The Governor of the Reserve Bank of Australia Glenn Stevens is optimistic on the outlook for house prices as he addressed the federal economic committee last week. Mr Stevens said house prices may have stopped their decline, as interest rates continue to remain on hold.
Confidence still seems to be low, with the Housing Industry Association reporting a 5.6 per cent decline in new home sales for July, ending three months of gains.
House sales fell in all states except Queensland. Western Australia posted the worst result with a 14.4 per cent drop.
Real estate industry figures
The Australian Bureau of Statistics has reported a 2.5 per cent decline in construction activity for the June quarter after it rose 7.8 per cent in the previous quarter. Analysts had predicted it to climb by 0.5 per cent. Detached housing fell by 3.5 per cent. All states excluding Queensland softened in the three months.
The HIA-Commonwealth Bank Housing Affordability Index improved by 1.1 per cent or 0.7 points in the June quarter which is 10.6 per cent higher over the year. Melbourne and Brisbane’s affordability softened. Outside of the capital cities, affordability improved everywhere except South Australia and Western Australia.
The latest study from Macromonitor has revealed that Australia’s undersupply could have been over stated. Its Australian Construction Outlook report for residential buildings, which is based on 2011 Census data, suggests the national housing shortfall has shrunk to 23,000 as of June this year. Macomonitor had originally forecast a 100,000 home deficit prior to the Census update.
RP Data’s annual figures for the year to May show Queensland’s coal rich Bowen Basin returning strong capital gains over the past year, increasing to over 30 per cent. RP Data warns some mining towns could see a reduction in the scale of price growth over the next year, if commodity prices continue to soften.
Residential property market
Australian Property Monitors has posted the results of auction clearance rates across Australia’s capital cities at the weekend. Sydney recorded a solid 63 per cent clearance rate from 223 properties for auction, Melbourne was slightly up, with a 58 per cent clearance rate from 159 properties, Brisbane 40 per cent from 37 properties and Adelaide cleared 47 per cent from 27 reported auctions.
Commercial property sector
Many Australian real estate investment trusts have provided a positive outlook this reporting season, with their 2013 forecasts predicting higher full year earnings and distributions to shareholders. Analysts attribute the lower costs of debt for the expected rise in earnings.
Investa Office Fund (ASX:IOF)
has purchased an office tower in Perth’s St George’s Terrace for about $82 million. The purchase is forecast to generate additional earnings of 4 cents per share in fiscal 2013 and funded from existing debt facilities. The news came ahead of its full year results, which saw a 29 per cent decline in its net profit, largely due to a poor performance from its European portfolio and a divestment of assets in the US.
Full year results
Centro Retail Australia (ASX:CRF)
which owns 41 shopping centres has booked a net loss of $223 million in the seven months to June 30, dragged down by the settlement of a long-running class action. Its underlying earnings, came in slightly above its guidance. Looking ahead, Centro says it is confident in delivering earnings growth in 2013 and beyond. The shopping centre owner also announced it seeks to acquire up to $1.2 billion worth of properties over the next three years from its struggling syndicate business.
FKP Property Group (ASX:FKP)
has swung to a full year net loss of $350.3 million after it booked a net profit of $82.3 million the year before. Its full year result reflected a write down of its retirement portfolio due to the adoption of appropriate valuation assumptions given market conditions. The diversified property and investment group expects its future growth to be generated from the delivery of its existing residential and commercial development pipeline. Separately, FKP announced it will seek to raise about a $208 million via a 6 for 7 non-renounceable pro-rata entitlement offer, in an attempt to reduce its debt.
Boral Limited (ASX:BLD)
has firmed its full year net profit by 5.3 per cent to $177 million. The construction manufacturer has advised its result was hit by $75 million worth of significant items. Price gains and improved volumes in Boral’s US business offset volume declines across most of its Australian businesses.
Brookfield Prime Property Fund (ASX:BPA)
posted a full year net loss of $2 million down from a profit of $37.5 million the year before. The fund saw a reduction in its net assets as well as unrealised losses on property revaluations. A $44 million interest rate added to its loss. Brookfield’s property portfolio is valued at $825.3 million and maintains a positive outlook citing strong occupancy levels across its portfolio.
Devine Limited (ASX:DVN)
booked a full year net loss of $12.9 million down from over $20 million the year before. The Residential developer included an impairment charge of $24 million after tax against a number of assets. Devine’s chief cited difficult trading conditions across the property sector but says it is focused on wholesale build opportunities and replenishing land stocks.