This Week in Real Estate: Property news that you can trust
Value of Homes Tops 8 Trillion
Australian property market hits an all-time high with the value of homes topping $8 trillion. Well ahead of shares, superannuation, and commercial developments, housing remains the nation’s largest asset class.
According to CoreLogic’s latest analysis review, the total value of residential real estate in Australia has reached $8.1 trillion, followed by superannuation with $3 trillion, Australian listed stocks with $2.7 trillion, and finally, commercial real estate with $964 billion.
CoreLogic head of research Eliza Owen says, “The Australian dwelling market has reached fresh record highs for the past four months and the end of April marked the first time the total value of Australian housing broke the $8 trillion mark”.
This latest data suggests that in the three months to April, house prices rose by 6.8% across the country, the fastest and highest quarterly growth since December 1988.
According to Owen, “This puts residential property at around four times the size of Australian GDP and $1 trillion more than the combined value of the ASX, superannuation and commercial real estate stock.”
Budget Expands FHB Scheme
Another 10,000 places will be added to the First Home Loan Deposit Scheme (FHLDS). The report was confirmed by Treasurer Josh Frydenberg in this week’s Federal Budget.
With this incentive, first-home buyers are allowed to buy a new home with a deposit of 5% without having to pay lenders mortgage insurance (LMI). The remaining 15% will then be guaranteed by the Government.
Each wave of the FHLDS consists of 10,000 spots, and the last wave saw the caps on the value of eligible new homes lifted to $950,000 in Sydney, and $850,000 in Melbourne. In other capital cities, participants could buy properties worth $550,000.
According to Frydenberg, “It is about giving people the opportunity to get into the market”.
The Federal Budget also lifted the maximum amount of superannuation contributions that can be released under the First Home Super Saver Scheme. For a first-home deposit, an amount of $30,000 to $50,000 can be used.
No Budget Change on Tax Matters
According to the official delivery of the Federal Budget, here will be no changes to the personal income tax brackets for 2021-2022. While the 2021 budget includes a number of measures relevant to property investors, it does not change existing arrangements on negative gearing, nor does it touch capital gains tax.
This lack of action on negative gearing was largely foreseen by property experts like Viktor Kumar of the Right Property Group. According to Kumar, “parties don’t mess around with property and tax pre-election. If they do, they get annihilated at the elections”.
With a new “Family Home Guarantee” having been introduced, up to 10,000 single parents will be allowed to purchase a home with as little as a 2% deposit over the next four years.
The scheme comes into effect from 1 July 2021 and is subject to a similar price cap system as the existing First Home Buyers scheme.
Launched last year, the FHLDS (New Homes) scheme will be expanded for a second year and will provide an additional 10,000 places in 2021-2022.
194,000 Homes To Be Built This Year
Forecasts by Master Builders Australia are suggesting a surge in residential construction across the country. A rise to 194,257 homes by July 1is predicted by the MBA along with a strong residential construction activity in 2021-2022, countering a 10.6% fall in commercial activity.
This prediction reflects the impact of HomeBuilder which also drove a 12.4% increase in home renovations, and a strong residential construction activity in 2021-2022 with 151,754 new builds.
MBA represents the $200 billion building and construction sector. This lobby group had painted a gloomy picture at the height of last year’s pandemic suggesting a mere 115,822 builds. Their final prediction is now expected to exceed construction levels of 2019-20 by 13.4%.
This expects the number of HomeBuilder applications will come in at 130,000 once the final numbers are released. The value of residential construction work that is directly supported by HomeBuilder is expected to peak at $39.36 billion and also 355,145 full-time jobs.
Vacancy Rates Drop to 1.9%
According to SQM Research, the national residential rental vacancy rate has dropped to 1.9% in April from the 2.1% mark in March, and from 2.6% a year ago. Six of the eight capital cities have vacancy rates that are below the national average of 1.9%, including five which are below 1%.
Louis Christopher of SQM says that suburban vacancy rates continue to fall and that “landlords are demanding huge rent hikes in some locations including the Gold Coast and North Coast NSW”.
Right now, the total number of vacancies across Australia is 66,411 residential properties which is down from 72,436 in March. The vacancy rate in Melbourne fell to 4.0% in April from the previous 4.4%, while in Sydney, the drop is 3.1% from 3.4%.
The vacancy rate remained below 1.0% in Perth, Adelaide, Canberra, Darwin and Hobart, while in Brisbane, the vacancy rate fell to 1.4%.
Meanwhile, with apartment oversupply in the Sydney CBD and Melbourne CBD, vacancy rates jumped to 7.3% and 8.3%, respectively.