What’s next for real estate?
After two and a half years of robust growth there are signs the housing boom is coming to an end. Sales figures are showing a distinct slowing of value growth in capital city house prices including Sydney and Melbourne. 2015 could see the passing of the baton from outperformers Sydney and Melbourne to those capital cities yet to see significant gains such as Brisbane, Adelaide and Hobart. Perth and Darwin continue to suffer from the downturn in the mining industry whilst the nation’s capital Canberra remains a value for money purchase area.
Real Estate figures
The sixth annual Bankwest First Time Buyer Deposit Report says median house prices nationwide have increased by 7.1 per cent in the past year whilst wages for first home buyers have risen by just 2.6 per cent. This means that the average time to save for a 20 per cent deposit which doesn’t attract the further cost of mortgage insurance, has now swelled to 4.1 years from 3.9 years in the past 12 months. The report also revealed that whilst the ABS says first home buyers account for 1 in ten home loans nationally, in NSW, the most expensive housing market, that figure drops to 1 in 50 home loans.
Corelogic RP Data says that the rate of value growth across the combined capital cities will continue to moderate in 2015. Despite record low interest rates, which are tipped to go even lower into 2015, the market is running out of steam. Looking ahead, as buyers find it more difficult to enter the Sydney and Melbourne property markets, areas of regional NSW and Victoria could see stronger demand as could Brisbane.
Meanwhile the Housing Industry Association is also tipping slowing value growth in 2015. HIA says that new home starts have been a strong contributor to the economy in 2014 and will remain higher into next year. Signs of growth are being spotted in the home renovations sector and could increase into 2015. But the growth in home values is expected to ease dramatically outside of Sydney, Melbourne and Brisbane.
And the HIA Renovations Roundup report reveals the renovation market is showing signs of life. Shane Garret, Chief Economist at HIA, says things are taking a turn for the better for the $28.5 billion market with expectations of ten per cent growth over the next three years.
Renovations have slumped since the GFC on the basis of weak dwelling price growth in many markets and also quite depressed levels of consumer sentiment. It does seem however that a turnaround has kicked off and that things will start to improve in 2015 on the back of strong dwelling price growth in key markets and continued low interest rates which might possibly fall further next year. One of the things holding back activity has been a weak labour market over the past year and also very slow wage growth over the medium term out to the end of this decade. As the economy gets back on track the labour market will strengthen, income growth will pick up and that will add a further boost to the outlook for renovation activity.
That was Shane Garret, Chief Economist at the housing Industry Association.
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 76 per cent clearance rate from 395 properties for auction, Melbourne cleared 68 per cent from 488 properties, Brisbane had a 30 per cent clearance rate from 89 properties listed and Adelaide cleared 50 per cent from 49 listed auctions.
Commercial property sector
Mirvac Group (ASX:MGR)
has inked a deal to sell a 50 per cent stake in its office development at 2 Riverside Quay in Melbourne to unlisted property fund manager ISPT for $106 million.
Folkestone Limited (ASX:FLK)
has entered into 50:50 joint venture with Sydney developer Lyon Group to develop a mixed use site in Sydney’s north-west.
Leighton Holdings Limited (ASX:LEI)
subsidiary Leighton Properties will develop a $221 million University of Western Sydney (UWS) campus building on a site in Parramatta.
And Shopping Centres Australasia Property Group Limited (ASX:SCP)
has bought the Clempton Park shopping centre, south west of Sydney’s CBD, for $48 million.