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20 Feb 2023 - Australian Secure Capital Fund - Market Update

By: Australian Secure Capital Fund

Australian Secure Capital Fund - Market Update January

Australian Secure Capital Fund

February 2023


January saw property prices fall nationally by 1%, which was less than December and the smallest month to month decline since mid last year according to CoreLogic's national Home Value Index.

Prices fell across all capitals by an average of 1.1%, however regional housing values continued to record a milder rate of decline at -0.8%. Hobart saw the largest reduction (-1.7%), followed by Brisbane (-1.4%), Sydney (-1.2%), Melbourne (-1.1%), Canberra (-1.0%), Adelaide (-0.8%) while the falls in Perth and Darwin were less significant at (-0.3%) and (-0.1%) respectively.

The quarterly trend however is pointing to a reduction of the in the pace of decline, and despite the falls every capital city and region is still recording home values above pre-pandemic levels.

Contributing to the reduction of dwelling values, is the fall in demand. Capital city dwelling sales were down -29.4% on previous year figures, with listings -22.2% below the same time last year meaning that most home owners who are considering selling are sitting things out with no pressure to sell into this market.

Weekly auction activity has begun to increase in 2023, with 706 auctions taking place across capital cities last weekend achieving a 67.9% clearance rate which we consider positive. Melbourne recorded the most auctions with 259 auctions taking place at a clearance rate of

68.3% (67.5% last year), followed by Sydney with 202 auctions and a strong clearance rate of 71.6% (66.3% last year). Adelaide achieved the best clearance rate for the weekend with 76.8% (81.8% last year) for their 105 auctions whilst Brisbane and Canberra were lower with clearance rates of 59.6% (80.1% last year) and 52.2% (85.5% last year) respectively.

Whilst property prices will undoubtedly be linked to the movement in interest rates we do believe we are nearing the end of the rate rise cycle, with some banks already beginning to reduce the fixed rates for 3 and 5 year terms.

The resurgence in overseas student migration will also see the rental market remain tight and help support yields across the residential property market. As a result we do believe housing values will stabilise over the coming months as some level of confidence returns to the market. 

Quick Insights

The Return of Students 

Demand is set to strengthen in inner-city suburbs across Australia as the Chinese government directs its students to return to university campuses worldwide. Almost 50,000 Chinese students are expected to flood back into Australian capitals looking for rental accommodation as they return to in-person study. This injection of demand is likely to raise rental yields by at least 5%


Extra Eastern Income 

Demand for rentals in Sydney's affluent eastern suburbs never waned throughout last year even as the supply of suitable housing dried up. As a result, an additional $19,812 in rental income was delivered to some landlords throughout 2022. Across the country, houses and units across 195 suburbs made at least $5200 a year in extra rent during the same period.


Apartments Continue to Rise 

In addition to the rental apartment frenzy in Melbourne and Sydney, property prices among apartments have also risen. In particular, Adelaide, and Brisbane have seen unit values jump by significant amounts. 76 suburbs across Queensland and South Australia, broke record-high prices in December. Adelaide's Mitchell Park alone rose by more than 30%. Tim Lawless of CoreLogic has explained that, "...with borrowing capacity reducing as interest rates rise, it's likely the lower price points of unit values have become more broadly appealing."



Funds operated by this manager:

ASCF High Yield Fund, ASCF Premium Capital FundASCF Select Income Fund

Source:

Australian Financial Review
Article 1 -  Inner-city rents may jump 5pc with return of 50,000 Chinese students by Nila Sweeney, Julie Hare, Nick Lenaghan and Gus McCubbing
Article 2 - These Sydney suburbs just gave landlords an extra $20,000 by Nila Sweeney
Article 3 - The suburbs where apartment prices are still soaring by Nila Sweeney

 

 

 

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