AUSTRALIAN APARTMENTS · 2015-12-18 · 1.8% to September 2015 Source: Knight Frank Research,...

RESIDENTIAL RESEARCH

AUSTRALIAN APARTMENTS RESIDENTIAL MARKET OVERVIEW Q4 2015

HIGHLIGHTS Sales volume, capital values and rents grew across the Australian apartment market as gross rental yields compress in the September 2015 quarter. Total vacancy trends upwards, now at market equilibrium.

Changes to legislation: Fees now payable on application for foreign investors buying in Australia and stricter penalties apply; Updates to sunset clause and existing strata laws in New South Wales.

Pressure from APRA continues to impact investor borrowing, although the owner occupier market has stepped in to offset overall household borrowing; major banks raise standard variable rates.

2

KEY FINDINGS

An uptick in Australian

economic growth and a fall in

overall unemployment occurred

in the September quarter.

The Reserve Bank of Australia

has kept the official cash rate

target unchanged at 2.00% in

December, although major banks

lifted standard variable rates in

October.

Fees are now payable on

application for foreign

investors and stricter penalties

apply for those in breach;

Updates to sunset clause and

existing strata laws in NSW.

Australian apartments have

averaged annual growth of

7.7% in capital values in

September, with the last quarter

recording growth of 2.4% to

stand at a median $473,500.

Over the year to September,

Australian apartment sales

volumes were up 5.9% to

163,988 while as at September,

gross rental yields averaged

4.64%.

Australian median apartment

rents rose 2.4% over the year to

September to achieve $420 per

week, while total vacancy

trended upwards to 3.0%.

MICHELLE CIESIELSKI Knight Frank Residential Research

AUSTRALIAN APARTMENTS 2015 and into 2016.

Changes to Legislation Foreign Investors in Australia

From 1 December 2015, all foreign

investors must now pay a fee before their

foreign investment application will be

processed and stricter penalties have

been ramped up by the Australian

Taxation Office for those who breach the

rules. The fee structure is stated in Figure

2 and penalties are detailed in our latest

Insight report.

For Victoria, including the capital city of

Melbourne, this fee is in addition to the

state-based 3% duty payable on the

purchase price, and the annual absentee

tax of 0.5% on the property value for

foreign owners who leave their property

vacant for extended periods throughout

the year.

The Economy The Australian economy has experienced

an uptick in growth over the September

2015 quarter, up 2.5% YoY, off the back

of a lower Australian dollar and coming

off less than ideal weather conditions mid

-year for exporting commodities.

Unemployment was recorded at 5.8%

across Australia in November,

compressing 40bps from three months

earlier.

The Australian Prudential Regulatory

Authority (APRA) continues to endorse a

more stricter lending practice after on-

going concerns of over-heated residential

markets in Sydney and Melbourne. As a

result, in the three months to October

2015, the overall growth in both the

investor and owner occupier housing

finance markets fell 0.5% by total value.

Over this same time, housing finance for

construction and purchase for investment

recorded negative growth of 7.6%,

although the owner occupier market

offset total housing finance with growth

in finance of 8.3%.

In December, the Reserve Bank of

Australia held the official cash rate target

at the historic low of 2.00%; observed for

the past eight consecutive months.

Despite the RBA decision, the major

banks increased their standard variable

lending rates in late October, so it is likely

there will be further recalibration for the

investment market in the final quarter of

Source: Knight Frank Research, ABS, RBA

FIGURE 1

National Key Economic Indicators

FIGURE 2

Fees Payable by Foreign Investors,

Residential Property Based on Property Value, AUD

$1 million or less Over $1 million

$5,000

$10,000 then $10,000

incremental fee increase

per additional $1 million

in property value

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Mar-

15

Jun-1

5

Sep

-15

May-1

5

Aug

-15

No

v-1

5

Jun-1

5

Sep

-15

Dec-1

5

Ap

r-15

Jul-

15

Oct-

15

Ap

r-15

Jul-

15

Oct-

15

GDP ANNUAL

GROWTH RATE

UNEMPLOYMENT RATE CASH RATE TARGET QUARTERLY GROWTH

OF INVESTOR HOUSING

FINANCE, BY VALUE

QUARTERLY GROWTH

OF OWNER OCCUPIER

HOUSING FINANCE, BY

VALUE

http://www.knightfrank.com.au

http://www.knightfrank.com.au/research/foreign-investment-in-australian-residential-december-2015-3413.aspx


3

RESEARCH AUSTRALIAN APARTMENTS OVERVIEW Q4 2015

Buying off the plan in NSW

New sunset clause laws have been

announced by the New South Wales

(NSW) Government to protect off-the-

plan (OTP) purchasers when developers

cancel contracts without good reason

and on-sell the subject property for a

financial gain. If a developer intends on

rescinding a contract on, or after

2 November 2015, they must first seek

consent from the purchaser and if this is

not resolved, the developer will need to

apply to the Supreme Court for the

termination. The legislation will also apply

retrospectively, and apply to contracts

that have exchanged, but not yet passed

the sunset clause date. In Western

Australia (WA), purchasers are the only

party that can invoke a sunset clause in

OTP sales.

Strata laws in NSW

The Strata Development Bill 2015 will

come into effect in July 2016 delivering

over 90 changes to existing laws

affecting both residential and commercial

properties. The Bill covers changes to

proxy farming, improving outdated

regulations impacting renovations,

increased protection against building

defects, as well as, the collective

decision making sales process.

Encouraging the renewal of older tired

buildings, only 75 per cent of consenting

approval will be required from owners to

terminate and renew a strata scheme,

down from the current 100 per cent

requirement.

NSW is the first state to pass updated

strata legislation, although the Victorian

Government is considering the 75 per

cent threshold when it introduces

reforms, while WA is proposing to

introduce a sliding scale for termination

of strata titles based on the age of the

building. The Northern Territory

Government is currently drafting a

proposed review and an inquiry is

underway in South Australia of their

strata laws.

Capital Values & Sales Volumes Over the year to September 2015,

Australian apartment capital values have

experienced 7.7% growth with the last

three months of this period recording

growth of 2.4% to stand at a median

capital value of $473,500. Capital growth

amongst the capital cities has continued

to be led by Greater Sydney (at 15.6%),

Greater Hobart (at 5.8%) and Greater

Melbourne (at 5.4%) over the past year.

Across Australia, 163,988 apartment

sales were recorded in the year ending

September 2015; 5.9% more than

recorded the previous year. The market

has yet to return to the double-digit sales

volume growth that led to steep gains in

capital values throughout 2014 and 2015,

demonstrating that further capital growth

in Australian apartments will likely be at a

more sustainable pace.

As shown in Figure 3, when utilising

growth in sales volume as a leading

indicator, it would be expected that

Greater Brisbane and Greater Melbourne

are likely to witness further capital growth

heading into 2016. Greater Hobart and

the Australian Capital Territory (ACT) are

Source: Knight Frank Research, Residex

FIGURE 3

Annual Change in Sales Volume &

Median Capital Values No. of Apartments

Indexed, 100 = Sep-13


FIGURE 4

Apartment Yield Ranges % Gross Rental Yield, September 2015

displaying signs of a potential upswing

over the medium term for capital growth

after experiencing negative growth in

2014.

Rents, Vacancy & Yields Australian apartment rents rose 2.4%

over the year to September 2015 to

achieve a median $420 per week. Despite

this increase, total vacancy grew 40bps

to 3.0% over the same time according to

the REIA. Highest annual rental growth is

still being experienced in Greater Sydney,

at 5.7% over the year to September 2015

while achieving a median rent of $560 per

week. Although since mid-2015 rents in

Greater Sydney have remained steady as

total vacancy has fallen from 2.1% to

1.9% over this time, it is likely we will

once again see a rise in rents early in the

new year.

In September 2015, gross rental yields for

Australian apartments averaged 4.64%.

With continued negative growth in

apartment capital values over the past

year, Greater Darwin recorded the highest

gross rental yield at 5.87% in September

2015, although rents continued to fall

throughout this period. As shown in

Figure 4, Greater Sydney returns the

lowest gross rental yields across

Australia, at 4.30%. When plotted over a

five year range, current yields in Greater

Sydney are at the lower end of the range;

a similar experience being recorded by

Greater Brisbane and Greater Perth.

60

70

80

90

100

110

120

130

140

150

Sep

-13

Dec-1

3

Mar-

14

Jun

-14

Sep

-14

Dec-1

4

Mar-

15

Jun

-15

Sep

-15

GR. BRISBANE

GR. MELBOURNE

GR. HOBART

GR. ADELAIDE

GR. SYDNEY

ACT

GR. PERTH

GR. DARWIN

GR. SYDNEY

GR. HOBART

GR. MELBOURNE

GR. BRISBANE

GR. ADELAIDE

GR. PERTH

ACT

GR. DARWIN

SALES VOLUME CAPITAL VALUES

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

SY

DN

EY

ME

LB

OU

RN

E

BR

ISB

AN

E

PE

RT

H

AD

ELA

IDE

CA

NB

ER

RA

HO

BA

RT

DA

RW

IN

FIVE YEAR YIELD RANGE YIELD AS AT SEP-15



4

SYDNEY

TABLE 1

Apartment Key Indicators, September Quarter 2015

Region

Median

Capital Value

($)

Capital

Growth

Last Quarter

(%)

Capital

Growth

Last Year

(%)

Sales

Volume

Last Year

(no.)

Median

Weekly Rent

($)

Gross

Rental Yield

(% p.a)

Sydney* 799,000 4.2 12.8 590 790 5.33#

CBD & South^ 814,000 1.7 11.4 13,004 680 4.35

North^ 789,000 2.3 15.9 8,114 630 4.17

North West^ 638,500 5.0 18.8 10,705 520 4.26

South West^ 576,500 4.1 17.7 11,274 470 4.25

Far West^ 380,500 6.9 20.4 4,255 375 5.15

Greater Sydney 677,000 3.2 15.6 45,854 560 4.30

Australia 473,500 2.4 7.7 163,988 420 4.64

September quarter saw

continued growth in capital

values of 3.2%; with total growth

of 15.6% year on year

Weekly rents rose by 5.7% in

September to $560 compared to

one year ago

Gross rental yields currently

average 4.30% across Greater

Sydney, to become the lowest in

the country

Over the past year a total 45,854

apartments were sold; falling by

1.8% to September 2015


FIGURE 5

Apartment Values & Sales Volume

Greater Sydney

Capital Values & Sales Volumes Greater Sydney apartments continued to

see considerable price growth of 3.2% in

the third quarter of 2015, maintaining the

highest capital value across Australia at

$677,000. Annual capital growth was

recorded at 15.6% to September, with

median values increasing 39.2% since

the last trough in December 2012 and

71.2% since the end of 2008. Annual

sales turnover was down by 1.8% on the

prior year, despite 45,854 apartments

transacting.

Source: Knight Frank Research, Residex, REINSW

Rents & Vacancy Up 5.7% over the last year and standing

at a median $560 per week in September

2015, Greater Sydney apartment rents

continue to gain strength. On average,

rents have grown 5.9% each year, since

September 2005.

Greater Sydney recorded 1.9% total

vacancy in September 2015; the tightest

rate across the country— compressing

from a peak of 3.1% in August 2012. The

Middle (10-25km) and Outer (20km+)

rings assisted in keeping vacancy down

with 1.9% and 1.7% respectively. The

Inner (0-10km) ring witnessed 2.0%

vacancy—all well below the 3% market

equilibrium.

Rental Yields Over the year to September quarter

2015, median gross rental yields fell

42bps to 4.30%, with the last quarter

alone contracting a substantial 16bps

due to strong capital value growth and

stable rents.

Outlook Sales volumes are expected to stabilise

over the short term, as the Sydney

market begins to ease in the second half

of 2015. Both capital values and rents are

expected to rise again over the next 12

months, although not as strong as seen

this year. Gross rental yields are likely to

further compress.

Source: Knight Frank Research, Residex *Denotes Select Suburbs Only #Annual Average ^Denotes Residential Region (see back page)

FIGURE 6

Apartment Rents & Total Vacancy

Greater Sydney

0

10,000

20,000

30,000

40,000

50,000

60,000

$450,000

$500,000

$550,000

$600,000

$650,000

$700,000

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15

ANNUAL SALES VOLUME (RHS) MEDIAN CAPITAL VALUE (LHS)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

$0

$100

$200

$300

$400

$500

$600

$700

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15

MEDIAN WEEKLY RENT TOTAL VACANCY




5


MELBOURNE

TABLE 2


Region

Median

Capital Value

($)

Capital

Growth

Last Quarter

(%)

Capital

Growth

Last Year

(%)

Sales

Volume

Last Year

(no.)

Median

Weekly Rent

($)

Gross

Rental Yield

(% p.a)

Melbourne* 454,000 -1.2 4.9 4,134 470 5.49#

CBD & Inner/North West^ 438,000 0.7 4.8 17,424 395 4.73

North East^ 538,500 2.7 7.2 7,364 410 3.97

South East^ 497,000 2.8 6.9 8,154 400 4.19

Bayside & Frankston^ 522,000 4.9 4.6 1,883 415 4.15

Greater Melbourne 489,500 2.6 5.4 39,865 405 4.34

Geelong* 463,000 3.0 4.1 69 395 4.49#

Australia 473,500 2.4 7.7 163,988 420 4.64


Capital Values & Sales Volumes Median capital values of Greater

Melbourne were up 2.6% at $489,500 in

the third quarter of 2015; an improvement

on the 0.1% decline recorded in the first

quarter of 2015. Over the past two years

to September 2015, apartments have

experienced growth of 11.3%, with 5.4%

growth being recorded in the last 12

months. Sales volume has strengthened,

with 39,865 apartments sold over the year

to September 2015, up 11.0% on the

prior year—the strongest since 1999. Source: Knight Frank Research, Residex, REIV. ^rolling 6-mth average

Rents & Vacancy Over the past year, weekly apartment

rents in Greater Melbourne rose 2.5% to

$405. A rolling six month average of

2.9% was recorded for total vacancy in

September, after oscillating around the

3.0% market equilibrium over the past

five years. During this time, rents have

sustained an upward trend, growing on

average 2.9% per annum. Total vacancy

was mixed in Melbourne according to

REIV, with the Inner (0-10km) ring

standing at 2.8%, the Middle (10-20km)

ring standing at 3.4% and the Outer

(20km+) ring recording 1.9% during the

September quarter.

Rental Yields Rental yields were recorded at 4.34% in

the September quarter 2015, the second

lowest in the country behind Sydney.

Gross rental yields have averaged 4.45%

across Greater Melbourne area over the

past 10 years.

Outlook Greater Melbourne’s strong population

growth will continue to positively impact

the apartment market with overall growth

in capital values and rents to be

sustained heading into 2016, although

some suburbs close to the CBD are likely

to see minimal capital growth as more

completed projects come online.

Annual capital growth was

recorded at 5.4% to September

2015; while the last quarter rose by

2.6%

Rents increased by 2.5% to $405

per week over the 12 months to

September 2015

Gross rental yields in Greater

Melbourne currently average

4.34%

Sales volume increased 11.0%

over the past year to 39,865

apartments

FIGURE 7


Greater Melbourne

FIGURE 8


Greater Melbourne


0

10,000

20,000

30,000

40,000

50,000

60,000

$380,000

$400,000

$420,000

$440,000

$460,000

$480,000

$500,000

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

$300

$320

$340

$360

$380

$400

$420

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15

MEDIAN WEEKLY RENT TOTAL VACANCY^




6

BRISBANE

TABLE 3


Region

Median

Capital Value

($)

Capital

Growth

Last Quarter

(%)

Capital

Growth

Last Year

(%)

Sales

Volume

Last Year

(no.)

Median

Weekly Rent

($)

Gross

Rental Yield

(% p.a)

Brisbane* 485,000 1.1 0.7 581 580 6.18#

CBD & North^ 421,500 1.0 2.6 9,447 410 5.07

South^ 360,000 3.2 3.7 8,263 375 5.47

Greater Brisbane 380,000 1.4 2.7 19,478 380 5.23

Cairns* 365,000 1.8 -1.6 105 405 5.90#

Gold Coast^ 361,000 2.7 5.3 8,351 400 5.79

Noosa Heads* 573,500 -1.6 -3.0 290 570 5.21#

Rockhampton* 473,000 -0.7 -4.1 174 470 5.29#

Townsville* 397,500 -0.5 -5.0 100 415 5.59#

Australia 473,500 2.4 7.7 163,988 420 4.64


recorded at 2.7% with capital

values rising 1.4% over the past

quarter alone

Rents are up 1.3% over the last 12

months, to stand at $380 per week

Across Greater Brisbane, gross

rental yields currently average

5.23%

Sales volume was up 7.2% over

the past year to September, to

19,478 apartments


Capital Values & Sales Volumes Greater Brisbane apartment values

witnessed growth of 1.4% to $380,000 in

the September 2015 quarter, with total

annual growth of 2.7%. Sustained strong

sales volume has pushed up capital

values, with a total 19,478 apartments

transacting over the past year, 7.2%

more than the year to September 2014—

and increasing almost 51% over the past

three years.

Source: Knight Frank Research, Residex, REIQ

Rents & Vacancy Greater Brisbane apartment weekly rents

rose 1.3% to $380 over the year to

September 2015; weaker than the

average annual growth of 4.2% over the

last decade. Rents have remained stable

for quite some time, growing only 2.3%

since September quarter 2012.

Recording 2.3% vacancy in the

September 2015 quarter— 10bps below

the long term, 10 year average—

Brisbane has remained below 3%

vacancy over the past five years. This

was pushed up slightly by higher

vacancies in the post-GFC period.

Rental Yields Gross rental yields have fallen 8bps to

5.23% over the year to September

quarter 2015 across Greater Brisbane,

whilst the gross rental yield reaches as

high as 6.18% in the suburb of Brisbane.

Outlook As sales volume trends upwards, it’s

likely apartments will see a pick up in

capital value growth. As new projects

come online over the next twelve months,

rents may be impacted in the inner

suburbs, although vacancy remains

relatively low.

FIGURE 9


Greater Brisbane

FIGURE 10


Greater Brisbane


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

$335,000

$340,000

$345,000

$350,000

$355,000

$360,000

$365,000

$370,000

$375,000

$380,000

$385,000

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

$330

$340

$350

$360

$370

$380

$390

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15





7


PERTH

TABLE 4


Region

Median

Capital Value

($)

Capital

Growth

Last Quarter

(%)

Capital

Growth

Last Year

(%)

Sales

Volume

Last Year

(no.)

Median

Weekly Rent

($)

Gross

Rental Yield

(% p.a)

Perth* 491,500 -3.8 -10.0 239 485 5.37#

East Perth* 532,500 -3.4 -5.0 303 515 5.26#

North Perth* 582,500 -3.1 -4.9 57 485 4.53#

South Perth* 550,000 -4.3 -3.8 220 450 4.59#

Subiaco* 621,000 -3.0 0.1 103 530 4.60#

Fremantle* 582,500 -1.1 -4.5 134 500 4.54#

Greater Perth 452,000 -2.3 -2.6 10,800 405 4.68

Australia 473,500 2.4 7.7 163,988 420 4.64

Capital growth over the year to

September fell by 2.6%; with

growth down 2.3% in the last

quarter

Weekly rents currently average

$405; down from $430 the year

before in September


Perth area currently average

4.68%

Annual apartment sales of 10,800

was down 16.9% in September

when compared to the prior year


Capital Values & Sales Volumes In September quarter 2015, median

capital values for Greater Perth

apartments were recorded at $452,000

falling 2.3% on the previous quarter while

also falling 2.6% over the past 12

months. An average annual 5.2% growth

was recorded in Greater Perth over the

past 10 years. After strong growth in the

lead up to the peak in sales volume of

14,789, in December 2013, sales turnover

has achieved a more sustainable 10,800

in September 2015. Source: Knight Frank Research, Residex, REIWA

Rents & Vacancy Median rents declined by 5.8% in the

year to September 2015 across Greater

Perth, to record $405 a week. This is up

12.1% from September 2011, and well

above the 10 year average of just over

$358 a week. Over the same period,

strong rental growth was recorded in

both North Perth and South Perth —at

26.0% and 15.4% respectively.

Total vacancy currently trends 260bps

above market equilibrium, at 5.6% for the

Greater Perth area. This level was last

experienced in December quarter 1993.

Rental Yields Across Greater Perth, gross rental yields

have fallen 16bps over the past year,

averaging 4.68%, as both capital values

and rents fall. Higher yields are still being

achieved in pockets of the market,

including suburbs such as Perth (5.37%)

and East Perth (5.26%).

Outlook With sales volumes steadily decreasing,

Greater Perth apartments are expected

to become more affordable over the next

12 months. Similarly, as vacancy inches

up further, rents are likely to continue

being impacted.

FIGURE 11


Greater Perth

FIGURE 12


Greater Perth

Source: Knight Frank Research, Residex *Denotes Select Suburbs Only #Annual Average

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

$300,000

$320,000

$340,000

$360,000

$380,000

$400,000

$420,000

$440,000

$460,000

$480,000

$500,000

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15





8

ADELAIDE

TABLE 5


Region

Median

Capital Value

($)

Capital

Growth

Last Quarter

(%)

Capital

Growth

Last Year

(%)

Sales

Volume

Last Year

(no.)

Median

Weekly Rent

($)

Gross

Rental Yield

(% p.a)

Adelaide* 377,500 0.9 7.1 562 425 5.95#

CBD & Inner^ 344,000 0.4 3.5 3.655 320 4.89

Outer^ 269,500 2.4 2.9 1,644 280 5.46

North Adelaide* 440,000 2.8 5.3 107 395 4.79#

Glenelg* 425,000 -3.3 0.6 149 415 5.14#

Greater Adelaide 318,500 0.7 4.4 5,297 305 5.04

Mt Gambier* 176,500 1.4 1.5 80 175 5.37#

Australia 473,500 2.4 7.7 163,988 420 4.64

The September quarter recorded

marginal capital growth of 0.7%;

with annual growth measuring

4.4%

Rents increased 1.7% in the year

to September, to $305 per week


return 5.04% across Greater

Adelaide

Sales turnover grew 12.9% over

the past year to September to

5,297 apartments


Capital Values & Sales Volumes Over the last quarter to September 2015,

Greater Adelaide apartment values have

increased marginally at 0.7% growth, to

stand with a median capital value of

$318,500. Apartment capital values

recorded a total 4.4% growth over the

past 12 months, the highest annual

growth rate since June quarter 2010.

Sales turnover increased by a substantial

12.9% over the past year to 5,297

apartments. This was the highest growth

recorded by a capital city in Australia.

Source: Knight Frank Research, Residex, REIA

Rents & Vacancy Apartment rents rose 1.7% to $305 per

week over the year to September 2015

across Greater Adelaide. The suburb of

Adelaide achieves considerably more, at

$425 per week. With the exception of

Hobart, Greater Adelaide currently

achieves the lowest rent across the

country.

The last recorded vacancy in Greater

Adelaide reported by the REIA was at

December 2014, which was down to

2.8% from 3.1% at the close of 2013.

This followed a vacancy peak of 3.9% in

June 2012, after averaging 1.8% vacancy

in the five years prior.

Rental Yields Gross rental yields have remained above

5.00% over the past two years across

Greater Adelaide. With rents remaining

flat, gross rental yields have risen 2bps in

Greater Adelaide over the last quarter to

a median 5.04%.

Outlook Sales volume continues to build

momentum year on year—despite

relatively stable rental growth over the

past 10 quarters. Capital values are

expected to continue to strengthen over

the next 12 months, off the back of

growth in sales volume.

FIGURE 13


Greater Adelaide

FIGURE 14

Apartment Rents & Rental Yields

Greater Adelaide


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

$270,000

$280,000

$290,000

$300,000

$310,000

$320,000

$330,000

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15


4.20%

4.40%

4.60%

4.80%

5.00%

5.20%

5.40%

5.60%

5.80%

6.00%

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15

MEDIAN WEEKLY RENT GROSS RENTAL YIELDS




9


CANBERRA

TABLE 6


Region

Median

Capital Value

($)

Capital

Growth

Last Quarter

(%)

Capital

Growth

Last Year

(%)

Sales

Volume

Last Year

(no.)

Median

Weekly Rent

($)

Gross

Rental Yield

(% p.a)

Canberra City* 452,000 -1.8 0.3 76 455 5.36#

Braddon* 408,500 -3.2 -3.0 322 400 5.24#

Belconnen* 355,000 -2.5 -3.0 249 355 5.21#

Deakin* 762,500 -0.7 4.8 16 640 4.56#

Kingston, ACT* 489,500 -1.8 1.1 230 485 5.20#

Gungahlin* 330,500 -2.4 -0.3 33 330 5.30#

Australian Capital Territory 398,000 -2.6 -0.1 3,617 395 5.17

Australia 473,500 2.4 7.7 163,988 420 4.64

Capital values fell 0.1% over the

year to September 2015; with

growth also falling 2.6% over the

last quarter

Weekly rents average $395 in

September; remaining stable from

one year ago


average 5.17% across the

Australian Capital Territory

Sales volume increased 12.6%

over the past year to 3,617

apartments transacting


Capital Values & Sales Volumes Capital values in the ACT fell 2.6% in the

past quarter, however over the past 12

months fell only 0.1%. This fall may be

lagging however, as the total number of

annual apartment sales transacted has

increased significantly, from 3,212 in the

September quarter of 2014 to 3,617 in

September quarter in 2015. The annual

sales volume is also trending higher than

the 10 year annual average of 3,254

apartments.


Rents & Vacancy Across the year to September 2015, rents

remained stable in the ACT, to record a

median of $395 per week. This measured

a 2.5% fall on the previous quarter, and

down from the peak of $460 per week in

September 2012. Canberra City rents fell

by 1.8% in the quarter to $455 per

week—the theme common throughout

the major suburbs of the ACT.

As at September 2015, total vacancy in

the ACT was 3.8%. This had fallen from a

height of 5.2% in December 2013, and

has compressed 50bps from September

12 months ago.

Rental Yields Across the Territory, gross rental yields

have fallen 3 bps over the past quarter to

5.17% as both rents and capital values

fell, and have moved erratically for the

most part of 10 years reflecting the

volatile Canberra apartment market.

Outlook Capital value growth has been volatile

over the past five years— however,

stronger sales volume is expected to

strengthen capital values over the

medium term. Similarly, median weekly

rents are expected to fall in line with

increasing vacancy across the market.

FIGURE 15



FIGURE 16




0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

$370,000

$380,000

$390,000

$400,000

$410,000

$420,000

$430,000

$440,000

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

$360

$380

$400

$420

$440

$460

$480

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15





10

HOBART

TABLE 7


Region

Median

Capital Value

($)

Capital

Growth

Last Quarter

(%)

Capital

Growth

Last Year

(%)

Sales

Volume

Last Year

(no.)

Median

Weekly Rent

($)

Gross

Rental Yield

(% p.a)

Hobart* 498,500 2.9 2.7 28 450 4.71#

Battery Point* 474,000 1.1 0.1 21 430 4.75#

Kingston, Tas* 285,000 3.4 6.9 35 310 5.73#

Greater Hobart 279,000 0.9 5.8 680 290 5.39

Launceston* 278,500 4.5 8.8 21 330 6.43#

Devonport* 200,000 1.5 -3.7 31 230 5.98#

Burnie* 156,500 -2.5 -11.3 5 185 6.25#

Australia 473,500 2.4 7.7 163,988 420 4.64


Capital Values & Sales Volumes In the year to September 2015, a total of

680 apartments were sold; inline with the

number of sales transactions recorded in

the same period the year earlier. Strong

sales growth in the September quarter of

5.1% saw this as the highest figure

achieved since September quarter 2010.

Over the 12 months, apartment values

rose 5.8% to a median $279,000, with the

last quarter recording a growth rate of

just 0.9%. Despite the marginal quarterly

growth in Greater Hobart, the suburb of

Hobart recorded 2.9% growth. Source: Knight Frank Research, Residex, REIA

Rents & Vacancy Over the past 10 years, Greater Hobart

rents have averaged $250 per week,

while vacancy has averaged circa 2.9%.

Rents for Greater Hobart apartments rose

3.6% over the year to September 2015,

to stand at a median $290 per week. This

volatile rental market is 5.1% higher than

that recorded in September 2013.

Conversely, vacancy has contracted from

3.6% to 2.8% over the year to

September 2015, after a peak of 5.0% in

September 2012. The suburbs of Hobart

and prestigious suburb of Battery Point

achieve median weekly rents of $450 and

$430 respectively.

Rental Yields Across Greater Hobart, gross rental

yields have increased 3bps on the

previous quarter. Apartment yields now

average 5.39%, well above the Australian

average of 4.64%.

Outlook Over the past three quarters, sales

volumes and capital values have both

strengthened, indicative of a recovering

broader market for Hobart apartments.

We expect to see continued upward

growth in rents as vacancy continues to

fall below 3% equilibrium.


recorded at 5.8% to September

2015; with last quarter growth at

0.9%

Rents currently stand at $290 per

week in September, rising by

3.6% compared to 12 months ago

Across Greater Hobart, gross

rental yields currently average

5.39%

Over the past year, the number of

apartments transacted remained

steady with a total 680 sold

FIGURE 17


Greater Hobart

FIGURE 18


Greater Hobart


0

100

200

300

400

500

600

700

800

900

$230,000

$240,000

$250,000

$260,000

$270,000

$280,000

$290,000

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

$240

$250

$260

$270

$280

$290

$300

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15





11


DARWIN

TABLE 8


Region

Median

Capital Value

($)

Capital

Growth

Last Quarter

(%)

Capital

Growth

Last Year

(%)

Sales

Volume

Last Year

(no.)

Median

Weekly Rent

($)

Gross

Rental Yield

(% p.a)

Darwin* 550,000 5.0 8.1 28 685 6.49#

Larrakeyah* 460,000 1.7 0.4 102 535 6.00#

Stuart Park* 501,500 5.7 2.2 79 565 5.89#

Fannie Bay* 512,500 -2.3 3.3 35 560 5.51#

Coconut Grove* 428,500 3.6 1.7 37 465 5.71#

Nightcliff* 369,500 1.9 5.1 49 425 6.04#

Greater Darwin 415,000 1.9 -4.2 532 465 5.87

Australia 473,500 2.4 7.7 163,988 420 4.64


Capital Values & Sales Volumes Over the past 12 months to September

2015, median values for Greater Darwin

apartments fell 4.2% to $415,000,

however rose 1.9% over the September

quarter—the strongest quarterly growth

since December 2012. Yearly apartment

sales to September 2015 are currently

totalling just over one third of that

experienced in Greater Darwin a decade

ago; with 532 sold over the year to

September 2015—128 of those being in

the last quarter.


Rents & Vacancy Over the past year to September 2015,

Greater Darwin apartment rents have

weakened to $465 per week, falling

5.1%, but remaining stable over the

September quarter. Greater Darwin holds

the second highest apartment rents

across Australia, despite the fall. Rents in

the suburb of Darwin achieve significantly

higher rates at $685 per week. As at

September 2015, total vacancy in Greater

Darwin was recorded at 7.5%. Vacancy

has consistently climbed since recording

2.4% in June 2013. This is significantly

higher than market equilibrium, at 3%,

with rents likely to continue to be

impacted as a result.

Rental Yields Across Greater Darwin, gross rental

yields currently average 5.87% —the

highest return in the country. The

combination of falling capital values, as

well as relatively high rents, has resulted

in higher yields recorded.

Outlook Despite an uptick in growth over the past

quarter, capital values are likely to

weaken further in 2016, as sales volumes

continue to fall. Vacancy continues to rise

as mining activities ease—with nine

consecutive quarters of vacancy rises

already experienced, with no sign of

easing despite falling rents.

Capital values rose 1.9% in the

September quarter of 2015,

however decreased 4.2% over the

year to September

Weekly rents averaged $465 in

September; softer than the $490

witnessed in September 2014


Darwin currently average 5.87%,

the highest in the country

Annual apartment sales of 532

was down 33.7% when compared

to the year earlier

FIGURE 19


Greater Darwin

FIGURE 20


Greater Darwin


0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

$340,000

$360,000

$380,000

$400,000

$420,000

$440,000

$460,000

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

$0

$100

$200

$300

$400

$500

$600

Sep

-11

Mar-

12

Sep

-12

Mar-

13

Sep

-13

Mar-

14

Sep

-14

Mar-

15

Sep

-15





Knight Frank Research provides strategic advice, consultancy services and forecasting

to a wide range of clients worldwide including developers, investors, funding

organisations, corporate institutions and the public sector. All our clients recognise the

need for expert independent advice customised to their specific needs.

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

Global House Price

Index

Q3 2015

Prime Global Cities

Index

Q3 2015

The Wealth Report

2015

Knight Frank Research Reports are available at KnightFrank.com.au/Research

Foreign Investment in

Residential

December 2015

© Knight Frank 2015 This report is published for general information only. Although high standards have been used in

the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be

accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this

document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to

particular properties or projects. Reproduction of this report in whole or in part is not permitted without prior consent of,

and proper reference to Knight Frank Research.

RESIDENTIAL RESEARCH

Michelle Ciesielski Director

+61 2 9036 6659

[email protected]

Bradley Rehn Assistant Analyst

+61 2 9036 6656

[email protected]

Matt Whitby Group Director

Head of Research and Consultancy

+61 2 9036 6616

[email protected] RESIDENTIAL PROJECT MARKETING

& KEY STATE CONTACTS

Michael Robinson Head of Project Marketing, Australia

+61 3 9604 4775

[email protected]

Erin Van Tuil Director, Sydney (NSW)

+61 2 9036 6699

[email protected]

Neil Kay Senior Director, Perth (WA)

+61 8 6210 0112

[email protected]

Daniel Cashen Director, Melbourne (Vic)

+61 3 9604 4749

[email protected]

Gillian Bail Director, Brisbane (Qld)

+61 7 3246 8842

[email protected]

Peter McVann Managing Director, Adelaide (SA)

+61 8 8233 5210

[email protected]

Terry Daly Managing Director, Canberra (ACT)

+61 2 6221 7869

[email protected]

Scott Newton Chief Executive Officer, Hobart (Tas)

+61 3 6220 6999

[email protected]

Matthew Knight Managing Director, Darwin (NT)

+61 8 8982 2502

[email protected]

INTERNATIONAL

PROJECT MARKETING

Erin Van Tuil Director

International Project Marketing

+61 2 9036 6699

[email protected]

RESIDENTIAL REGION MAPS

GREATER SYDNEY

GREATER BRISBANE

GREATER MELBOURNE

NORTH

EAST CBD & INNER/

NORTH WEST

SOUTH

EAST

BAYSIDE &

FRANKSTON

GREATER ADELAIDE

CBD &

NORTH

SOUTH

CBD &

INNER

OUTER

CBD &

SOUTH

NORTH

SOUTH

WEST

FAR

WEST

NORTH

WEST



http://www.knightfrank.com.au/Research






AUSTRALIAN APARTMENTS · 2015-12-18 · 1.8% to September 2015 Source: Knight Frank Research,...

Documents

Transcript of AUSTRALIAN APARTMENTS · 2015-12-18 · 1.8% to September 2015 Source: Knight Frank Research,...