Muted house prices fail to spur rate cut

Real Estate

Australia’s central bank has decided to keep the nation’s official interest rate unchanged at 3.25 per cent at its November board meeting. A rebound in commodity prices and higher inflation data were among the reasons provided by the central bank. The move defied expectations for a rate cut and follows a 25 basis point cut last month. 
The Housing Industry Association (HIA) says the decision to keep rates on hold is disappointing amid soft house prices. However, looking ahead, HIA says a multi-rate cut in the December quarter could lift confidence enough to generate a rise in new home building, which is at recessionary lows. 
National house prices

The Australian Bureau of Statistics has reported a moderate rise for house prices in the September quarter. The average price of homes edged up 0.3 per cent, down from a rise of 0.6 per cent in the June quarter but the first annual rise since March last year, with some economists tipping a stabilisation in the housing market.
Quarterly house prices rose the most in Perth, up 1.8 per cent. Canberra was the nation’s worst performing capital city, dropping 1.1 per cent followed by Adelaide and Darwin. 

Industry figures  
The Reserve Bank of Australia has reported a slight improvement in private sector credit with poor consumer confidence keeping figures subdued. Private sector lending was up 0.3 per cent in September following a rise of 0.2 per cent in both July and August. Lending for housing was up 0.4 per cent for the month and up 4.7 per cent for the year. 
The latest trades report for the September quarter shows a greater availability of skilled labour consistent with a weak residential construction sector. On a national level there has been an oversupply of skilled labour for five consecutive quarters. The Gold Coast recorded the highest proportion of unemployed tradesmen in the country. Perth and regional Western Australia have an undersupply of tradespeople.
Figures released by SQM Research reveal the level of residential property listings around the nation remained relatively unchanged last month. Year-on-year however, the figures reveal that stock has taken a dip, with a 2.7 per cent decrease compared to the same time last year. The most notable of the capital city decreases is Darwin, recording a decline of 26.3 per cent in stock from the same time last year. Both Sydney and Perth have also shown considerable yearly declines, with both dropping about 11 per cent over the year. 

Auction results 

Sydney recorded a 66 per cent clearance rate from 316 properties for auction, Melbourne cleared 52 per cent from 66 properties, Brisbane had a 43 per cent clearance from 35 properties listed and Adelaide cleared 44 per cent from 27 reported auctions. 

Residential developers

Australand Property Group (ASX:ALZ) says the property markets in Melbourne had weakened in the third quarter but the property group upheld its previous guidance to deliver 3 to 4 per cent earnings growth for its full year results which is only a month away. Some analysts are sceptical about the group’s earnings potential for the year ahead, due to a soft residential sector particularly in Victoria, which accounts for about 50 per cent of its development plans. Analysts at the Commonwealth Bank (ASX:CBA) have switched their recommendations to a hold from a buy. 

Cedar Woods Properties Limited (ASX:CWP) says it will rely on strong demand for its projects in growth areas of Western Australia and Victoria. The company affirmed its full year guidance and is on track to deliver a net profit of about $34 million underpinned by presales of $162 million.

Commercial property news
Lend Lease Group (ASX:LLC) has appointed Kylie Rampa as head of its Australian investment management business. Ms Rampa will oversee $8.8 billion funds under management as well as the retail asset management business. The appointment will commence from February next year. Ms Rampa joins Lend Lease from her post as Chief Executive of the Gandel Group, which holds stakes in listed retail funds such as the Charter Hall Retail REIT. Lend Lease posted a net profit of $503 million in the 2012 financial year.
Transfield Services Limited (ASX:TSE) has appointed Graeme Hunt to the role of CEO. Mr Hunt has been acting as interim Chief Executive since the end of September after Peter Goode resigned. The construction and maintenance firm says Mr Hunt was the best candidate after it carried out a search for a permanent appointment. The company also has announced $145 million worth of new work that includes management of about 500 Boral sites across Australia.  Transfield Services posted a full year net profit of $85 million.
Trading updates
Leighton Holdings Limited (ASX:LEI) has confirmed it is on track to reach its full year profit after the construction company swung from a loss to a profit in the first nine months of the 2012 financial year. The construction company expects to deliver an underlying net profit of between $400 and $450 million over the full 2012 calendar year. Leighton has also issued $US500 million of bonds in its first US public market offering and says the notes provide an attractive source of long-term debt capital for the group and diversifies its funding profile. Leighton will use the proceeds from the notes to refinance existing short-term debt  facilities.
Boral Limited’s (ASX:BLD) trading conditions remain difficult according to Chief Executive Mike Kane, as he addressed shareholders at its annual meeting. The construction manufacturer’s underlying earnings for the December half will be in line with the previous six months. Mr Kane expects improved market conditions in the USA and the domestic housing sector for the second half of fiscal year 2013. Divestments over the past two years has generated about $170 million and the planned sell down of non- core assets and property sales would generate about $300 million over the next two years. 

Devine Limited (ASX:DVN) says challenging market conditions in the residential sector has forced it to downgrade its full year profit before tax to about $10 million, down from a pre-tax profit of $16 million recorded in fiscal 2012. Devine says the Victorian property market remains soft but affirmed it has a solid backlog of residential development opportunities ahead with Queensland and South Australia showing an uplift in activity due to recent government stimulus. Leighton Holdings Limited (ASX:LEI) remains as the company’s largest shareholder with a 50.06 per cent stake. Devine booked a net loss of $12.9 million in fiscal 2012.
FKP Property Group (ASX:FKP) says its upmarket residential apartment development in Camberwell Junction in Melbourne has reached practical completion. The settlements of 122 apartments are expected to deliver proceeds of $105 million and scheduled to commence later this month. The total end value of the project is $150 million that combines 144 apartments, a 120-seat restaurant and retail space that has been 60 per cent pre-committed. FKP Property Group booked a full year net loss $359.9 million. 

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