Housing Pulse. November Westpac Institutional Bank

Transcription

1 Housing Pulse November 218 Westpac Institutional Bank

2 Contents Executive summary 3 Overview: weak finish to Special topics: Historical house price corrections 6 Prudential policy update 8 Housing and household wealth 1 Additional material: charts & tables 26 Summary & forecast tables Economic & financial forecasts 32 Housing market data 34 Appendix 38 State by state New South Wales: price correction nears 1 12 Victoria: weakness intensifies 14 Queensland: holding up well 16 Western Australia: lurch lower despite positives 18 South Australia: market steady, sentiment slips 2 Tasmania: boom cooling but supply tight 22 Territories: NT s slump slows; ACT tight 24 The Housing Pulse report is produced by Westpac Economics Editor: Matthew Hassan Internet: economics@westpac.com.au This issue was finalised on 23 November 218. The next issue will be published on 22 February

3 Executive summary Our last Housing Pulse showed buyer sentiment continuing to stabilise but a further weakening in housing markets suggested other factors were driving things a tightening in lending standards in particular. Three months on its a similar story around buyer sentiment overall but conditions across the major markets have weakened again with turnover dropping to very low levels and price corrections deepening in Sydney, Melbourne and Perth. The Westpac Housing Consumer Sentiment Index* has shown little change, improving slightly over the last 3mths but consistent with the signal earlier in the year pointing to stabilising activity. This is clearly implying that other factors affecting credit availability, such as tightening loan criteria and falling investor activity, are behind the current market weakening. For the record, the main driver of the sentiment lift is improved reads on time to buy and jobs, partially offset by a more downbeat view on prices. Conditions continue to vary significantly across states. Weakness remains more pronounced for the previously strong NSW and Vic markets, sentiment suggesting the former may be nearer to stabilising than the latter. Qld continues to hold up much better although buyer sentiment still looks to be lacking a spark. WA has succumbed to renewed price declines despite hopeful signs earlier in the year, the move clearly weighing on sentiment. SA continues to be a steady performer and Tasmania s contrarian boom is starting to cool despite markets remaining tight. We have added extra material on all of these state markets in this issue (p26) and included some facts and figures on the smaller territories (p24) as well as additional data tables in residential property listings (p37). The special topics in this month s issue look at historical house price corrections; the latest on prudential policy measures; and the links between housing and household wealth. 1. Australia: national housing conditions ann ch Oct-8 Oct-1 Oct-12 Oct-14 Oct-16 Oct-18 Housing pulse November 218 Westpac Consumer Housing Sentiment Index* *adv. 3mths; ^ stock seas. adj d by Westpac, smoothed Source: ABS, CoreLogic, Westpac Melbourne Institute turnover^ latest month ann ch The Westpac Consumer Housing Sentiment Index* has shown little change... implying other factors affecting credit availability... are behind the current market weakening *The Westpac Consumer Housing Sentiment Index is a composite measure based on four housing related components of the Westpac Consumer Sentiment survey. See Appendix on p38 for more details. 3

4 Overview: weak finish to Consumer sentiment: housing index time to buy* seasonally adjusted actual *seasonally adjusted series is 3mth avg avg price expectations^ 6 Nov-8 Nov-11 Nov-14 Nov-17 Nov-8 Nov-11 Nov-14 Nov index Source: Melbourne Institute, Westpac Economics ^seasonally adjusted series is qtly 3. Consumer sentiment: jobs & risk index unemp. expectations (lhs) seasonally adjusted *seasonally adjusted series is 3mth avg unemp. to rise unemp. to fall actual avg 6 Nov-8 Nov-11 Nov-14 Nov-17 Nov-8 Nov-11 Nov-14 Nov-17 ^qtly risk aversion (rhs)^ more risk averse less risk averse index Source: Melbourne Institute, Westpac Economics The Sydney-Melbourne driven price correction that began just over a year ago has carried through to the end of 218 and is showing few signs of abating. Conditions still vary widely across different geographies weakness centred on the two major eastern cities and a longer running adjustment in Perth but prices holding up better in other capital cities and in most regional areas. Sentiment moves have been mixed over the last three months: time to buy assessments lifting further from their 217 lows but price expectations again pared back sharply. Unemployment expectations and risk aversion are largely unchanged over the last six months. Turnover remains near historical lows 3yr lows in terms of the share of the total dwelling stock. That follows an expansion that never reached any great heights turnover peaking at around ½ of the total dwelling stock compared to 7-8 during the early 2s boom. It currently sits at just under 4. Auction markets showed a further weakening in Aug-Nov with clearance rates in both Sydney and Melbourne now at very low levels near 4. Pre-auction withdrawals have also risen materially, concealing the extent of weakness around 2 of auctions in Sydney have been withdrawn over the last nine months. Prices nationally are now down 3.4 from their Sep 217 peak but are down close to 7 across the Sydney and Melbourne markets on a combined basis. Perth prices are down 4yr. Prices are up slightly in Brisbane and Adelaide, and continue to show robust gains in Hobart (albeit slowing to a single digit pace in annual terms). 4

5 4. Auction clearance rates Residential property listings ratio weekly sales to new listings (lhs)* 6mth avg Sydney monthly avg *all figures seasonally adjusted by Westpac 3 Nov-8 Nov-11 Nov-14 Nov-17 Nov-8 Nov-11 Nov-14 Nov-17 *ratio > 1 means sales outstripping new listings mthly (adv'd 3mths).7 Nov-8 Nov-11 Nov-14 Nov-17 Nov-8 Nov-11 Nov-14 Nov-17 Housing pulse November 218 total listings (rhs)^ avg ^shown as months of sales Melbourne Sources: APM, CoreLogic, Westpac Economics months Source: CoreLogic, Westpac Economics Nationally, the Westpac Melbourne Institute time to buy a dwelling index has risen. since Aug to be up 16.7yr. Despite the continued recovery the index remains pts below its long run average. The Westpac MI Consumer House Price Expectations Index posted another sharp 12 drop over the 3mths to Nov, the fall again centred on NSW and Vic. At 99 the latest reading is on a par with the weakest we have ever seen on this index, when it was first compiled back in May 29. State measures for NSW and Vic both hit new lows in the 8-8 range, with Vic s index down 2 over the last 3mths alone. The house price corrections underway in Sydney and Melbourne look to be firmly embedded in consumer expectations. The Westpac Melbourne Institute Unemployment Expectations Index declined 6.9 over the 3mths to Nov, essentially reversing the rise seen over the previous 3mths (recall that higher reads mean more consumers expect unemployment to rise in the year ahead). That said, consumer unemployment fears are still materially better than in 217. That matches the improvement in official labour market estimates, most notably the unemployment rate nationally which has declined from. a year ago to around currently. Consumers continue to exhibit high levels of risk aversion. The Westpac Consumer Risk Aversion Index based on responses to questions on the wisest place for savings lifted slightly from 44. in Jun to 44.8 in Sep, only slightly below the 46.6 reading a year ago. More consumers favour pay down debt (2) than real estate and shares combined (19).

6 Special topic: historical house price corrections 6. Dwelling price corrections: all episodes index Melbourne (218) Sydney (217) index *all capital city price corrections since 19 (Syd, Melb only prior to 1979); based at 1 at price peak, changes shown in real terms; dotted lines indicate less reliable estimates Perth (214) Sources: CoreLogic, Residex, Stapledon, ABS, Westpac Economics months 7. Dwelling price corrections: macro conditions index recessions/gfc interest rate cycle other Sources: CoreLogic, ABS, Westpac Economics *all major capital city price corrections since 198 indexes based at 1 at price peak with changes shown in real terms, adjusted for inflation Melb (218) Sydney (217) Sydney (24) index Perth (214) months With Australia s housing market now a year into its price correction, its worth reviewing previous price adjustments for clues about the potential depth and duration of the current cycle. Unfortunately, while history offers many precedents, there are few that provide good guides to the current situation. Examples of material price corrections in the absence of high interest rates and/or a wider macro-economic shock are rare. House price corrections are more common than many Australians may appreciate. The high inflation of the 197s and 198s, which often disguised material house price corrections in real, inflation adjusted terms, and the long period of sustained price growth through the 199s and early 2s have likely conditioned many to believe that prices rarely fall. The experience since then, and in particular the decade since the GFC, has clearly challenged that idea. All up, covering the post-198s period for which we have reliable price data for the five major capital cities, there have now been about thirty separate price corrections in real terms. Chart 6 plots the course of these adjustments month to month alongside earlier corrections in the Sydney and Melbourne markets going back to 19 (based on less reliable price data) and the current corrections underway in the Sydney, Melbourne and Perth markets in total, fifty-five separate episodes. Chart 7 shows the post-198 corrections for which we have the best data and separates these into those associated with recessions/the GFC, those associated with significant interest rate tightening cycles and the rest. 6

7 8. Dwelling price corrections: size and duration # total decline (real ) during recession/gfc Housing pulse November 218 other *all capital city price corrections since 198 (N=33) non recession corrections >1 rare but not unheard of duration (years) Sources: CoreLogic, Westpac Economics and can often be very prolonged < < Dwelling price corrections: sentiment responses ppt CSI fin vs year ago sentiment (lhs) latest price corrections in Sydney and Melbourne * avg over period compared to avg over 12mths prior fin. next 12mths ecy next 12mths ecy next yrs unemp. expns other measures (rhs) time buy dwelling other rate cycle recession/gfc house price expns # ppt Sources: Melbourne Institute, Westpac Economics risk aversion Clearly the majority of house price corrections are associated with wider macro-economic developments about a thirds are associated with economic recessions or large macro-economic shocks and another third are associated with interest rate tightening cycles. Not surprisingly, the corrections associated with recessions tended to be sharper, deeper and longer lasting. Chart 8 shows the distribution of price adjustments according to the cumulative real price decline and the duration of the adjustment with recession corrections marked in red. Whereas other price corrections tend to run to 1-1 in real terms and for about a year, those associated with recessions tend to be corrections of more than 2 and often run considerably longer (up to yrs). Notable amongst the other correction category is the ongoing correction in Perth which qualifies as the longest price adjustment of any major capital city since 198, with the decline in real terms on a par with the most brutal corrections seen during the 199s recession. Clearly the mining boom-bust cycle is a major driver here that limits its relevance to the corrections underway in Sydney and Melbourne. The Sydney correction in 24 however may provide a slightly better example, representing a price adjustment that was largely unrelated to wider macro cycles. Chart 9 looks at how sentiment in each state varied during different price corrections again grouped into recession/gfc, rate cycles and other. Notably, the wider sentiment drag in the last group is much milder. The same looks to be mostly the case so far for the current house price corrections in Sydney and Melbourne. 7

8 Special topic: prudential policy update 1. Summary of prudential policy measures Macro prudential 21 1 limit on investor loan growth Micro prudential Tightened serviceability assessments and improved consistency across lenders, including minimum assessment floor interest rates >7; serviceability assessment buffers >2 and applied to both new and existing debt. 216 Tightened serviceability assessments including estimates of credit card repayments; scaling of benchmark measures of minimum expenses; discounts to estimates of uncertain/variable income limit on share of interest only loans limit on investor loan growth removed 11. Macro prudential targets ann investor housing credit (lhs) *thin line shows 6mth annualised growth rate Sources: ABS, APRA, Westpac Economics Restrictions on high LVR interest only and investor loans and continue to restrain lending to high risk segments Lenders to develop limits on share of new loans with debt to income ratios above 6, improve collection of information on expenses, and strengthen controls on verifying existing debt 1 limit Source: APRA, Westpac Economics interest only loans (rhs) interest-only 3cap Sep-9 Sep-12 Sep-1 Sep-18 Sep-9 Sep-12 Sep-1 Sep Both macro and micro prudential policy remain on hold and look unlikely to be changed materially any time soon. Recall that macro refers to the aggregate guidelines set down by regulators the 1 investor credit growth limit and the 3 cap on the share of interest only (IO) loans while micro covers the more detailed guidelines around loan assessments and lenders risk management. Despite this, there has been some additional tightening in lending conditions through the middle of 218, initiated more by the banks than the regulator with the focus on improving assessments of expenses and prospective borrowers other debt commitments. Going forward, some further incremental tightening is also possible, including from measures associated with the ongoing Royal Commission into Banking, Superannuation and Financial Services (due to give its final report in Feb 219). Other housing-related government policy is also live. The Federal election due between now and the end of May raises the prospect of potential changes to both negative gearing and capital gains tax arrangements. The opposition ALP party, currently ahead in polls, supports restricting negative gearing tax concessions to newly built properties only (with current arrangements grandfathered for existing investors) and halving the capital gains tax concession. At the state level, the NSW government has recently announced it will move to CPI indexation of stamp duty brackets from July next year, although the initial saving will be relatively small (estimated at $ for the average property buyer). 8

9 12. Lending: interest only and major bank share owner occupier investor *outstanding loans, dotted lines show share of new loans interest only share (lhs) 1 investor limit Sources: RBA, APRA, Westpac Economics Jun-9 Jun-11 Jun-13 Jun-1 Jun-17 Jun-9 Jun-11 Jun-13 Jun-1 Jun-17 Housing pulse November interest only cap major bank market share (rhs)^ ^share of housing credit across all ADIs (non ADI share of total housing credit estimated < ) 1 investor limit 3 interest only cap 13. Tighter lending conditions: selected aspects share of new borrowers (lhs) *amount borrowed as share of estimated maximum based on current lending standards and income-adjusted HEM (214 figures) Sources: RBA, Melbourne Institute, Westpac Economics month of switch interest only refi stress (rhs) 3-6 days in arrears switch - early switch - scheduled P&I loans^ ^based on similarly seasoned loans. max < months The latest system-wide data continues to show macroprudential targets being met comfortably. System-wide investor credit growth is currently tracking at 1.4yr with the six month annualised pace below 1. Some of this slowdown will reflect the shift from IO to principal and interest (P&I) loans with the principal repayments in the latter acting as a slight drag on (net) growth in investor credit. At 16.6, the share of new IO loans in Q3 is also well below the 3 cap. Indeed, the share in the total stock of loans is also now below the cap (29 as at Q3, down from 39 in Q1 217) reflecting the larger than expected switching between loan types. The RBA s October Financial Stability Review provides some interesting takes on the impact of prudential policy measures and the more recent tightening in lending standards (the review is essentially the journal of record for prudential policy). On policy, the collective impact is assessed as having reduced the riskiness of new borrowing with little evidence to suggest they have excessively constrained aggregate credit supply or had a significant impact on housing construction or competition for lending. The investor credit growth limit is estimated to have had little impact on the total flow of loan approvals (despite a large decline investor loans). The tightening in lending standards is viewed as mainly impacting high risk borrowers with most taking out loans well below the maximum offered by lenders. On the potential for repayment shock for IO borrowers refinancing, they report liaison and evidence suggesting some IO switchers have experienced difficulties but have subsequently been able to adjust to higher payments within about a year. 9

10 Special topic: housing and household wealth 14. Dwelling prices and total housing assets ann Australia dwelling prices Syd-Melb only Sources: ABS, CoreLogic, Westpac Economics total housing assets^ *contribution to annual growth in total housing assets change in avg value of dwellings change in number of dwellings ann Household balance sheets: price corrections dwellings super other total debt annual disposable income (Westpac estimates for Sep 218); figures show change during dwelling corrections Sources: ABS, Westpac Economics dwelling corrections A key question for Australian economic forecasters and policy-makers at the moment is the extent to which the price correction in housing markets will have spill-over effects on the wider economy. A key channel for this is likely to be around so-called wealth effects changes in household behaviour, spending in particular, that reflect, directly and indirectly, the change in household wealth. Currently the RBA expects these negatives to be minimal although they have often been significant in the past. Our analysis has shown pure wealth effects, i.e. separate to wider macro and interest rate cycles, are surprising difficult to pinpoint (for more, see our July Red Book). In this special topic we focus on a simpler question, sizing the likely impact of the price correction on the wider household balance sheet. Several points show through. In particular the size of the impact is mitigated by: the extent to which the price correction is confined to Sydney and Melbourne; additions to the stock of dwellings; moderating growth in household debt; and the performance of non-housing assets. Despite this, price declines are still set to have a sizable impact on total household wealth, broadly comparable to the episode depending on how these factors play out. Chart 14 highlights the extent to which the current price correction is concentrated in the Sydney and Melbourne markets and the contributions to total housing asset growth from changes in the stock of dwellings and valuations. So far, Australia-wide prices are down 3½yr, a slightly milder decline than during episode. Dwelling completions effectively add about 1.8 a year to the total value of housing assets. 1

11 16. Household net worth: indicative projection household disposable income; Sep 218 quarter is Westpac estimate; *projection is based on continuation of current price and credit growth trends, dwelling completions and no change in non housing wealth 4 Sep-83 Sep-88 Sep-93 Sep-98 Sep-3 Sep-8 Sep-13 Sep Household net worth by state Housing pulse November 218 Sources: ABS, Westpac Economics NSW Vic Qld WA annual disposable income, Westpac estimates Sources: ABS, Westpac Economics dwelling corrections Comparing the current situation to previous price corrections highlights the impact of other balance sheet items. Chart 1 shows the value of housing assets alongside superannuation, other assets (which includes direct holdings of deposits and shares), and debt, all as a proportion of annual disposable income. It shows the extent to which wider macro-economic forces also impact. During the GFC for example, all asset categories were hit hard as financial markets slumped and the economic slowdown impacted super contributions. The price corrections in and the mid-9s also showed additional drags from other assets reflecting the rate tightening cycles at the time. Chart 16 shows the net result for total household net worth (i.e. wealth). It also includes estimates for the Sep quarter and a projection. The projection is indicative only and based on a continuation of current price and credit growth trends, our projections for dwelling completions and no change in non housing wealth. This last assumption is conservative super holdings in particular typically rise when labour income and financial markets are not hit hard (indeed these have continued to rise through the correction to date). The upshot is that, on a conservative basis, the total impact on household wealth could be a further decline equivalent to 3 of annual income, and a cumulative decline equivalent to 74 of annual income. While this sounds large, it is against the backdrop of gains equivalent to 166 of income over the previous 3yrs. The decline is comparable to that seen in the correction but much milder than during the GFC. It would effectively return wealth to Sep 216 levels. 11

12 New South Wales: price correction nears NSW consumers: housing related sentiment index time to buy* seasonally adjusted actual *seasonally adjusted series is 3mth avg avg price expectations^ 6 Nov-8 Nov-11 Nov-14 Nov-17 Nov-8 Nov-11 Nov-14 Nov-17 index Source: Melbourne Institute, Westpac Economics ^seasonally adjusted series is qtly 19. NSW housing composite vs turnover ann ch Westpac Consumer Housing Sentiment Index* turnover^ *advanced 3mths; ^ stock, seas. adj d by Westpac, smoothed Source: CoreLogic, Westpac Melbourne Institute latest month Oct-8 Oct-1 Oct-12 Oct-14 Oct-16 Oct-18 ann ch The price correction has intensified in NSW. Following material revisions to historical estimates and another three months of declines, Sydney prices are now down 9 from their 217 peak, tracking a similar pace of decline over the last 3mths and back to Sep 216 levels. The price detail continues to show houses and top and middle tier properties leading the adjustment. Across sub-regions, middle ring suburbs have been notably weaker over the last 6mths while inner suburbs have seen some moderation in price declines. Several regional NSW markets have also dipped into annual declines after holding up much better through to mid 218 (see p26). Despite the deterioration, the signal from the NSW Consumer Housing Sentiment index has improved over the last 3mths, suggesting that, in the absence of other factors such as tightening lending conditions, turnover could stabilise in 219 (note that in chart 22 and similar charts for other states both the index and turnover are shown in annual change terms rather than levels). That is a significant qualifier however turnover has undershot the index throughout the last two years, mainly reflecting the tightening in credit availability, the low level of sales seeing a significant lift in unsold listings. NSW consumers are becoming less negative on time to buy as affordability improves. Unemployment expectations have also improved. However this has been partially offset by a weaker price expectations. On supply, rental vacancy rates have continued to creep higher, into the 2.-3 range suggesting completions are easing what has been persistent rental tightness. 12

13 2. Sydney dwelling prices ann 3mthly ann d, adv. 6mths * all dwellings, seasonally adjusted Sources: CoreLogic, Westpac Economics Nov-8 Nov-1 Nov-12 Nov-14 Nov-16 Nov-18 ann boom robust stable correcting NSW Population: 8.mn Net migration: 7k pa GSP: $93bn (33 Aus) Dwellings: 3.1mn, $2.8trn Capital: Sydney 21. NSW: dwelling approvals, vacancy rates dwelling approvals* vacancy rate^ 3mth avg Source: ABS, REIA, Westpac Economics mthly 3yr avg *existing stock of dwellings ^Sydney, qtly, seasonally adjusted by Westpac. Sep-8 Sep-11 Sep-14 Sep-17 Sep-8 Sep-11 Sep-14 Sep-17 Housing pulse November June years avg* ^ GSP, ann State final demand, ann Employment, ann Unemployment rate, # Population, ann Dwelling prices, ann Rental yield, # Sales/new listings, ratio Total listings, mths sales * avg last 2yrs; ^ latest available estimate, GSP is Westpac forecast; # June qtr readings Sources: ABS, CoreLogic, APM, Residex, Westpac Economics 13

14 Victoria: weakness intensifies 22. Vic consumers: housing related sentiment index seasonally adjusted actual time to buy* avg *seasonally adjusted series is 3mth avg price expectations^ 6 Nov-8 Nov-11 Nov-14 Nov-17 Nov-8 Nov-11 Nov-14 Nov-17 index Source: Melbourne Institute, Westpac Economics ^seasonally adjusted series is qtly 23. Vic housing composite vs turnover ann ch Westpac Consumer Housing Sentiment Index* *advanced 3mths; ^ stock, seas. adj d by Westpac, smoothed Source: ABS, CoreLogic, Westpac Melbourne Institute turnover^ latest month Oct-8 Oct-1 Oct-12 Oct-14 Oct-16 Oct-18 ann ch Vic s price correction started later in the piece but has accelerated notably since mid-218. Melbourne prices are down ½ from their peak but have been tracking an 8+ annual pace of decline over the last 6mths. As with NSW, the correction has been more pronounced for houses and for top and middle tier properties. By sub-region, Melbourne s inner east and north east are now leading the declines with price softness easing in the inner city. Annual price growth remains positive in regional areas, likely supported by additional stamp duty concessions for first home buyers purchasing newly built homes in regional areas, introduced last year. Buyer sentiment remains soft. The Vic Consumer Housing Sentiment index fell sharply in Sep-Oct, recovering somewhat in Nov but still down a touch on Aug and implying further weakness in turnover. Assessments of time to buy have been steady and unemployment expectations have improved significantly but this has been more than offset by a sharp slump in price expectations (down 2 in the last 2mths alone). Melbourne s auction market has continued to weaken with clearance rates sliding well below. With turnover at very low levels, listings are backing up quickly with total listings of units now running at nearly nine months of sales, double the level in 216 (see p27 for more detail). Melbourne s rental market remains unambiguously tight with vacancy rates holding around 2. This is despite a surge in apartment completions in the city, from around 1k a year mid-decade to 17-18k a year currently. This particular supply surge is set to continue in

15 24. Melbourne dwelling prices ann 3mthly ann d, adv. 6mths * all dwellings, seasonally adjusted Sources: CoreLogic, Westpac Economics Nov-8 Nov-1 Nov-12 Nov-14 Nov-16 Nov-18 ann boom robust stable correcting Vic Population: 6.4mn Net migration: 99k pa GSP: $424bn (23 Aus) Dwellings: 2.6mn, $1.9trn Capital: Melbourne 2. Vic: dwelling approvals, vacancy rates dwelling approvals* vacancy rate^. 3mth avg mthly yr avg *existing stock of dwellings ^Melbourne, qtly, seasonally adjusted by Westpac Sep-6 Sep-1 Sep-14 Sep-18 Sep-6 Sep-1 Sep-14 Sep-18 Housing pulse November 218 Source: ABS, REIA, Westpac Economics June years avg* ^ GSP, ann State final demand, ann Employment, ann Unemployment rate, # Population, ann Dwelling prices, ann Rental yield, # Sales/new listings, ratio Total listings, mths sales * avg last 2yrs; ^ latest available estimate, GSP is Westpac forecast; # June qtr readings Sources: ABS, CoreLogic, APM, Residex, Westpac Economics 1

16 Queensland: holding up well 26. Qld consumers: housing related sentiment index seasonally adjusted actual time to buy* *seasonally adjusted series is 3mth avg avg price expectations^ 6 Nov-12 Nov-14 Nov-16 Nov-18 Nov-12 Nov-14 Nov-16 Nov-18 index Source: Melbourne Institute, Westpac Economics ^seasonally adjusted series is qtly 27. Qld housing composite vs turnover ann ch Westpac consumer housing sentiment (lhs)* *advanced 3mths; ^ stock, seas. adj d by Westpac, smoothed Source: ABS, CoreLogic, Westpac Melbourne Institute turnover (rhs)^ latest month Oct-8 Oct-1 Oct-12 Oct-14 Oct-16 Oct-18 ann ch Qld s housing market remains subdued, turnover soft and moving lower but not quite as weak as in NSW and Vic, and prices stable rather than falling. Importantly, the Brisbane market saw no real run up in prices through the latest upswing. Even the burst of apartment activity that resulted in a material weakening in unit prices in 217 saw relatively little spillover to the wider market (reflecting the relatively small share of the units in the Brisbane housing stock). The affordability mix continues to be much more supportive although sentiment still looks to be restraining activity. The sub-regional detail shows prices essentially stable across most tiers in the Brisbane market. By sub-region, the north and the satellite suburb of Ipswich have dipped into annual price declines but other areas have held up. The Gold Coast and Cairns have also dipped into negative while the Sunshine Coast, which was a notable outperformer in 217, has seen prices stall flat. The Qld Consumer Housing Sentiment index has dipped back a touch over the last 3mths, slightly softer assessments of time to buy and price expectations more than offsetting a better read on unemployment expectations and slight easing in risk aversion. Residential property listings have lifted but remain around long run averages for houses. Brisbane rental vacancy rates have continued to tighten, heading towards Vacancy rates are still sub-2 in the Gold and Sunshine Coasts and even sub-2 in Cairns, and have returned to normal levels in mining areas. On the supply side, the dwelling construction pipeline is unthreatening with under-build (relative to population). 16

17 28. Brisbane dwelling prices ann 3mthly ann d, adv. 6mths * all dwellings, seasonally adjusted Sources: CoreLogic, Westpac Economics Nov-8 Nov-1 Nov-12 Nov-14 Nov-16 Nov-18 ann boom robust stable correcting Qld Population:.mn Net migration: 3k pa GSP: $34bn (19 Aus) Dwellings: 2.mn, $1.trn Capital: Brisbane 29. Qld: dwelling approvals, vacancy rates June years avg* ^ 4. dwelling approvals* vacancy rate^ 3. 3mth avg mthly 3. 3yr avg Source: ABS, REIA, Westpac Economics. *existing stock of dwellings ^Brisbane, qtly, seasonally adjusted by Westpac Sep-8 Sep-11 Sep-14 Sep-17 Sep-8 Sep-11 Sep-14 Sep GSP, ann State final demand, ann Employment, ann Unemployment rate, # Population, ann Dwelling prices, ann Rental yield, # Sales/new listings, ratio Total listings, mths sales * avg last 2yrs; ^ latest available estimate, GSP is Westpac forecast; # June qtr readings Sources: ABS, CoreLogic, APM, Residex, Westpac Economics Housing pulse November

18 Western Australia: lurch lower despite positives 3. WA consumers: housing related sentiment index time to buy* seasonally adjusted actual *seasonally adjusted series is 3mth avg 6 Nov-12 Nov-14 Nov-16 Nov-18 Nov-12 Nov-14 Nov-16 Nov-18 avg price expectations^ index Source: Melbourne Institute, Westpac Economics ^seasonally adjusted series is qtly 31. WA housing composite vs turnover ann ch Westpac consumer housing sentiment (lhs)* turnover (rhs)^ Oct-8 Oct-1 Oct-12 Oct-14 Oct-16 Oct-18 latest month ann ch *advanced 3mths; ^ stock, seas. adj d by Westpac, smoothed Source: ABS, CoreLogic, Westpac Melbourne Institute In what must be a dismaying development for the long suffering WA housing market, Perth s price correction has re-accelerated over the last 6mths. That is a deeply disappointing outcome given the hopes emerging earlier in the year that the Perth market might be about to stabilise from its multi-year declines. Instead Perth prices are now tracking a faster 6. annual pace of decline. In level terms they are back near the lows seen during the GFC and, prior to that, in mid-26. The latest lurch lower is despite some otherwise quite promising signs. The WA state economy has now clearly emerged out of recession with labour markets and household incomes both improving. Affordability has also been looking more supportive. The segment and regional detail shows the latest shift in price momentum has been broadly based. Prices for houses, top tier segments and in the inner Perth market have seen milder slippage. The renewed price correction has weighed on buyer sentiment with both time to buy and price expectations weakening over the last six months, more than offsetting a more positive tone evident in other sentiment components. The WA Consumer Housing Sentiment index continues to point to softening conditions ahead. The renewed weakness has come despite signs that the overhang of rental property that has been a feature of the long market correction is continuing to clear. With the renewed price weakening centred on units, and a still large backlog of unsold units, the turnaround has clearly not been enough to provide outright support. 18

19 32. Perth dwelling prices ann 3mthly ann d, adv. 6mths * all dwellings, seasonally adjusted Sources: CoreLogic, Westpac Economics Nov-8 Nov-1 Nov-12 Nov-14 Nov-16 Nov-18 ann boom robust stable correcting WA Population: 2.6mn Net migration: 1k pa GSP: $26bn (14 Aus) Dwellings: 1.1mn, $.6trn Capital: Perth 33. WA: dwelling approvals, vacancy rates June years avg* ^ dwelling approvals* vacancy rate^ 8 3mth avg Source: ABS, REIA, Westpac Economics 7 mthly 6 4 3yr avg *existing stock of dwellings ^Perth, qtly, seasonally adjusted by Westpac Sep-6 Sep-1 Sep-14 Sep-18 Sep-6 Sep-1 Sep-14 Sep GSP, ann State final demand, ann Employment, ann Unemployment rate, # Population, ann Dwelling prices, ann Rental yield, # Sales/new listings, ratio Total listings, mths sales * avg last 2yrs; ^ latest available estimate, GSP is Westpac forecast; # June qtr readings Sources: ABS, CoreLogic, APM, Residex, Westpac Economics Housing pulse November

20 South Australia: market steady, sentiment slips 34. SA consumers: housing related sentiment index time to buy* seasonally adjusted actual *seasonally adjusted series is 3mth avg avg price expectations^ 6 Nov-12 Nov-14 Nov-16 Nov-18 Nov-12 Nov-14 Nov-16 Nov-18 index Source: Melbourne Institute, Westpac Economics ^seasonally adjusted series is qtly 3. SA housing composite vs turnover ann ch Westpac consumer housing sentiment (lhs)* turnover (rhs)^ Source: ABS, CoreLogic, Westpac Melbourne Institute avg last 2mths *advanced 3mths; ^ stock, seas. adj d by Westpac, smoothed Oct-8 Oct-1 Oct-12 Oct-14 Oct-16 Oct-18 ann ch The SA housing market remains a clear outperformer amongst the mainland states. Price growth has slowed but remains positive at 1.3yr, having never achieved any great heights during the preceding upswing (growth peaked at 4yr in mid 217). Buyer sentiment is a little less positive but continues to point to steady activity rather than declines. In stark contrast to the larger mainland states, turnover in SA has been rising over last year and is reasonably high by recent standards. Just under 4 of the dwelling stock is turning over, compared to a 3.9 average over the last yrs and a 4.7 average over the longer run. The price detail for Adelaide shows performances by dwelling type and tier very closely clustered. However, sub-regional price data shows the west and south of the city outperforming slightly and the north seeing some price slippage. Prices are showing a material correction across the Barossa wine-making region but are much more sensitive to cycles, having posted strong gains in the previous three years. Listings data shows market supply relatively tight for houses with sales outstripping new listings. Units are much softer but a tiny part of the Adelaide market. The cooling in the SA Consumer Housing Sentiment index over the last 3mths reflects a broad loss of confidence with declines in time to buy, and less optimistic views on unemployment and the outlook for house prices. That said, the SA index does seem flighty at times, particularly compared to the more stable progress of actual turnover. The wider backdrop around the economy and labour markets remains supportive. 2

21 36. Adelaide dwelling prices ann 3mthly ann d, adv. 6mths * all dwellings, seasonally adjusted Sources: CoreLogic, Westpac Economics Nov-8 Nov-1 Nov-12 Nov-14 Nov-16 Nov-18 ann boom robust stable correcting SA Population: 1.7mn Net migration: 6k pa GSP: $16bn (6 Aus) Dwellings:.8mn, $.4trn Capital: Adelaide 37. SA: dwelling approvals, vacancy rates dwelling approvals* 3mth avg mthly 3yr avg *existing stock of dwellings. Sep-8 Sep-11 Sep-14 Sep-17 Sep-8 Sep-11 Sep-14 Sep-17 Housing pulse November 218 vacancy rate^ Source: ABS, REIA, CoreLogic, SQM Research Westpac Economics ^Adelaide, qtly, seasonally adjusted by Westpac (estimates based on CoreLogic and SQM Research data from 21 on) June years avg* ^ GSP, ann State final demand, ann Employment, ann Unemployment rate, # Population, ann Dwelling prices, ann Rental yield, # Sales/new listings, ratio Total listings, mths sales * avg last 2yrs; ^ latest available estimate, GSP is Westpac forecast; # June qtr readings Sources: ABS, CoreLogic, APM, Residex, Westpac Economics 21

22 Tasmania: boom cooling but supply tight 38. Tas consumers: housing related sentiment index time to buy (lhs)* price expectations (rhs)^ index seasonally adjusted actual Source: Melbourne Institute, Westpac Economics *seasonally adjusted series is 6mth avg, actual is 3mth avg avg ^seasonally adjusted series is qtly 6 Nov-12 Nov-14 Nov-16 Nov-18 Nov-12 Nov-14 Nov-16 Nov Tas housing composite vs turnover ann ch Westpac consumer housing sentiment (lhs)* *advanced 3mths; ^ stock, seas. adj d by Westpac, smoothed Source: ABS, CoreLogic, Westpac Melbourne Institute turnover (rhs)^ Oct-8 Oct-1 Oct-12 Oct-14 Oct-16 Oct-18 avg last 2 mths ann ch Tas s contrarian housing boom is showing clear signs of cooling although the Hobart market remains tight and price gains are heating up in other parts of the state. The Tas market is considerably smaller than the mainland states about a third of the size of the next smallest state, SA and about a tenth of the major states. It also tends to see slower, more volatile growth in economic activity and population, and historically it has usually underperformed on price growth. Right now though the volatility is on the upside. That is seeing the housing market outperform by a wide margin but it is also seeing the rapid emergence of acute shortages of supply that may generate problems down the track. Hobart dwelling price growth has shown a clear moderation from a peak of 13.yr earlier in the year to 9.7 currently. The last 3mths have seen price growth track a slower 6 annualised pace. The price detail shows a sharper slowdown amongst top tier properties and for the inner and north eastern parts of Hobart. Notably, price growth has accelerated over the last year for Launceston and the rest of Tas. The Tas Consumer Housing Sentiment index has been a sharp lift back into positive territory. Interestingly, the move is coming from a lift in time to buy, partially offset by reduced expectations for prices. This may be a bit premature. Rental vacancy rates remain very low in Hobart. Residential property listings also point to tight conditions with sales still running ahead of new listings and just total listings covering just 2.7 months (vs a long run average of.7). 22

23 4. Hobart dwelling prices ann 3mthly ann d, adv. 6mths * all dwellings, seasonally adjusted Sources: CoreLogic, Westpac Economics Oct-8 Oct-1 Oct-12 Oct-14 Oct-16 Oct-18 ann boom robust stable correcting Tas Population:.mn Net migration: 4k pa GSP: $3bn (2 Aus) Dwellings:.2mn, $99bn Capital: Hobart 41. Tas: dwelling approvals, vacancy rates June years avg* ^ 4 3mth avg mthly dwelling approvals* Source: ABS, REIA, Westpac Economics vacancy rate^ 4 GSP, ann State final demand, ann Employment, ann yr avg Unemployment rate, # Population, ann Dwelling prices, ann Rental yield, # *existing stock of dwellings ^Hobart, qtly, seasonally adjusted by Westpac Sep-6 Sep-1 Sep-14 Sep-18 Sep-6 Sep-1 Sep-14 Sep-18 Sales/new listings, ratio Total listings, mths sales * avg last 2yrs (12yrs for listings metrics); ^ latest estimate; # June qtr readings Sources: ABS, CoreLogic, APM, Residex, Westpac Economics Housing pulse November

24 Territories: NT s slump abating?; ACT tight 42. NT: turnover, Darwin dwelling prices ann ch turnover (lhs) stock, seas. adj d by Westpac, smoothed all dwellings, seasonally adjusted Sources: CoreLogic, Westpac Economics 3mthly ann d, adv. 6mths prices (rhs)^ -3 Oct-8 Oct-11 Oct-14 Oct-17 Oct-2 Oct-8 Oct-11 Oct-14 Oct-17 ann boom robust stable correcting NT Population:.2mn Net migration: 2k pa GSP: $2bn (2 Aus) Dwellings:.1mn, $38.2bn Capital: Darwin 43. NT: dwelling approvals, vacancy rates dwelling approvals (lhs)* 3yr avg *existing stock of dwellings 6mth avg 3mth avg Source: ABS, REIA, Westpac Economics vacancy rate (rhs)^ ^Darwin, qtly, seasonally adjusted by Westpac. Sep-6 Sep-1 Sep-14 Sep-18 Sep-6 Sep-1 Sep-14 Sep June years avg* ^ GSP, ann State final demand, ann Employment, ann Unemployment rate, # Population, ann Dwelling prices, ann Sales/new listings, ratio Total listings, mths sales * avg last 2yrs (last 1yrs for listings); ^ latest available estimate; # June qtr readings Sources: ABS, CoreLogic, Westpac Economics 24

25 44. ACT: turnover, Canberra dwelling prices ann ch turnover (lhs) stock, seas. adj d by Westpac, smoothed all dwellings, seasonally adjusted 3mthly ann d, adv. 6mths prices (rhs)^ -3 Oct-8 Oct-11 Oct-14 Oct-17 Oct-2 Oct-8 Oct-11 Oct-14 Oct-17 ann boom robust stable correcting Sources: CoreLogic, Westpac Economics ACT Population:.4mn Net migration: k pa GSP: $39bn (2 Aus) Dwellings:.2mn, $119bn Capital: Canberra 4. ACT: dwelling approvals, vacancy rates June years avg* ^ yr avg dwelling approvals* 6mth avg 3mth avg Source: ABS, REIA, Westpac Economics vacancy rate^ GSP, ann State final demand, ann Employment, ann Unemployment rate, # Population, ann Dwelling prices, ann Sales/new listings, ratio *existing stock of dwellings ^Canberra, qtly, seasonally adjusted by Westpac Sep-6 Sep-1 Sep-14 Sep-18 Sep-6 Sep-1 Sep-14 Sep-18 Total listings, mths sales * avg last 2yrs (last 1yrs for listings); ^ latest available estimate; # June qtr readings Sources: ABS, CoreLogic, Westpac Economics Housing pulse November 218 2

26 Additional material: charts and tables 46. NSW: Sydney dwelling prices: by type, tier NSW Sydney rest of NSW type * 6mth annualised all dwellings, seasonally adjusted houses units top 2 middle bottom 2 Sources: CoreLogic, Westpac Economics Oct-8 Oct-12 Oct-16 Oct-8 Oct-12 Oct-16 Oct-2 boom robust stable correcting 47. NSW dwelling prices: selected sub-regions Sydney -2 Oct-8 Oct-12 Oct-16 Oct-8 Oct-12 Oct-16 tier City & inner south Eastern subs Newcastle Inner west Ryde Illawarra Capital region *6mth annualised, all dwellings Sources: CoreLogic, Westpac Economics rest of NSW Population:.1mn 2.7mn Net migration*: 67k pa 17k pa Employ (state): Dwellings, no.: 1.9mn 1.2mn Dwellings, value: $1.9trn $.6trn June years avg^ # Sydney Employment, ann Unemployment rate, Houses prices, ann sales/new listings, ratio total listings, mths sales Units prices, ann sales/new listings, ratio total listings, mths sales rest of NSW Employment, ann Unemployment rate, Dwelling prices, ann * incl. flows within state; ^avg last 2yrs (last 1yrs for listings); #latest available estimates; Sources: ABS, CoreLogic, Westpac Economics 26

27 48. Vic: Melbourne dwelling prices: by type, tier Vic Melbourne rest of Vic type *all dwellings, seasonally adjusted Sources: CoreLogic, Westpac Economics houses units top 2 middle bottom 2 Oct-8 Oct-12 Oct-16 Oct-8 Oct-12 Oct-16 Oct Vic dwelling prices: selected sub-regions Melbourne tier Inner Inner East Mornington Pen. North East West Geelong Ballarat *6mth annualised, all dwellings Sources: CoreLogic, Westpac Economics rest of Vic -2 Oct-8 Oct-12 Oct-16 Oct-8 Oct-12 Oct-16 boom robust stable correcting Population: 4.9mn 1.mn Net migration*: 89k pa 1k pa Employ (state): Dwellings, no.: 1.8mn.7mn Dwellings, value: $1.4trn $.3trn June years avg^ # Melbourne Employment, ann Unemployment rate, Houses prices, ann sales/new listings, ratio total listings, mths sales Units prices, ann sales/new listings, ratio total listings, mths sales rest of Vic Employment, ann Unemployment rate, Dwelling prices, ann * incl. flows within state; ^avg last 2yrs (last 1yrs for listings); #latest available estimates; Sources: ABS, CoreLogic, Westpac Economics Housing pulse November

28 Additional material: charts and tables, continued. Qld: Brisbane dwelling prices: by type, tier Qld Brisbane rest of Qld type *all dwellings, seasonally adjusted Sources: CoreLogic, Westpac Economics houses units top 2 middle bottom 2 Oct-8 Oct-12 Oct-16 Oct-8 Oct-12 Oct-16 Oct-2 1. Qld dwelling prices: selected sub-regions Brisbane tier Inner city North Gold Coast Ipswich Moreton south Sunshine Coast Cairns *6mth annualised, all dwellings Sources: CoreLogic, Westpac Economics rest of Qld Oct-8 Oct-12 Oct-16 Oct-8 Oct-12 Oct-16 boom robust stable correcting Population: 2.4mn 2.mn Net migration*: 3k pa 19k pa Employ (state): Dwellings, no.:.9mn 1.1mn Dwellings, value: $.trn $.trn June years avg^ # Brisbane Employment, ann Unemployment rate, Houses prices, ann sales/new listings, ratio total listings, mths sales Units prices, ann sales/new listings, ratio total listings, mths sales rest of Qld Employment, ann Unemployment rate, Dwelling prices, ann * incl. flows within state; ^avg last 2yrs (last 1yrs for listings); #latest available estimates; Sources: ABS, CoreLogic, Westpac Economics 28