Values are falling in Melbourne but continue to climb in regional Vic.
Melbourne dwelling values fell by -2.3% over the second quarter of 2018 which was their largest quarterly fall since January 2012 and regional Vic values increase by 0.6%.
Over the 12 months to September 2018, Melbourne dwelling values fell by -3.4%, their largest annual fall since August 2012, while in regional Vic values increased by 8.3%, which was slightly lower than their recent peak rate of growth.
Although value growth has slowed rapidly over the past year in Melbourne, regional Vic continues to see comparatively stronger growth, driven by housing being much more affordable than it is in Melbourne.
Annual values falls are currently confined to the upper quartile of the market
Over the past year, dwelling values for the most affordable 25% of Vic housing stock has increased by 4.2% while the middle 50% of housing stock has increased 8.4% and the most expensive 25% has recorded a decline of -5.9%.
In Melbourne, the most affordable 25% of properties have increased in value by 4.0% over the past year compared to a -1.1% fall across the middle 50% of the market and a -7.5% fall across the 25% of most expensive properties.
Regional Vic dwelling values have increased 4.2% across the most affordable 25% of properties over the past year, are 7.9% higher across the middle 50% of properties and have increased by 10.0% across the most expensive 25% of properties.
There’s been a significant fall in sales transactions over the past 12 months
Over the past three months there was 26,540 house and unit settlements in Vic which was -13.4% lower than over the same three month period last year.
In Melbourne, there were 19,060 transactions settled over the three months to September 2018 which was -17.2% lower than the same period in 2017.
There were 7,480 house and unit settlements in regional Vic over the three months to September 2018 which was -1.9% lower than the number over the third quarter of 2017.
Rental growth has accelerated in regional Vic while it has slowed in Melbourne
Over the third quarter of 2018, Melbourne rents fell by -0.1% while they increased by 0.5% over the period in regional Vic.
Throughout the past year, Melbourne rental growth has slowed from 4.5% to 2.6% and in regional Vic annual rental growth was 3.3% a year ago and has increased to 4.0% over the past year.
Melbourne rental rates are falling on the back of a significant increase in housing supply over recent years while both values and rents are rising in regional Vic highlighting strengthening housing demand.
Melbourne yields are lifting from historic lows while regional Vic yields continue to soften
Gross rental yields in Melbourne were recorded at 3.31% in September 2018, up from 3.09% a year earlier.
Regional Vic gross rental yields have fallen from 4.80% in September 2017 to 4.59% in September 2018.
Annual growth in state final demand for Vic remains the greatest in the nation
State final demand measures the total value of goods and services that are sold in a state to buyers who wish to either consume them or retain them in the form of capital assets. It excludes sales made to buyers who use them as inputs to a production activity, export sales and sales that lead to accumulation of inventories. Given it excludes exports and inventories it isn’t directly comparable to GDP.
State final demand in Vic increased by 1.2% over the June 2018 quarter which was a smaller increase than the March 2018 quarter.
Over the past 12 months, Vic state final demand has increased by 5.2% which was the greatest growth of all states and territories.
The unemployment rate in Vic continues to trend lower
Vic’s trend unemployment rate was recorded at 4.7% in September 2018 which was down from 5.9% a year earlier and the lowest it has been since November 2008.
Vic has created 85,190 jobs over the 12 months to September 2018.
Based on the 85,190 jobs created over the past year, total employment has increased by 2.6% and 29.6% of all jobs created nationally last year were in Vic.
Vic remains the nation’s population growth powerhouse but growth continues to slow
Vic’s population increased by 137,395 persons over the 12 months to March 2018 which was the state’s smallest increase in population since December 2015 however, it still accounted for 36.1% of the nation’s population increase.
Looking at the components, the 143,420 person population increase was comprised of 38,593 from natural increase, 83,703 persons from net overseas migration and 15,099 persons from net interstate migration.
Natural increase is slowly trending lower, net overseas migration was the lowest it’s been since December 2016 and net interstate migration has been falling for four consecutive quarters and is the lowest it’s been since December 2015.
While unit approvals are well down from their peak, house approvals are climbing
In August, there were 4,907 dwellings approved for construction in Vic which was -6.9% lower over the month and -16.8% lower year-on-year.
Over the month there were 3,648 houses approved for construction, an increase of 9.7% over the month and a 2.9% increase year-on-year.
Unit approvals are in a clear downtrend across Vic after falling -35.4% in August to be -46.5% lower than in August 2017 and are now -81.0% lower than their peak.
The number of dwellings under construction in Vic is only slightly below its historic high
According to the ABS there were 73,936 dwellings under construction across Vic at the end of June 2018.
The 73,936 is split between: 23,364 new houses, a historic high 50,085 new units and 487 non-new dwellings.
Although there was a slight decline in the number of dwellings under construction over the quarter, the number of units under construction climbed to a new record-high.
Both owner occupier and investor demand for mortgages is waning
The total value of housing finance commitments in Vic during August 2018 was $9.6 billion which was -2.7% lower over the month and -11.0% lower yearon-year.
The $9.6 billion was split between: $2.2 billion in owner occupier refinances, $4.4 billion in owner occupier new lending and $2.9 billion in lending to investors.
Refinancing is the only segment of lending which was greater than it was a year ago which highlights the weakening demand for new mortgages across Vic.