Market size

Two tables this post.

Please take 30 seconds to look at them.

Table 1: Detached house sales + median price

Location

Sales

% change

Median $

% change

Adelaide

14,770

-10%

$472,000

2%

Brisbane region

29,550

-11%

$545,000

0%

Canberra

4,130

-13%

$690,000

1%

Darwin

1,120

-5%

$485,000

-3%

Gold Coast

6,930

-14%

$650,000

0%

Hobart

3,690

-14%

$460,000

8%

Melbourne

46,910

-19%

$714,000

-5%

Perth

23,800

-7%

$475,000

-3%

Sunshine Coast

5,010

-11%

$605,000

0%

Sydney

40,680

-6%

$890,000

-6%

Matusik + Price Finder.  Year ending September 2019.  % change on year before.

Table 2: Detached house sales by price group

Location

< $500k

$500k-$750k

$750k-$1m

>$1m

Adelaide

55%

26%

13%

6%

Brisbane region

41%

31%

18%

10%

Canberra

11%

40%

35%

14%

Darwin

53%

37%

8%

2%

Gold Coast

22%

36%

26%

16%

Hobart

57%

27%

13%

3%

Melbourne

13%

35%

26%

27%

Perth

54%

23%

13%

10%

Sunshine Coast

23%

44%

23%

10%

Sydney

9%

21%

27%

43%

Matusik + Price Finder.  Year ending September 2019. 

Most will focus on the price column in the first table and then spend most of their time reviewing the change in price.  Many will take sides too, either agreeing with or rejecting, my summary of the annual change in the median price data.

But few will focus on the sales volumes in table 1 and even less will spend much time – in my experience – on the second table at all.

Yet, sales volume and especially volumes by price group (and product type) are the key elements to understanding a housing market.

Our minds have been hijacked by price and especially its annual, monthly and even, now, daily movement.

Most online databases promote price.  The name of my preferred sales database – Price Finder – speaks volumes.

When my business undertakes market analysis – or when Paul Broad and I are commissioned to provide project advice – we always spend considerable time understanding, and illustrating, the size of the relevant housing segment.

You need to understand the size of your market, what market share you can realistically achieve and your competitive set. 

The aim should be to reduce your sales risk.

It’s rare to be able to grow a market.  At times it can be done but almost always at high expense.

Many in the property sales space will tell you that they have a wide funnel.  But in reality, it is very uncommon. 

Its best to know the market’s limitations from the get-go and plan accordingly.

Change?

Queensland faces two elections this year – local government elections in late March and a state government election in late October.

In most cases, local government elections mean little to those in the electorate, whilst the state poll – which Labor currently holds by just four seats – is considered a more serious affair.

Many believe that Labor will lose the Queensland state election and that we bring about changes.  Some think that these changes will be significant.

A change can be a good as a holiday.  And after a break one often feels more confident and refreshed.  There is considerable credence in this postulation.

But also, confidence is a flitting thing.  Increasingly so it seems these days.

I like to go back to the numbers when confronted with such conjecture.

And the numbers suggest, that regardless of state government flavour, there is likely to be little real change on the Queensland scene.

Queensland carries substantial debt.  Taxation revenue will remain fundamental regardless of party.  There is very little room to ease state taxation or provide incentives.

Queensland’s taxation revenue essentially comes from four income streams.  These, based on the 2019-2020 budget, are:

  • 33% Property (transfers, taxation + levies)
  • 28% Payroll (tax)
  • 23% Motor vehicles (registration, duties + insurance)
  • 10% Gambling (taxes + levies)

So, don’t expect any major property related changes. 

A new government isn’t going to be able to notably reduce the cost of doing business nor are they likely to try and reduce the number of cars on Queensland roads.  Quite the opposite in fact.

And with state revenue from gambling increasing by 10% per annum over recent years, expect more casinos and gaming contraptions at your local in the years to come.

Change? 

Hmmm, I do wonder.

Short supply

At present one in five (18%) of Australia’s households hold two generations and some ten percent (9%) hold three generations.  These figures are expected to rise to 24% and 13%, respectively, within the next decade.

Yet our analysis into this market segment has found that less than 5% of Australia’s existing housing stock successfully caters to this multi-generational market.

Recent analysis by CoreLogic has found that building a secondary self-contained home in the backyard can lift the overall properties value by up to 30% and adds around 27% to an investment properties previous rental income.

This work by CoreLogic also found that there were 583,000 properties in Sydney, Melbourne and Brisbane that met the criteria for an additional self-contained backyard dwelling.

Our work has found that the inclusion of a $185,000 Backyard Home (including development approval and infrastructure costs) – in the Brisbane context – can achieve gross rental yields of between 8% to 10% for permanent tenancies and between 15% and 20% for short-term occupancies.

Our work has also found that middle-ring detached homes with a fully-compliant and high quality one-bedroom secondary residence – like Backyard Homeresell for between 12% and 15% more than other dwellings in the same location without a secondary abode.

The demand for backyard housing solutions is high and rising. 

And the supply of housing that caters well for multi-generational and other household members is in short supply.

Interest rates

It might not happen later today, but it should happen soon and maybe twice in the next couple of months.

I am of course talking about the RBA cutting the cash rate.

Mark Twain famously said “Lies, damned lies, and statistics”.  And this was quoted in the context of the use of statistics to bolster weak arguments.

But for mine, the chart below isn’t a weak argument.  It shows that interest rates are heading down.

However, don’t expect much of it to be passed onto us punters.  

Nor will it really have much impact, economically, except maybe to help keep some housing markets more buoyant than they really should be.

But when you only have one or two tools in your tool box you have to use what you have got to try and get the job done.

Big homes

The average floor area of a new free-standing house in Australia is 254 square metres.

Our homes are much larger than those within Europe and even many American cities.

Why has this occurred? 

It is simply economics.

The actual land component of a new house and land package is very high and fixed.

And these days the land usually costs around two-thirds of the total purchase price.

For example, a 150m2 three-bedroom house and land package can cost $525,000. The land price would be around $330,000 and the cost to build the house about $195,000. The building rate equates to $3,500/m2 when including the price of the land.

Now, a larger 250m2 four bedroom house with a study + even multi-purpose room might cost $275,000 to build, making the end package total $600,000. The buyer gets 100m2 of extra house for just $75,000 more.

The total end price per square metre has now dropped to $2,400 or 30% less.

And here is the real rub.

Assuming that the buyer can afford to pay the extra deposit and fund a $600,000 house and land package, all it costs – assuming a ten percent deposit, 25 year principal and interest loan and using a 3.75% variable interest rate – is an extra $10 per day in mortgage payments.

The new home buyer can now own a home that is two-thirds larger for just $70 per week.

To upsize the house, as outlined in the example above, would cost the buyer an extra $3,650 per year.

Given the high cost of land in and around our capital cities, the trend towards larger new homes makes economic sense.

Buyers are just acting in their own interests and are making rational decisions to choose a larger and more valuable home for what is a small additional out of pocket expense in the broad scheme of things.

Unless there are real economies in the land content – for example, the plentiful supply of subdivided land to keep land prices keen – building a small house is often not the best value for money.

On the rise

At first glance it looks like we have a lot of spare bedrooms.

Yes, our homes are big, but they aren’t all that well designed to cater for multigenerational households.

The number of people per household is now on the rise.

This is being influenced by a range of factors including low housing affordability, harder economic times, limited land supplies in our major cities, rising land prices and demographic change.

Increasing traffic congestion and travels times are also having an impact. 

Many younger adults are staying at home longer or boomeranging back and forth. Whilst, in some cases, grandparents are living in the family home too.

Also, quite a few homeowners are taking in a tenant to help make ends meet.

My new business venture backyardhome.com.au caters for these trends. 

Goodbye Anglosphere

Queensland: Population growth components

Years

Natural increase

Overseas migration

Interstate migration

Total change

Annual change in population component

2009

36,519

59,319

14,702

109,266

2018

29,356

27,741

24,698

81,795

2019

29,882

32,963

22,831

85,676

Distribution of annual growth by population component

2009

33%

54%

13%

100%

2018

36%

34%

30%

100%

2019

35%

38%

27%

100%

Change over last year

Number

526

5,222

-1,867

3,881

%

2%

19%

-8%

5%

Matusik + ABS 3101.0. Financial years.

Queensland is attracting more people.

They are increasing coming from overseas and not from interstate. 

Queensland’s biggest increase in overseas nationalities over the last five years were:

  • Indian up 64%
  • Korean up 57%
  • Chinese up 49%
  • Spanish up 44%
  • Sri Lankan up 43%
  • Filipino up 35%
  • Vietnamese up 35%                                

If this population remix remains in play, then Queensland’s housing needs will change. 

Many of the nationalities high up on the Queensland overseas growth list want different things when it comes to housing when compared to older Australian households and migrants coming from the Anglosphere.

They like, for example, to live in multi-generational groups. 

For many accommodating their adult children and/or their elderly parents on the same title is the major factor when buying or renting. 

Many also opt to improve their residence – over time – to support more household members.

For more detail about backyard home go here.

A lopsided nation

Resident population and annual growth

State or territory

2018

2019

10 years

Last year

Difference

NSW

7,980,168

8,089,526

103,577

109,358

6%

Victoria

6,462,019

6,594,804

122,287

132,785

9%

Queensland

5,009,424

5,095,100

76,633

85,676

12%

South Australia

1,736,527

1,751,693

14,279

15,166

6%

Western Australia

2,594,181

2,621,680

38,143

27,499

-28%

Tasmania

528,298

534,281

2,993

5,983

100%

Northern Territory

247,058

245,869

1,984

-1,189

-160%

ACT

420,379

426,709

7,192

6,330

-12%

Australia

24,982,688

25,364,307

367,265

381,619

4%

Matusik + ABS 3101.0. Financial years.

One might say there are winners and losers. 

With Tasmania, Queensland and Victoria in the improving line-up and the Northern Territory and Western Australia in the loser’s circle.

Well one might.  But I reckon it depends on which side of the fence you sit. 

More bums on seats can be a good thing, but it can also be a curse.

Remember for every 1,000 increase in population there is another 776 cars.  This ratio is 817 in Queensland and even higher out west and in Tasmania.

There is little doubt that the east coast states are dominating population growth, with an 85% market share last year.  Its share of the spoils is on the rise too. 

When it comes to population, we have a very lopsided nation.

For more detail about what is – and isn’t – going on in south east Queensland go here.

Jobs matter

South East Queensland: Employed residents

Municipality

Number of employed persons

Annual change

2014

2018

2019

5 years

Last year

Brisbane

632,343

662,943

671,172

7,766

8,229

Gold Coast

291,212

321,601

333,754

8,508

12,153

Ipswich

88,266

99,703

103,269

3,001

3,566

Lockyer Valley

16,182

18,299

18,222

408

-77

Logan

123,066

151,453

148,943

5,175

-2,510

Moreton Bay

206,582

218,328

219,055

2,495

727

Noosa

25,502

26,715

27,424

384

709

Redland

77,539

81,457

84,288

1,350

2,831

Scenic Rim

17,356

19,568

19,875

504

307

Somerset

9,979

10,607

10,758

156

151

Sunshine Coast

142,076

150,240

156,427

2,870

6,187

Toowoomba

73,744

80,766

77,967

845

-2,799

Total SEQld

1,703,847

1,841,680

1,871,154

33,461

29,474

Matusik + Small Area Labour Markets Australia. Years ending June.

Some areas are doing better than others. 

However, the overall trend is down, with fewer new jobs being created across SEQld last year when compared to the previous five year average.

Also, of note is that if Brisbane is going to continue to create about a quarter of the new jobs in the region, it really needs to think through its new housing development policies.

Does Brisbane really want to be a doughnut city, where most workers reside elsewhere and commute in and out of the city each day? Do Brisbane residents want to pay the lion’s share of that burden?  Or is it best to have people work and live within a close commute?  I wonder.

Regardless of my muse, new job creation is the challenge for Queensland and a big factor as to how the local housing market plays out during 2020.

And if you want to get another 23 tables like this one, go here.

Shut happens

Merry Christmas – oops Happy Holidays – to you and your family.

I hope you have a safe and relaxing break.  Spend some time with people that matter.  Often easier said than done.

At this time of the year I like to share with you a list of books that are worth reading or listening to.  They include:

Has the luck run out? by David Fagan

Breaking Point by Peter Seamer

Australia Reimagined by Hugh Mackay

The Salt Path by Raynor Winn

The Land Before Avocado by Richard Glover

China’s Great Wall of Debt by Dinny McMahon

Doughnut Economics by Kate Raworth

Enjoy.

The Matusik Missive starts again in mid-January.  

By then we should have downsized and moved to Tasmania.  

I will be splitting my time over the next couple of years in two places – Brisbane and Tassie.  Back to gold status flight membership for sure!

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