PROFILE:
AUSTRALIAN REAL ESTATE
INDUSTRY
Review 2005-06
Real Estate Institute of Australia
October 2006
2
PROFILE
AUSTRALIAN REAL ESTATE INDUSTRY
Review 2005-2006
INDEX
Page Page
Economic Overview 3 Table 13. Total Number of Residential
Gross Domestic Product 3 Land Sales, By State 13
Chart 1. Chain Volume GDP: Levels and Table 14. Total Value of Residential
Growth 4 Land Sales ($ million), By State 13
Consumer Price Index (CPI) 4 Residential Property Prices 14
Chart 2. CPI Inflation – All Groups 5 Table 15. Median House Prices, June
Interest Rates 5 Quarter, 2006 15
Chart 3. Average Quarterly Mortgage Table 16. Australian Weighted Median
Labour Market 6 House Prices 15
Balance of Payments 7 Chart 4. Moving Annual Median House
Key Features of the Real Estate Prices, Capital Cities 16
Industry 7 Residential House Rents 16
Property Market Indicators 8 Table 17. Median Weekly House Rents,
Australian Housing Stock 8 June Quarter, 2006 16
Table 1. Australian Housing Stock 9 Other Dwellings Sales 17
Additions to Stocks 9 Table 18. Median Other Dwellings Prices,
Residential Building Approvals 9 June Quarter, 2006 17
Table 2. Residential Building Approvals 9 Chart 5. Moving Annual Median Prices,
Dwelling Unit Commencements 10 Other Dwellings, Capital Cities 17
Table 3. Dwelling Unit Other Dwellings Rents 17
Commencements 10 Table 19. Median Weekly Other
Table 4. Value of Building Work Dwellings Rents, June Quarter, 2006 18
Commenced 11 Vacancy Rates 18
Table 5. Value of Building Work Done 11 Table 20. Vacancy Rates: (All Rented
Home Ownership 11 Dwellings) June 2006 18
Table 6. Home Ownership: Australia 11 Home Loan Affordability 18
Residential Property Sales, Australia 12 Chart 6. Australia: Home Loan
Table 7. Total Number of House Sales, Affordability Indicator 19
By State 12 Non-Residential Markets 19
Table 8. Total Value of House Sales Table 21. Value of Construction Work
($ million), By State 12 Done on Non-Residential Buildings 20
Table 9. Total Number of Other Foreign Investment 20
Dwellings Sales, By State 13 Table 22. Recent Foreign Property
Table 11. Total Number of Dwelling Investment in Australia 22
Sales, By State 13 References 23
Table 12. Total Value of Dwelling
Sales, ($ million), By State 13
3
ECONOMIC OVERVIEW
Introduction1
GDP increased by 2.7% during 2005-06, with consumption and business investment
the main contributors to economic growth. Domestic spending, with business
investment the fastest growing component, has driven the expansion. However,
growth in household consumption slowed considerably from 2004-05. Growth was
strongest in Western Australia, at over double the rate of growth of the national
economy, and driven by rapid capital expansion in the mining sector.
Features of the Australian economy through 2005-06 include:
• A robust labour market, with unemployment figures at historically low levels.
• A booming minerals sector, driven by higher export volumes as well as higher
prices.
• Consumer price inflation was higher than expected at around 4.0% over the
year to June 2006.
• Total household credit grew by 13.4% in 2005-06, slightly lower than the ten-
year average of 14.6%. Despite the strong growth in household credit, the
household sector continues to take a more cautious approach to its finances
than was the case a few years ago, with consumption increasing broadly in line
with household income. There has been a modest increase in mortgage
arrears, although this remains low by both historical and international
standards. The Reserve Bank of Australia advises that household balance
sheets appear to be in reasonable shape, although caution is needed.
• Housing investment detracted from national growth in 2005-06, posting its
largest annual decline (3%) since 2000-01.
• Australia’s external performance also detracted from economic growth, with
exports rising by 1.9%, outpaced by imports, which rose by 7%.
• The Reserve Bank of Australia (RBA) increased the cash rate by 0.25% in
both May 2006 and August 2006, bringing the cash rate to 6.00%. Analysts
suggest a further interest rate increase in 2006 is possible.
Overall, Australian domestic demand slowed in 2005-06 and is likely to be more
subdued in the coming year. However, the strength of the economy is being
maintained through strong labour market conditions and rapid growth in the value of
mineral exports, expected to increase by 18% in 2006-07, according to research by the
Australian Bureau of Agricultural and Resource Economics.
Gross Domestic Product
• Gross Domestic Product (GDP) is the total annual value of all legal goods and
services produced domestically.
1
Statement on Monetary Policy, Financial Stability Review and Bulletin, various issues, Reserve Bank
of Australia.
4
• The annual value of GDP to June 2006 was $918.5 billion, a growth of 2.7%
over the year. This compares with growth of 2.6% in 2004-05 and 4.0% in
2003-04. The Federal Budget forecast GDP growth of 3.25% in 2006-07. 2
• In seasonally adjusted terms:3
o Annual expenditure on new and used dwellings of $31.8 billion was
3.9 percent lower than in 2004-05;
o Annual expenditure on alterations and additions of $26.8 billion was
4.1 percent lower than in 2004-05;
o Annual expenditure on total dwellings of $58.5 billion was 4.0 percent
lower than in 2004-05; and
o Annual expenditure on total non-dwelling construction of $51.3 billion
was 14.3 percent higher than in 2004-05.
• In seasonally adjusted terms, the percentage of property sector industries value
added to GDP in 2005-06 were:4
o 7.9% by ownership of dwellings
o 11.4% by property and business services (excluding ownership of
dwellings), and
o 6.7% by construction
Chart 1: Chain Volume GDP: Levels and Growth, June 20065
1000.0 6.0
900.0
5.0
800.0
Percentage Change
700.0
4.0
600.0
$Billion
500.0 3.0
400.0
2.0
300.0
200.0
1.0
100.0
0.0 0.0
Jun.1998
Jun.1999
Jun.2000
Jun.2001
Jun.2002
Jun.2003
Jun.2004
Jun.2005
Jun.2006
$Billion Annual Growth %
Consumer Price Index (CPI)
• CPI measures changes in the price of a ‘basket’ of goods and services that
accounts for a high proportion of expenditure by consumers. The Australian
‘basket’ comprises eight groups of goods and services. CPI measures
inflation.
2
Federal Budget, 2006-07
3
ABS Catalogue 5206.0, Tables 5 and 6.
4
ABS Catalogue 5206.0, Table 16
5
ABS Catalogue 5206.0, Table 3
5
• Apart from 2000-01 when inflation reached 6.0% following the introduction of
GST, the annual inflation rate has been kept to low levels since 1996-97 as
shown in Chart 2.
• In the last four years, annual inflation as at June was 3.1% in 2003, 2.4% in
both 2004 and 2005, rising to 4.0% in 2006. These rates are within the range
considered appropriate by the RBA in the context of sound monetary policy.
• The RBA stated that underlying consumer inflation edged up to around 0.9 per
cent in the June quarter and to a little below 3 per cent over the year to the
June quarter. Most measures of underlying inflation were higher than they
were six months ago, and there is upward pressure on wages and prices
because of the tight labour market, rising materials costs and strong world
economic growth. Inflation is above the RBA target of 2 to 3%, which could
cause the RBA to consider raising interest rates again.
Chart 2. CPI Inflation – All Groups. Weighted Average of Eight Capital Cities
(Financial Years)6
150.0 7.0
140.0 6.0
130.0 5.0
Percent
120.0 4.0
Index
110.0 3.0
100.0 2.0
90.0 1.0
80.0 0.0
Jun.1995
Jun.1996
Jun.1997
Jun.1998
Jun.1999
Jun.2000
Jun.2001
Jun.2002
Jun.2003
Jun.2004
Jun.2005
Jun.2006
Index Number Percentage Change
Interest Rates
• The most recent high of 6.25% in the official cash interest rate in Australia
was recorded in August 2000. Subsequently, the RBA reduced the rate on six
consecutive occasions to 4.25% in December 2001. Since that time, the rate
has been increased by 25 basis points on each of seven occasions to its current
level of 6.00%. The cash rate remained unchanged for two extended periods
from June 2002 to November 2003, and from December 2003 to March 2005.
• Mortgage interest rates move with the cash rate as shown in Chart 3.
• In September 2000, when the cash rate was at its recent highest level of
6.25%, the average standard variable interest rate for the quarter was 7.77%
6
ABS Catalogue 6401, Tables 640101a and 640102a
6
and the average 3-year fixed rate was 7.93%. In December 2001, when the
official cash rate was at its lowest level of 4.25%, the quarterly average
standard variable rate dropped to 6.10% and the quarterly average 3-year fixed
rate fell to 6.36%.
• In the June quarter 2006, the average standard variable interest rate across all
mortgage lender groups was 7.27% and the average three year fixed rate was
7.08%. The RBA cash rate was 5.75%. This subsequently was increased to
6.0% in August 2006.
Chart 3. Average Quarterly Mortgage Interest Rates7
9.0%
8.0%
7.0%
6.0%
Percent
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Nov-99
Nov-00
Nov-01
Nov-02
Nov-03
Nov-04
Nov-05
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Quarter
Av. Var Rate % Av 3yr Fixed rate % RBA Cash Rate %
Labour Market
• In June 2006, Australia’s total labour force was estimated at 10.605 million
people of which 10.064 million (94.9%) were employed.
• Of those employed, 45.0% were females and 55.0% were males.
• 67.7% of employed people were in full-time work whilst 27.2% had part-time
work. The proportion of people employed in part-time work is gradually
increasing whilst the proportion of people employed in full-time work has
been gradually decreasing.
• The total unemployment rate of 5.1% was the lowest since 1981.
• The total participation rate was 64.5%.
7
Data from CANNEX and RBA (Interbank Cash market figures used)
7
Balance of Payments
• Australia’s terms of trade increased by 1.9% in the June quarter 2006, to
around their highest level in 50 years. This increase reflects sharp rises in
commodity prices, notably nickel and copper.
• The value of exports increased by 1.6% over the year, as a result of higher
commodity prices, but the growth of export volumes was subdued. The value
of imports increased by 7.0%, largely as a result of the significant increase in
world oil prices.
• Australia’s deficit on trade in goods and services was estimated to have
increased by 6% in the June quarter 2006.
• In line with the improvement in the terms of trade, the current account deficit
improved from 6.2% of GDP in the June quarter 2005 to 5.9% of GDP in the
June quarter 2006.
KEY FEATURES OF THE REAL ESTATE INDUSTRY
• The latest available survey of Australian Real Estate Services was conducted
by the ABS in 2002-03 and the results are summarised below.
• The Real Estate Services industry covered in the survey included valuing,
purchasing, selling by auction and private treaty, and managing or renting real
estate for others8.
• The total number of businesses in the industry was 10,000, up 7.1% compared
with the previous survey period, 1998-99.
• The total number of people employed in the industry in 2002-03 was 76,599,
up 10.1% compared with the previous survey period.
• Approximately 80% of real estate industry businesses are members of the Real
Estate Institute.
• The number of persons employed as real estate agents at 30 June 2003 was
67,934, of which 35,988 (53%) were franchised real estate agents and 31,946
(47%) were non-franchised real estate agents.
• The number of real estate agents employed in June 2003 was 47% higher than
the number employed (46,202) in June 1999.
• Permanent employees (excluding proprietors and working business partners)
comprised 86.7% and casual employees comprised 8.0% of real estate agents.
• Females comprised 55%, and males comprised 45% of employed real estate
agents in June 2003.
8
ABS Catalogue 8663.0
8
• The relative proportions of categories of the total number (67,934) of real
estate agents were:
o Real estate agency managers 13.4%
o Real estate sales persons – residential properties 33.2%
o Real estate sales persons – commercial properties 4.9%
o Property managers – residential properties 14.9%
o Property managers – commercial properties 4.7%
o Valuers/land economists 0.5%
o Other staff 28.4%
100.0%
• The relative proportions of size of real estate agency were:
o 0 - 4 persons 39.0%
o 5 - 9 persons 34.1%
o 10 - 19 persons 20.6%
o 20 - 49 persons 5.8%
o 50 – 99 persons 0.3%
o 100 or more persons 0.2%
100.0%
• Total income from all sources to real estate agents in the year to June 2003
was $6,818.7 million and the average operating profit margin was 11.1%.
PROPERTY MARKET INDICATORS
Australian Housing Stock
• The estimates of Australia’s housing stock in Table 1 were obtained from
information on occupied and unoccupied dwellings in Census years 1991,
1996 and 2001. The Census is the responsibility of the Australian Bureau of
Statistics (ABS).
9
Table 1. Australian Housing Stock9
1991 Census 1996 Census 2001 Census
Dwelling Type % of % of % of
No. No. No.
Total9 Total9 Total10
Occupied dwellings:
4,533,946 71.3 4,911,909 68.5 5,327,309 68.4
Separate Houses
Semi-detached, terrace
452,827 7.1 517,181 7.2 632,176 8.1
and townhouses
Flats/Units/Apartments 680,803 10.7 816,704 11.4 923,139 11.9
Other dwellings 55,439 134,024 134,274
Not Stated 42,561 116,254 55,304
Unoccupied dwellings 597,667 9.4 679,165 9.5 717,877 9.2
Total Dwellings (Stock) 6,363,243 7,175,237 7,790,079
• Australia’s housing stock increased by 1.4 million dwelling units or 22.4% in
the ten-year period from 1991 to 2001.
• Changes in the relative proportions of categories of occupied dwellings from
1991 to 2001 reflected changing life-styles, including emerging preferences by
many Australians for living in flats, units, apartments, or townhouses.
• The proportion of total dwellings occupied as separate houses declined from
71.3% in 1991 to 68.4% in 2001 whilst occupied flats, units, apartments and
townhouses increased from 17.8% of total dwellings in 1991 to 20.0% ten
years later.
Additions to Stocks
• Residential Building Approvals. The number and value of residential
building approvals in each of the last three years are shown in Table 2.
Table 2. Residential Building Approvals11
2003-04 2004-05 2005-06
No. $billion No. $billion No. $billion
Houses 121,159 21,243.6 107,529 20,550.0 104,348 21,389.7
Other Dwellings 61,203 9,919.0 54,270 9,521.0 45,648 8,332.1
Total dwelling units 182,362 36,223.7 161,799 35,092.6 149,996 34,990.0
• In 2003-04, the number and value of approvals for new houses increased
whilst the number and value of other dwellings decreased compared with the
preceding year.
• The reduction in residential building approvals in 2004-05 reflected the effects
of two interest rate rises in late 2003, and a cooling of property prices that
began in the markets for other dwellings in late 2003 to be followed by a
9
ABS Census data 1991, 1996, 2001. The data for 2006 has not yet been released.
10
Total dwellings comprise occupied dwellings plus unoccupied dwellings. The percentages are
calculated as the number of occupied dwellings in each category as a percentage of the total dwellings.
Unoccupied dwellings in each category are not shown in Table 1 and have been excluded from the
percentage calculations. Unoccupied dwellings data are available in the original ABS tables produced
from the Census data
11
ABS Catalogue 8731.0, Tables 7 and 19. Other Dwellings = Flats/units/townhouses
10
noticeable reduction in the rates of growth of house prices some six to twelve
months later.
• Momentum in national dwelling approvals was subdued during the first half of
2006. With interest rate rises in May and August 2006, it is likely that
dwelling approvals will continue to remain weak in the second half of 2006.
Medium density dwelling approvals have decreased at a slower rate than high
density dwelling approvals.
Dwelling Unit Commencements
• ABS total estimates (including private and public sectors) of dwelling unit
commencements in the last three years are shown in Table 3.
• There was a rise in commencement of new houses in 2003-04 followed by a
substantial reduction in 2004-05, and a small fall in 2005-06.
Commencements of new other dwellings declined in all three years, with a
sizeable decline in 2005-06.
Table 3. Dwelling Unit Commencements12
2003-04 2004-05 2005-06
Number Change Number Change Number Change
from from from
previous previous previous
period period period
% % %
New Houses 117,540 4.5 105,059 -10.6 103,297 -1.7%
New Other
52,577 -4.4 50,295 -4.3 45,487 -8.6%
Dwellings
Total dwelling units 172,376 1.2 157,547 -8.6 150,505 -4.5%
• Tables 4 and 5 show the value of building work in Australia. They provide
estimates of the value of building work commenced (Table 4), and the value of
building work done (Table 5) for new residential building, alterations and
additions and non-residential building.
o Value of building work commenced is the anticipated completion value
when the first physical building activity has been performed on site.
o Value of building work done is the estimated value of building work
carried out on jobs that commenced in the reference period.
• The value of building work done on residential buildings averaged 66.4% of
the total value of building work done over the last five years.
12
ABS Catalogue 8750.0, Table 1 Original estimates for Total Sectors
11
Table 4. Value of Building Work Commenced13
New Alterations Total Total Non- Non- Total
Residential & Residential Residential Residential Residential Building
Building Additions Building Building Building Building
$m $m $m % $m % $m
2001-02 25,058.8 4,165.0 29,223.8 68.4 13,473.2 31.6 42,697.0
2002-03 28,676.5 4,705.0 33,381.6 67.7 15,937.6 32.3 49,319.2
2003-04 31,396.8 5,459.4 36,856.2 68.5 16,915.7 31.5 53,771.9
2004-05 31,228.5 5,611.2 36,839.7 65.0 19,825.3 35.0 56,665.0
2005-06 32,308.7 5,883.8 38,192.5 62.2 23,166.1 37.8 61,358.6
Table 5. Value of Building Work Done14
New Alterations Total Total Non- Non- Total
Residential & Residential Residential Residential Residential Building
Building Additions Building Building Building Building
$m $m $m % $m % $m
2001-02 22,285.60 4,122.10 26,407.70 66.8 13,135.10 33.2 39,542.90
2002-03 27,224.60 4,761.80 31,986.40 67.9 15,097.70 32.1 47,084.20
2003-04 30,891.80 5,634.60 36,526.30 67.9 17,264.10 32.1 53,790.40
2004-05 32,837.50 5,914.70 38,752.20 66.1 19,847.60 33.9 58,599.80
2005-06 32,749.20 5,923.30 38,672.50 62.2 23,485.70 37.8 62,158.20
Home Ownership
• Table 6, derived from ABS Census data, shows the pattern of home ownership
in Australia at five-year intervals from Census year 1971 to Census year 2001.
• From 1971 to 2001, the total number of dwellings in Australia increased
94.3% from 4.0 million to 7.8 million. From 1986 to 2001, the proportion of
total occupied dwellings either owned or being purchased (i.e. in total, a
measure of home ownership) declined from 69.1% to 66.7%.
Table 6. Home Ownership: Australia15
Census Year Households (%)
Tenure
1971 1976 1981 1986 1991 1996 2001
Owned na 31.6 33.2 38.2 40.3 41.4 40.2
Being Purchased na 34.7 33.0 30.9 27.0 25.5 26.5
Total Owners 67.3 66.3 66.2 69.1 67.3 66.9 66.7
Renters: State Housing 5.5 4.9 4.9 5.4 5.7 5.1 4.5
Renters: Private Landlord 21.8 20.3 20.0 20.4 20.9 23.6 23.1
Total Renters 27.3 25.2 24.9 25.8 26.6 28.7 27.6
Other Tenure 5.4 8.5 8.8 5.1 6.1 4.4 5.8
Total Occupied Dwellings (‘000) 3,670 4,140 4,669 5,187 5,765 6,496 7,072
Total Unoccupied Dwellings (‘000) 339 431 469 543 597 679 718
Total Dwellings (‘000) 4,009 4,571 5,138 5,730 6,362 7,175 7,790
• From 1986 to 2001, home ownership declined 2.4 percentage points whilst the
proportion of occupied dwellings that were rented increased 1.8 percentage
points.
13
ABS Catalogue 8752.0, Tables 15 and 16
14
Ibid, Tables 13 and 14
15
ABS Census data, various years. Percentages calculated as percent of total occupied dwellings
12
• The number of households with an owner-occupier mortgage increased from
27% in 1993-04 to 35% in 2003-04, despite the rate of home ownership
remaining broadly unchanged over the same period. The increase has been
most marked in the 45 – 54 year age group, reflecting an increasing use of
home equity to finance a range of lifestyle options.
• Over the ten years from 1993-94 to 2003-04, the number of households with a
geared property investment increased from 7% to 10.5%.
Residential Property Sales – Australia.
• Most residential statistics in Australia are presented for ‘houses’ and ‘other
residential dwellings’. ‘Houses’ as defined by ABS, are self-contained
dwellings separated from other dwellings by at least 0.5 metres. A self-
contained dwelling contains at least, cooking, bathing and toilet facilities.
‘Other residential dwellings’ is an aggregation of flats, units (apartments) and
townhouses. In Australia, ‘apartments’ are synonymous with units.
Generally, separate data on apartments in Australia are either not available or
are not compiled for analytical purposes.
• The most reliable records of total annual residential sales are obtained from
the appropriate government department in each State and Territory.
• The marked reduction in residential sales in New South Wales in 2004-05
reflected the impact of the introduction of a new vendor transfer duty of 2.25%
in 2004. The New South Wales Government repealed that duty in August
2005.
Table 7. Total Number of House Sales, By State16
Year NSW Vic Qld SA WA Tas NT ACT Aus.
2001-02 107,394 68,283 93,077 32,347 45,200 12,795 2,130 9,148 370,374
2002-03 107,765 93,170 97,843 33,071 45,490 15,509 2,050 6,018 400,916
2003-04 101,636 99,703 95,122 30,491 48,624 11,681 2,649 5,863 395,769
2004-05 77,162 125,029 79,195 30,169 52,637 9,739 2,753 4,480 381,164
2005-06 na na na 27,048 na na na na na
Table 8. Total Value of House Sales, ($ million), By State
Year NSW Vic Qld SA WA Tas NT ACT Aus.
2001-02 37,946 16,394 19,168 5,208 8,200 1,391 426 1,895 90,628
2002-03 45,666 25,872 24,115 6,724 8,983 1,988 442 1,877 115,667
2003-04 47,655 31,768 28,274 7,736 13,310 2,056 674 2,284 133,757
2004-05 38,110 41,242 27,261 8,306 16,272 2,112 784 1,799 135,886
2005-06 na na na 7,848 na na na na na
16
All the data tables 7-12 was obtained from the Various State Departments and Residex Pty Ltd
13
Table 9. Total Number of Other Dwellings Sales, By State
Year NSW Vic Qld SA WA Tas NT ACT Aus.
2001-02 56,374 19,692 29,237 7,603 9,100 2,135 1,216 4,388 129,745
2002-03 57,198 27,825 33,358 7,285 10,260 2,934 1,265 3,322 143,447
2003-04 52,258 30,722 31,890 8,835 9,162 4,185 2,095 4,152 143,299
2004-05 31,253 40,778 21,216 6,415 10,011 1,747 2,219 2,722 116,361
2005-06 na na na 5,488 na na na na na
Table 10. Total Value of Other Dwellings Sales ($ million), By State
Year NSW Vic Qld SA WA Tas NT ACT Aus.
2001-02 19,215 4,606 5,961 1,022 1,316 238 190 871 33,419
2002-03 21,538 7,389 7,044 1,517 1,563 408 202 817 40,478
2003-04 21,140 9,095 8,104 1,994 2,100 384 388 1,293 44,498
2004-05 13,207 12,116 6,036 1,580 2,581 392 462 982 37,356
2005-06 na na na 1,316 na na na na na
Table 11. Total Number of Dwelling Sales, By State
Year NSW Vic Qld SA WA Tas NT ACT Aus.
2001-02 163,768 87,975 122,314 39,950 54,300 14,930 3,346 13,536 500,119
2002-03 164,963 120,995 131,201 40,356 55,750 18,443 3,315 9,340 544,363
2003-04 153,894 130,425 127,012 39,326 57,786 15,866 4,744 10,015 539,068
2004-05 108,415 165,807 100,411 36,584 62,648 11,486 4,972 7,202 497,525
2005-06 na na na 32,536 na na na na na
Table 12. Total Value of Dwelling Sales, ($ million), By State
Year NSW Vic Qld SA WA Tas NT ACT Aus.
2001-02 57,161 21,000 25,129 6,230 9,516 1,629 616 2,766 124,047
2002-03 67,204 33,261 31,159 8,241 10,546 2,396 644 2,694 156,145
2003-04 68,795 40,863 36,378 9,730 15,410 2,440 1,062 3,577 178,255
2004-05 51,317 53,358 33,297 9,886 18,853 2,504 1,246 2,781 173,242
2005-06 na na na 9,164 na na na na na
Table 13. Total Number of Residential Land Sales, By State
Year NSW Vic Qld SA WA Tas NT ACT Aus.
2001-02 16,910 19,854 15,055 10,368 9,052 2,784 453 1,180 75,656
2002-03 9,858 28,980 14,015 10,026 15,380 5,172 370 1,274 85,075
2003-04 9,584 28,770 12,460 11,245 16,210 4,505 430 953 84,157
2004-05 7,084 31,126 10,454 9,506 16,162 2,396 525 422 77,675
2005-06 na na na 7,373 na na na na na
Table 14. Total Value of Residential Land Sales ($ million), By State
Year NSW Vic Qld SA WA Tas NT ACT Aus.
2001-02 3,556 1,459 2,049 630 746 140 41 140 8,761
2002-03 2,107 3,343 1,904 1,010 1,173 237 47 152 9,973
2003-04 2,615 3,295 2,194 1,634 2,500 284 52 174 12,748
2004-05 2,308 3,818 3,208 1,470 2,928 225 59 121 14,137
2005-06 na na na 1,040 na na na na na
• The highest number of total dwelling sales of 544,363 was recorded in 2002-
03 and these represented a turnover of 7.0% of the Australian housing stock of
7.790 million dwellings.
14
• A little more than 75% of all residential sales per year occur in three States,
namely New South Wales, Victoria and Queensland. These are also the most
populous states in Australia, with more than 77% of the total population.
• The effects of the extraordinary increase in residential prices experienced in
Australia from around the beginning of 2001 through to late 2003 are reflected
in the sales figures in Tables 7 to 14. As the tables show, sales and prices
began to decline much earlier in New South Wales, Queensland, Tasmania and
the Australian Capital Territory compared with the other states.
Residential Property Prices
• Each State and Territory collects residential sales price data. Most of the State
and Territory Real Estate Institutes (REIs) produce quarterly publications that
include median prices separately for houses (usually new and established
combined), other dwellings (flats/units/townhouses), and vacant residential
land.
• The REIA also has a quarterly publication, called Real Estate Market Facts
(REMF). REMF contains inter alia, median prices for ‘houses’ and ‘other
dwellings’ for each capital city and for up to three major regional centres in
each of the States/Territories. The data used by the REIA are mainly provided
by State and Territory Government Departments, or by the REIs. Importantly,
the REIA and each of its eight member REIs use the same sales databases.
• The purpose of Real Estate Market Facts is to provide an overview of major
residential property markets in Australia. Individual copies or annual
subscriptions to Real Estate Market Facts may be purchased on-line from the
REIA web site at www.reia.com.au.
• Where possible, median property prices are calculated from sales at the date of
contract exchange. Attempts to report median prices as early as possible after
the close of a reference period inevitably involve reducing numbers of sales
from which to calculate median prices as the time between the close of the
reference period and the date of reporting the prices is shortened. The current
situation in Australia is as follows:
o Sydney prices are based on contract date information, revised once, with
preliminary prices for the latest quarter compared with revised prices for
earlier quarters. Prices are adjusted for compositional change (ie mix and
quality of dwellings). The median prices for 2005-06 are not comparable
with those of previous years, which were not adjusted for compositional
change.
o Hobart (contract date) and Darwin (settlement date) sales prices are not
revised.
o Melbourne (contract date), Brisbane (contract date), Adelaide (settlement
date) and Perth (contract date) prices are revised once and percentage
15
changes compare current quarter preliminary estimates with revised
estimates in previous quarters.
o Canberra (contract date) prices are revised twice and percentage changes
compare current quarter preliminary estimates with preliminary estimates
in previous quarters.
• Table 15 shows the latest median house prices for each of the capital cities for
the June quarter 2006.
Table 15. Median House Prices, June Quarter, 2006 ($’000)17
Syd Melb Bris Adel Perth Canb Hob Dar
June quarter 2006 523.0 375.0 326.0 286.5 395.0 380.0 277.0 350.0
March quarter 2006 517.0 357.0 325.0 279.0 365.0 375.0 282.5 335.0
June quarter 2005 527.0 360.0 315.0 275.0 295.0 352.5 260.0 279.8
% Change:
Mar’06 – Jun’06 1.2 5.0 0.3 2.7 8.2 1.3 1.9 4.5
Jun’05 – Jun’06 -0.8 4.2 3.5 4.2 33.9 7.8 6.5 25.1
• The REIA calculates a quarterly Australian weighted average median house
price, shown in Table 16. The price is derived from the quarterly median
house prices for all capital cities weighted according to the number of houses
for each corresponding city. The numbers of houses in each city were
provided by the ABS from the 2001 Census.
Table 16. Australian Weighted Average Median House Prices ($’000)18
Sep qtr Dec qtr Mar qtr Jun qtr
2003-04 379.4 382.6 380.7 380.3
2004-05 368.9 380.6 378.1 377.9
2005-06 386.0 396.9 394.4 407.3
• Chart 4 shows moving annual median (trend) house prices for each capital city
in Australia for the five years from June 2000 to June 2005 and the
extraordinary growth. The moving annual median house prices are calculated
from quarterly median house price data sourced from the States and Territories
via the REIs.
17
Mortgage Choice/REIA Real Estate Market Facts, June quarter 2006
18
ibid
16
Chart 4. Moving Annual Median House Prices, Capital Cities19
600
Median Prices ($'000) 550
500
450
400
350
300
250
200
150
100
Mar
Mar
Mar
Mar
Mar
Dec
Dec
Dec
Dec
Dec
Jun
Jun
Jun
Jun
Jun
Sept
Sept
Sept
Sept
Sept
Jun
2001 2002 2003 2004 2005 2006
SYD1 MELB BRI ADE PER
Residential House Rents
• The estimates of median weekly house rents for the June quarter 2006 in
Australian capital cities are shown in Table 17. For most cities, the median
rents are derived from all rental bonds that were lodged in the relevant quarter
with the State Rental Tenancy Authorities.
Table 17. Median Weekly House Rents, June Quarter, 200620
3 Bedroom Houses
City Quarterly median Annual
$/week % change
Sydney 265 1.9
Melbourne 230 7.0
Brisbane 280 16.6
Adelaide 240 9.1
Perth 250 19.0
Canberra 320 6.7
Hobart 255 15.9
Darwin 300 5.3
19
ibid
20
ibid
17
Other Dwellings (Flats/Units/Townhouses) Sales
• The sources of sales prices for other dwellings for most States are Government
Departments and in others, the primary sources are the REIs.
• Table 18 shows the median prices for other dwellings for each of the capital
cities for the June quarter 2006.
• In addition, Chart 5 shows the moving annual median (trend) sales prices
(calculated from quarterly median prices) for this broad group of residential
properties over the five years from June 2001 to June 2006. The moving
annual prices are shown for each capital city, namely Sydney, Melbourne,
Brisbane, Adelaide, Perth Canberra, Hobart and Darwin.
Table 18. Median Other Dwellings Prices, June Quarter, 200621
Syd Melb Bris Adel Perth Canb Hob Dar
June quarter 2006 355.0 315.0 280.0 215.0 320.0 305.0 227.5 267.5
Mar quarter 2006 359.0 306.0 270.0 215.0 280.0 301.0 220.0 260.0
June quarter 2005 362.0 300.0 260.0 205.0 240.0 295.0 225.0 202.5
% Change:
Mar’06 – Jun’06 -1.1 2.9 3.7 0.0 14.3 1.3 3.4 2.9
Jun’05 – Jun’06 -1.9 5.0 7.7 4.9 33.3 3.4 1.1 32.1
Chart 5. Moving Annual Median Other Dwellings Prices, Capital Cities22
400
350
Dwelling Prices ('000)
300
250
200
150
100
50
0
Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun
2002 2003 2004 2005 2006
Quarter
SYD1 MEL BRIS ADEL PERTH CANB HOB DAR
Other Dwellings (Flats/Units/Townhouses) Rents
• The June quarter 2006 median weekly rents for other dwellings in Australian
capital cities are shown in Table 19. A national median rent for Australia is not
calculated by REIA.
21
ibid
22
ibid
18
Table 19. Median Weekly Other Dwellings Rents, June Quarter, 200623
2 Bedroom Flats/Units/Townhouses
City Quarterly median Annual percent change
$/week
Sydney 300 7.1
Melbourne 230 4.5
Brisbane 260 18.2
Adelaide 185 8.8
Perth 230 24.3
Canberra 300 7.1
Hobart 210 23.5
Darwin 220 4.8
Vacancy Rates
• Vacancy Rates in Australia are obtained from surveys of member Real Estate
Agents by the REIs and usually relate to rented properties in each capital city
only. Vacancy rates are difficult to obtain and estimates are usually aggregated
for all types of rented accommodation including houses, flats, units and
townhouses. The rates are calculated from the number of vacant properties in
the aggregate rent roll of rented properties in specified cities in the last month
of each quarter.
• An industry ‘rule of thumb’ suggests that vacancy rates below about 3.0%
indicate a high level of demand for rental accommodation.
• The most recent vacancy rates for rented dwellings in Australian capital cities
are shown in Table 20.
Table 20. Vacancy Rates: (All Rented Dwellings) June 200624
Vacancy Rate Quarterly Change Annual Change
Location
% % pts % pts
Sydney 2.1 0.1 -0.4
Melbourne 1.7 -0.1 -0.9
Brisbane 2.2 0.7 0.3
Adelaide 1.6 -0.1 -0.2
Perth 1.8 0.4 -0.7
Canberra 2.0 0.2 -0.5
Hobart 2.2 0.0 0.0
Darwin 2.4 -0.9 0.5
Home Loan Affordability
• The REIA Home Loan Affordability Indicator (HLAI) is the ratio of median
family income to average loan repayments, and an increasing value reflects
improving affordability of housing loans. An increasing value reflects
improving affordability of housing loans
23
ibid
24
REI surveys of Real Estate Agent Property Managers
19
• The national indicator had a value of 30.1 for the June quarter 2006. This
compares with the average national quarterly value of 37.7 for the period from
March 1980 to June 2006. The most recent lowest level of 30.3 was reached in
the December quarter 1990.
• A range of factors influences the affordability of home loans, including:
o The amount to be borrowed which reflects the price of the property being
purchased and the borrower’s equity situation.
o The size of loan, interest rates and the period of the loan that determine the
average loan repayment.
o Family income that determines the ability to repay a mortgage.
• Chart 6 shows how the REIA Home Loan Affordability Indicator has moved
each quarter since the June quarter 2002.
Chart 6. Home Loan Affordability Indicator, All of Australia25
41.0
39.0
37.0
35.0
HLAI
33.0
31.0
29.0
27.0
25.0
MAR03
MAR04
MAR05
MAR06
JUN02
DEC02
JUN03
DEC03
JUN04
DEC04
JUN05
DEC05
JUN06
SEP02
SEP03
SEP04
SEP05
Quarter
Non-Residential Markets.
• Statistics on the non-residential building sector in Australia are provided by
the ABS for three main categories, namely Commercial, Industrial and Other
non-residential buildings. Taken together, Commercial and Industrial
comprise Hotels, Retail (Shops), Factories, Offices, Other Business Premises.
Other non-residential buildings comprise Social and Institutional buildings
including Educational, Health, Entertainment and Recreational, and Other
Social and Institutional buildings.
• During 2005-06, there was continued strong growth in prices and borrowing in
the commercial property market. Over the year to March 2006, bank lending
25
REIA Home Loan Affordability Report, June 2006.
20
for commercial property rose by 18.3%, a similar increase to the previous
year.
• Table 21 shows the level of expenditure on construction work done and the
percentage of the total annual amount spent in the three main categories of
non-residential buildings since 2003-04.
Table 21. Value of Construction Work Done on Non-Residential Buildings26
Activity 2003-04 2004-05 2005-06
$ million % $ million % $ million %
Total Commercial Building 7,597 44.0 8,639 43.5 10,276 43.8
Total Industrial Building 2,789 16.2 3,543 17.8 4,220 18.0
Total Commercial plus Industrial 10,386 60.2 12,182 61.4 14,496 61.7
Total Social and Institutional Building 6,878 39.8 7,666 38.6 8,989 38.3
Total Non-residential Building 17,264 100.0 19,848 100.0 23,486 100.0
• Office property prices rose by 13.7% over the year to June 2006, the strongest
annual growth since September 2000. Perth led the growth with a 35.9%
increase in office property prices, followed by Brisbane (27.1%), Adelaide
(13.1%), Melbourne (12.5%), Sydney (9.1%) and Canberra (5.7%).
• Industrial property prices rose 11.6% over the year to June 2006, with Perth
again leading with a 16.6% growth in prices, followed by Sydney (12.0%),
Brisbane (10.6%), Melbourne (9.3%) and Adelaide (5.6%).
Foreign Investment
• All acquisitions of residential real estate in Australia by foreign interests
require prior foreign investment approval.
• All contracts of sale to acquire residential real estate by foreign interests must
be made conditional on foreign investment approval and must allow at least 30
days for a decision to be granted.
• Residential real estate means Australian real property (including vacant land),
other than
o Developed commercial properties (i.e. offices, factories, warehouses,
restaurants, shops, recreation facilities, but not accommodation
facilities such as hotels) and
o Land that is integral to a commercial farming business. Acquisitions of
hobby farms and rural residential blocks by foreign interests are
included in the residential real estate category.
• All proposed acquisitions of residential real estate should be submitted for
examination regardless of value unless the purchaser is an Australian citizen,
permanent resident or a foreign national entitled to "special category visa"
(such as a New Zealand citizen) and purchasing in their own name.
26
ABS Catalogue 8752.0, Table 51
21
• Other persons wishing to purchase residential real estate (including temporary
residents, or companies with foreign shareholders or trusts with foreign
management and/or beneficiaries) must apply in advance to the Government
through the Foreign Investment Review Board for approval.
• Acquisitions by Australian citizens and their foreign spouses to purchase
residential property as joint tenants do not require foreign investment
approval.
• Developed residential real estate means houses, flats or units that have been
occupied.
• Acquisitions of developed residential real estate by foreign interests are not
normally approved except for:
o Foreign nationals temporarily resident in Australia for more than 12
months purchasing a residence for use as their principal place of residence
while in Australia (and not for rental purposes), subject to the sale of the
property when they cease to reside in Australia, their visa expires or they
no longer reside in the property. This category includes long-stay retirees,
and students 18 years of age and over studying courses of more than
twelve months duration at recognized tertiary institutions. Normally a
$300,000 limit applies to acquisitions by students; and
o Foreign companies with an established substantial presence in Australia
buying for their named senior executives resident in Australia for periods
longer than 12 months.
• Acquisitions of vacant land are normally approved subject to a specific
condition requiring ongoing construction to commence within 12 months of
foreign investment approval and provided that the equivalent of at least 50 per
cent of the acquisition price of the land is expended on development.
• Applications to acquire existing residences for redevelopment may be
approved provided that the proposal provides for substantial redevelopment
expenditure in relation to the acquisition cost of the property and an increase
in the housing stock. Additionally, the existing house must remain unoccupied
pending redevelopment.
• For both vacant land and redevelopment categories, once the development
condition has been fulfilled, there is no restriction on the subsequent use of the
property by the foreign investor, i.e. it may be rented out, sold or retained for
the foreign investor's own use.
• Foreign interests may apply to acquire home units, town houses, house/land
packages etc either off the plan, during the construction phase or when the
dwelling is newly completed, provided that it has never been occupied or sold
and provided no more than 50 per cent of the dwellings in any one
development are sold to foreign interests. However, when the property is to be
on sold, it is treated as developed residential real estate and its sale is subject
to the restrictions applying to that category of residential real estate.
Developers of more than 10 unit/townhouse projects may apply in advance to
22
sell up to 50 per cent of the residences to foreign investors. Where such
approval has been granted, it is not necessary for individual foreign interests to
apply for approval.
• Table 22 shows the levels of foreign investment in property in Australia in
2004-05 and 2005-06. The total value of foreign investment in Australian real
estate fell by 18.7% between 2004-05 and 2005-06 to $20.91 billion. Foreign
investment in property is primarily sourced from USA, Singapore, Malaysia,
Hong Kong, Japan, UK, Germany, and other EU counties.
Table 22. Recent Foreign Property Investment in Australia27
2004-05 2005-06 % Change
Approvals Value $b Approvals Value $b Approvals Value
$b
Residential 3,945 15.28 3,848 1,4.46 -2.4 -5.4
Commercial 114 10.43 101 6.44 -11.4 -38.3
Total 4,059 25.71 3,949 2,0.91 -2.7 -18.7
• Applications for approval to purchase residential real estate should be directed
to: The Executive Member, Foreign Investment Review Board, Department of
the Treasury, Langton Street, Canberra ACT 2600, Australia.
o Facsimile: +61 2 6263 2940
o Telephone inquiries: +61 2 6263 3795
o Website at: www.firb.gov.au
o Email: firb@treasury.gov.au
• The REIA is currently seeking a review of Australia’s Foreign Investment
Guidelines in order to:
o Update threshold values applying to the purchase of Australian
property by foreigners to reflect current and foreseeable future market
property values,
o Revise the conditions for redevelopment of residential real estate, and
o Liberalise the laws that place restrictions on the eligibility of foreigners
who may purchase property in Australia.
Prepared by:
Real Estate Institute of Australia
Canberra ACT 2600
October 2006
27
FIRB Annual Reports 2004-05 & 2005-06
23
Bibliography
Access Economics Pty Ltd. 2006. Business Outlook. Various Issues.
Australian Bureau of Statistics. 2001 Census; Catalogues 5206.0, 5609.0, 6202.0, 6401.0,
8731.0, 8750.0, 8752.0, 8755.0.
BIS Shrapnel. 2006. Building Industry Prospects.
Foreign Investment Review Board. Annual Reports.
Real Estate Institute of Australia. Australian Property Market Indicators. Various Issues.
Real Estate Institute of Australia. Home Loan Affordability Report. Various Issues.
Real Estate Institute of Australia. Real Estate Market Facts. Various Issues.
Reserve Bank of Australia. 2006. Bulletin. Various Issues.
Reserve Bank of Australia. 2006. Financial Stability Review. September Issue.
Reserve Bank of Australia. 2006. Statements on Monetary Policy. Various Issues.