Debuilt director Danny Burger reports on a breakfast discussion about the challenges and opportunities in construction finance. Property market analytics and a news summary also provide valuable insight to the industry’s current climate.

EXPERT COMMENTARY

NEWS SUMMARY

Key Points:

• Australian companies are optimistic about the housing market’s recovery

• Hobart is the least affordable city in Australia for rentals

• The rest of Australia appears to be becoming more affordable

• Residential construction is down, but non-residential construction is up

Residential Market

This week there was optimism for a housing market recovery.

The Australian reported that brickmaker Brickworks believes that the market downturn was an interruption to a long, upward trend in Australia. Despite lower profits in the September quarter compared to last year, the company is positive that the market is now set for success with looser lending restrictions and potential further rate cuts. (Perry Williams, 26/11/19 – Brickworks upbeat despite lower earnings)

The Age highlighted that real estate agency McGrath has forecasted a return to earnings growth for FY20. McGrath bases its prediction on demand outpacing supply and purchasers’ fear of missing out on properties before prices rise significantly. (Carolyn Cummins, 28/11/19 – McGrath flags return to growth as housing sentiment lifts)

The AFR reported that French champagne brand Piper-Heidsieck is also seeing rising sales and Australia’s house price boom is a key driver. (Simon Evans, 25/11/19 – House price boom drives champagne to the suburbs)

Housing Affordability

In the AFR, the most recent Rental Affordability Index revealed that Hobart has the least affordable rents in Australia for the second year in a row, partly due to the strength of the short term holiday market. On the other hand, Sydney, Melbourne and Brisbane have seen affordability improve for their rental markets. (Nila Sweeney, 27/11/19 – Hobart faces rental crisis as average households struggle to pay)

The AFR also highlighted the improvement in affordability for quality and ‘liveable’ Sydney and Melbourne suburbs. Falling prices have opened up options for buyers who would have been unable to afford them 12 months ago. The PRD nationwide report identified Melbourne’s Caulfield North and Sydney’s Croydon Park as both liveable and affordable suburbs. (Michael Bleby, 28/11/19 – ‘Liveable’ suburbs get more affordable, but it won’t last)

See more suburbs that have improved in their affordability and liveability in The Urban Developer article Australia’s Most ‘Liveable’ Suburbs Become More Affordable.

Not all suburbs are seeing success. The AFR reported that lack of interest in higher-end properties indicates that the market has not fully recovered. Four homes priced over $3 million in Melbourne’s inner-city suburbs did not attract any bidders last weekend,. (Duncan Hughes, 24/11/19 – Melbourne’s top end goes from boom to bomb)

Construction Sector

Declining residential construction was a common topic in the media this week after the ABS released construction figures on Wednesday. The AFR reported that home building has now declined for the fifth-straight quarter, forcing the industry to rely on non-residential work. Residential construction declined 3.1% from the June quarter, which is the lowest level since September 2015. JPMorgan predicts that reliance on the non-residential sector “imparts some modest upside risk” to private capital expenditure and GDP growth. (Michael Bleby, 27/11/19 – Home building and infrastructure work contract in September quarter)

The Australian reported that the reduction in residential construction will make it more difficult for low income earners to enter the property market. A report by PowerHousing Australia and CoreLogic reveals that factors which usually improve accessibility into the housing market, such as lower interest rates, improved serviceability and greater access to credit are being negated by increasing values and decreasing building approvals and construction rates. (Mackenzie Scott, 28/11/19 – Construction drought squeezes affordability as values rise again)

In contrast, the AFR reported that commercial construction will flourish for another year, leaving residential and infrastructure construction behind. New investment in offices, warehouses, schools and hotel and leisure projects could be the cause of this increase in non-residential construction. (Michael Bleby, 27/11/19 – Construction boom gets an extra year’s boost from non-residential work)

View the decline in construction rates and other up-to-date market data with Debuilt’s property market analytics.

PROPERTY ANALYTICS

Our property analytics includes a simple collection of graphs that we update monthly. We find that it provides us with a high level dashboard to assist us in keeping track of a selection of key statistics.

Feel free to check out our selection of key market analytics:

ARCHITECTURE & DESIGN

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To learn more about Debuilt Property please visit www.debuilt.com.au or email either Paul: pabrahams@debuilt.com.au or Daniel: dburger@debuilt.com.au.

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