Housing Market Update: Property Investor Summit

Housing market
update
Property Investor
Summit
February 2018 Tim Lawless
tim.lawless@corelogic.com.au
@timlawless
©2017 RP Data Pty Ltd t/as CoreLogic Asia Pacific. All rights reserved. Confidential. 1
Housing: Australia’s most valuable asset
class
Number of dwellings
9.9 million
Residential Real Estate Outstanding
$7.6 Trillion mortgage debt

$1.72 trillion
Australian Superannuation
$2.5 Trillion Household wealth
held in housing
Australian Listed Stocks 52.2%
$1.9 Trillion
Commercial Real Estate Total sales p.a.
466,176
$0.948 Trillion
Gross value of
sales p.a.
$299.3 billion
Source:
©2017 CoreLogic, RBA,
RP Data Pty Ltd ASX, ABS,
t/as CoreLogic APRAAll rights reserved. Confidential.
Asia Pacific. 2
The past nine years have seen capital gains
significantly skewed towards Sydney and
Melbourne
Cumulative change in dwelling values post GFC
(Jan 2009 to Jan 2018)
Source:
©2017 CoreLogic
RP Data Pty Ltd t/as CoreLogic Asia Pacific. All rights reserved. Confidential. 3
Poll Question One
Sydney and Melbourne have dominated capital gains over the
past two cycles, but which city is likely to be the strongest
performer over the coming five years?
a. Sydney
b. Melbourne
c. Brisbane
d. Adelaide
e. Perth
f. Hobart
g. Darwin
h. Canberra
i. Other (regional market)
Victoria and New South Wales accounted for
three quarters of jobs created nationally over
the past five years
Jobs growth by state, 2012 to 2017 Jobs growth by state, long-term
45% 35%
39.3%
40%
36.0% 30% 28.6%
35% 25.0% 24.8%
25%
30%
25% 20%
20% 17.1% 15% 12.7%

15%
10%
10%
5% 4.2%
5%
1.7% 2.1% 1.2% 0.7% 1.8% 1.2% 1.4% 2.1%
0% 0%
NSW Vic Qld SA WA Tas NT ACT NSW Vic Qld SA WA Tas NT ACT
Source:
©2017 CoreLogic, ABS
Jobs growth is now more broad based, with
stronger jobs creation spreading outside of Vic
and NSW
Annual change in trend employment Share of total job creation, 12 months to

December 2017
40%
35% 33.6%
30% 27.2%
25% 23.8%
20%
15%
9.8%
10%
5% 2.4% 2.5%
1.7%
0%
-1.0%
-5%
NSW Vic Qld SA WA Tas NT ACT
Source:
Victoria and New South Wales accounted for
almost two thirds of Australia’s population
growth over the past five years
Share of national population growth Share of national population growth
2012 to 2017 long-term
40% 30%
36.1% 27.1% 26.7%
35% 24.6%
25%
29.8%
30%
20%
25%
20% 19.3% 15% 13.2%
15%
10%
10% 8.3%
5% 4.2%
5% 3.6%
1.8% 1.9%
0.5% 0.5% 1.0% 1.3%
0% 0%
NSW Vic Qld SA WA Tas NT ACT NSW Vic Qld SA WA Tas NT ACT
Source:
Queensland now leads the nation in terms of
net interstate migration
New South Wales Victoria Queensland South Australia Western Australia
35,000 35,000 20,000 6,000 20,000
Net Overseas Migration
30,000 30,000 5,000

15,000 15,000
25,000 25,000 4,000
20,000 20,000 10,000 10,000
3,000
15,000 15,000
5,000 2,000 5,000
10,000 10,000
5,000 5,000 1,000
0 0
0 0 0
-5,000 -5,000 -5,000 -1,000 -5,000
'82 '87 '92 '97 '02 '07 '12 '17 '82 '87 '92 '97 '02 '07 '12 '17 '82 '87 '92 '97 '02 '07 '12 '17 '82 '87 '92 '97 '02 '07 '12 '17 '82 '87 '92 '97 '02 '07 '12 '17
0 8,000 18,000 1,000 4,000

Net Interstate Migration
-2,000 6,000 16,000 500 3,000

4,000 14,000 2,000
-4,000 0
2,000 12,000 1,000
-6,000 0 10,000 -500 0
-8,000 -2,000 8,000 -1,000 -1,000
-4,000 6,000 -2,000
-10,000 -1,500
-6,000 4,000 -3,000
-12,000 -8,000 2,000 -2,000 -4,000
-14,000 -10,000 0 -2,500 -5,000
'82 '87 '92 '97 '02 '07 '12 '17 '82 '87 '92 '97 '02 '07 '12 '17 '82 '87 '92 '97 '02 '07 '12 '17 '82 '87 '92 '97 '02 '07 '12 '17 '82 '87 '92 '97 '02 '07 '12 '17
Source:
Combined
capitals
Sydney
Source:
©2017 CoreLogic
Combined
Melbourne
capitals
Source:
©2017 CoreLogic
Combined
capitals
Brisbane
Source:
©2017 CoreLogic
Combined
capitals
Adelaide
Source:
©2017 CoreLogic
Combined
capitals
Perth
Source:
©2017 CoreLogic
Combined
capitals
Hobart
Source:
©2017 CoreLogic
Conditions are diverse
outside of the capitals.
Satellite cities and

coastal markets have
generally shown the
strongest growth rates
over the past twelve
months
Housing affordability has become challenging
across Sydney, and to a lesser extent, Melbourne
Sydney Melbourne Brisbane
<200k
200k <400k
400k <600k
600k <800k
800k <1m
1m <1.2m
1.2m <1.4m
>1.4m
Source:
©2017 CoreLogic
Dwelling price to income ratio, capital cities % of annual gross household income to service an
9.5
80% LVR mortgage, capital cities
60%
Sydney, 9.3
8.5
50% Sydney, 49.2%
Melbourne, 7.8
7.5
Melbourne, 41.2%
40%
6.5 Adelaide, 6.4 Adelaide, 33.9%

Brisbane, 31.4%
Brisbane, 5.9 30% Perth, 31.1%
Perth, 5.9 Hobart, 29.9%
Hobart, 5.6 Canberra, 27.2%
5.5
Canberra, 5.1 Darwin, 22.3%
20%
4.5
Darwin, 4.2
10%
3.5
2.5 0%
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-02
Sep-03
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Source:
©2017 CoreLogic
Gross rental yields have trended lower over
recent years as value growth has outpaced
rental growth
Gross rental yields Gross rental yields as at Aug-17
Source:
©2017 CoreLogic
Poll Question Two
Are rental yields an important consideration for you when
considering investment opportunities?
a. Yields are my highest priority when making an investment decision

b. Yield is important, but prospects for capital gain are more important
c. I don’t care about the rental yield, its all about location and
prospects for capital gain
d. I prefer a balanced approach to yields and capital gain
Listing numbers are starting to trend higher
in some cities, reducing urgency and
enabling buyers to negotiate Total advertised listings (rolling 28 day
count), combined capitals
Number of new and total properties advertised for sale, 28
days to 29 January 2018
No of new 12 mth No of total 12 mth
Capital city
listings change (%) listings change (%)
Sydney 4,436 -9.2% 20,249 23.3%
Melbourne 4,889 -9.8% 23,697 1.7%
Brisbane 3,295 -7.5% 18,629 2.3%
Adelaide 1,592 -9.1% 7,698 1.4%
Perth 3,326 -5.9% 19,989 -6.4%
Hobart 299 -6.3% 1,018 -37.4%
Darwin 116 -9.4% 1,438 -3.9%
Canberra 562 16.6% 1,799 10.1%
Combined capitals 18,515 -7.8% 94,517 3.1%
Source:
©2017 CoreLogic
Auction clearance rates were trending
lower throughout most of 2017 but have
started 2018 on a stronger footing
Auction clearance rates (four week average)
Melbourne
Sydney
All capitals
weighted average
Source:
©2017 CoreLogic
Apartment supply remains elevated in
some markets, but approvals are generally
trending lower
Source:
The pipeline of new unit supply remains
close to record highs
Houses and units under Houses under construction by state Units under construction by state
construction, national
Source:
Poll Question Three
I think off the plan unit markets are:
a. Substantially oversupplied
b. Oversupplied within specific areas / product types
c. Supply is appropriate relative to demand
d. Undersupplied
6 month average value of lending to investors
A slowdown in
investment demand
will have a more
substantial effect on
Sydney and
Melbourne where
% of total lending (ex refinances) to investors investment is most
concentrated.
Source:
First home buyers have shown a sharp
response to stamp duty concessions in
NSW and Vic First home buyers as a % of all owner occupier
First home buyers as a % of all owner occupier housing finance housing finance commitments, Nov 2017
commitments
Source:
Mortgage rates remain around historic lows
for owner occupiers but are 60 bp’s higher for investors
Source:
©2017 CoreLogic, RBA
Regulatory changes and higher mortgage rates
have impacted on investment demand and
interest-only demand has shrunk significantly
Annual change in housing credit
15.0%
% of mortgages originated on interest only terms
10.0% APRA 10% speed limit
50% 45.6%
5.0% 45%
Owner occupier housing Investment housing
40%
0.0% 35%
Dec-07 Dec-09 Dec-11 Dec-13 Dec-15 Dec-17 30%
25% APRA 30% origination target
% of mortgages settled with an LVR>=80% 20%
16.9%
15%
Sep-08
Sep-09
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Source:
©2017 CoreLogic, APRA,
RP Data Pty Ltd RBA Asia Pacific. All rights reserved. Confidential.
t/as CoreLogic 28
Mortgage rates likely to remain low
Household debt to disposable income ratio
Source:
Poll Question four
My views on the local market going forward with regards to

annual capital gains
a. At least 10% growth over the next year

b. Values to rise 5-10%
c. Values will rise but less than 5%
d. Values will fall but not by more than 5%
e. Values will by 5-10%
f. Values will fall by more than 10%
g. Not sure
Where to from here?
• Sydney has moved through its peak growth phase, but expecting a controlled slowdown and only
moderate fall in dwelling values.
• Melbourne more resilient, but also slowing.
• Hobart has been the standout for capital gains, but its growth run is likely to ease in 2018.
• Perth is likely approaching the bottom of its downturn.
• Brisbane and Adelaide recording modest capital gains.
• Caution around inner city unit markets, particularly Brisbane, Melbourne and Perth.
• Higher demand from owner occupiers may help to offset a slowdown in investment activity.
• Regional lifestyle markets are rebounding strongly and satellite cities are performing well.
• Resource driven markets are showing signs of improved conditions but a recovery will take a long time.
About Us
CoreLogic Australia is a wholly owned subsidiary of CoreLogic (NYSE: CLGX), which is the largest property data and analytics
company in the world. CoreLogic provides property information, analytics and services across Australia, New Zealand and Asia, and
recently expanded its service offering through the purchase of project activity and building cost information provider Cordell. With
Australia’s most comprehensive property databases, the company’s combined data offering is derived from public, contributory and
proprietary sources and includes over 500 million decision points spanning over three decades of collection, providing detailed
coverage of property and other encumbrances such as tenancy, location, hazard risk and related performance information.
With over 20,000 customers and 150,000 end users, CoreLogic is the leading provider of property data, analytics and related services
to consumers, investors, real estate, mortgage, finance, banking, building services, insurance, developers, wealth management and
government. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and geo spatial
services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk.
CoreLogic employs over 650 people across Australia and in New Zealand. For more information call 1300 734 318 or visit
www.corelogic.com.au
CoreLogic produces an advanced suite of housing market analytics that provides key insights for understanding housing market conditions at a granular
geographic level. Granular data is often used for portfolio analysis and benchmarking, risk assessments and understanding development feasibility and
market sizing. It gives industry professionals valuable modules which provide essential analytics and insights for decision making and strategy formation
within the residential property asset class. We can tailor reports to suit your business requirements.
Call us on 1300 734 318 or email us at ask@corelogic.com.au or visit us at www.corelogic.com.au
Granular Data and Analytics
Market Scorecard: Monitor and measure market share and performance of real estate agents at an individual office or a Franchise brand level
across Australia. Identify the competing brands and independents at a suburb, postcode, user defined territory and State level. Easily locate
growth opportunities and market hotspots, and view the performance of the established offices in these new areas of interest.
Market Trends: Detailed housing market indicators down to the suburb level, with data in time series or snapshot and segmented across
houses, units and land. The Market Trends data includes key housing market metrics such as median prices, median values, transaction
volumes, rental statistics, vendor metrics such as average selling time and vendor discounting rates.
CoreLogic Indices: The suite of CoreLogic Indices range from simple market measurements such as
median prices through to repeat sales indices and our flagship hedonic home value indices. The CoreLogic Hedonic index has been specifically
designed to track the value of a portfolio of properties over time and is relied upon by Australian regulators and industry as the most up to date
and accurate measurement of housing market performance.
Economist Pack: A suite of indices and indicators designed specifically for Australian economic commentators who require the most up to date
and detailed view of housing market conditions. The economist pack includes the CoreLogic Hedonic indices for capital cities and ‘rest of state’
indices, the stratified hedonic index, hedonic total return index, auction clearance rates and median prices.
Investor Concentration Report: Understanding ownership concentrations is an important part of assessing risk. Areas with high investor
concentrations are typically allocated higher risk ratings due to the over-representation of a particular segment of the market. Through a series
of rules and logic, CoreLogic RP Data has flagged the likely ownership type of every residential property nationally as either owner occupied,
investor owned or government owned.
Mortgage Market Trend Report: CoreLogic RP Data is in a unique position to monitor mortgage related housing market
activity. Transaction volumes, dwelling values and mortgage related valuation events all comprise our Mortgage market
trend report which provides an invaluable tool for mortgage industry benchmarking and strategy.
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Housing market

Residential Real Estate Outstanding

$7.6 Trillion mortgage debt

Jobs growth by state, 2012 to 2017 Jobs growth by state, long-term

20% 17.1% 15% 12.7%

Annual change in trend employment Share of total job creation, 12 months to

20% 19.3% 15% 13.2%

30,000 30,000 5,000

0 8,000 18,000 1,000 4,000

-2,000 6,000 16,000 500 3,000

Satellite cities and

6.5 Adelaide, 6.4 Adelaide, 33.9%

a. Yields are my highest priority when making an investment decision

I think off the plan unit markets are:

Household debt to disposable income ratio

My views on the local market going forward with regards to

a. At least 10% growth over the next year

• Melbourne more resilient, but also slowing.

• Perth is likely approaching the bottom of its downturn.

• Brisbane and Adelaide recording modest capital gains.

Call us on 1300 734 318 or email us at ask@corelogic.com.au or visit us at www.corelogic.com.au

Base data from the LIST © State of Tasmania http://www.thelist.tas.gov.au

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