House prices post second annual drop

Real Estate

The tally is in and Australian house prices continued to fall last year despite a series of rate cuts. FNN speaks to AMP Limited’s (ASX:AMP) AMP Capital Investors Head of Investment Strategy and Chief Economist Dr Shane Oliver about his interest rate outlook for the year ahead and we look at the latest auction clearance rates and commercial property news.
 
National home values have dropped for the second straight year, representing the worst run in sixteen years for the Australian property market. RP Data-Rismark Home Value index shows dwelling values in Australia’s eight capital cities fell 0.4 per cent in 2012, dragged down by Melbourne with a decline of 2.9 per cent and Brisbane and Adelaide where prices dropped 0.8 per cent over the year. Darwin property values led the gains, rising 8.9 per cent, followed by Sydney lifting 1.5 per cent and Perth increasing 0.8 per cent. RP Data says home prices are now 5.7 per cent down from historic highs at the end of 2010.
 
Figures have shown more Australians are being tempted to leave the city for a slower pace. Sea Change Success reports more than 200,000 city folk will start a new life with a sea change and more than 700,000 will make the transition to a regional area in the next three years. The online lifestyle adviser says 350,000 people consider making a sea change every year but only 20 per cent live out the dream.
 
Commentary
 
FNN spoke exclusively to AMP Limited’s (ASX:AMP) AMP Capital Investors Head of Investment Strategy and Chief Economist Dr Shane Oliver about his outlook for interest rates in 2013:
 
“My feeling is that the Reserve Bank’s job isn’t done yet- they will need to cut the cash rate again- probably down to 2.5 per cent. There is a risk it could go a little bit below that, down towards 2 per cent but my base case is a full 2 to around 2.5 per cent. That will be necessary to get the standard variable mortgage rate down to around 6 per cent, discount rates will obviously also be below that but I think the Australian household sector and the Australian corporate sector still needs lower interest rates which in turn I think will ultimately add to confidence that we still start to see a recovery coming through.”
 
To watch more of the interview click  here.
 
Australian auction results
 
Sydney recorded a 72 per cent clearance rate from 44 properties for auction
Melbourne cleared 54 per cent from 74 properties
Brisbane had a 71 per cent clearance rate from 7 properties
Adelaide cleared 54 per cent from 74 reported auctions
 
ASX property headlines
 
FKP Property Group (ASX:FKP)tumbled to the worst performing stock of the S&P/ASX 200 index last year, dropping 57 per cent. The property and investment company was impacted by a soft residential real estate market in the same year its long standing Managing Director and CEO Peter Brown retired.
 
Property developer Lend Lease Group (ASX:LLC) has secured a $264 million construction contract with Land Securities to construct two new buildings in central London.
 
Real estate fund manager Folkestone Limited (ASX:FLK) has expanded its funds management platform through completing its acquisition of Austock Group Limited’s (ASX:ACK) property funds management business.