Greetings from Scoutable and welcome to our Quarterly Wrap Up.
I hope you are well.
Market Update
At its October meeting, the Reserve Bank of Australia left the cash rate at 4.1% for the fourth consecutive month. The Reserve Bank did however mention that further rate rises may be required to achieve target inflation.
CoreLogic’s national Home Value Index reported an increase of 0.8% in dwelling values across Australia in September 2023. Q3 reported a quarterly growth of 2.2%, down from Q2’s growth of 3%. Looking at the Home Value Index of capital cities for Q3 2023, a gain of 2.5% reported in Sydney, 1.3% in Melbourne and 3.9% in Brisbane. Adelaide is leading the chart with a 4.3% gain.
Currently, growth rates are directly relating to stock levels. Tim Lawless, CoreLogic’s research director, noted, “The three capitals recording the highest capital gain each have advertised supply levels that are around 40% below their previous five-year average. Advertised supply levels across Hobart, where values are still trending lower, have been holding at above average levels since June last year and were almost 40% above its five-year average.”
National dwelling values have increased 6.6% since January 2023. The market is still 1.3% below peak levels recorded in April 2022. CoreLogic reported if growth rate continues at the current pace the national index will likely recover to a new high by end of November.
Looking forward, the three key elements to keep an eye on for market movements over the next six to twelve months are consumer confidence, supply and serviceability (i.e. interest rate movements & Australian Prudential Regulation Authority mortgage assessment rate).
Rental Update
Vacancy rates continue to be at record lows. The pre-COVID average vacancy rate for capital cities was 3.1%. Currently, the capital city vacancy rate is sitting at 1%. Whilst vacancy rates are low, rental growth has eased over the last quarter. Australia’s rental market index grew 1.6% over Q3 2023, down from quarterly rise of 2.7% in Q2 and 2.9% in Q1 2023. The ease in growth is likely fuelled by affordability issues.
Government News
The Victorian government announced in May, a part of their 10-year COVID recovery plan, the threshold for Victoria's land tax (doesn’t apply to your owner-occupied home) will be lowered from $300,000 to $50,000 from 1st January 2024. The annual charge of $500 will apply to affected properties between $50,000 and $100,000. A charge of $975 will apply for property landholdings worth between $100,000 and $300,000, while land tax rates for properties above $300,000 will rise by $975 plus 0.1 per cent of the land's value. This could potentially pull some investors out of the market that would otherwise be considering buying, but it's too early to predict the impact, i.e. the cost of the land tax might just be passed on to the tenants via increased rent.
Further, Victoria have announced another property tax change, announced on the 3rd October, Victoria’s Vacant Residential Land Tax, a charge on homes that are left unoccupied for more than six months (currently applies to Melbourne’s inner and middle ring suburbs), will be expanded to the entire state (including regional areas) from the 1st January 2025. The tax is charged at 1% of the capital improved value (CIV) of the property. For example, if a property has a CIV of $500,000, the tax would be $5,000.
If you would like to discuss the property market further, please get in touch.
Until next quarter,
Kellie Landrey | Principal Buyers Agent
