Australian house prices increase 0.8% in November, but still below May 2017 levels

Christopher Joye

Coolabah Capital

In the month of November, Australian dwelling values (ie, houses and apartments) climbed a solid 0.8% across all metro and non-metro markets according to CoreLogic's hedonic index (specifically, 0.7% in the capital cities and 1.4% across the non-metro regional areas), which we had foreshadowed here

With the COVID-19 induced peak-to-trough fall across the nation now officially recorded at 2.1% (revised up from a previously estimated 1.7%), Aussie home values are still 0.9% below the high watermark set at the end of April (on a monthly basis) notwithstanding increases recorded in October (0.4%) and November (0.8%). 

Somewhat more remarkably, Australian dwelling values are still 0.5% lower than they were almost 4 years ago. That is to say, there has been no net increase in national house prices since May 2017.

In November, the Melbourne market registered its first full month of capital gains with dwelling values rising by 0.7%, notably outpacing Sydney (0.4%) and Brisbane (0.6%). Healthier house price increases were registered in Perth (1.1%), Adelaide (1.3%), Hobart (1.4%), and Darwin (1.9%) and Canberra (1.9%).

Over the three months to November 2020, capital city dwelling values have increased 0.7%, underperforming regional areas (2.8%) and the combined national market (1.1%).

In all cities, gross rental yields remain above the cost of servicing mortgage debt, which has opened the door to positive (as opposed to negative) gearing. The best rental yields are in Darwin (7.0%), Canberra (5.5%), Adelaide (5.3%), Perth (5.3%), and Brisbane (5.1%). Yields are comparatively low in Sydney (3.3%) and Melbourne (3.7%).

The recovery in the housing market is a crucial plank in the broader national rebound from the 1-in-100 year global pandemic, and a key demonstration of the fact that the RBA's monetary policy transmission mechanism is working. This is especially important with second and third COVID-19 waves cresting around the world, and at a time when Australia faces downside risks from China's assault on our economy. 

With housing credit growth running at just 3.3% on an annual basis according to the latest RBA data, and lending standards the toughest they have been in modern banking history, there are scant financial stability risks for regulators to worry about at this juncture.

Clients will recall that Coolabah forecast a tiny 0% to 5% correction in national house prices in March, predicting they would start rising again in September and October (as they did) with total capital gains over the next few years expected to be at least 10% to 20%.

Coolabah has also been consistently very bearish on relations between China and the West.

Investment Disclaimer Past performance does not assure future returns. All investments carry risks, including that the value of investments may vary, future returns may differ from past returns, and that your capital is not guaranteed. This information has been prepared by Coolabah Capital Investments Pty Ltd (ACN 153 327 872). It is general information only and is not intended to provide you with financial advice. You should not rely on any information herein in making any investment decisions. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. The Product Disclosure Statement (PDS) for the funds should be considered before deciding whether to acquire or hold units in it. A PDS for these products can be obtained by visiting Neither Coolabah Capital Investments Pty Ltd, EQT Responsible Entity Services Ltd (ACN 101 103 011), Equity Trustees Ltd (ACN 004 031 298) nor their respective shareholders, directors and associated businesses assume any liability to investors in connection with any investment in the funds, or guarantees the performance of any obligations to investors, the performance of the funds or any particular rate of return. The repayment of capital is not guaranteed. Investments in the funds are not deposits or liabilities of any of the above-mentioned parties, nor of any Authorised Deposit-taking Institution. The funds are subject to investment risks, which could include delays in repayment and/or loss of income and capital invested. Past performance is not an indicator of nor assures any future returns or risks. Coolabah Capital Institutional Investments Pty Ltd holds Australian Financial Services Licence No. 482238 and is an authorised representative #001277030 of EQT Responsible Entity Services Ltd that holds Australian Financial Services Licence No. 223271. Equity Trustees Ltd that holds Australian Financial Services Licence No. 240975. Forward-Looking Disclaimer This presentation contains some forward-looking information. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements. Although forward-looking statements contained in this presentation are based upon what Coolabah Capital Investments Pty Ltd believes are reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Coolabah Capital Investments Pty Ltd undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.

Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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