Residential Developer Market Intelligence

MAJOR RESEARCH PARTNER

Q1 –2019

Silver SponsorsResearch Partners Gold Sponsors

Welcome to the Q1-2019 edition of the UDIA NSW Residential Developer Market Intelligence (RDMI) report. The quarterly RDMI aims to provide a targeted residential market performance update across the Greater Sydney, Lower Hunter, Central Coast, Illawarra and ACT housing markets.

This publication is prepared with the understanding that residential property market dynamics are complex and nuanced, and thus quality, timely market intelligence is essential for market participants supplying new products.

The publication draws upon a range of information sources including exclusive and bespoke data provided by CoreLogic - our key research partner. A key feature of the RDMI report is the inclusion of ‘bottom-up’ insights provided by our leading developer members on the state-of-play in their regional market of operational focus.

The RDMI reporting output and content inclusions continues to evolve, and in this edition we are pleased to present a new dashboard headline indicators section - in the opposing page. This dashboard highlights the continuation of challenging market conditions facing the development sector as the property downturn continues to unfold across the State.

UDIA NSW expects the subdued demand profile for new residential products to persist for at least the next six months and most likely into the 2020 calendar year. Underpinned by a ‘credit crunch’ for both retail consumers and developers in the wake of the Banking Royal Commission, we expect the soft market conditions to continue to put downward pressure on pricing and sales volumes over the coming period.

I trust the data and insights in this RDMI are of value for you and your organisation, and would welcome any feedback or thoughts about the publication emailed to tadams@udiansw.com.au

Cover Image: No. 1 Lacey by Cornerstone Property

Toby Adams

General Manager – Strategy & Research

UDIA NSW

Market Performance Headline Metrics

Greater Sydney

Central Coast

Lower Hunter

ACT

Median House Sale Price (set-tled) (3-month

change)

Median Unit Sale Price (settled)

(3-month change)

Volume of House Sales (settled)

(3-month change)

Volume of Unit Sales (settled)

(3-month change)

Change in Approvals (12 months to Feb 2018 vs 12 months Feb 2019)

-1.6% -6.3% -0.2% -1.4% -17%

-1.5% -7.6% -0.9% -4.2% 26%

-0.3% -6.2% -1.1% -8.4% -15%

-1.3% -6.2% -0.5% -4.5% 12%Illawarra

1.2% -3.2% -0.2% -1.4% 60%

Population Growth (NSW)

Source: ABS

NSW Employment/Unemployment (Seasonally Adjusted)

Source: ABS

Consumer Price Index (CPI)

Source: ABS

Cash Rate and Average Lending Rates

Source: RBA

Consumer Sentiment

Source: Roy Morgan

Economic Snapshot

• The latest ABS statistics to Septmber 2018 show a 34% drop in the natural population increase from the previous quarter. The strong population growth in NSW remains bolstered primarily by net overseas migration. In Q3-2018, NSW experienced a net increase of 35,500 people which was 39% of the total net Australian population increase for the quarter.

• In February 2019, NSW’s unemployment rate was 4.3% which is significantly lower than the national average. This is below even the low national average of 5%, with total employment growing in NSW by 2.3% over the preceding 12 months.

• The official cash rate has remained steady at 1.5% for 31 months now since August 2016.

• Consumer sentiment across the two major indices fell slightly to start the year (4.4%, ANZ Roy-Morgan; 5.3% Westpac-Melbourne Institute)

Median House Price (New): Capital Cities

Source: CoreLogic

Median Unit Price (New): Capital Cities

Source: CoreLogic

National Housing Snapshot

First Home Buyers Australia, Proportion and Loan Size

Source: ABS

Total Approvals 12 Months to Jan 2018 vs 12 Months to Jan 2019

Source: ABS

Housing Affordability Ratio (National)

Source: CoreLogic

Detached

Multi-unit

20022004

20062008

20102012

20142016

2018

Dw

ellin

g P

rice

to

Inco

me

Rat

io

7.5

7.0

6.5

6.0

5.0

5.5

4.5

4.0

Dw

ellin

gs

Multi-unit

Detached

• The total volume of residential dwelling approvals continues to decline in most capital cities. In the year to February 2019, the Sydney approval pipeline has contracted by 17% and Melbourne’s by 13%.

• First home buyers accounted for 18% of national house sales in January 2019, a proportion that has been largely maintained since October 2017.

• The national housing affordability ratio for detached dwellings (x7.8) and multi-units (x6.4) has improved marginally in recent months on the back of falling pricing in Sydney and Melbourne.

• The median sale price for new units in Sydney in December 2018 was $735k, which was 24% higher than Melbourne and 41% higher than Brisbane.

• The median sale price for new detached houses in Sydney was $975k, down 3% from the March 2018 high.

Change in New House and New Unit Price (Rolling 3 month Average) (Sydney)

Source: CoreLogic

Weekly Auction Clearance Rates (Sydney)

Source: CoreLogic

Greater Sydney

Source: REINSW

Residency Vacancy Rate (Sydney, Monthly)

Approvals by District 12 months to Jan 2018 vs 12 months to Jan 2019

Source: ABS

Total Approvals (Sydney, Monthly)

Source: ABS

• Greater Sydney is continuing to feel the effects of the current property downturn, with a decline in approvals, the ongoing retraction of detached housing price, an increase in the residential vacancy rate, and auction stock and clearance levels falling short of early 2018 numbers.

• The approvals decline has been felt across the Greater Sydney region, with every district experiencing reduction in total approvals over the last year. The Eastern City has recorded the greatest reduction with total dwelling approvals contracting by 34%. This was followed by the South District (which contracted by 30%) and the Western City (which contracted by 15%).

• Median whole-of-market house price in Greater Sydney has fallen by 1.6% in the last 3 months, and the volume of house sales has fallen by 6.3%. New detached house price has fallen by 1.5% in the last 3 months.

• Median whole-of-market unit price has contracted by 0.2%, with the volume of unit sales down 1.4% over the last 3 months. New unit price has increased by 0.3%.

Apartment Supply Snapshot

Median Sale Price by Quartile, Houses, Greater Sydney (12 months to Jan 2019)

Median Sale Price by Quartile, Units, Greater Sydney (12 months to Jan 2019)

Median Days on Market, Selected LGAs (12 months to Jan 2019)

Total Apartment Completions (Cal. Year)

Total Apartment Yield Under Construction

Total Apartment Yields Approved

Median Sale Price of New Units

Vacancy Rate (Residential)

Median Asking Rent (Residential)

Median Rental Yield

33,270

41,975

$720,000 Jan 2019

16%

55%

2.3% (Feb 2018)

-26%

-1.3%

-0.9%

N/A

65,647

3.2% (Feb 2019)

$540

3.9%

Source: CoreLogic

Source: CoreLogic

Source: CoreLogic

Source: CoreLogic

Twelve Month Change

Current

Greater Sydney

Approvals by District 12 months to Jan 2018 vs 12 months to Jan 2019

“There is no doubt that negative sentiment combined with lending policies is having a significant impact across Sydney’s market. Sales activity has decreased with most buyers preferring to wait on the sidelines. There is some settlement risk to work through in 2019, particularly in lower quality areas with localised over-supply. On the positive side, we are seeing increased first home buyer activity spurred by improved affordability while the fundamentals of population growth and economic activity remain strong. The re-election of the State Liberal government will provide policy continuity to underpin industry investment, however housing approvals have fallen sharply suggesting that Sydney’s housing supply targets will not be met in coming years. We expect to see a period of undersupply that will coincide with an improvement in market conditions. ”

Mike Williams – Head of Strategy & Acquisitions, Legacy Property

Developer Insight

Median:$950,000

Upper Quartile:$1,500,000

Lower Quartile:$690,000

Median:$720,000

Upper Quartile:$950,950

Lower Quartile:$572,000

$0 $0

Median:$950,000

Upper Quartile:$1,500,000

Lower Quartile:$690,000

Median:$720,000

Upper Quartile:$950,950

Lower Quartile:$572,000

$0 $0

LGA 3 Month % Change in Median Sales Price (Whole of Market, as at 31/01/2019)

Greater Sydney (Detached)

Source: CoreLogic

Spotlight on South District: LGA Market Update

1. Ryde2. Canada Bay3. Strathfield4. Burwood5. Inner West6. Georges River7. Bayside8. Sydney9. Randwick10. Waverly11. Woolhara12. Mosman13. North Sydney14. Willoughby15. Lane Cove16. Hunters Hill

1

2

3 4 5

67

8

910

1 1

1213

1415

16

Source: CoreLogic

0%%%

3 Month % Change in Median Sales Price (Whole of Market, as at 31/01/2019)

Greater Sydney (Multi Unit)

Source: CoreLogic

Spotlight on North District: LGA Market Update

Source: CoreLogic

1. Ryde2. Canada Bay3. Strathfield4. Burwood5. Inner West6. Georges River7. Bayside8. Sydney9. Randwick10. Waverly11. Woolhara12. Mosman13. North Sydney14. Willoughby15. Lane Cove16. Hunters Hill

1

2

3 4 5

67

8

910

1 1

1213

1415

16

0%

%%

Approvals (Central Coast, Monthly)

Source: ABS

Source: ABS

Approvals (Central Coast) by Dwelling Type,12 Months to Feb 2018 vs 12 Months to Feb 2019

Completions (Central Coast, Monthly)

Weekly Rents (Central Coast, Jan 2019)

Source: NSW DPE

Source: CoreLogic

Houses $450 0.0% 3.6%

$390 2.6% 4.1%

Median Asking

Rent

12 Month Change in

Asking Rent

Rental Yield

Source: CoreLogic

Multi-Unit

Vacancy Rates (Central Coast, Monthly)

Source: REINSW

Central Coast

• Approvals in the Central Coast have dropped off in recent months, with rolling annual dwelling approvals falling 5% over the 3 months to February 2019.

• The price of new houses and units has remained relatively flat in the 3 months to January 2019, with the median new house price falling by 2% and the median unit price remaining at $585k.

• Whole of market house and unit prices were similarly stable, despite sales volumes beginning to decline. The volume of house sales was down 7.6% in the 3 months to January 2019, while unit sale volumes were down 4.2%.

• The suburbs with the greatest 3-month movement in median house price were Wyong Creek (23.6% increase), Kilcare (21.4% increase) and West Gosford (14.3% decrease). The greatest 3-month movements in unit prices were in Wamberal (13.4% increase), Booker Bay (13.3% decrease) and Toukley (6% decrease).

Median New House and Unit Price (Central Coast, Monthly)

Central Coast

Central Coast Update as at 31/01/2019

Source: CoreLogic

Source: CoreLogic

3 Month % Change in Median Sales Price (Whole of Market, as at 31/01/2019)

0%

%% 24%15%

Residency Vacancy Rates (Hunter, Monthly)

Source: REINSW

Approvals (Greater Newcastle, Monthly)

Source: ABS

Approvals by LGA Jan 2018 vs Jan 2019

Source: NSW DPE, ABS

Source: CoreLogic

Lower Hunter

Weekly Rents (Newcastle LGAs, Jan 2019)

Source: CoreLogic

Cessnock$370$290

5.7%0.0%

4.8%5.6%

$430$370

$410$320

$450$405

$430$350

2.4%2.8%

2.5%10.3%

4.7%2.5%

2.4%6.1%

4.1%4.6%

4.5%5.3%

3.7%4.0%

4.2%4.4%

Median Asking

Rent

12 Month Change in

Asking Rent

Rental Yield

Lake Macquarie

Maitland

Newcastle

Port Stephens

• Lower Hunter approvals are also in decline, falling 16% in the 3 months to February 2019.

• New house and unit prices are starting to show signs of contraction. House prices in Newcastle and Lake Macquarie fell by 1%, while the rest of the Hunter had no change. Unit prices across the Hunter fell by 2%. Established house prices were stable, while established unit prices dropped by 1%.

• Sales volumes have begun to decline in the Lower Hunter, with house sales down 6.2% and unit sales down 8.4%.

• The suburbs with the greatest 3-month movement in median house price were Croudace Bay (20.9% increase), Holmesville (13.7% increase) and Salt Ash (13.4% increase). Those with the greatest 3-month movement in median unit price were Hamilton (22.9% increase), the Junction (19.9% decrease) and Edgeworth (14.7% decrease).

Median New House and Unit Price (Hunter, Monthly)

Lower HunterLocal Government Area (LGA) 3 Month Change in Median Sales Price (Whole of Market, as at 31/01/2019)

LGA Market Update as at 31/01/2019

Cessnock

Maitland City

Port Stephens

Lake Macquarie Newcastle

Source: CoreLogic

Source: CoreLogic

Developer Insight “While demand for product in the Newcastle region has reduced slightly off a strong base in line with the overall slowdown in investor lending, quality well-priced properties remain attractive and Newcastle represents a value proposition within a dynamic labour market. The overall Newcastle fundamentals remain sound.”

Suzanne Pitson – General Manager of Sales and Marketing, DHA

↑ 0.1%

↑ 0.0%

↑ 0.0%

↓ 1.4%

0.0%

0.0%↓ 0.8%

↓ 1.0%

↓ 0.9%

↓ 2.9%

Illawarra

Residency Vacancy Rates (Illawarra, Monthly)

Source: REINSW

Approvals by LGA, 12 Months to Feb 2018 vs 12 Months to Feb 2019

Source: NSW DPE, ABS

Median New House and Unit Price (Illawarra, Monthly)

Approvals (Illawarra, Quarterly)

Source: NSW DPE, ABS

Weekly Rents (Illawarra LGAs, Jan 2019)

Source: CoreLogic

Kiama

Median Asking

Rent

12 Month Change in

Asking Rent

Rental Yield

Shellharbour

Shoalhaven

Wollongong

$580$470

3.6%4.4%

3.3%4.0%

$500$420

$395$330

$510$400

0.0%5.0%

3.9%0.0%

2.0%0.0%

4.0%4.2%

3.7%4.1%

3.5%3.5%

• Dwelling approvals in the Illawarra have started to slow, increasing by just 3% in the 3 months to February 2019.

• New house and unit prices have remained flat over the last 3 months, with the median new house price falling just 0.5%. The established market fared slightly less well, with the median house price dropping 1.3% and the median unit price falling 0.5%.

• Sales volumes are starting to decline, with house sales down 6% and unit sales down 4.5%.

• The suburbs that experienced the greatest movement in median house price over the 3 months to January 2019 were Bawley Point (15.4% increase), Minnamurra (15% decrease) and Dolphin Point (14.2% decrease). The suburbs with greatest 3-month movement in median unit price included Coniston (15.1% increase), West Wollongong (11.7% increase) and Gerringong (7.8% decrease).

Source: CoreLogic

WollongongKiama

Shellharbour

Source: CoreLogic

Source: CoreLogic

Shoalhaven

LGA Market Update as at 31/01/2019

IllawarraLocal Government Area (LGA) 3 Month Change in Median Sales Price (Whole of Market, as at 31/01/2019)

↓ 3.2%

↓ 0.4%

0.0%

↓ 1.0%

↓ 0.7%

0.0%

“Sale prices have been flat or marginally lower over the last quarter, coming off a high base. In general, prices in the region have fared slightly better than Sydney, although there has been significant growth in listings for units over the last year. Demand for greenfield and detached housing products remain strong, buoyed by strong employment and population growth. However, we continue to see some potential buyers struggling with financing as a result of the changes at the major lenders. We need to continue releasing a steady supply of serviced land in the urban release areas to keep prices affordable, as well as pushing for caps on developer taxes and charges in the face of lower sale prices.”

Alby Peros – Development Manager, Stockland

↓ 1.3%

↓ 0.5%

Developer Insight

Approvals (ACT & Queanbeyan, Monthly)

Source: ABS

Approvals (New, ACT, by Dwelling Type) 12 Months to Feb 2018 vs 12 Months to Feb 2019

Approvals (New, Queanbeyan, by Dwelling Type) 12 Months to Feb 2018 vs 12 Months to Feb 2019)

Source: ABS

Source: ABS

Completions (ACT, Quarterly)

Source: ABS

Weekly Auction Clearance Rates (ACT)

Source: CoreLogic

ACT & Queanbeyan

• Approvals in the ACT & Queanbeyan have also slowed, increasing by just 1% in the 3 months to February 2019.

• The median house price in the ACT has increased by 1.2% to $658k, while unit prices remained flat at $426k.

• Sales volumes have fallen slightly over the last 3 months, with house sales down 3.2% and unit sales down 1.4%.

• The suburbs with the most significant 3-month movement in median house price were Kingston (29% increase), Forrest (14.3% decrease) and Oxley (14% decrease). Those with the greatest 3-month movement in median unit price were Chifley (26.2% increase), Barton (23% increase) and Weston (21.8% increase).

ACT & Queanbeyan3 Month Change in Median Sales Price (Houses), as at 31/01/2019

LGA Market Update as at 31/01/2019

Source: CoreLogic

Source: CoreLogic

Queanbeyan Urban (NSW)

ACT

0%% %15% 29%

National Property ClockAdapted from Herron Todd White, Month in Review

April 2019

Illawarra Melbourne Newcastle Sydney

Canberra Central Coast

Dubbo Mid North Coast

Hobart Sunshine Coast

Adelaide Albury Launceston

Brisbane Cairns

Alice Springs Perth Rockhampton

Darwin South West WA

Canberra Illawarra Melbourne

Newcastle Perth Sydney

Central Coast Coffs Harbour Gold Coast

Lismore Mid North Coast

Hobart Sunshine Coast

Bathurst Dubbo

Adelaide Ipswich

Cairns Whitsunday

Brisbane South West WA

HOUSES

UNITS

Source: Herron Todd White, Month in Review, April 2019

THE URBAN DEVELOPMENT INSTITUTE OF AUSTRALIA (UDIA) IS THE PEAK BODY

REPRESENTING THE URBAN DEVELOPMENT INDUSTRY IN AUSTRALIA.

UDIA NSW OFFICE

Officially established in 1963, UDIA NSW has grown to become the leading industry body representing the interest of the NSW property development sector.

UDIA NSW aims to secure the viability and sustainability of the urban development industry for the benefit of our members and the communities they create by

advocating for more liveable, affordable and connected cities.

We represent the leading participants in the industry and have more than 500 member companies across the entire spectrum of the industry including developers, institutional investors, third party logistics providers, financiers, builders, suppliers,

architects, engineers, lawyers, town planners, academics and state and local government bodies. A quarter of these members are based in regional NSW.

UDIA NSW members are represented by an elected council of 13 leading industry practitioners who are responsible for the strategic direction of the Institute. UDIA

NSW also has an extensive committee and regional chapter structure that involves more than 300 of the development industry’s key stakeholders in policy formulation.

UDIA NEW SOUTH WALES 02 9262 1214

LEVEL 5, 56 CLARENCE ST. SYDNEY, NSW 2000 www.udiansw.com.au

udia@udiansw.com.au

ABOUT UDIA

Source: Herron Todd White, Month in Review, April 2019

Image: Wivenhoe Village by Mbark

Silver SponsorsResearch Partners Gold Sponsors