Home loan lenders are battling for the hearts and minds of borrowers following the central banks record rate cut earlier this month, and Westpac has launched the most recent offensive. The bank lowered its one year fixed rate home loans to 4.79 per cent, while its underlings including Bank of Melbourne and St. George dropped their one to five year fixed rates.
Mortgage rates are seeing their lowest levels since the global financial crisis of 2008 and Bank of Melbourne boss Scott Tanner insists rate wars are a further continuation of injecting more competition into the home loan marketplace. Each of the big four banks passed on the full 25 basis points of the RBA’s May rate cut, as did a plethora of smaller lenders.
On the standard variable mortgage front, ANZ and NAB are out-flanking the enemy with a 6.13 per cent rate, while Westpac’s 6.26 per cent is the highest of the big four. Analysts believe the aggressive cuts to fixed rates are an indication the banks are pricing further rate cuts from the Reserve Bank down the track.
Real Estate figures
A new report has cast further light on tough conditions for Australia’s residential construction industry. The Housing Industry Association’s Trade Availability Index pulled back from 0.22 at the end of 2012 to 0.19 in the first quarter of this year, with a read above zero indicating oversupply. In the quarterly report of builders and sub-contractors HIA says, while there are signs of a recovery this year, it is from a very low starting point.
Commentary
Turning to commentary now, the RBA followed up on its May interest rate decision with the release of the minutes from its May board meeting this week, noting that some improvements in the housing market weren’t quite sufficient to justify not making another cut. According to the Central Bank:
“... for some months the Board had considered that the inflation outlook provided scope to ease monetary policy further, should that be necessary to support demand. Members were conscious of the strengthening conditions in the housing market, but also noted that credit growth had remained subdued. In consideration of low inflation and soft growth, the Board judged that a further reduction in the cash rate was appropriate.”
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 78 per cent clearance rate from 287 properties for auction, Melbourne cleared 75 per cent from 268 properties, Brisbane had a 64 per cent clearance rate from 25 properties listed and Adelaide cleared 42 per cent from 30 reported auctions.
Commercial property sector
The latest headlines from the commercial property sector:
CSR Limited
(ASX:CSR) has reported a full year loss of $146.9 million, which includes the write down of its Viridian glass business.
The building products supplier’s trading revenue for the year to March fell 7 per cent to $1.68 billion, falling prey to a tough construction sector.
GPT Group
(ASX:GPT) has sold its 50 per cent interest in the Erina Fair shopping centre for $397.1 million. GPT’s stake in the shopping centre was sold to a client of Lend Lease Investment Management at a one per cent premium to GPT’s December 2012 value. Australian Prime Property Fund owns the remaining 50 per cent of the asset, which is managed by Lend Lease.
Stockland
(ASX:SGP) has announced an institutional placement to raise $400 million, aimed at reducing debt and expanding its retail development program. The property developer will offer 103 million new shares at $3.88 each, representing 4.7 per cent of issued capital. Also this week, Stockland reportedly cut 80 jobs as part of its cost-cutting drive. The group is aiming to cut gross overheads by 10 per cent in 2014 – including staffing costs, processes efficiencies and a national procurement system. Last week Stockland said it was expecting its full-year earnings per share to come in at the lower end of its guidance, because of costs associated with a restructure of the group.
