Real estate auctioneers are taking a well earned break after a standout 2014 where capital city house prices rose across the board. 2015 looks to see continued growth in new home construction while house price growth should see some stabilisation. Lending practices will come under scrutiny as the Australian Prudential Regulation Authority starts to visit banks and lenders checking on risky lending conventions. The lower Aussie dollar could also take pressure of the Reserve Bank to lower later this year. Meanwhile commercial property is also set to shine in 2015 with the highly-sought after office space sector again leading the way and real estate investment trusts proving an attractive safe haven in volatile times.
Real Estate figures
The Corelogic RP Data Hedonic Home Value Index is showing that dwelling values across the combined capital cities rose by 0.9 per cent in December taking the annual rise to 7.9 per cent for 2014. Values rose in all cities with the exception of Canberra and Darwin which both fell by 0.6 per cent for the month. It’s no surprise Sydney is the most expensive city with a median dwelling price of $730,000 whilst Hobart is our most affordable capital with a median price of $341,500.
FNN spoke to Dr Steve Keen from Head of Economics at London’s Kingston University about the risk factors associated with the current strength in the housing market.
“Take a look at the level of debt in the country. The only form of debt that is rising dramatically is mortgage debt and the only bracket that is borrowing is so called investors. We are basically gambling on rising house prices. That was triggered by the RBA being forced to push rates below what they thought they were going to be anyway and the RBA should have brought in prudential controls like its neighbours in New Zealand did and had the courage to call this a bubble. I see, in the RBA, quite a degree of cowardice on trying to confront the market – vs certainly its cousins in New Zealand – so that bubble is debt-driven plus also foreign buyer-driven. And what I’m annoyed by, and I see this happening for a lot of central banks around the world, the RBA in particular, is they are quite happy to see an asset bubble because they think that stimulates spending but an asset bubble is stimulating spending by stimulating borrowing and your price of having that increased spending form what they see as the wealth effect and certainly from people borrowing money in the first place, is higher leverage and higher debt and more fragility. And that’s not running an economy, that’s destroying it.”
That was Steve Keen from London’s Kingston University.
Commercial property sector
Growthpoint Properties Australia Limited (ASX:GOZ)
will pay around $7 million for 1.1 hectare site in Mulgrave, east of Melbourne and develop it into a seven storey suburban office building.
360 Capital Group Limited (ASX:TGP)
has established 360 Capital Retail Fund No.1, an unlisted fund which will acquire two shopping centres for $68 million.
DEXUS Property Group (ASX:DXS)
has acquired The Lakes Business Park at Botany, south of Sydney’s CBD for $153.5 millionantho.
And Mortgage Choice Limited (ASX:MOC)
has appointed John Flavell as incoming CEO replacing Michael Russel in April next year.