Time is flying and we’ve seen much happen globally over the past ten years. Australia has accomplished many great things and we’ve felt all types of impact over the last decade, 2009 to 2019 within the property market.
Principal of Suburbanite, valuer and market commentator, Anna Porter, takes a look into the past decade of property and establishes which capital cities fell off a cliff.
The Global Financial Crisis of 2007 and 2008, lead us into the past decade of property.
“Markets generally across the country, especially in capital cities, got some real turmoil in the 2010, 2011 period, off the back off the GFC,” says Anna Porter.
“The property market DOES NOT respond as quickly as the share market. Whilst we appreciate the GFC was in around 2007-2008, the property market took a little bit longer to respond to that and we had a tough, challenging economy,”
“The 2010, 2011, negative growth trends we saw generally across the capital cities was certainly a reflection of that and most of our Australian markets with the exception of Darwin and to a lesser extent Perth, went into a recovery period from 2012 onwards.”
But from the back end of 2018 through much of 2019, all the markets except Canberra and Hobart have started to see negative trending again which has been very tightly linked into the Banking Royal Commission, lending crunch, APRA put a cap on investment lending which pulled investors out of the market to close to 12 months except for really strong cash investors, and also the federal election.
Porter calls out the Politicians, and believes they should not allow three major economic influences cumulate in the same 12-month period again as it has had a devastating effect on the property market for the end of the decade.
Here’s Porter’s Highlight Reel for the end of the Decade.
Wondering where was the worst performing city for the decade? Darwin certainly takes the cake and saw a negative again for 2019.
Perth was in the negative and Adelaide just slid into the negative momentarily, it just almost got away with it but we saw a slight negative trend for 2019.
Brisbane hit a small negative for 2018/2019, whereas Melbourne and Sydney fell off a cliff in the same period, and wiped off much of the growth that was seen in 2017. Melbourne still sitting -3.7% lower than its 2017 November peak and Sydney a whopping -8.0% lower than its July 2017 peak according to corelogic.
Hobart is one of the few markets that did not go negative in 2019.
Canberra was the only other capital that didn’t slip into the negative for 2019 and it pushed through the really turbulent times.
“I do not see Hobart as being sustainable but Canberra is definitely a good news story,” shares Porter.
“Hobart was the front runner for the end of the decade and had 4.2% growth. This mainly came from it being the cheapest market in the country, so when investors had trouble accessing money in the past 12 months, a lot of investor turned to Hobart where they could buy an investment property for the price of a luxury car.”
When a lot of investors just didn’t have any real significant borrowing power for mainland, capital city style, blue-chip investments they looked at what their alternatives were and flocked to Hobart which drove prices up.
“But this was not built on any sustainable indicators like employment, migration or infrastructure spend, so it will be short lived,” according to Porter.
Canberra had 3% growth over the past year, and Porter sees it as a really sustainable market.
“Canberra had great growth over the past year and was able to sustain it because of really strong government employment and it’s a very robust market, strong economy and sustainable location,” says Porter.
“There’s actually a lot of employment opportunities and not all of them are from the government although they may feed from the government,”
“Anyone who owns property in Canberra has actually done really well in the past 12 months as it is in the growth stage of the cycle.”
Canberra is a great sustainable location compared to Hobart who whilst may have had good growth in the past 12 months is certainly now in a concerning position as too many investors have hit the one location in a short period of time, which can have a devastating effect.
Porter believes the growth of Hobart will likely be undone in 2020.
Here’s Porter’s City by City Breakdown of the Decade.
Between 2009 and 2014 we saw year on year negative growth in Hobart where the market really took some money off the table with home values and an annual 5-10% decline for a number of years in those periods.
“We only started to see an upward trend in the past couple of years where the numbers are starting to tremble back up and Hobart has had a strong year in 2019. In the back end of 2019, the growth is starting to become a little more subdue and settle down,” says Porter.
“Given the growth through Hobart is not driven by anything sustainable like employment and infrastructure spend, migration, population growth, there’s no sustainability around that.”
Over the decade, it was actually quite turbulent for this market.
“From my experience on the ground, I can defiantly see that this market has been driven by investors which I think is very dangerous around sustainability as its very unlikely to continue,” she says.
“Interestingly enough, market data only started being captured and monitored for Hobart in 2003 and onwards,” says Porter.
“We don’t have a lot of historical information to really understand how sustainable the market is and how it moves through different times and trends.”
Darwin has been trending down very heavily since 2013 and even had a pretty bad year in 2010.
“Darwin had their best year in 2009 with double digit growth but since then it has been quite staggeringly trending downwards,” says Porter.
“They’ve had mining closures and there’s been some real turmoil for the market.”
When we look at the decade in Perth, it has been a bit of a rollercoaster ride.
“Like Darwin, there was some strength with double digit growth around 2009 but it went back down to double digit negatives before going back up to double digit growth around 2014 and back down again,” she describes.
“We are still now seeing the capital city sitting as an overall negative market for the past 12 months but when you look into the Inner Metro suburbs, there’s certainly some more popular suburbs which are starting to have some growth come through.”
Porter expects the trend to turn a corner and the stability will start to settle in moving forward
Adelaide has had an interesting decade. It came in strong through 2009 with some significant growth in the years leading up to it but had a decline in 2010 which was not unusual around the country.
“Since 2014, it’s had year on year growth, but dropped off a bit in the back end of 2018,” shares Porter.
2019 was impacted by the looming Federal Election and the lending crunch and some affordability issues with the property market nationally, so the smaller markets like Adelaide start to feel the pinch with national economy issues.
Brisbane’s done quite well and is surprisingly stable. The slow and steady nature of Brisbane won the race.
“Coming into 2009, Brisbane was a little turbulent but managed to have subdued positive growth year on year since then at about 4 or 5%,” says Porter.
“It hasn’t set the world on fire but has been a nice consistent player. We’ve seen a bit of a drop off again in the 2018 period which again can be attributed to the national issues like the lending crunch and Banking Royal Commission,”
“As for 2019, after a bumpy start to the year like most capitals, we saw Brisbane trending back up again at the back end of the year. Brisbane dwelling values increased by 0.8% in November, 2019 so we can see it moving modestly in the right direction.”
So where are the two cities that fell off a cliff in this decade?
Melbourne and Sydney both climbed to the top of the cliff and then fell.
“Starting with Melbourne, they started the decade a little tough with downward trends. Going in from 2012 all the way through to 2017 there was very strong double-digit growth for Melbourne year on year and we’re talking the likes of 15-20% growth,” says Porter.
“Then we had this absolute fall of a cliff in 2018 to 2019 with a negative sitting in the double digits of around 10% average for the capital, which wiped out the uplift of 2017 and still remains below the 2017 peak at the back end of 2019.”
All of the growth of 2018 was completely wiped out in 2019.
“BUT, when you’ve had consistent strong growth in the years prior, you’re still in a much better position overall,” Porter shares.
“We always expect to see a correction come through after such year on year growth which was a nice relief for people trying to get into the market especially first home buyers.”
Then we turn to Sydney, who were riding high for a long time.
Sydney did much the same as Melbourne and the two powerhouses really fell into line with each other.
“We saw a strong entrance into 2009 with robust double-digit growth but there was a modest decline in 2010,” says Porter.
“Going into 2012 to 2018 there was some fairly strong growth coming through and again year on year double digit growth,”
“Sydney has since started to feel the pinch and growth has not been as strong. In 2017, Sydney had seen the likes of 15% growth on average across the capital, and then we have seen many Sydney side suburbs take a hit through 2018 and into 2019, with the values still sitting below the 2017 peak.”
Porter is blaming the Banking Royal Commission, Federal Election, and the other national factors contributing to this mixing pot causing Sydney to fall off a cliff.
“Anyone who has properties in Sydney or Melbourne still would have a lot of equity sitting in their home,” she says.
Moving right on to Canberra, even though it’s probably a bit more likened to Brisbane if you want those steady, consistent markets, Canberra has quite a good year.
“Canberra had a very strong 2009 but a negative trend in 2010-2011, similar to most capital cities,” says Porter.
From 2012 onward, we have seen Canberra performing in a nice steady pace with 5%-10% per annum growth being felt across many of the suburban suburbs for housing. The unit market however has not faced as well and has seen declines in values, even double digit declines over the few years, as a result of that sector being oversupplied.
Beyond the City lenses for the Decade
Porter shares that regional markets throughout Australia have performed at 52% less growth than capital city markets in Australia.
“This shows a real disparity between the growth performance of regional investments and regional properties compared to capital cities,” says Porter.
“It’s driven by the fact regional markets are heavily susceptible to things like drought, employment drivers and a lack of infrastructure going into regional hubs,”
“Also, we’re seeing in our regional areas as the economy slows down through different times of the cycle in different areas, the economy generally slows which can affect things like tourism dollars being spent which has a filter through to the property market.”
Opposite to this, when we look into capital city markets they are certainly seen as more strongly underpinned by employment, wages growth, infrastructure spend and not as susceptible to things like drought conditions so they don’t have that volatility and that’s exactly what we’re seeing through the property trends.
“When we look at the number of properties actually seeling and go back over the past decade we see just shy of about 40,000 properties selling on average every month nationally,” says Porter.
These are the properties going through a sales transaction process and are settling.
“When we take the high and the low of that, we look at the strongest point in the period which was around 2016 and the back end of 2015 where we saw it creep up to almost 50,000 per month selling,” Anna Porter shares.
“That’s a significantly strong year in the property market which was predominantly driven by Sydney and Melbourne,”
“Perth, Adelaide and Darwin were not as prosperous but with Sydney and Melbourne being the powerhouses for the country, they really lifted the whole nation.”
When we look at the lowest point, it’s actually currently now in the 2019 year.
“The national average has been approximately struggling to clear anything over 30,000 property sales a month,” she explains.
“We can certainly say this is having a direct impact on agents as they certainly need that sales volume to be viable,”
“New sales coming to market are down 14% nationally from the year prior and Sydney is certainly struggling with new sales volume coming onto the market,”
“This has kept a strength in pricing this year but as soon as the volume starts picking up again, we can expect to see the short-lived slight boost in pricing drop right back down.”
When you look at the property market, one of the biggest players are the real estate agents and they would be really feeling the pinch now.
“If you’re looking at selling a property in 2020, now would be a good chance to see if you can get a good commission, have your pick at the agents and see who you can get a really good price and deal from,” she advises.
“If the volume doesn’t start to increase, we will start to see a lot of agents drop out of the market.”