Sydney Region Mortgage Repayment Mapping

Using our household surveys, we are able to map the relative size of monthly mortgage repayments for households. This snapshot is of the Sydney region.

The largest monthly repayments are on average being made by households in the eastern suburbs, including Woollahra, Waverley, Mosman, North Sydney, Manly, and Palm Beach. There is a high correlation with house prices here.

The high mortgage stress suburbs, around Cambletown, Liverpool, Fairfield and Blacktown have quite high monthly mortgage repayments. This can truly be called the mortgage belt.

Further away from the urban centres, repayments are lower.

Sydney-Region-Mortgage-Repayments

 

Sydney Region House Price Mapping

Using our survey data, we have created a house price heat map for the Sydney region. This data excludes units and other high density properties. We will post comparable high density data later.

The most expensive transfers took place in the eastern suburbs, including Darling Point, Edgecliff, Bellevue Hill, Vaucluse and Double Bay. Next on the lower North Shore was Mosman, then Palm Beach, Rose Bay and Kirribilli.

Lowest prices were in the western suburbs, including Orchard Hill, Mount Vernon, Horsley Park and Cambletown. There is an interesting correlation between lower prices and high levels of mortgage stress, which we mapped recently.

NSW-House-Prices

Is The Property Investor Party Over?

Yesterday, commenting on the latest ABS data, I hinted that the DFA household research, freshly minted for March 2014 contained indications that residential property investors were trending down, for the first time in more than 18 months. So today we examine some of the data from the survey.

To start, this is a plot of residential property investors, by type (using our property segmentation models). After a significant rise since 2011, we see the hint of a reversal.

PtyInvestTrend1If we then look in detail at the proportion of investors who are expecting to transact in the next 3 months, we see the number falling away, as a percentage of all residential property investors. By June 2014, it will be 8% lower than its peak.

PtyInvestTrend2So, then we examined the state trends, and its all about NSW and VIC. This chart shows where the relative proportion of households compared with Sept 2013, now not actively considering transacting. The most significant fall is in NSW, (56%), then VIC (28%).

PtyInvestTrend4Finally, we looked at what was driving this change in attitude. In essence, whist some might not be able to get finance, or find the right place to buy, 64% said it was because they have already bought, and 21% said it was because they now felt that capital appreciation over the next 2 years was not going to be sufficient to get they returns they wanted if they did. That said, not one of the households in our survey is expecting to sell a recently acquired investment property to lock in returns.

PtyInvestTrend3So what to make of all this. Well, it does look as though the residential investment party is coming to an abrupt end. The party really only impacted the main Sydney and Melbourne markets, with perhaps small after-parties in other states. But property investors are becoming sated, and so we expect to see demand slow, with a fall in investment lending to follow. It may take a few months to work through, but as investment purchasers drove the market hard over the last 12 months, momentum may change going forwards. Given the unaffordable high prices for many owner occupiers, and potential first time buyers, its certainly possible we will see prices do an about turn. Banks who were relying on increasing their investment property lending may be in for a rude shock. That is unless investors get a second wind. My money is on last drinks, with the hangover to follow!

Where Households Buy – Tasmanian Heat Map

Completing our series on where households buy, we feature Tasmanian households today, using data from our household surveys. Previously we featured Sydney, Melbourne, Perth, Adelaide and Brisbane.

Whilst a small volume of transactions have occurred in Tasmania, the relative distribution of houses and units is interesting. There are differences between areas where houses and units have been purchased.

Looking first at units, the largest volume has been in Launceston, followed by Hobart, Sandy Bay, Glenorchy and Bellerive.

TAS-UnitsHouses, are well represented in Launceston, then Devonport, Burnie, and Bellerive.

TAS-HousesThat completes the mapping by traded volume of new and existing houses.

Household Incomes and House Prices

The ratio between income and house prices in an important indicator, because if it gets too far out of whack, its a sign of stress in the system. Data is often cited to show that on average, the ratio of debt to disposable income verses house prices track quite closely and so we are not in a house price bubble. So when Christopher Joye wrote in the SMH yesterday about the risk to house prices, and published data to show the average ratio between prices and disposable income was a high 4.4, we were prompted to revisit this issue.

It is relevant because the RBA is talking about a ratio of 5.0 times using the national accounts data which includes a number of items like compulsory superannuation, workcover premiums, and owner-occupied imputed rents, none of which are really discretionary. An article in the AFR at the time, suggested a ratio of 7.0 was nearer the mark.

We already highlighted the risk of taking an average value across all households, and used the NSW data to show relative movements across time by segment. But we have just run some numbers by segments, across states, from our surveys (latest date is 1 week old) and here are the results. No surprise the ratios vary by type of property owner, and also by state. First time buyers are at  7 times in NSW, whereas people refinancing in Tasmania are at 3.5 times.

RatioIn addition, looking at data from the ABS Social Trends Database we see relative household income analysis. We show both the gross household income and disposable income, annualised in the chart below.

IncomeFinally, we referred back to the recent Demographia survey. Their method is based on rating affordability using the “Median Multiple” of house prices and income, which is widely used to evaluate urban markets, and which has been recommended by the World Bank and the United Nations. They do not consider mortgage costs, because interest rates vary, whereas the price for a property is more stable. Severely unaffordable geographies included Australia (6.3), New Zealand (8.0), and Hong Kong (14.9). Sydney (9.0) was the fourth least affordable major market. Highly elevated Median Multiples were also recorded in Melbourne (8.4), Auckland (8.0) and London (7.3).

Afford2It seems to me, on any of these measures, affordability is an issue, and spiraling house prices will probably lead to trouble later, either because they in turn fall, or households will extend themselves too far thanks to lax lending standards, and slip into mortgage stress. We will revisit our stress models shortly.

Bottom line is, which ever method you use to calculate these ratios, if you stick to a consistent method, the trend does not lie. And the trend is up – houses are simply not very affordable for many.

Where Households Buy – South Australia Heat Map

Turning to SA, we look at where households have bought, using our households surveys, and looking separately at both units and houses.

The highest number of units were transferred in Glenelg, then central Adelaide, followed by Salisbury, Elizabeth, Davoren Park, Plympton and Norwood. Then comes Whyalla (233km from Adelaide, and finally, close in suburbs at Eastwood, Frewville, Fullarton, Highgate and Parkside.

SA-UnitsTurning to houses, Morphett Vale and Woodcroft lead the way, then Flagstaff Hill, Salisbury and Craigmore which is 28 km from Adelaide. Next is Mount Gambier (377 km away from Adelaide, and off map), Hallett Cove, O’halloran Hill, Golden Grove and Greenwith (21 km from Adelaide).

SA-Houses

 

Where Households Buy – Brisbane Heat Map

In this post we look at Brisbane and surrounding suburbs, using our household survey data to plot the volume of new and existing house and unit transfers in recent years. Actually we have to include a large area of Queensland, because the geographic distribution is widespread.

Starting with units, the Gold Coast has the highest concentration, followed by Southport and Labrador (then Cains, off map), followed by central Brisbane. Next comes Paradise Point and South Stradbroke.

QLD-UnitsTurning to houses, Toowoomba (off map) leads the way, then Bungaberg and Mackay, Ipswich, Hervey Bay, Gladstone, Cains, Nerang, Rockhampton, Luscombe and Caloundra.

QLD-HousesWhat is striking is the widespread distribution of house transfers across the suburbs, mostly well beyond the CBD.

 

Where Households Buy – Perth Heat Map

Continuing our Geo-mapping series, today we plot Perth and surrounding areas, suburbs which are growing quickly and subject to high numbers of house transfers. Using data from our household surveys, we plot the number of transfers for both units and houses by postcode.

Looking at units first, Joondanna, Tuart Hill and Yokine, suburbs just 6km from Perth CBD leads the way, followed by Scarborough, Maylands, Como, Karawara, Manning, Salter Point and Waterford, all South of the CBD. Then comes Floreat, Jolimont and Wembley, and Palmyra all west of Perth. We see one hot spot, 75kn south, at Dudley Park, Erskine, Mandurah and Wannanup.

WA-Unit-Count2Turning to houses, Dudley Park, Erskine, Mandurah and Wannanup lead the way, followed by Merriwa  Mindarie, Joondalup, Edgewater and Mullaloo. Rockinham, Shoalwater, Waikiki and Warnbro follow (~42km from Perth CBD), then inland areas (20km from Perth CBD) including Atwell, Aubin Grove, Banjup, Beeliar, Hammond Park, Jandakot, South Lake, Success and Yangebup.

WA-Unit-CountOur mapping shows both new and existing property transfers. One caveat, there has been significant development north and south of Perth recently, and some of these new areas will be underrepresented in our 10 year data summary.

Our analysis shows how the distribution of houses and units varies, and especially the significant expansion both South and North of Perth CBD.

Where Households Buy – Melbourne Heat Map

Continuing our analysis from our household survey data, we have plotted the relative volume of property transfers in and around Melbourne. Again we separate unit transfers from house transfers, as they have very different geographic distributions. This data includes the purchase of both new, and existing properties.

Looking first at units, the highest count is in the Melbourne CBD, followed by St Kilda and St Kilda West, then Southbank, South Yarra followed by Carnegie, Glen Huntly and Murrumbeena. After this areas including Port Melbourne and Carlton are also represented. All these areas are in close proximity to the City.

VIC-Unit-CountHouses have a different distribution with Ballarat and surrounding areas having the highest count, followed by Frankston, then Chartwell and Werribee. Areas including Narre Warren, Marshall, Mount Duneed and Wandana Heights are next. Bendigo and surrounding areas follow on. The bulk of houses being transferred are considerably further from the City than the units above.

VIC-House-CountThis is consistent with our analysis of household buying behaviour, as they trade price, against features, against location, against transport and services. We may display some of our price data later as this reinforces the trades-offs which households make.

Where Households Buy – Sydney Heat Map

As part of our household surveys we ask about recent house and unit transfers. In the time we have been compiling the data we have collected significant trend data. Today we display maps of the Sydney showing the hot spots for both Unit and House transfers since 2007.

Looking at units first, we see significant activity in the CBD, and on the CBD Fringe, at places like. Darlinghurst, Surry Hills, Elizabeth Bay, Kings Cross, and Woolloomooloo. But there is also significant momentum in western Sydney, in places like Chipping Norton, Liverpool, Moorebank and Warwick Farm and also at Harris Park and Parramatta. We also see hot spots in the lower north shore, including, Crows Nest, Greenwich, Naremburn, and St Leonards and northen beaches at Cromer, Dee Why and North Curl Curl. Finally, in the south, we see momentum around Wollongong. The areas are colour coded on the map by transaction volumes, red is the highest.

NSW-Unit-CountTurning to house transfers, the map is somewhat different. The highest volumes of transfers were in the west, around Campbelltown, Englorie Park, Macarthur Square, Ruse and Woodbine. Also in the west are areas including Chipping Norton, Hammondville, Liverpool and Mount Pritchard. The central coast is also a hot spot, around Alison, Mannering Park, Tuggerah, Wyong,Wyongah and Yarramalong as well as Bateau Bay,  Shelly Beach, The Entrance, Tumbi and Umbi. Looking south, there are high volumes of transfers near Wollongong, including at Sanctuary Point, St Georges Basin and Sussex Inlet. Kellyville, Kellyville Ridge and Rouse Hill is another hot spot in the west. Again high volumes are shown in red.

NSW-House-CountOverall we see considerable expansion on the urban fringes of Sydney, and overall transaction volumes are lower closer into the CBD. Next time we will overlay some property price data, because there are some significant extremes. Lower cost housing maps well with high transaction volumes.

I am using Sydney as a case study. We maintain similar data for other urban centres, so we may present some other state data plots later.