Property cools, will prices fall

Real Estate


In what could be good news for buyers, the runaway Sydney and Melbourne property markets are showing more and more signs of cooling down. Last week’s move by Westpac to raise interest rates by 0.2 per cent saw a big drop in the Sydney auction clearance rate. The rate has been dropping steadily for weeks now but dropped five per cent in the past weekend. It’s slowed from highs of 90 per cent in May to 65 per cent on Saturday. Melbourne wasn’t hit as hard and it’s only these two cities that have seen ‘bubble-like’ gains in the past two years. 
 
Real estate economic news

The Reserve Bank remains concerned about the housing market. In its recently released bi-annual Financial Stability Review, the central bank said that ‘domestic risks to financial stability in Australia continue to revolve mainly around developments in some local property markets’ specifically Sydney and Melbourne. The RBA did note that APRA measures to slow investor had had some impact and that there were ‘tentative signs that sentiment may be turning in the housing markets of the two largest cities.” However, the review did argue that ‘risks are rising in the commercial property sector’ with Perth and Brisbane experiencing over supply. 
 
The Westpac/Melbourne Institute Survey of Consumer Sentiment showed that confidence in the housing market is easing. The ‘time to buy a dwelling’ index fell by 0.9 per cent to be 8.6 per cent down on a year ago and 30 per cent lower than two years ago. New South Wales is 14 per cent down to be 34 per cent down on a year ago and 55 per cent down in two years. The Sydney component is 46 per cent down in the past year
 
Commentary

FNN spoke to Dr Shane Oliver Chief Economist at AMP Capital about the slowing of the Melbourne and Sydney markets and whether we will see prices there starting to fall.  
 
“My feeling is over the next 12 months prices will continue to rise but at a far more modest pace. Rather than 15-20 per cent you’re looking at gains of around 5 per cent or something of that order. As we go into 2017 though, I wouldn’t be at all surprised if prices see modest declines of the order of 5 to 10 per cent. That is what we saw in the last property cycle downswing back in 2005, 2009 & 2012 and I think we are going to through something similar in response to an exhaustion on the side of buyers at a time when supply is starting to pick up.”

Auction results
 
Sydney recorded a 65 per cent clearance rate from 874 properties for auction, Melbourne cleared 73 per cent from 1233 properties, Brisbane had a 67 per cent clearance rate from 142 properties listed and Adelaide cleared 67 per cent from 49 listed auctions. 
 
Commercial Property
 
ALE Property Group (ASX:LEP) has received a unsolicited takeover offer of $3.95 per share from investment services company Caledonia Private Investments.
 
National Storage REIT (ASX:NSR) has announced plans to expand its Sydney presence via a $10.7 million acquisition of three self-storage centres.
 
Lend Lease Limited (ASX:LLC) has been named top Multi-Unit Residential contractor in the US by Engineering News Record and Building Design and Construction magazines. 
 
And Mirvac Group’s (ASX:MGR) ground-breaking new office building at 200 George St Sydney will showcase new wireless technology which will allow a redesign of the traditional office environment to a  new flexible workspace.