Auction markets soar close to the sun
The capital city housing market is steaming on with Sydney posting increasing clearance rates in the high eighties. Strong results have also been achieved in Canberra as well with almost two third of homes scheduled for auction sold prior to the event. In Melbourne, auction results are at a five year high with an average clearance rate of 79.6 per cent over the past 4 weeks. First home buyers continue to find the mortgage market challenging despite record low interest rates. There are also worries that the cheap credit is artificially inflating house prices with the price boom in NSW especially risky.
Vacant land prices show strong growth
New research from CoreLogic RP Data shows the median price of vacant land across the combined capital cities rose to a record high by the end of 2014. The median land price jumped 6.2 per cent to $257,500. The area size of vacant land has also increased to 480sqm, up from 462sqm a year earlier, reversing a 20 year trend. Sydney land prices are up 16.7 per cent to $350,000 where as Melbourne’s median price is up 12.7 per cent to $240,000.
Elsewhere, the RBA’s Financial Stability Review has voiced more concerns about the continued strength of investment buying in the property market. Investor buying tends to be more speculative and the RBA is worried that the amplified run-up in house prices will increase the risk that some regions may fall significantly later on. In its report the central bank said ,’importantly a future fall in housing prices would reduce wealth and dampen spending for the broader household sector, particularly for those households with significant housing debt, not just for the investors that contributed to the upswing.’ The RBA also warned of risks building in the commercial property market and said it was still too early to see any results from tighter prudential controls on the banks.
Also released this week, the 2015 Mortgage Report from Deloitte suggests that last year’s 20 per cent growth in home loan settlements is unsustainable. Authors of the report say that much of the enormous volume was due to pent up demand from existing home owners. Slowing growth in China and high unemployment in some Australian markets indicate that this year’s loan origination will only grow in the region of six to ten percent for 2015. Tighter macro-prudential rules are also expected to start to impact the market.
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 86 per cent clearance rate from 715 properties for auction, Melbourne cleared 79 per cent from 1122 properties, Brisbane had a 48 per cent clearance rate from 144 properties listed and Adelaide cleared 50 per cent from 69 listed auctions.
Commercial property sector
Finbar Group Limited
(ASX:FRI) will pay $7.25 million for a mixed use development site in South Perth that it expects to develop into a $60 million project containing 56 luxury residences as well as retail and office space.
Lend Lease Group
(ASX:LLC) has struck a joint venture deal with a Malaysian developer to work on the $2.8 billion Lifestyle Quarter in the country’s new financial district.
Also in Malaysia, Ansell Limited
(ASX:ANN) has tied up the sale of its Shah Alam plant for $29 million.
And Abacus Property Group
(ASX:ABP) have started a joint venture with privately owned AM alpha to sell 309 George Street in the CBD in Sydney for $112.3 million.
