Easter and Anzac Day weekends impact real estate in April

May, 2017 by

After motoring along for the best part of five years, the Australian real estate market took a breather in April, according to CoreLogic.

According to the CoreLogic results, dwelling values increased by 0.1% across the combined capital cities in April, with housing market conditions slowing in both Sydney and Melbourne.

Head of CoreLogic Research Tim Lawless said, “The two hottest housing markets in the nation have shown signs of slowing down in April, with the CoreLogic Hedonic Home Value Index recording a rise of just 0.1% over April, the lowest month-on-month rise in capital city dwelling values since December 2015.”

The softer results across Australia’s two largest capital cities comes after dramatic capital gains were recorded over the second half of 2016 and the first three months of 2017.  Between July 2016 and the end of March 2017, Sydney dwelling values surged 11.3%, whilst Melbourne values increased slightly more at 12.6% in the same period, according to CoreLogic.

“It’s fair to expect that with April dominated by school holidays, the Easter and Anzac long-weekends, plenty of buyers had matters of family on their minds, rather than attending open for inspections and auctions,” said Angus Raine, Executive Chairman, Raine & Horne.

Vacancy Rates Tumble Across Nation

May, 2017 by

Data released by SQM Research in the middle of April revealed vacancy rates tumbled across all capital cities in March, falling to just 1.5% in Melbourne and 1.7% in Sydney, with upward pressure likely to be maintained on rents in the nation’s two biggest cities.

Nationwide, the vacancy rate dropped to 2.3% in March, down from 2.4% the previous month, based on 73,554 vacancies. In Canberra, the vacancy rate fell to a very tight 0.8%, down from 0.9% in February, while in Adelaide it fell to just 1.8%, down from 2.0%. Vacancies dropped in Perth and Darwin, as well as Hobart and Brisbane.

“The numbers reflected a seasonal tightening in vacancy rates. Vacancies usually drop in the early months of the year as people return to their jobs after the summer break and students go back to universities in March,” said Louis Christopher, Managing Director, SQM Research.

Significantly, the vacancy rate continued to fall in Melbourne despite predictions of apartment oversupply, according to Louis. “Even in the spots where we would have expected to see oversupply, such as Docklands and Southbank, we are not seeing it, where there are thousands of apartments, new and old.”

Great Australian Dream is alive and kicking

May, 2017 by

The great Australian home ownership dream is still very much alive, especially if you are a earning more than $70,000 a year, according to accounting leader, KPMG.

Residential property is still a sought after investment and one a significant number of Australians plan to make in the next two years, according to a key finding from KPMG Australia’s latest mortgage market survey, The Australian Home Loan Market – Winning the fight for customers (May 2017).

Geoff Rush, KPMG Financial Services Partner said that it was notable that 63% of respondents who currently do not have a home loan stated they intend to apply for one within the next 2 years.

“We believe this reflects a generally held belief that residential asset prices will continue to rise in the long run despite current high prices and issues around affordability,” said Geoff. “We also noted the difference in stated intentions amongst workforce segments, with a significant 73% of ‘established workforce’ respondents who do not currently have a home loan planning to apply within the next 2 years.”

Rates stay on hold in May

May, 2017 by

The RBA left interest rates on hold and its Statement on Monetary Policy made no significant changes to its economic forecasts, according to a leading economist.

Consequently, there appears to be no immediate threat of an interest rate rise anytime soon, which is excellent news for homeowners with a mortgage.

“[The RBA] is more confident that its forecasts for stronger growth and inflation are on track,” said Shane Oliver, Chief Economist, AMP Capital. “With the economy growing, headline inflation is back within the RBA’s 2-3% target zone and with concerns remaining around the Sydney and Melbourne property markets, the pressure to cut rates again has declined.

“Our base case remains that the RBA will be on hold out to the second half of 2018 when rates will start to rise.”

Capital City values surging at fastest rate since 2010

April, 2017 by

Combined capital city dwelling values grew by a significant 1.4% in March, taking the combined capital city index to an annual growth rate to 12.9%, according to property analytics firm, CoreLogic.

This is the highest annual rate of growth since the twelve months ending May 2010 and in even better news for Australian homeowners, four capital cities including Sydney (18.9%), Melbourne (15.9%), Canberra (12.8%) and Hobart (10.2%), achieved double digit growth rates in the year to March 31, 2017.

“For most the past 5 years, Sydney and Melbourne have driven Australian real estate growth,” said Angus Raine, Executive Chairman, Raine & Horne. “It’s pleasing to see that the combination of low interest rates and stronger investment activity is starting to flow into markets outside the major southern capitals.” Angus is predicting that the Perth and Darwin real estate markets are set to rebound in 2017. “The economies of Perth and Darwin have absorbed the slump in mining investment,” says Angus. “Consequently, those real estate markets will start to generate some moderate price growth this year.”

First home buyers tapping super get golden support

April, 2017 by

Given the ongoing concerns about housing affordability, the reaction to speculation the federal government may allow Australians to use superannuation savings to fund a first home deposit should come as no surprise, according to Jordan Eliseo, Chief Economist at leading precious metal specialist ABC Bullion.

Writing for nestegg.com.au, Jordan supports the idea that first home buyers should be able to access their super savings because, “housing is a critical component of any retirement plan.”

One of the key arguments against allowing Australians to dip into their superannuation for a home deposit is that it will leave them with a smaller pool of capital to tap into come retirement. “This is, of course, true but it also misses two key points,” says Jordan. “By buying a home, the superannuant is not engaging in a form of conspicuous consumption that leaves them with nothing to show for it at the end of the day.

“They are still investing in an asset, with many in reality trading share and fixed income exposure for direct property, with the money able to be returned to their fund in the event of a sale.”

Just as importantly, Jordan notes that we cannot have a credible conversation about the retirement needs of Australians without focusing on the importance of owning the roof over their head. “This much was made clear in the latest Association of Superannuation Funds of Australia (ASFA) retirement standard update that suggested a retired couple wanting to live comfortably and who rented in Sydney would need more than $1.15 million in their superannuation fund.”

In contrast, couples that own their home would need only $640,000, placing non-home owning retirees “at a distinct financial disadvantage”, according to ASFA CEO Martin Fahy.

Interest rates on hold until 2018

April, 2017 by

As expected, the Reserve Bank of Australia left the cash rate on hold at 1.5% when it met in early April. 

According to Dr Shane Oliver, Chief Economist, AMP Capital, the cash rate has probably hit rock bottom after falling from 4.75% in 2011 to a record low of 1.5% in August 2016. Furthermore, the AMP economist is predicting the next move will be a rate hike but not until second half 2018. “Another rate cut looks unlikely because economic growth is okay – having bounced back in the December quarter after a temporary slump,” says Shane. “National income is up from its lows thanks to higher commodity prices, while the RBA expects underlying inflation will gradually rise.”

By the same token, Shane believes it’s too early to be thinking about hikes as the unemployment and underemployment rates in combination are above 14%, which is too high. “This [factor] is maintaining downwards pressure on wages growth, which is at record low of 1.9% year on year.

“The RBA has to set interest rates for the average of Australia so raising interest rates just to slow the hot Sydney and Melbourne property markets would be complete madness at a time when overall growth is still fragile, underlying inflation is well below target and property price growth elsewhere is benign.”

Residential vacancy rates fall across Australia

April, 2017 by

Housing data released by SQM Research in March revealed the vacancy rate in Melbourne tumbled to just 1.7% in February, a near 10-year low.

In Canberra, vacancy rates fell to 0.9%, the lowest since May 2012. In Sydney vacant rental properties dropped to 1.9%, which is down from 2.5% in December. Across Australia, there were 78,029 properties available for rental, a national vacancy rate of 2.4%.

The last time the vacancy rate in Melbourne was 1.7% was in June 2007, so this result is remarkable, according to Louis Christopher, Managing Director, SQM Research. “Despite predictions of looming apartment oversupply in inner-city Melbourne, we are seeing vacancies fall, rather than rise.

“Even in in the Docklands, the vacancy rate tumbled to just 2.4% last month, down from a high of 6% in December. The rental market could tighten further in Melbourne as some apartment developments are scaled back, which would cut supply and could pressure rental growth higher in that city.”

First home buyers

March, 2017 by

The number of first home buyers in Australia rose to 23,273, an increase of 6.6% during the quarter and an increase of 0.5% compared to the December quarter 2015, according to the latest Adelaide Bank/REIA Housing Affordability Report.

First home buyers now make up 13.8% of the owner-occupier market and, if refinancing is excluded, the figure currently sits at 20.7%. The number of first home buyers increased in all states and territories over the December quarter 2016.

The Northern Territory enjoyed the largest increase of 29.9% in first time buyers, while the average loan size to first home buyers increased by 1.3% over the December quarter.

Annual capital city growth trend reaches new high

March, 2017 by

Capital city dwelling values rose 1.4% in February, with Sydney continuing as the overall capital gains leader, according to the latest CoreLogic Hedonic Home Value Index

The strong capital gain over February was led by Canberra (+3.2%) and Sydney (+2.6%), with Melbourne (+1.5%) and Hobart (+1.0%) also returning significant increases.

CoreLogic Head of Research Tim Lawless said the February results mark a new high point in the current growth cycle, with capital city dwelling values increasing by 11.7% over the past twelve months. He added, “The annual growth rate across the combined capitals hasn’t been this strong since the twelve months ending June 2010.

“In Sydney, where the annual rate of growth is now 18.4%, this is the highest annual growth rate since the twelve months ending December 2002 when the housing boom of the early 2000s started to slow.

The latest CoreLogic results take the current housing growth cycle into its 58th month.  Since June 2012, capital city dwelling values have increased by a cumulative 47.3%, a great result for owner-occupiers and investors.