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May 6, 2021
REA Insights Commercial Property Snapshot
After a record-breaking March, demand for commercial property eased slightly in April. Despite the dip in activity, April marked the second-highest month on record for ‘Buy’ searches on realcommercial.com.au. In this month’s commercial snapshot, we continue to track search volumes over time and demand by category. We also provide a view of user behaviour by analysing the most-searched keywords per asset class as well as looking at the most popular commercial property listings for the month. How are search volumes tracking? As COVID-19 affected the property market in both March and April 2020, we continue to observe large year-on-year growth figures. ‘Buy’ searches are up 61% year-on-year, while and ‘Lease’ searches have surged 65%. ‘Buy’ search volumes were the second highest they have ever been across all states bar the Australian Capital Territory, where searches increased 7% month-on-month to a new record high. National ‘lease’ search volumes were 12% lower than the peak seen in March. ‘Lease’ searches in the Australia Capital Territory recorded the smallest drop among the states, just 3% below its peak the month prior. The year-on-year jump is visible across all categories. Given it’s resilience during COVID-19 lockdowns, the year-on-year change in searches for commercial farming was the lowest of the asset classes, up 26%. Conversely, searches for medical/consulting and office listings were impacted the most last year but have positively bounced back, recording high year-on-year increases of 171% and 155% respectively. In particular, search volume for office spaces continue to rise as commercial property seekers look for non-CBD office spaces. What are people and businesses looking to buy? Compared to the other categories that have recorded high year-on-year growth of more than double, the hotel/leisure sector appears to not have fully recovered from the impacts of the pandemic, recording a relatively modest year-on-year increase of 61%. This is likely due to the significant deceleration of travel and entertainment and uncertainty around the length of time it will take these sectors to recover. In April, showrooms was the only category that recorded a positive month-on-month change (3%). This was prominently attributed to the 41% increase in New South Wales, which saw the highest month-on-month growth across all states and categories. The chart below shows the month-on-month percentage change of views per listing, rather than the typical year-on-year figures usually presented in this report. The year-on-year trend is abnormally high given demand the impacts of the lockdowns 12 months ago. What are people and businesses looking to lease? All lease categories recorded a month-on-month drop in views per listing, the largest of these being commercial farming (-11%), offices (-11%) and warehouses (-10%). For offices, the decrease can be attributed to New South Wales (-14%) and Western Australia (-15%), which saw the largest declines. The national decrease recorded for warehouses was driven by all states bar Tasmania, which saw a 3% month-on-month increase. In April’s analysis of the top searched keywords, ‘freehold’ appeared in all categories except industrial/warehouses, suggesting a growing desire to have complete control over a commercial property. The keyword made its first appearance in the retail sector this month. Additionally, the showroom/bulky goods category seems to be almost synonymous with the industrial/warehouse category, as ‘warehouse’ became the top-searched keyword for the former type of listings this month.
May 6, 2021
NEW LISTINGS LIFT SUBSTANTIALLY
If you’ve been holding off selling your home, for fear of becoming homeless, the market is finally sending the signal you’ve been looking for according to CoreLogic’s latest national home value data. You’d be hard pressed to find anybody in Australia who isn’t aware that it’s a ‘vendor’s market’, and has been since June last year. Until now, one of the reasons is that so many homeowners are not prepared to sell, frightened they’ll not being able to find another home in a reasonable timeframe. That’s because advertised stock levels have been running at 25% below the five-year average, until late April at least. However, now the pendulum has swung somewhat, with new listings to market now well above average, relative to the past two years. This is positive news for those that would like to move, but have been discouraged by the degree of buyer competition they read about. While advertised stock levels are still low, more property is flowing onto the market and relationships with local agents have never been more important. A substantial number of those new listings are not being advertised, either because vendors are preferring discrete sales, or because agents are able to strike agreements between seller and buyer rapidly. Housing values lift 1.8% in April CoreLogic’s national home value index recorded a 1.8% rise in April, with the monthly pace of gains easing from a 32-year high in March of 2.8%. Although the pace of growth has slowed, housing values are still rising rapidly, up 6.8% over the past three months alone – now 10.2% higher than last year’s September COVID low. Small fish are sweet The four smallest capital cities recorded double digit annual growth (Adelaide 10.3%, Hobart 13.8%, Darwin 15.3% and Canberra 14.2%), reflecting a smaller COVID-related disruption and an earlier start to the growth phase last year. Melbourne is recording the lowest level of annual growth (2.2%) due to a larger downturn, attributable to the extended lockdown period last year. Preference for houses over apartments The trend of houses outperforming units continued last month, yet again, as Australians demonstrated a preference for more space, a backyard, or a regional relocation – tree change/sea change. This shift away from higher density housing during a global pandemic is understandable, however a rise in flexible working arrangements also seems to be supporting greater demand for houses around the outer-fringes of capital cities. Relatively weak investor activity, compounded by a supply overhang in some CBD high-rise precincts, is also dampening price growth in unit markets. Upper quartile still leading growth Continuing the opposite of last year’s trend, the upper quartile of the housing market rose 8.8% in the last quarter, compared with a 4.1% lift in values across the lower quartile.
Apr 1, 2021
National home value index rises at its fastest pace in 32 years
CoreLogic’s national home value index recorded a 2.8% rise in March, the fastest rate of appreciation since October 1988 (3.2%). These exceptionally strong growth conditions remain broad-based, with values rising by at least 1.4% across each of the capital cities and ‘rest-of-state’ areas over the month. Sydney led the pack for capital gains in March, with values surging 3.7% over the month and 6.7% higher over the first quarter of the year. According to CoreLogic’s research director, Tim Lawless, “The last time Sydney housing values recorded a quarterly trend this strong was in June/July 2015. Following this brief surge, the pace of growth rapidly slowed as limits on investor lending kicked in to slow the market.” Across the regional markets, gains were highest in NSW, where values were up 2.8% over the month. March marked several inflection points across the market: Sydney and Melbourne have now staged a full recovery from earlier downturns. With the acceleration in capital gains across Sydney and Melbourne, the larger capitals have started to outpace many of the smaller cities that were previously leading the charge in growth. Sydney dwelling values are now 2.6% higher than their July 2017 peak: a remarkable recovery considering the -14.9% drop in values through to May 2019 and the further -2.9% fall throughout the COVID downturn. Similarly, Melbourne housing values have recovered from the -11.1% fall between 2017 and 2019, and the -5.6% drop in values through the worst of the COVID related downturn to set a new record high in March. Additionally, for the first time in a year, growth in capital city housing values outpaced the regional markets. CoreLogic’s combined capital cities index recorded a 2.8% lift in March compared with the 2.5% gain seen across the combined regionals index. “Housing values in regional areas are 11.4% higher over the past year, demonstrating the earlier stronger growth trend; capital city values are now 4.8% higher on an annual basis with the acceleration in growth evident in March,” Mr Lawless said. In March, Victoria was the only state where regional housing values rose at a faster pace than their capital city counterparts. Regional Victorian values were up 2.6% compared with a 2.4% rise across Melbourne. Lower density housing has continued to outpace higher density housing for capital gains. Nationally, house values were 3.0% higher over the month while unit values were up a more modest 1.9%. Across the combined capitals, the quarterly growth rate for houses (6.5%) is more than double that of units (3.1%). “Despite the underperformance, unit markets have turned a corner, with Sydney recording two consecutive months of rising values, while the Melbourne unit market has seen values consistently rising since October last year, with the trend accelerating over recent months.”
Mar 31, 2021
REA Insights Weekly Commercial Search Report
Australia’s commercial market continues its recovery with search volumes continuing to track upwards for both ‘Buy’ and ‘Lease’. Over the past week, searches to buy commercial property increased by 5% on realcommercial.com.au to reach the highest weekly volume on record. Compared to the 12 months prior, ‘For sale’ searches were up 112.1%, reflecting the beginnings of the impact of COVID-19 over March 2020. Buy searches increased in every state over the past week, excepting South Australia where volumes held steady. The largest weekly rises were seen in the Australian Capital Territory (17.8%) and New South Wales (11.7%), with growth in Victoria (1.9%), Queensland (4.1%) and Western Australia (6.6%) at more modest levels. ‘For lease’ search volumes for commercial property also reached a new record, rising 3.8% over the past week and up 125.4% from levels seen 12 months ago. Leading the increase in lease searches were the Australian Capital Territory and Tasmania, where volumes were up 16.6% and 15.6% respectively week-on-week. New South Wales (3.3%), Victoria (4.5%) and South Australia (4.6%) also saw reasonably strong weekly growth, while the Northern Territory was the only state to record a decline (-1.6%) in searches over the past week. The upward trend in search volumes is a positive signal for the recovery of commercial property, as businesses start to regain confidence.
Mar 26, 2021
SHARPEST GROWTH IN 17 YEARS
According to CoreLogic, Australian home values surged 2.1% higher in February; the largest month-on-month change in the national home value index since August 2003. A combination of record low mortgage rates, improving economic conditions, government incentives and a significant shortage of inventory has created a broad-based boom across the housing market nationally. Values rose in every capital city, and throughout each state regionally, confirming a growth phase that hasn’t been seen in Australia for more than a decade. Sydney and Melbourne were amongst the strongest performing markets, gaining 2.5% and 2.1% respectively in just four weeks, however, the quarterly trend saw smaller cities like Darwin (5.5%+), Hobart (4.8%+) and Perth (4.2%+) outperform their larger cousins. Both Sydney and Melbourne remain below their peaks, but at this rate it won’t be long before new record highs are established. Annual regional price gains exceed capital cities The outflow of city-based residents continued through February, with regional markets gaining a further 2.1%, thereby turning in a stronger performance. However, the performance gap has narrowed, compared with the earlier phase of the growth cycle. Regional house prices experienced less of a decline last year, when city properties were worst affected by COVID, but putting everything in context, regional housing values have increased 9.4% in the past year, whereas city prices have risen 2.6%. Why are property prices increasing so rapidly? CoreLogic’s most recent measure of total listing numbers continues to see advertised inventory significantly below that of recent years. The number of properties advertised for sale nationally remained 26.2% below 2020 levels over the 28 days ending February 21. This level of supply represents historically low levels, on a month per month basis, however the quarterly trend hold promise for buyers. By that measure, the number of home sales is up 35.3% on 2020 levels, with regional dwelling sales 40.6% higher compared with a 32% lift in capital city sales. The imbalance between supply and demand is the central factor driving house prices higher. With supply at record lows for this time of year and buyer demand well above average, conditions favour sellers.
Mar 2, 2021
Brisbane's Month in Review
The Brisbane office market presently has a high level of uncertainty with more questions than answers about its future direction and the ongoing impacts of COVID 19. Almost a year on from the start of the COVID 19 crisis, it is clear that office markets remain the sector about which there is most conjecture and the greatest level of market uncertainty. Adding to this uncertainty is the volatile trajectory of the disease in Australia and the response that has seen offices quickly emptied as workers were sent home for lengthy lockdowns. Whilst the lockdown in Queensland was ostensibly the shortest of the three eastern states, there has been an extended period of work from home for many CBD offices which was only relaxed in the latter months of 2020. Even then, it is now clear that many workplaces are instituting far more liberal work from home arrangements with a consensus seeming to form around a two- or three-day office presence (with Mondays and Fridays the preferred work from home days). The impact of these arrangements on the ongoing need for office accommodation will be profound and have follow through impacts on office markets for years to come. At a basic level, it would appear that there is a significant under-utilisation of office space at the present time. Whilst the extent of this will oscillate through the working week and doesn’t therefore directly correlate to an ability to reduce office space by a commensurate amount, it is now putting a huge question mark on the future office needs of every organisation, with the prospect of widespread downsizing as leases expire. The immediate impact of this on office markets is: a heightened level of uncertainty; shorter lease terms; more flexible lease options; and significant increases in the availability of sublease space. This is likely to ultimately translate into reduced effective rent levels (initially via increased incentives) and will have longer term impacts on the viability of future development. To date we have observed substantially reduced levels of leasing activity for larger requirements, shorter lease terms and a dramatic slowing in the volume and size of office market transactions. There is not yet broad-based evidence of face rental reductions, however this is a high probability as overall vacancy increases. The principal impact has been felt in the CBD and fringe markets to date. Suburban locations appear to be holding up so far. It is however shining a stronger spotlight on the need for good quality buildings, strong locations, good parking ratios and accessibility as keys to securing tenants. In terms of investment activity, there are few transactions however those that have occurred have been for properties with strong lease covenants and a healthy WALE or term certain. In particular we note that properties with government backed leases are keenly sought and have formed the predominance of the post-COVID sales activity. A recent sale in this regard was 36 Brandl Street, Eight Mile Plains at an analysed yield of approximately 6.64% having a WALE of 4.85 years with a state government lease profile (74 per cent of the achievable gross income). The future of the Brisbane market is dependent upon how the COVID crisis continues to unfold. There is a large weight of money seeking good quality investment property, however confidence levels are very fragile and the markets could easily be spooked if there were further significant outbreaks.