Heard the expression “a rising tide lifts all boats”?
That’s more or less what’s happening in the Aussie property market right now. There are factors that are driving the entire market – record low interest rates, aggressive buying from overseas, tsunamis of easy money sloshing round the globe.
These things will have an impact on every property market in the country. But that’s not to say that individual markets will have the same experience. Some will move from stable to booming. Some will go from bad to not-so-bad. Some might even get worse, if local factors dominate the national trends.
So I’ve been wondering a bit lately about what markets will be shifting into boom gear. We’ve all heard about the boom in Sydney. The newspapers are full of it. But where else?
This graph caught my eye the other day. It comes from the ANZ survey of property professionals. I think by that they just mean real estate agents. I don’t remember getting a call. Maybe it’s in my spam box.
Anyway, the take-home message should be familiar to us now. Across the country, property industry confidence is strong, and the best it’s been in years.
That’s what the series of bars at the end tells us. – the national results.
But what piqued my interest was the state-by-state break-downs. There’s a few things we all knew about. Like the boom in NSW. Confidence there has spiked, as Sydney drops it into overdrive.
And then there’s the moderation of confidence in WA and the NT. Conditions seem to have eased a bit over the past year or so, but are still holding at very healthy levels.
And things have only eased because things were so out of control before. Look at the NT in June 2012. When asked about the property outlook, agents were ticking the box that said: “Wetting myself with excitement.”
So agents may have stopped hyper-ventilating, but they’re still feeling up beat.
But this is all old news. What really struck me was the sudden party-vibe going round Queensland real estate agents.
The vibe has been pretty sombre over the past year or so, then suddenly bam, they’re breaking out the champagne glasses. Confidence has made a huge jump in the most recent survey, from 115 to over 140 on the index.
And suddenly real estate agents in Brisbane are as pumped as they are in Sydney.
But hang on. Sydney is in the middle of a boom. Does that mean Brisbane is too?
Well, why don’t we take a look, my dear Watson.
To start with, one of the first things that gave us fore-warning of the boom in Sydney was Auction clearance rates. Weekend after weekend, they’re still giving 90% a nudge.
Brisbane clearance rates are only hitting towards 50%. But then, auctions have never been that popular a way to sell a house in Brisbane, and auctions rarely clear that well there.
So when you remember that Brisbane averaged around 35 percent through 2010, the jump up towards 50% is impressive, and in line with the jump in Sydney.
And anecdotally, auctions are attracting a lot of attention. Local auctioneer Jason Andrew has said that his average crowd sizes are up, from around 18 previously, to around 40 in recent weeks.
So there’s clear signs that the market is hotting up.
There’s early signs of heat in the price data too. RP Data report property values were up 1.7 percent in the September quarter. While that’s only 2.5 percent higher than a year ago, if it keeps up that pace, we’re looking at around 10 percent year on year. It’s starting to look pretty healthy.
But probably a key reason why there’s a fair bit of upside to the Brisbane outlook, is that Brisbane is still a fair way of its peak. RP Data report that house prices are still 10 percent lower than they were back in November 2009, and have been under-performing the national market since.
BIS Shrapnel reckon that there was a widely-held perception that the Brisbane market was over-priced and over-supplied, and this together with a lower rate of net migration and softer economic conditions created a recipe for a disappointing property market.
However, BIS Shrapnel also reckon that’s Brisbane prices have over-corrected, and they’re now looking for a bit of bounce back. As they note, there’s been a level of under-building in recent years, and the rental market is starting to pick up.
Probably the chart that gets closest to the heart of this for my money is this one here from RP Data. It compares house prices to rents over the past 5 years.
It’s a pretty stark difference. While house prices have been falling (3.3% since December 2007), rents have continued to increase. Rents are now up 27% over this period, creating a yawning gap between rent and value growth.
This can’t go on forever. Sooner or later, this will pull yield-hunting investors back into the market, as well as renters who now find that it’s cheaper to buy than rent.
6 years is a pretty long time in terms of property corrections, and my thought is that this has to be coming to an end.
And it looks like I’m not the only one. Real estate agents across Brisbane seem to be agreeing with me.
There seems to be a widely-held view that the correction is over, and prices are going to bounce back – supported of course by record low interest rates and EZ money.
And, as I’ve noted in other places, Brisbane and SEQ have been attracting some serious attention from Chinese buyers.
So here’s my tip. Over the next 6 months, the papers will start filling up with headlines about the boom in Brisbane.
You heard it here first.