RESIDENTIAL RESEARCH
AUSTRALIAN APARTMENTS RESIDENTIAL MARKET OVERVIEW Q4 2015
HIGHLIGHTS Sales volume, capital values and rents grew across the Australian apartment market as gross rental yields compress in the September 2015 quarter. Total vacancy trends upwards, now at market equilibrium.
Changes to legislation: Fees now payable on application for foreign investors buying in Australia and stricter penalties apply; Updates to sunset clause and existing strata laws in New South Wales.
Pressure from APRA continues to impact investor borrowing, although the owner occupier market has stepped in to offset overall household borrowing; major banks raise standard variable rates.
2
KEY FINDINGS
An uptick in Australian
economic growth and a fall in
overall unemployment occurred
in the September quarter.
The Reserve Bank of Australia
has kept the official cash rate
target unchanged at 2.00% in
December, although major banks
lifted standard variable rates in
October.
Fees are now payable on
application for foreign
investors and stricter penalties
apply for those in breach;
Updates to sunset clause and
existing strata laws in NSW.
Australian apartments have
averaged annual growth of
7.7% in capital values in
September, with the last quarter
recording growth of 2.4% to
stand at a median $473,500.
Over the year to September,
Australian apartment sales
volumes were up 5.9% to
163,988 while as at September,
gross rental yields averaged
4.64%.
Australian median apartment
rents rose 2.4% over the year to
September to achieve $420 per
week, while total vacancy
trended upwards to 3.0%.
MICHELLE CIESIELSKI Knight Frank Residential Research
AUSTRALIAN APARTMENTS 2015 and into 2016.
Changes to Legislation Foreign Investors in Australia
From 1 December 2015, all foreign
investors must now pay a fee before their
foreign investment application will be
processed and stricter penalties have
been ramped up by the Australian
Taxation Office for those who breach the
rules. The fee structure is stated in Figure
2 and penalties are detailed in our latest
Insight report.
For Victoria, including the capital city of
Melbourne, this fee is in addition to the
state-based 3% duty payable on the
purchase price, and the annual absentee
tax of 0.5% on the property value for
foreign owners who leave their property
vacant for extended periods throughout
the year.
The Economy The Australian economy has experienced
an uptick in growth over the September
2015 quarter, up 2.5% YoY, off the back
of a lower Australian dollar and coming
off less than ideal weather conditions mid
-year for exporting commodities.
Unemployment was recorded at 5.8%
across Australia in November,
compressing 40bps from three months
earlier.
The Australian Prudential Regulatory
Authority (APRA) continues to endorse a
more stricter lending practice after on-
going concerns of over-heated residential
markets in Sydney and Melbourne. As a
result, in the three months to October
2015, the overall growth in both the
investor and owner occupier housing
finance markets fell 0.5% by total value.
Over this same time, housing finance for
construction and purchase for investment
recorded negative growth of 7.6%,
although the owner occupier market
offset total housing finance with growth
in finance of 8.3%.
In December, the Reserve Bank of
Australia held the official cash rate target
at the historic low of 2.00%; observed for
the past eight consecutive months.
Despite the RBA decision, the major
banks increased their standard variable
lending rates in late October, so it is likely
there will be further recalibration for the
investment market in the final quarter of
Source: Knight Frank Research, ABS, RBA
FIGURE 1
National Key Economic Indicators
FIGURE 2
Fees Payable by Foreign Investors,
Residential Property Based on Property Value, AUD
$1 million or less Over $1 million
$5,000
$10,000 then $10,000
incremental fee increase
per additional $1 million
in property value
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Mar-
15
Jun-1
5
Sep
-15
May-1
5
Aug
-15
No
v-1
5
Jun-1
5
Sep
-15
Dec-1
5
Ap
r-15
Jul-
15
Oct-
15
Ap
r-15
Jul-
15
Oct-
15
GDP ANNUAL
GROWTH RATE
UNEMPLOYMENT RATE CASH RATE TARGET QUARTERLY GROWTH
OF INVESTOR HOUSING
FINANCE, BY VALUE
QUARTERLY GROWTH
OF OWNER OCCUPIER
HOUSING FINANCE, BY
VALUE
3
RESEARCH AUSTRALIAN APARTMENTS OVERVIEW Q4 2015
Buying off the plan in NSW
New sunset clause laws have been
announced by the New South Wales
(NSW) Government to protect off-the-
plan (OTP) purchasers when developers
cancel contracts without good reason
and on-sell the subject property for a
financial gain. If a developer intends on
rescinding a contract on, or after
2 November 2015, they must first seek
consent from the purchaser and if this is
not resolved, the developer will need to
apply to the Supreme Court for the
termination. The legislation will also apply
retrospectively, and apply to contracts
that have exchanged, but not yet passed
the sunset clause date. In Western
Australia (WA), purchasers are the only
party that can invoke a sunset clause in
OTP sales.
Strata laws in NSW
The Strata Development Bill 2015 will
come into effect in July 2016 delivering
over 90 changes to existing laws
affecting both residential and commercial
properties. The Bill covers changes to
proxy farming, improving outdated
regulations impacting renovations,
increased protection against building
defects, as well as, the collective
decision making sales process.
Encouraging the renewal of older tired
buildings, only 75 per cent of consenting
approval will be required from owners to
terminate and renew a strata scheme,
down from the current 100 per cent
requirement.
NSW is the first state to pass updated
strata legislation, although the Victorian
Government is considering the 75 per
cent threshold when it introduces
reforms, while WA is proposing to
introduce a sliding scale for termination
of strata titles based on the age of the
building. The Northern Territory
Government is currently drafting a
proposed review and an inquiry is
underway in South Australia of their
strata laws.
Capital Values & Sales Volumes Over the year to September 2015,
Australian apartment capital values have
experienced 7.7% growth with the last
three months of this period recording
growth of 2.4% to stand at a median
capital value of $473,500. Capital growth
amongst the capital cities has continued
to be led by Greater Sydney (at 15.6%),
Greater Hobart (at 5.8%) and Greater
Melbourne (at 5.4%) over the past year.
Across Australia, 163,988 apartment
sales were recorded in the year ending
September 2015; 5.9% more than
recorded the previous year. The market
has yet to return to the double-digit sales
volume growth that led to steep gains in
capital values throughout 2014 and 2015,
demonstrating that further capital growth
in Australian apartments will likely be at a
more sustainable pace.
As shown in Figure 3, when utilising
growth in sales volume as a leading
indicator, it would be expected that
Greater Brisbane and Greater Melbourne
are likely to witness further capital growth
heading into 2016. Greater Hobart and
the Australian Capital Territory (ACT) are
Source: Knight Frank Research, Residex
FIGURE 3
Annual Change in Sales Volume &
Median Capital Values No. of Apartments
Indexed, 100 = Sep-13
Source: Knight Frank Research, Residex
FIGURE 4
Apartment Yield Ranges % Gross Rental Yield, September 2015
displaying signs of a potential upswing
over the medium term for capital growth
after experiencing negative growth in
2014.
Rents, Vacancy & Yields Australian apartment rents rose 2.4%
over the year to September 2015 to
achieve a median $420 per week. Despite
this increase, total vacancy grew 40bps
to 3.0% over the same time according to
the REIA. Highest annual rental growth is
still being experienced in Greater Sydney,
at 5.7% over the year to September 2015
while achieving a median rent of $560 per
week. Although since mid-2015 rents in
Greater Sydney have remained steady as
total vacancy has fallen from 2.1% to
1.9% over this time, it is likely we will
once again see a rise in rents early in the
new year.
In September 2015, gross rental yields for
Australian apartments averaged 4.64%.
With continued negative growth in
apartment capital values over the past
year, Greater Darwin recorded the highest
gross rental yield at 5.87% in September
2015, although rents continued to fall
throughout this period. As shown in
Figure 4, Greater Sydney returns the
lowest gross rental yields across
Australia, at 4.30%. When plotted over a
five year range, current yields in Greater
Sydney are at the lower end of the range;
a similar experience being recorded by
Greater Brisbane and Greater Perth.
60
70
80
90
100
110
120
130
140
150
Sep
-13
Dec-1
3
Mar-
14
Jun
-14
Sep
-14
Dec-1
4
Mar-
15
Jun
-15
Sep
-15
GR. BRISBANE
GR. MELBOURNE
GR. HOBART
GR. ADELAIDE
GR. SYDNEY
ACT
GR. PERTH
GR. DARWIN
GR. SYDNEY
GR. HOBART
GR. MELBOURNE
GR. BRISBANE
GR. ADELAIDE
GR. PERTH
ACT
GR. DARWIN
SALES VOLUME CAPITAL VALUES
4.00%
4.50%
5.00%
5.50%
6.00%
6.50%
SY
DN
EY
ME
LB
OU
RN
E
BR
ISB
AN
E
PE
RT
H
AD
ELA
IDE
CA
NB
ER
RA
HO
BA
RT
DA
RW
IN
FIVE YEAR YIELD RANGE YIELD AS AT SEP-15
4
SYDNEY
TABLE 1
Apartment Key Indicators, September Quarter 2015
Region
Median
Capital Value
($)
Capital
Growth
Last Quarter
(%)
Capital
Growth
Last Year
(%)
Sales
Volume
Last Year
(no.)
Median
Weekly Rent
($)
Gross
Rental Yield
(% p.a)
Sydney* 799,000 4.2 12.8 590 790 5.33#
CBD & South^ 814,000 1.7 11.4 13,004 680 4.35
North^ 789,000 2.3 15.9 8,114 630 4.17
North West^ 638,500 5.0 18.8 10,705 520 4.26
South West^ 576,500 4.1 17.7 11,274 470 4.25
Far West^ 380,500 6.9 20.4 4,255 375 5.15
Greater Sydney 677,000 3.2 15.6 45,854 560 4.30
Australia 473,500 2.4 7.7 163,988 420 4.64
September quarter saw
continued growth in capital
values of 3.2%; with total growth
of 15.6% year on year
Weekly rents rose by 5.7% in
September to $560 compared to
one year ago
Gross rental yields currently
average 4.30% across Greater
Sydney, to become the lowest in
the country
Over the past year a total 45,854
apartments were sold; falling by
1.8% to September 2015
Source: Knight Frank Research, Residex
FIGURE 5
Apartment Values & Sales Volume
Greater Sydney
Capital Values & Sales Volumes Greater Sydney apartments continued to
see considerable price growth of 3.2% in
the third quarter of 2015, maintaining the
highest capital value across Australia at
$677,000. Annual capital growth was
recorded at 15.6% to September, with
median values increasing 39.2% since
the last trough in December 2012 and
71.2% since the end of 2008. Annual
sales turnover was down by 1.8% on the
prior year, despite 45,854 apartments
transacting.
Source: Knight Frank Research, Residex, REINSW
Rents & Vacancy Up 5.7% over the last year and standing
at a median $560 per week in September
2015, Greater Sydney apartment rents
continue to gain strength. On average,
rents have grown 5.9% each year, since
September 2005.
Greater Sydney recorded 1.9% total
vacancy in September 2015; the tightest
rate across the country— compressing
from a peak of 3.1% in August 2012. The
Middle (10-25km) and Outer (20km+)
rings assisted in keeping vacancy down
with 1.9% and 1.7% respectively. The
Inner (0-10km) ring witnessed 2.0%
vacancy—all well below the 3% market
equilibrium.
Rental Yields Over the year to September quarter
2015, median gross rental yields fell
42bps to 4.30%, with the last quarter
alone contracting a substantial 16bps
due to strong capital value growth and
stable rents.
Outlook Sales volumes are expected to stabilise
over the short term, as the Sydney
market begins to ease in the second half
of 2015. Both capital values and rents are
expected to rise again over the next 12
months, although not as strong as seen
this year. Gross rental yields are likely to
further compress.
Source: Knight Frank Research, Residex *Denotes Select Suburbs Only #Annual Average ^Denotes Residential Region (see back page)
FIGURE 6
Apartment Rents & Total Vacancy
Greater Sydney
0
10,000
20,000
30,000
40,000
50,000
60,000
$450,000
$500,000
$550,000
$600,000
$650,000
$700,000
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
ANNUAL SALES VOLUME (RHS) MEDIAN CAPITAL VALUE (LHS)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$0
$100
$200
$300
$400
$500
$600
$700
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
MEDIAN WEEKLY RENT TOTAL VACANCY
5
RESEARCH AUSTRALIAN APARTMENTS OVERVIEW Q4 2015
MELBOURNE
TABLE 2
Apartment Key Indicators, September Quarter 2015
Region
Median
Capital Value
($)
Capital
Growth
Last Quarter
(%)
Capital
Growth
Last Year
(%)
Sales
Volume
Last Year
(no.)
Median
Weekly Rent
($)
Gross
Rental Yield
(% p.a)
Melbourne* 454,000 -1.2 4.9 4,134 470 5.49#
CBD & Inner/North West^ 438,000 0.7 4.8 17,424 395 4.73
North East^ 538,500 2.7 7.2 7,364 410 3.97
South East^ 497,000 2.8 6.9 8,154 400 4.19
Bayside & Frankston^ 522,000 4.9 4.6 1,883 415 4.15
Greater Melbourne 489,500 2.6 5.4 39,865 405 4.34
Geelong* 463,000 3.0 4.1 69 395 4.49#
Australia 473,500 2.4 7.7 163,988 420 4.64
Source: Knight Frank Research, Residex
Capital Values & Sales Volumes Median capital values of Greater
Melbourne were up 2.6% at $489,500 in
the third quarter of 2015; an improvement
on the 0.1% decline recorded in the first
quarter of 2015. Over the past two years
to September 2015, apartments have
experienced growth of 11.3%, with 5.4%
growth being recorded in the last 12
months. Sales volume has strengthened,
with 39,865 apartments sold over the year
to September 2015, up 11.0% on the
prior year—the strongest since 1999. Source: Knight Frank Research, Residex, REIV. ^rolling 6-mth average
Rents & Vacancy Over the past year, weekly apartment
rents in Greater Melbourne rose 2.5% to
$405. A rolling six month average of
2.9% was recorded for total vacancy in
September, after oscillating around the
3.0% market equilibrium over the past
five years. During this time, rents have
sustained an upward trend, growing on
average 2.9% per annum. Total vacancy
was mixed in Melbourne according to
REIV, with the Inner (0-10km) ring
standing at 2.8%, the Middle (10-20km)
ring standing at 3.4% and the Outer
(20km+) ring recording 1.9% during the
September quarter.
Rental Yields Rental yields were recorded at 4.34% in
the September quarter 2015, the second
lowest in the country behind Sydney.
Gross rental yields have averaged 4.45%
across Greater Melbourne area over the
past 10 years.
Outlook Greater Melbourne’s strong population
growth will continue to positively impact
the apartment market with overall growth
in capital values and rents to be
sustained heading into 2016, although
some suburbs close to the CBD are likely
to see minimal capital growth as more
completed projects come online.
Annual capital growth was
recorded at 5.4% to September
2015; while the last quarter rose by
2.6%
Rents increased by 2.5% to $405
per week over the 12 months to
September 2015
Gross rental yields in Greater
Melbourne currently average
4.34%
Sales volume increased 11.0%
over the past year to 39,865
apartments
FIGURE 7
Apartment Values & Sales Volume
Greater Melbourne
FIGURE 8
Apartment Rents & Total Vacancy
Greater Melbourne
Source: Knight Frank Research, Residex *Denotes Select Suburbs Only #Annual Average ^Denotes Residential Region (see back page)
0
10,000
20,000
30,000
40,000
50,000
60,000
$380,000
$400,000
$420,000
$440,000
$460,000
$480,000
$500,000
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
ANNUAL SALES VOLUME (RHS) MEDIAN CAPITAL VALUE (LHS)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$300
$320
$340
$360
$380
$400
$420
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
MEDIAN WEEKLY RENT TOTAL VACANCY^
6
BRISBANE
TABLE 3
Apartment Key Indicators, September Quarter 2015
Region
Median
Capital Value
($)
Capital
Growth
Last Quarter
(%)
Capital
Growth
Last Year
(%)
Sales
Volume
Last Year
(no.)
Median
Weekly Rent
($)
Gross
Rental Yield
(% p.a)
Brisbane* 485,000 1.1 0.7 581 580 6.18#
CBD & North^ 421,500 1.0 2.6 9,447 410 5.07
South^ 360,000 3.2 3.7 8,263 375 5.47
Greater Brisbane 380,000 1.4 2.7 19,478 380 5.23
Cairns* 365,000 1.8 -1.6 105 405 5.90#
Gold Coast^ 361,000 2.7 5.3 8,351 400 5.79
Noosa Heads* 573,500 -1.6 -3.0 290 570 5.21#
Rockhampton* 473,000 -0.7 -4.1 174 470 5.29#
Townsville* 397,500 -0.5 -5.0 100 415 5.59#
Australia 473,500 2.4 7.7 163,988 420 4.64
Annual capital growth was
recorded at 2.7% with capital
values rising 1.4% over the past
quarter alone
Rents are up 1.3% over the last 12
months, to stand at $380 per week
Across Greater Brisbane, gross
rental yields currently average
5.23%
Sales volume was up 7.2% over
the past year to September, to
19,478 apartments
Source: Knight Frank Research, Residex
Capital Values & Sales Volumes Greater Brisbane apartment values
witnessed growth of 1.4% to $380,000 in
the September 2015 quarter, with total
annual growth of 2.7%. Sustained strong
sales volume has pushed up capital
values, with a total 19,478 apartments
transacting over the past year, 7.2%
more than the year to September 2014—
and increasing almost 51% over the past
three years.
Source: Knight Frank Research, Residex, REIQ
Rents & Vacancy Greater Brisbane apartment weekly rents
rose 1.3% to $380 over the year to
September 2015; weaker than the
average annual growth of 4.2% over the
last decade. Rents have remained stable
for quite some time, growing only 2.3%
since September quarter 2012.
Recording 2.3% vacancy in the
September 2015 quarter— 10bps below
the long term, 10 year average—
Brisbane has remained below 3%
vacancy over the past five years. This
was pushed up slightly by higher
vacancies in the post-GFC period.
Rental Yields Gross rental yields have fallen 8bps to
5.23% over the year to September
quarter 2015 across Greater Brisbane,
whilst the gross rental yield reaches as
high as 6.18% in the suburb of Brisbane.
Outlook As sales volume trends upwards, it’s
likely apartments will see a pick up in
capital value growth. As new projects
come online over the next twelve months,
rents may be impacted in the inner
suburbs, although vacancy remains
relatively low.
FIGURE 9
Apartment Values & Sales Volume
Greater Brisbane
FIGURE 10
Apartment Rents & Total Vacancy
Greater Brisbane
Source: Knight Frank Research, Residex *Denotes Select Suburbs Only #Annual Average ^Denotes Residential Region (see back page)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
$335,000
$340,000
$345,000
$350,000
$355,000
$360,000
$365,000
$370,000
$375,000
$380,000
$385,000
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
ANNUAL SALES VOLUME (RHS) MEDIAN CAPITAL VALUE (LHS)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$330
$340
$350
$360
$370
$380
$390
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
MEDIAN WEEKLY RENT TOTAL VACANCY
7
RESEARCH AUSTRALIAN APARTMENTS OVERVIEW Q4 2015
PERTH
TABLE 4
Apartment Key Indicators, September Quarter 2015
Region
Median
Capital Value
($)
Capital
Growth
Last Quarter
(%)
Capital
Growth
Last Year
(%)
Sales
Volume
Last Year
(no.)
Median
Weekly Rent
($)
Gross
Rental Yield
(% p.a)
Perth* 491,500 -3.8 -10.0 239 485 5.37#
East Perth* 532,500 -3.4 -5.0 303 515 5.26#
North Perth* 582,500 -3.1 -4.9 57 485 4.53#
South Perth* 550,000 -4.3 -3.8 220 450 4.59#
Subiaco* 621,000 -3.0 0.1 103 530 4.60#
Fremantle* 582,500 -1.1 -4.5 134 500 4.54#
Greater Perth 452,000 -2.3 -2.6 10,800 405 4.68
Australia 473,500 2.4 7.7 163,988 420 4.64
Capital growth over the year to
September fell by 2.6%; with
growth down 2.3% in the last
quarter
Weekly rents currently average
$405; down from $430 the year
before in September
Gross rental yields in Greater
Perth area currently average
4.68%
Annual apartment sales of 10,800
was down 16.9% in September
when compared to the prior year
Source: Knight Frank Research, Residex
Capital Values & Sales Volumes In September quarter 2015, median
capital values for Greater Perth
apartments were recorded at $452,000
falling 2.3% on the previous quarter while
also falling 2.6% over the past 12
months. An average annual 5.2% growth
was recorded in Greater Perth over the
past 10 years. After strong growth in the
lead up to the peak in sales volume of
14,789, in December 2013, sales turnover
has achieved a more sustainable 10,800
in September 2015. Source: Knight Frank Research, Residex, REIWA
Rents & Vacancy Median rents declined by 5.8% in the
year to September 2015 across Greater
Perth, to record $405 a week. This is up
12.1% from September 2011, and well
above the 10 year average of just over
$358 a week. Over the same period,
strong rental growth was recorded in
both North Perth and South Perth —at
26.0% and 15.4% respectively.
Total vacancy currently trends 260bps
above market equilibrium, at 5.6% for the
Greater Perth area. This level was last
experienced in December quarter 1993.
Rental Yields Across Greater Perth, gross rental yields
have fallen 16bps over the past year,
averaging 4.68%, as both capital values
and rents fall. Higher yields are still being
achieved in pockets of the market,
including suburbs such as Perth (5.37%)
and East Perth (5.26%).
Outlook With sales volumes steadily decreasing,
Greater Perth apartments are expected
to become more affordable over the next
12 months. Similarly, as vacancy inches
up further, rents are likely to continue
being impacted.
FIGURE 11
Apartment Values & Sales Volume
Greater Perth
FIGURE 12
Apartment Rents & Total Vacancy
Greater Perth
Source: Knight Frank Research, Residex *Denotes Select Suburbs Only #Annual Average
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
$300,000
$320,000
$340,000
$360,000
$380,000
$400,000
$420,000
$440,000
$460,000
$480,000
$500,000
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
ANNUAL SALES VOLUME (RHS) MEDIAN CAPITAL VALUE (LHS)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
MEDIAN WEEKLY RENT TOTAL VACANCY
8
ADELAIDE
TABLE 5
Apartment Key Indicators, September Quarter 2015
Region
Median
Capital Value
($)
Capital
Growth
Last Quarter
(%)
Capital
Growth
Last Year
(%)
Sales
Volume
Last Year
(no.)
Median
Weekly Rent
($)
Gross
Rental Yield
(% p.a)
Adelaide* 377,500 0.9 7.1 562 425 5.95#
CBD & Inner^ 344,000 0.4 3.5 3.655 320 4.89
Outer^ 269,500 2.4 2.9 1,644 280 5.46
North Adelaide* 440,000 2.8 5.3 107 395 4.79#
Glenelg* 425,000 -3.3 0.6 149 415 5.14#
Greater Adelaide 318,500 0.7 4.4 5,297 305 5.04
Mt Gambier* 176,500 1.4 1.5 80 175 5.37#
Australia 473,500 2.4 7.7 163,988 420 4.64
The September quarter recorded
marginal capital growth of 0.7%;
with annual growth measuring
4.4%
Rents increased 1.7% in the year
to September, to $305 per week
Gross rental yields currently
return 5.04% across Greater
Adelaide
Sales turnover grew 12.9% over
the past year to September to
5,297 apartments
Source: Knight Frank Research, Residex
Capital Values & Sales Volumes Over the last quarter to September 2015,
Greater Adelaide apartment values have
increased marginally at 0.7% growth, to
stand with a median capital value of
$318,500. Apartment capital values
recorded a total 4.4% growth over the
past 12 months, the highest annual
growth rate since June quarter 2010.
Sales turnover increased by a substantial
12.9% over the past year to 5,297
apartments. This was the highest growth
recorded by a capital city in Australia.
Source: Knight Frank Research, Residex, REIA
Rents & Vacancy Apartment rents rose 1.7% to $305 per
week over the year to September 2015
across Greater Adelaide. The suburb of
Adelaide achieves considerably more, at
$425 per week. With the exception of
Hobart, Greater Adelaide currently
achieves the lowest rent across the
country.
The last recorded vacancy in Greater
Adelaide reported by the REIA was at
December 2014, which was down to
2.8% from 3.1% at the close of 2013.
This followed a vacancy peak of 3.9% in
June 2012, after averaging 1.8% vacancy
in the five years prior.
Rental Yields Gross rental yields have remained above
5.00% over the past two years across
Greater Adelaide. With rents remaining
flat, gross rental yields have risen 2bps in
Greater Adelaide over the last quarter to
a median 5.04%.
Outlook Sales volume continues to build
momentum year on year—despite
relatively stable rental growth over the
past 10 quarters. Capital values are
expected to continue to strengthen over
the next 12 months, off the back of
growth in sales volume.
FIGURE 13
Apartment Values & Sales Volume
Greater Adelaide
FIGURE 14
Apartment Rents & Rental Yields
Greater Adelaide
Source: Knight Frank Research, Residex *Denotes Select Suburbs Only #Annual Average ^Denotes Residential Region (see back page)
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
$270,000
$280,000
$290,000
$300,000
$310,000
$320,000
$330,000
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
ANNUAL SALES VOLUME (RHS) MEDIAN CAPITAL VALUE (LHS)
4.20%
4.40%
4.60%
4.80%
5.00%
5.20%
5.40%
5.60%
5.80%
6.00%
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
MEDIAN WEEKLY RENT GROSS RENTAL YIELDS
9
RESEARCH AUSTRALIAN APARTMENTS OVERVIEW Q4 2015
CANBERRA
TABLE 6
Apartment Key Indicators, September Quarter 2015
Region
Median
Capital Value
($)
Capital
Growth
Last Quarter
(%)
Capital
Growth
Last Year
(%)
Sales
Volume
Last Year
(no.)
Median
Weekly Rent
($)
Gross
Rental Yield
(% p.a)
Canberra City* 452,000 -1.8 0.3 76 455 5.36#
Braddon* 408,500 -3.2 -3.0 322 400 5.24#
Belconnen* 355,000 -2.5 -3.0 249 355 5.21#
Deakin* 762,500 -0.7 4.8 16 640 4.56#
Kingston, ACT* 489,500 -1.8 1.1 230 485 5.20#
Gungahlin* 330,500 -2.4 -0.3 33 330 5.30#
Australian Capital Territory 398,000 -2.6 -0.1 3,617 395 5.17
Australia 473,500 2.4 7.7 163,988 420 4.64
Capital values fell 0.1% over the
year to September 2015; with
growth also falling 2.6% over the
last quarter
Weekly rents average $395 in
September; remaining stable from
one year ago
Gross rental yields currently
average 5.17% across the
Australian Capital Territory
Sales volume increased 12.6%
over the past year to 3,617
apartments transacting
Source: Knight Frank Research, Residex
Capital Values & Sales Volumes Capital values in the ACT fell 2.6% in the
past quarter, however over the past 12
months fell only 0.1%. This fall may be
lagging however, as the total number of
annual apartment sales transacted has
increased significantly, from 3,212 in the
September quarter of 2014 to 3,617 in
September quarter in 2015. The annual
sales volume is also trending higher than
the 10 year annual average of 3,254
apartments.
Source: Knight Frank Research, Residex, REIA
Rents & Vacancy Across the year to September 2015, rents
remained stable in the ACT, to record a
median of $395 per week. This measured
a 2.5% fall on the previous quarter, and
down from the peak of $460 per week in
September 2012. Canberra City rents fell
by 1.8% in the quarter to $455 per
week—the theme common throughout
the major suburbs of the ACT.
As at September 2015, total vacancy in
the ACT was 3.8%. This had fallen from a
height of 5.2% in December 2013, and
has compressed 50bps from September
12 months ago.
Rental Yields Across the Territory, gross rental yields
have fallen 3 bps over the past quarter to
5.17% as both rents and capital values
fell, and have moved erratically for the
most part of 10 years reflecting the
volatile Canberra apartment market.
Outlook Capital value growth has been volatile
over the past five years— however,
stronger sales volume is expected to
strengthen capital values over the
medium term. Similarly, median weekly
rents are expected to fall in line with
increasing vacancy across the market.
FIGURE 15
Apartment Values & Sales Volume
Australian Capital Territory
FIGURE 16
Apartment Rents & Total Vacancy
Australian Capital Territory
Source: Knight Frank Research, Residex *Denotes Select Suburbs Only #Annual Average
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
$370,000
$380,000
$390,000
$400,000
$410,000
$420,000
$430,000
$440,000
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
ANNUAL SALES VOLUME (RHS) MEDIAN CAPITAL VALUE (LHS)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$360
$380
$400
$420
$440
$460
$480
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
MEDIAN WEEKLY RENT TOTAL VACANCY
10
HOBART
TABLE 7
Apartment Key Indicators, September Quarter 2015
Region
Median
Capital Value
($)
Capital
Growth
Last Quarter
(%)
Capital
Growth
Last Year
(%)
Sales
Volume
Last Year
(no.)
Median
Weekly Rent
($)
Gross
Rental Yield
(% p.a)
Hobart* 498,500 2.9 2.7 28 450 4.71#
Battery Point* 474,000 1.1 0.1 21 430 4.75#
Kingston, Tas* 285,000 3.4 6.9 35 310 5.73#
Greater Hobart 279,000 0.9 5.8 680 290 5.39
Launceston* 278,500 4.5 8.8 21 330 6.43#
Devonport* 200,000 1.5 -3.7 31 230 5.98#
Burnie* 156,500 -2.5 -11.3 5 185 6.25#
Australia 473,500 2.4 7.7 163,988 420 4.64
Source: Knight Frank Research, Residex
Capital Values & Sales Volumes In the year to September 2015, a total of
680 apartments were sold; inline with the
number of sales transactions recorded in
the same period the year earlier. Strong
sales growth in the September quarter of
5.1% saw this as the highest figure
achieved since September quarter 2010.
Over the 12 months, apartment values
rose 5.8% to a median $279,000, with the
last quarter recording a growth rate of
just 0.9%. Despite the marginal quarterly
growth in Greater Hobart, the suburb of
Hobart recorded 2.9% growth. Source: Knight Frank Research, Residex, REIA
Rents & Vacancy Over the past 10 years, Greater Hobart
rents have averaged $250 per week,
while vacancy has averaged circa 2.9%.
Rents for Greater Hobart apartments rose
3.6% over the year to September 2015,
to stand at a median $290 per week. This
volatile rental market is 5.1% higher than
that recorded in September 2013.
Conversely, vacancy has contracted from
3.6% to 2.8% over the year to
September 2015, after a peak of 5.0% in
September 2012. The suburbs of Hobart
and prestigious suburb of Battery Point
achieve median weekly rents of $450 and
$430 respectively.
Rental Yields Across Greater Hobart, gross rental
yields have increased 3bps on the
previous quarter. Apartment yields now
average 5.39%, well above the Australian
average of 4.64%.
Outlook Over the past three quarters, sales
volumes and capital values have both
strengthened, indicative of a recovering
broader market for Hobart apartments.
We expect to see continued upward
growth in rents as vacancy continues to
fall below 3% equilibrium.
Annual capital growth was
recorded at 5.8% to September
2015; with last quarter growth at
0.9%
Rents currently stand at $290 per
week in September, rising by
3.6% compared to 12 months ago
Across Greater Hobart, gross
rental yields currently average
5.39%
Over the past year, the number of
apartments transacted remained
steady with a total 680 sold
FIGURE 17
Apartment Values & Sales Volume
Greater Hobart
FIGURE 18
Apartment Rents & Total Vacancy
Greater Hobart
Source: Knight Frank Research, Residex *Denotes Select Suburbs Only #Annual Average
0
100
200
300
400
500
600
700
800
900
$230,000
$240,000
$250,000
$260,000
$270,000
$280,000
$290,000
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
ANNUAL SALES VOLUME (RHS) MEDIAN CAPITAL VALUE (LHS)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$240
$250
$260
$270
$280
$290
$300
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
MEDIAN WEEKLY RENT TOTAL VACANCY
11
RESEARCH AUSTRALIAN APARTMENTS OVERVIEW Q4 2015
DARWIN
TABLE 8
Apartment Key Indicators, September Quarter 2015
Region
Median
Capital Value
($)
Capital
Growth
Last Quarter
(%)
Capital
Growth
Last Year
(%)
Sales
Volume
Last Year
(no.)
Median
Weekly Rent
($)
Gross
Rental Yield
(% p.a)
Darwin* 550,000 5.0 8.1 28 685 6.49#
Larrakeyah* 460,000 1.7 0.4 102 535 6.00#
Stuart Park* 501,500 5.7 2.2 79 565 5.89#
Fannie Bay* 512,500 -2.3 3.3 35 560 5.51#
Coconut Grove* 428,500 3.6 1.7 37 465 5.71#
Nightcliff* 369,500 1.9 5.1 49 425 6.04#
Greater Darwin 415,000 1.9 -4.2 532 465 5.87
Australia 473,500 2.4 7.7 163,988 420 4.64
Source: Knight Frank Research, Residex
Capital Values & Sales Volumes Over the past 12 months to September
2015, median values for Greater Darwin
apartments fell 4.2% to $415,000,
however rose 1.9% over the September
quarter—the strongest quarterly growth
since December 2012. Yearly apartment
sales to September 2015 are currently
totalling just over one third of that
experienced in Greater Darwin a decade
ago; with 532 sold over the year to
September 2015—128 of those being in
the last quarter.
Source: Knight Frank Research, Residex, REIA
Rents & Vacancy Over the past year to September 2015,
Greater Darwin apartment rents have
weakened to $465 per week, falling
5.1%, but remaining stable over the
September quarter. Greater Darwin holds
the second highest apartment rents
across Australia, despite the fall. Rents in
the suburb of Darwin achieve significantly
higher rates at $685 per week. As at
September 2015, total vacancy in Greater
Darwin was recorded at 7.5%. Vacancy
has consistently climbed since recording
2.4% in June 2013. This is significantly
higher than market equilibrium, at 3%,
with rents likely to continue to be
impacted as a result.
Rental Yields Across Greater Darwin, gross rental
yields currently average 5.87% —the
highest return in the country. The
combination of falling capital values, as
well as relatively high rents, has resulted
in higher yields recorded.
Outlook Despite an uptick in growth over the past
quarter, capital values are likely to
weaken further in 2016, as sales volumes
continue to fall. Vacancy continues to rise
as mining activities ease—with nine
consecutive quarters of vacancy rises
already experienced, with no sign of
easing despite falling rents.
Capital values rose 1.9% in the
September quarter of 2015,
however decreased 4.2% over the
year to September
Weekly rents averaged $465 in
September; softer than the $490
witnessed in September 2014
Gross rental yields in Greater
Darwin currently average 5.87%,
the highest in the country
Annual apartment sales of 532
was down 33.7% when compared
to the year earlier
FIGURE 19
Apartment Values & Sales Volume
Greater Darwin
FIGURE 20
Apartment Rents & Total Vacancy
Greater Darwin
Source: Knight Frank Research, Residex *Denotes Select Suburbs Only #Annual Average
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
$340,000
$360,000
$380,000
$400,000
$420,000
$440,000
$460,000
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
ANNUAL SALES VOLUME (RHS) MEDIAN CAPITAL VALUE (LHS)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
$0
$100
$200
$300
$400
$500
$600
Sep
-11
Mar-
12
Sep
-12
Mar-
13
Sep
-13
Mar-
14
Sep
-14
Mar-
15
Sep
-15
MEDIAN WEEKLY RENT TOTAL VACANCY
Knight Frank Research provides strategic advice, consultancy services and forecasting
to a wide range of clients worldwide including developers, investors, funding
organisations, corporate institutions and the public sector. All our clients recognise the
need for expert independent advice customised to their specific needs.
RECENT MARKET-LEADING RESEARCH PUBLICATIONS
Global House Price
Index
Q3 2015
Prime Global Cities
Index
Q3 2015
The Wealth Report
2015
Knight Frank Research Reports are available at KnightFrank.com.au/Research
Foreign Investment in
Residential
December 2015
© Knight Frank 2015 This report is published for general information only. Although high standards have been used in
the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be
accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this
document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to
particular properties or projects. Reproduction of this report in whole or in part is not permitted without prior consent of,
and proper reference to Knight Frank Research.
RESIDENTIAL RESEARCH
Michelle Ciesielski Director
+61 2 9036 6659
Bradley Rehn Assistant Analyst
+61 2 9036 6656
Matt Whitby Group Director
Head of Research and Consultancy
+61 2 9036 6616
[email protected] RESIDENTIAL PROJECT MARKETING
& KEY STATE CONTACTS
Michael Robinson Head of Project Marketing, Australia
+61 3 9604 4775
Erin Van Tuil Director, Sydney (NSW)
+61 2 9036 6699
Neil Kay Senior Director, Perth (WA)
+61 8 6210 0112
Daniel Cashen Director, Melbourne (Vic)
+61 3 9604 4749
Gillian Bail Director, Brisbane (Qld)
+61 7 3246 8842
Peter McVann Managing Director, Adelaide (SA)
+61 8 8233 5210
Terry Daly Managing Director, Canberra (ACT)
+61 2 6221 7869
Scott Newton Chief Executive Officer, Hobart (Tas)
+61 3 6220 6999
Matthew Knight Managing Director, Darwin (NT)
+61 8 8982 2502
INTERNATIONAL
PROJECT MARKETING
Erin Van Tuil Director
International Project Marketing
+61 2 9036 6699
RESIDENTIAL REGION MAPS
GREATER SYDNEY
GREATER BRISBANE
GREATER MELBOURNE
NORTH
EAST CBD & INNER/
NORTH WEST
SOUTH
EAST
BAYSIDE &
FRANKSTON
GREATER ADELAIDE
CBD &
NORTH
SOUTH
CBD &
INNER
OUTER
CBD &
SOUTH
NORTH
SOUTH
WEST
FAR
WEST
NORTH
WEST