HOMES FINISH FINANCIAL YEAR UP 13.5%
National home values rose 1.9% in June, taking annual growth to 13.5% for the financial year. The growth in Australian dwelling values was led by houses, which rose 15.6% over the year, compared to a 6.8% lift in unit values, according to CoreLogic.
This is the highest annual rate of growth seen across the Australian residential property market since April 2004, when the early 2000’s housing boom was winding down after a period of exceptional growth. However, there are some markets where performance is starting to ease more notably.
Performance gap narrows
Each of the capital cities saw an uplift in dwelling values in June, ranging from a 3.0% rise in Hobart to a more subdued 0.2% lift in Perth. The performance gap has narrowed between regional Australia and the capital cities, though regional Australia did outperform slightly in monthly growth terms, rising 2.0% through June compared to 1.9% across the combined capital cities.
Darwin maintained the highest annual rate of growth across the capital cities, increasing 21.0% in value over the financial year, followed by Hobart (19.6%). Across regional Australia, regional NSW had the highest annual growth in dwelling values (21.1%), followed by regional Tasmania (20.8%).
Monthly change in capital city home values
Sydney p 2.6% p 15%
Melbourne p 1.5% p 7.7%
Brisbane p 1.9% p 13.2%
Adelaide p 1.6% p 13.9%
Perth p 0.2% p 9.8%
Hobart p 3% p 19.6%
Darwin p 0.8% p 21%
Canberra p 2.3% p 18.1%
National p 1.9% p 13.5%
Demand remains strong
In May, the unemployment rate fell to 5.1%, and the underutilisation rate fell to 12.5%, the lowest level since February 2013. Consumer confidence remained elevated through June, although down from the recent April highs. Elevated savings accumulated through COVID-restrictions last year, along with a more confident consumer sector, has encouraged consumption of larger goods, such as housing. This has all occurred against a back-drop of continued low mortgage rates, which is one of the most significant demand drivers.
Advertised stock remains low
The latest listings count from CoreLogic indicates that in the 28 days to June 27th, total advertised stock remained 24.4% below the five-year average. This dynamic of strong consumer demand, and low housing supply, continues to create some urgency among buyers.
The monthly change in Australian home values of 1.9% sits well above the decade average (which is 0.4%). However, this month’s growth rate is down 30 basis points from May 2021, and 90 basis points from a recent peak in March 2021. The only capital city to see a further increase in the monthly growth rate was Canberra, where dwelling values were 2.3% higher over June, compared with a 1.7% gain in May.
Across the capital cities, a loss of momentum was most evident across Perth and Darwin. For Perth dwellings, the monthly growth rate in values had averaged 1.4% between January and May 2021, but fell to 0.2% through June. Across Darwin, the monthly growth rate in dwelling values averaged 2.1% between January and May, but was just 0.8% through June.
Softer growth rates are also apparent in the upper end of the market.
IS RENOVATING YOUR THING?
Buying a ‘renovator’s delight’ can be enticing, however it’s important to weigh the renovation skills you have against the costs involved of hiring a professional to do the work for you.
The real costs of the ‘bargain’ you have convinced yourself you can transform may end up being much higher than you expected.
- Do you currently own any tools? The cost of buying or renting the equipment alone may be the dealbreaker
- How’s your hardware store game? If you can formulate questions that illicit answers from the sales staff that make sense, you’re in front.
- Can you take time away from your real job? A self-employed builder can slot their own reno into their work schedule, but how realistic is it for you to come home from your office job to rubble and work every weekend on your renovation?
- Do you thrive or crumble at the unexpected? Renovations come with equal parts excitement and horror – glorious floorboards, or termite riddled sawdust under that carpet? Can you cope with whatever the unexpected outcome will be?
- Are you a good decision maker? From doorknobs to light fittings, taps to paint colours, renovation is 60% hard dirty work and 40% decisions. If you can’t even decide what to make for dinner, you may be in trouble.
FAMILY HOME GUARANTEE TO SUPPORT SEPARATED PARENTS
The transition between living in your family home and setting up two new separate lives, post-divorce, is complex and painful in almost every case. As the family navigates through the emotional trauma, solutions are put in place that solve immediate problems.
But over the long term, more permanent decisions must be made. The financial toll of this can be significant, not just in the aftermath, but on your long-term financial goals as well. The immediate need is to find a place to live and if you’re already paying all of the family’s existing living expenses, adding a 2nd residence to that can be costly. Consider the most inexpensive option you have and work out how long you could use that as a solution. Moving into a small cheap studio by yourself and only seeing the children at the family home or in public places (parks, beach, movies etc) can be heart breaking but might make better financial sense in the short term. The biggest dilemma will be prioritising between the emotional needs of the children and the financial needs of the family.
It’s important to remember that this period of rebuilding your life after divorce is hopefully only temporary. Giving yourself a year or two to focus on rebuilding will make better sense in the long run. Once you have the time frames clear you can also work out how much money you can realistically save during that time to put towards a property purchase in the future. For newly single parents, saving a deposit can be a real challenge, especially when capital post-divorce is so depleted.
Those who haven’t owned property before will be relieved to learn the Federal Government has released an additional 30,000 places under their First Home Loan Deposit Scheme. First launched in 2019, with 10,000 places available, its goal was to support and enable first home buyers to buy a home sooner; specifically, those with at least 5% of a deposit saved. In addition, the New Home Guarantee program has also launched, with 10,000 places, to support first homeowners who want to build or purchase a new home with a deposit as low as 5 per cent. More specifically however, is support for single parents with dependent children, in the form of the Family Home Guarantee. Targeted at this group in particular (especially women), the scheme extends to both new and existing homes, isn’t limited to first home buyers and requires prospective buyers to have just 2% of a deposit. This scheme also launched July 1st with 10,000 places available to eligible applicants.
The first step may be to invest small in something that solves a problem or has some potential to boost your savings. Over committing yourself in the midst of the fall out can be disastrous and you may never be able to get back in front again financially. The recovery period won’t be easy but if you’re patient and strategic, it can be revelatory. Try to make solid sensible decisions that provide solutions and help you on your way to rebuilding a brand-new future.