You may have noticed bearish headlines over the past few weeks where the property market and its affiliates were referenced, with words such as tightening, clamping and crunching being used. This is unsurprising given the downswing we are entering in the market cycle, but I believe further context and data are needed for a more grounded perspective.
The latest property market data and analysis has revealed stagnant growth in the Sydney house market, a historical high unit median for the Sydney market, easing in Melbourne and an ease in the fall of growth in the resource regions of Western Australia and the Northern Territory.
Table 1 presents the statistics summary for April.
Table 1: April 2016 Summary
As you can see in the table, quarterly growth in Sydney house values was a modest 0.03%. This comes off the back of losses in the March quarter, and the result is a stagnant median house value of just over $1,040,000 – where it has been hovering since January.
On the other hand, units in the Sydney market increased a significant 1.26% over the April quarter. This follows losses in January and the median value is now at a historical high of $695,000.
The Melbourne market experienced more significant easing in the April quarter, with declines in median values of approximately $5,000 and $3,000 in the house and unit markets respectively. With Melbourne having a tendency to follow Sydney at a lag, there could be further short-term fluctuations in this market to come over the next few months – rather than a distinct downward trend.
Property values continue to fall in the resource regions of Western Australia and the Northern Territory. However, even though April quarterly growth remained in negative territory in the Perth and Darwin house markets, the figures were slightly better than those recorded in the March quarter, suggesting an ease in the fall of growth. Annual growth for these markets is presented in Graph 1.
Graph 1: Annual Growth Rates – Perth and Darwin
The graph shows that property values have been falling in these areas throughout much of 2015 up to today. It has been established that movements in commodities can be closely tied to economic and housing market performance in WA and the NT. Despite a small rally in the commodity price index in the first quarter of 2016, iron ore is still less than one third of what it was worth when it peaked at US$180 in February 2011.
Additionally, profits from the mining sector are not as widely spread throughout the states, as the operational phase of the mining boom employs less labour than the construction period. Interestingly, it seems that the Queensland labour market is suffering a higher unemployment rate (6.5%) in response to mining divestment. This could be because of the tighter labour markets in WA and the NT, where workers have higher mobility in response to mining and construction projects.