The Reserve Bank turned a lot of heads with its decision to cut the official cash rate by 25 basis points, taking it to a record low of 2.75 per cent. Property analysts and agents have applauded the decision as a welcome outcome for mortgage holders and first home buyers, one that will offer some relief to housing affordability.
National Australia Bank Limited
(ASX:NAB) was the first of the big four banks to respond to the RBA decision, opting to pass on the 25 basis point rate cut in full to standard variable home loan customers. NAB says it would reduce its standard variable home loan rate to 6.13 per cent per annum, equating to a saving of $62.50 per month in interest on the average $300,000 home loan.
Commonwealth Bank Limited
(ASX:CBA) also passed on the full cut, reducing its annual standard variable home loan to 6.15 per cent. Westpac Banking Corp
(ASX:WBC) and Suncorp Group
(ASX:SUN) have also passed on the full 25 basis points, while ANZ Banking Group
(ASX:ANZ) is withholding its decision until its regular interest rate review this Friday. The banks hope the lower interest rates will stimulate home lending, for them a critical source of profits.
Real Estate figures
Building approvals dropped more than expected last month. The Australian Bureau of Statistics has reported building approvals fell 5.5 per cent to 12,599 in March, defying expectations for a 1 per cent rise from the month before. Over the year, building approvals are 3.9 per cent up from March 2011.
The Australian Industry Group and Housing Industry Association’s Performance of Construction Index (PCI) says the construction sector shrank for the 35th consecutive month in April, with home and apartment building continuing to decline. The index fell 3.8 points to an index level of 35.2 in April, marking the fastest rate of contraction since September 2012.
Commentary
Turning to commentary and following on from the most recent decline in building approvals, HIA Senior Economist Shane Garrett this week spoke of the topsy turvy recent performance of the property sector, highlighting the need for potential policy intervention from the government:
“The sharp decline in approvals during March underlines the delicate state of Australia’s housing market. A tentative recovery does appear to be underway but remains delicate...Every positive indicator on housing seems to be quickly followed by negative data in relation to other aspects of the market. The Government must bear this in mind when prescribing policy measures. The industry is in a sensitive state and the need for supportive action from government at this time is great. There remains huge scope for policy intervention, especially with regard to inefficient taxes on housing.”
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 78 per cent clearance rate from 244 properties for auction, Melbourne cleared 71 per cent from 231 properties, Brisbane had a 41 per cent clearance rate from 37 properties listed and Adelaide cleared 53 per cent from 31 reported auctions.
Commercial property sector
Gold Coast developer Sunland Group Limited
(ASX:SDG) is involved in a Victorian Court of Appeal case with a lawyer involved in a controversial 2007 property deal in Dubai. According to various media reports it is alleged Sunland threatened to sue Anthony Brearley, who faces criminal charges over the deal, if he did not provide evidence it could use in a related lawsuit.
DEXUS Property Group
(ASX:DXS) has purchased three commercial towers in Perth’s Kings Square development from contractor Leighton Holdings Limited
(ASX:LEI) for $434.8 million,a record commercial property pre-sale in Western Australia.
Stockland
(ASX:SGP) has sold 175 Castlereagh St, Sydney, to Centuria Property Funds for $56 million. The property developer says the sale was in line with its strategy to optimise security holder returns by actively managing assets and recycling capital when expected risk adjusted returns are below its hurdle rates.
GPT Group
(ASX:GPT) chief Michael Cameron says the property investor remains interested in acquiring some of the assets of Australand Property Group
(ASX:ALZ), despite having had a previous proposal rejected. Mr Cameron says GPT is committed to advancing a proposal in the best interests of GPT and Australand securityholders.
Investa Office Fund
(ASX:IOF) has inked a 12-year lease agreement with Telstra Corporation Limited
(ASX:TLS) at 16-18 Mort St, Canberra. Under the deal, the building will be refurbished, upgrading the 2,200sq m floors to accommodate Telstra’s specifications.
