Housing Returns, Demand for Land at Historic Lows

The property market downturn has driven housing returns into the red, with the total returns for residential property slumping 3.3 per cent over the last year.

The combination of falling value growth and low rental yields has pushed total returns into negative territory for the first time since the global financial crisis.

The analysis, from Corelogic’s Cameron Kusher, looks at the total investment return trends across Australia’s capital cities and regional markets over the 2018-19 financial year.

The data showed diversity across markets, with housing returns remaining positive in Brisbane, Canberra Hobart, while returns remained “mildly positive” across regional markets at 1.6 per cent.

“To put it in context, housing returns last year were worse than those recorded during the financial crisis and during the 2010-12 downturn,” Kusher said.

Total returns over the fiscal year were lower in both Sydney and Melbourne, which recorded declines of -6.7 per cent and -6.0 per cent respectively.

“For Melbourne it was the first financial year in which returns were negative since 2011-12 and it was the largest fall in total returns on record,” Kusher said.

Total returns in Brisbane, while positive, were the lowest they have been since 2011-12 at 1.7 per cent.

The analysis comes as residential lot sales declined to record lows over the March quarter, as demand for new homes slumped off the back of the downturn.

The latest HIA-Corelogic Residential Land Report, which covers 47 markets across the country, showed a reduction in settled land sales, with just 7,236 lots sold over the quarter.

While house lot sales were almost 50 per cent lower than the 10-year average of 13,682, land prices remained largely intact.

“While the volume of sales decreased considerably, this was not reflected in the change in the median price of land,” HIA chief economist Tim Reardon said.

The national weighted median land price increased 0.9 per cent in the March quarter compared to the December quarter.

Related: House Price Declines ‘Credit Negative’ for States

Green shoots as declines slow

More recently, there’s been signs of buyers returning to the market as the slowing rate of declines, strong auction results and a boost in sentiment validates forecasts of a recovery from next year.

Domain’s latest House Price Report showed house price declines in Sydney slowing to 0.4 per cent in the June quarter — the smallest decline since 2017. House prices rose by 0.3 per cent in Melbourne for the first time since the downturn began.

Brisbane’s media house price dropped by 1.3 per cent in the June quarter, while its unit prices are now back to where they were in 2013.

Meanwhile, the latest sentiment survey, from ME Bank, showed improving confidence in the property market — with 38 per cent of those surveyed expecting house prices to rise over the next 12 months.

The survey results recorded an uptick from the March quarter, which was conducted prior to the federal election.