The Reserve Bank of Australia has delivered its property outlook this week and says despite lower interest rates, strong income growth and a rising population, a moderate rebound in home investment and construction is expected over the medium term. The central bank says Australian borrower’s reluctance to take on debt will continue amid ongoing global uncertainty. Large increases in house prices is also unlikely as buyers re-evaluate property values after a surge in house prices in the late 1990’s and early 2000’s.
Increases in stamp duty cuts are expected to entice Victorian first-home buyers into the market. Settlements that occur on or after the 1 January 2013 will be eligible for a 30 per cent discount up to a total purchase price of $600,000. The stamp duty cut increases to 40 per cent on 1 January,2014 and then to 50 per cent on 1 September, 2014. Victorians will also have the $7000 first-home buyers grant for both new and established homes. The first-home buyer’s boost of $13,000 for first-time buyers of new homes in Melbourne ended on 30 June as did $19,500 in regional areas.
Real estate figures The latest research from housing analytics group RP Data suggests investing in regional towns could provide better returns than capital cities. In NSW’s Hunter Valley, the median house cost of $359,000 has been growing at an average growth rate of 7.2 per cent a year over the last 10 years. This compares to Sydney which has a median house cost of $565,000 with only 2.9 per cent growth. In the Victorian coastal town of Barwon about 60 km southwest from Melbourne, the median house price is $370,000 with an average growth of 9.3 per cent. In comparison, Melbourne posted a median house price of $480,000 with a 6.4 per cent average growth rate over ten years.
Source: RP Data
The Australian Bureau of Statistics (ABS) has reported housing finance slightly up in September. Housing finance figures edged up 0.9 per cent to over 46,000. Economists were expecting a 1 per cent rise for the month. Total housing finance by value rose 3.8 per cent. The greatest percentage increase was in the ACT, where loan approvals for owner-occupiers rose 9.2 per cent. There was a 7.1 per cent increase in the Northern Territory, a 3.4 per cent increase in Tasmania, a 2.3 per cent increase in Victoria, a 1.6 per cent increase in NSW and a 0.6 per cent increase in Queensland. Loan approvals fell in South Australia and Western Australia. Loans for the purchase of new homes rose 9 per cent, its highest level in five years. Loans for the construction of new homes fell 6.3 per cent.
Australia and New Zealand Banking Group
(ASX:ANZ) says it will leave its variable interest rates on hold following its November review last week. ANZ’s decision comes after the RBA left the cash rate unchanged at 3.25 per cent on Melbourne Cup day.
Lending finance data has lifted in September according to the ABS. Overall business finance rose 6.9 per cent. Personal lending was up 2.6 per cent. Housing finance for owner occupiers lifted 1.5 per cent from the month before.
Australian construction activity is showing signs of improvement. The Australian Industry Group - Housing Industry Association performance of construction index rose to 35.8 in October, up from 30.9 the previous month. The rise still indicating contraction but suggests it is happening at a slower pace.
Auction results
Sydney recorded a 60 per cent clearance rate from 343 properties for auction, Melbourne cleared 61 per cent from 252 properties, Brisbane had a 35 per cent clearance from 33 properties listed and Adelaide cleared 25 per cent from only 7 reported auctions.
Commercial property sector
Australian real estate investment trusts (A-REITs) have delivered more than three times the returns compared to the Australian share market according to Goldman Sachs analysts. Over the past year, A-REITs have outperformed equities generating a 21.7 per cent rate of return compared to shares, which have delivered just 6.2 per cent. The analysts listed Goodman Group
(ASX:GMG),Westfield Group
(ASX:WDC) and BWP Trust
(ASX:BWP) as trading at premiums to their net tangible assets. Share price appreciation has allowed more REITs to close their trading gap following years of market discounting.
Goodman Group
(ASX:GMG) has successfully completed a $400 million institutional placement aimed at further expanding its global operating platform. The group also announced a joint venture with a Brazilian industrial and real estate developer. The JV, called WT Goodman, will see a 50/50 development of prime logistics and industrial properties throughout Brazil.
Commercial property news
Lend Lease Group
(ASX:LLC) is facing legal action over the collapse of its construction crane in New York during hurricane Sandy that recently engulfed the city. The global property developer is being accused of negligence by two New York dentists for failing to safely prepare and secure its crane which they claim caused them to close their businesses, after the area was declared an evacuation zone. The plaintiffs are seeking more than $US5 million in damages, there has been no comment issued by Lend Lease. The company is the construction manager for One57 which is said to be New York’s tallest residential building.
Leighton Holdings Limited’s
(ASX:LEI) wholly owned subsidiary Leighton Properties and Leighton Contractors are weeks away from commencing construction on a new office development in Melbourne’s CBD. Leighton Properties Managing Director says it had entered into a contract to purchase the land located at 567 Collins St, which will extinguish its previous joint venture development rights. Leighton Contractors are considering being an anchor tenant in the 55,000 square metre building.
