Dwelling Approvals Support Low Rates

November, 2017 by

New dwelling approvals rose marginally in August but remain below the peaks of 2016, supporting the decision of the RBA to leave rates on hold, according to Tim Reardon, Principal Economist for the Housing Industry Association (HIA).

“Residential building approvals are around 11% lower than their peak last year. The slow-down in activity has been gradual but activity still remains at high levels,” said Tim.

The move to record low interest rates was instrumental in bringing new home building starts to an all-time high last year, noted the HIA economist. “A move to increase rates at this time would unnecessarily compound the decline in activity that is already underway.

“The market is already adjusting to constraints on domestic and foreign investors.”

Growth in approvals in August was driven by a 2.3% increase in multi-unit approvals. However, approvals for new detached houses fell by 1.1%. “We expect this modest decline to progress for the next couple of years,” said Tim. “Increases in energy costs have had a similar impact to an increase in interest rates by restricting both corporate and household consumption.

“Combined with low wage pressures and the Australian dollar having appreciated, it is unlikely that the RBA will need to move rates in the near future,” concluded Tim Reardon.

Slash your mortgage repayments by refinancing with Our Broker

November, 2017 by

Following the Reserve Bank of Australia’s decision to keep the cash rate on hold at 1.5%, industry research reveals the average mortgage holder could save tens of thousands by refinancing their home loan.

Owner-occupiers paying principal and interest at the average rate of 4.31% can save up to $50,076 by switching to one of the lowest rates on the market of 3.44%. At the same time, investors paying interest-only at the average rate of 4.89% can save up to $59,524 by switching to one of the lowest rates on the market of 3.94%.

“Just because the cash rate is standing still doesn’t mean mortgage holders should,” said Sally Tindall from financial comparison website, RateCity. “A $50,000 saving is not to be sneezed at. That’s a lot of people’s annual salaries, right there,” she said.

If you feel you need some help negotiating the mortgage minefield, why not call Our Broker today on 1800 913 677. With access to over 35 lenders, Our Broker can connect you with the best home loan products to suit your circumstances.

REA reveals Australia’s best lifestyle suburbs

November, 2017 by

Buyers seeking suburbs offering the nation’s best lifestyle can expect to pay $731,000-$2,615,000, according to new research from realestate.com.au

The research was collected using data from CoreLogic and the Australian Bureau of Statistics.

Brisbane suburbs make up seven of the national top ten lifestyle suburbs with the sunshine state delivering not only on proximity to the beach but also other key lifestyle factors such as faster commute times.

St Kilda West is the nation’s top lifestyle suburb, followed by South Brisbane, Dutton Park, Spring Hill and Kangaroo Point, says realestate.com.au. St Kilda West, in inner Melbourne, also grabbed the top spot based on price too, with the highest median house price of $2,615,000. On the other side of the ledger, Corinda in Brisbane has the lowest median price at $731,000 among the leading lifestyle suburbs. “Nationally the list shows some suburbs that buyers may have traditionally overlooked but which have great walkability,” said REA Group Chief Economist Nerida Conisbee.

Tasmanian real estate leads the housing charge

November, 2017 by

The latest CoreLogic Home Value Index results confirmed that dwelling values edged 0.2% higher across Australia in September, led by a 0.3% rise in capital city values and a 0.1% gain across the combined regional markets. National values are up 8.0% over the past twelve months. 

Hobart cemented its position as the best performing housing market. The past twelve months has seen Hobart dwelling values surge 14.3% higher. This is the highest annual growth rate for real estate values in the Tasmanian capital since 2004. Yet the cost of housing remains substantially lower in Hobart than any other capital city with a typical house value of $412,340 and a median unit value of just under $320,000.

Melbourne’s housing market remains relatively resilient with dwelling values increasing by almost 1% in September and by 2.0% for the quarter.

CoreLogic head of research Tim Lawless said, “The stronger housing market conditions in Melbourne are supported by auction clearance rates which have consistently remained above 70%. Additionally, advertised stock levels remain remarkably low and private treaty sales continue to sell rapidly, averaging 30 days on market.”

National housing conditions steady

October, 2017 by

Hobart with growth of 13.6% emerged as the country’s best performing capital city based on growth in dwelling values over the past twelve months, according to the latest CoreLogic Home Value Index.

Sydney came second with 13.0% growth just ahead of Melbourne with an annualised average increase of 12.7%.

For investors and self-managed superfunds seeking decent income returns, CoreLogic says that regional investments are producing stronger yields. The combined gross rental yield for houses in regional Australia is 4.9% compared with 3.1% for city houses. The difference isn’t quite as stark for apartments. However, regional units are still well ahead with gross rental yields of 5.2% compared to 4.0% for city apartments.

For what it’s worth, Darwin is generating the strongest rental yields of all Australian capital cities. In the Northern Territory capital, houses are producing gross yields of 5.5% and apartments are retuning 5.8%.

Compared to a year ago, national residential property listings are down by 4.3%, according to SQM Research. Listings were down in Hobart by 20.2% and in Melbourne by 15.3%. The tight supply in Victorian and Tasmanian capitals will help to maintain the mounting pressure on house and unit prices.

Cash rate on hold signals good news for property

October, 2017 by

At its meeting in early September, the RBA decided to leave the cash rate unchanged at 1.50%.

The RBA has cited several reasons for leaving interest rates on hold including improving global economic conditions. “Labour markets have tightened further and above-trend growth is expected in a number of advanced economies, although uncertainties remain,” said Philip Lowe, Governor of the RBA. Growth in the Chinese economy, for example, is being supported by increased spending on infrastructure and property construction. “Commodity prices have risen recently, although Australia’s terms of trade are still expected to decline over coming years,” said Philip.

In the United States, the Federal Reserve expects to increase interest rates further, which will most likely ease the pressure on the RBA to move rates up anytime soon, noted Angus Raine, Executive Chairman, Raine & Horne.

In Australia, the recent economic data has been consistent with the RBA’s expectation that growth in the Australian economy will gradually pick up over the coming year, as the decline in mining investment runs its course. The outlook for non-mining investment has improved recently and reported business conditions are at a high level. Residential construction activity remains at a high level, but little further growth is expected. Retail sales have picked up recently, although slow growth in real wages and high levels of household debt will restrict spending.

Employment growth has been stronger over recent months and has increased in all states, which is excellent news for real estate, notes Angus. “The low level of interest rates is continuing to support the Australian economy and will underpin real estate markets longer-term.”

Land price increases unrelenting

October, 2017 by

The HIA-CoreLogic Residential Land Report, Australia’s leading report on the residential land market, shows that a typical vacant lot of land for housing increased in price by 2.1% in the March quarter of 2017.

The report shows a small increase in the supply of residential land on the market during the quarter and the price of land is now 9.3% higher than a year ago. “Land price increases in Australia are unrelenting,” said HIA Senior Economist, Shane Garrett.

“The solution to the housing affordability challenge lies in ensuring that the additional residential land needed across our cities and regional towns is delivered in the right place, at the right time and at the lowest price. This should be a key imperative for governments at all levels,” said Shane.

Don’t use rising property prices as excuse to curb foreign investment: John Howard

October, 2017 by

Former prime minister John Howard has warned against using climbing property prices as a reason to limit foreign investment.

Speaking at property industry symposium in Sydney in late August, Mr Howard told Commercial Real Estate that property price rises should be expected for any big city, but admitted that housing affordability was one area that Australia had gone backwards in.

“It’s a fundamental law of economics that if you’re going to have a growing population in a large urban concentration, you’re going to put a squeeze on housing prices. (But) we must not allow any of that to spill over into hostility to [foreign] investment,” he said. “In the long run, we would be crazy as a nation and it would be an act of self-destruction to ever become unfriendly towards foreign investment.”

APRA strikes fail to dampen investor zest for property

September, 2017 by

APRA’s intervention into Australia’s property market isn’t biting as much as the government watchdog might like, according to the ABS housing finance data.

The ABS data shows investor lending increased by 1.6% in June, according to the seasonally adjusted figures, and despite many lenders enacting several out-of-cycle rate hikes in recent months.

RateCity.com.au’s Sally Tindall said, “The APRA intervention initially took the steam out of the property market, but the latest figures confirm buyers are choosing to wear the rate hikes.

“APRA has been focused on deterring investor growth over two years now with limited success.”

The percentage of fixed rate loans has increased from 11.2% last September to 17.5% in June. This represents the highest percentage of fixers since November 2013, according to RateCity. “This is a clear reaction to the out of cycle rate hikes from the banks as borrowers move to protect themselves from future increases,” said Sally.

“With the spring real estate market just around the corner and auction rates continuing to make modest improvements, it will be interesting to see whether it will be game on again for the spring property market.”

RBA leaves cash rate at a record low of 1.50%

September, 2017 by

After its decision to leave the official cash rate at 1.5%, Angus Raine, Executive Chairman of Raine & Horne said it appears the RBA doesn’t consider the Australian economy to be strong enough to justify tightening the cash rate.

“That said, with the Australian dollar nudging $US0.80, there are plenty of international investors who appear to like the cut of Australia’s economic jib,” said Mr Raine. “And why not with inflation at 1.9%, which is below the RBA’s target range of 2-3%. Add our steady unemployment at 5.6% and Australia’s comparative political stability, and we look very good when judged against many other global economies.”

The RBA will monitor the higher Australian dollar, but its trajectory won’t be enough to force a cut any time soon, noted Dawn Inanli, General Manager, Raine & Horne Financial Services. “The clampdown by lenders on interest-only loans continues to be a more significant threat to owners with mortgages,” she said.

While this crackdown will have a negligible impact on the wider real estate market, older owner-occupiers with interest-only mortgages, might be squeezed financially if the lenders start forcing them to make principal and interest repayments, noted Dawn.

“If your lender is imposing new restrictions on your mortgage, and you’d like some advice about your options, contact Raine & Horne’s financial services arm, Our Broker on 1800 913 677.”