show.
China’s property market crisis is testing whether central bank Governor Yi Gang can stick to his stimulus-lite strategy. Yi has recently promised monetary policy will remain “accommodative” to support the economy, but there’s an implied limit to how far the PBOC will go.
Australia’s rapid-fire interest-rate increases are sending tremors through the nation’s heavily indebted households and threatening a property downturn on a scale unseen since the eve of the 1991 recession.
Brazil posted its biggest mid-month decline in consumer prices on record in a drop that was smaller than analysts expected, as President Jair Bolsonaro’s anti-inflation measures provide some relief ahead of elections.
Central banks across sub-Saharan Africa will likely have to remain focused on reining in price growth in the coming months, with economists raising their inflation forecasts in many of the region’s key economies. Countries including Ghana, Nigeria, South Africa and Kenya will see higher inflation than previously forecast this year, according to a Bloomberg News survey.
Israel’s central bank surprised most economists by delivering its biggest increase to interest rates in two decades. Iceland also hiked rates by 75 basis points, while Botswana opted for 50. Officials in Paraguay, Indonesia and Korea went for a 25-basis-point increase.
About 2,000 dockers at the Port of Felixstowe began an eight-day walkout on Sunday, halting the flow of goods through the UK’s largest gateway for containerized imports and exports. Shipping lines plan to reroute cargo around the picket line, adding time and cost.
Economic activity weakened from the US to Europe and Asia, reinforcing concerns that soaring prices and the war in Ukraine will tip the world into a recession.
I am dumber than our house.
In the past 10 years I have risen before dawn to produce early-morning radio, sliding outside in the darkness while trying not to wake our sleeping children.
As they’ve grown, I’ve kept working, juggling the rhythms of family life with the demands of live television, often only returning in the dark in time to help with bath time and bed.
My house isn’t that stupid. It just sits there.
Recent sales of similar properties in our area have added weight to what the data was telling me already.
In the decade we’ve lived here, our house has likely increased as much or more in value than I have earned in income.
I’m not poorly paid, but I am out-earned, consistently, by a construction of brick and wood — and, more importantly, the land it sits on — that just keeps getting more valuable as it ages and Melbourne’s population grows.
Some people will think this is wonderful, that my house has achieved such insane capital growth.
But is it? I’m not so sure.
A key element of what rising house prices do is what’s called the “wealth effect“.
It’s where you feel you’re richer so you’re looser with spending. That boosts company earnings, profits, investment and should lead to inflation and higher wages.
It’s one of the reasons economists worry about falling house prices. They create a “negative wealth effect” and people shut their wallets even though their financial position has essentially not changed.
An additional benefit of soaring house prices is that my wife and I could use the equity — the amount of value held in the increasingly valuable house — to borrow more money.
But the downsides are everywhere.
Our house might be worth more money but, if we sold it, we’d still require another one to live in. Even though there are thousands of housing markets across Australia — and prices can swing markedly even within small suburbs — most have risen at a consistent rate in recent decades.
The pandemic has supercharged prices. You’ll have read articles worrying about a potential 5 to 15 per cent drop in house prices. But that drop wouldn’t even take them back to where they were in 2019.
And the biggest downside of all: There’s very little chance our children will be able to live near us when they grow up — if they’re able to afford to move out at all.
What good is living in a house worth “X.X million” if you then need to drive across town, and possibly out of it altogether, to see the ones you love?
To explain some of the housing problems of Australia, I’m enlisting the help of John Legend.
Around the time my wife and I bought our house in an inner suburb of Melbourne, the US-based singer and his wife Chrissy Teigen were selling theirs.
We are similar in age and we’ve attended the same gigs a few times, but apart from that we don’t have a lot in common.
I work for the ABC in Melbourne. He’s sold millions of records and has an Elvis-like residency at a Las Vegas casino. The best tickets, including a private performance and a photo, cost $US1,000 ($1,438).
His fully renovated 600-square-metre three-bedroom house in the Hollywood Hills area of Los Angeles had a recording studio, manicured garden and a hot tub. Plenty of space to store the nine Grammy awards he had back then. The home was featured in Architectural Digest and eventually sold for just under $US2 million.
But at the same time, houses in the suburb I’d just bought in — with an extra bedroom, perhaps a garden or garage, items our house lacks — were selling for the same amount of Australian dollars.
His house had a commanding view and an outdoor bathtub. Ours looks over a factory. And both my house and the then-flash $2-million ones in our suburb are just a few blocks from the headquarters of a motorcycle gang.
So what’s going on?
He’s won an EGOT (Emmy, Grammy, Oscar and Tony award) and is a judge on The Voice.
I’m a public servant in Melbourne.
Why were we playing in the same sandpit?
The biggest problem with the housing market in Australia is that there’s not one way to fix it.
You could make housing more affordable by changing some of the elements I’ll list shortly, but just doing one or two wouldn’t shift the dial.
Multiple government and market forces make it hard to increase the affordability of housing … or create the political will needed to make it happen.
You’ve got to take in:
- Federal government decisions that shape the tax system, providing incentives to invest in housing (and not live in it). Negative gearing allows property investors who make a loss to reduce the tax they pay on other income. The capital gains discount sees half the profits from the sale of an investment property go untaxed. On top of that, there are tax discounts for people putting money into superannuation — far less than you’d pay in income tax. Many people with self-managed superannuation funds (SMSFs) are investing in property using these schemes, giving them a huge advantage over younger wage slaves
- The Reserve Bank sets interest rates, but its key focus is maintaining inflation (a measure that largely ignores house prices) within a band of 2 to 3 per cent per annum. It’s recently shot up (6.1 per cent a year and seemingly on the way higher) but for most of the past decade it’s been lower. That has kept interest rates low, allowing people to borrow more and keep pumping the market
- State government budgets have become addicted to stamp duty. The fee — paid on the transfer of a property — has risen with prices. In Victoria, the stamp duty on a $1 million home (around the median price in the capital Melbourne) is $55,000, or 5.5 per cent of the cost
- Renters have also got a bad deal from state governments. Some are slowly changing the rules — to allow pets and for renters to put pictures on the wall without prior permission — but things are tilted against the rights of tenants. Our standard one-year leases would bamboozle people in Europe where longer agreements are common. This precarious tenure, along with the privations of inspections and rules, are part of what drives demand for ownership
- Local governments have, at times, been loath to rezone land in appropriate and timely ways. In a bizarre patchwork, city planning has been largely abandoned and left to an unfair scrimmage between developers seeking inhuman heights and densities for buildings, while shocked community groups try to salvage something, hoping that sunlight can hit the ground at midday in January. Elsewhere, communities have stood in the way of modest developments in appropriate areas, hoping to keep their neighbourhoods frozen in time
- All governments have not done enough to boost social and affordable housing. The new federal government is finally back in the game (Victoria’s government too) but it is starting from a long way back. Around 4 per cent of Australia’s housing stock is affordable or social housing, reserved for people on low incomes. In many similar nations it’s closer to 20 or 30 per cent
- Home owners are also standing in the way of this change. The percentages move slightly, but essentially one-third of Australians own their homes outright, another third are paying them off and the final third are renting. With two-thirds owning or on their way to doing so, that’s a big constituency that is thought to want constantly rising — nay, soaring — house prices
But do they?
Change is slow
The Labor Party dropped the potential changes to negative gearing it took to the 2016 and 2019 elections.
But the tide of inequality — and people seeing through the chimera of the “wealth effect” — may start to shift the tide.
There are a lot of options: windfall taxes for rezoning, to stop land banking and promote sensible land use. Changes to stamp duty, perhaps swapping it for land tax (as is happening in the ACT and starting to happen in NSW). Alterations to loan-to-value ratios. Mandated affordable housing in developments. Substantial investments in expanding social housing projects.
Our obsession with property, and the way the tax system is tilted to promote it, means a median house in Melbourne is (depending on the exchange rate) more expensive than a median house in London.
The focus on land and buildings takes money out of productive enterprises, like people starting or expanding businesses, or investing in education and training.
I love our house: the community, my children living close to their school mates, being not too far from a park (or a bikie clubhouse, if I choose to take up a hobby).
But what I really love is the family in it.
And I know more families would rest easier at night and live less stressed and more fulfilled lives if our housing market wasn’t such a complete mess.