RP Data’s latest capital city index has shown a second consecutive monthly decline, coming on the back of a robust first quarter of dwelling value data, with analysts attributing the index decline to a parallel decline in consumer confidence over the past few months. April and May both saw substantial drops in consumer confidence as both reaction to the federal budget and ongoing domestic uncertainty took its toll. However despite dropping 1.2 per cent in May and 0.5 per cent in April, values are tracking at just over 1 per cent higher since the beginning of the year and 2.9 per cent higher than May last year.
Alongside the declining capital city index, other property market metrics are performing well. Auction clearance rates have been nudging 70 per cent in the major capitals, and vendor discounting as well as transaction volumes are also performing well. According to Rismark CEO Ben Skilbeck, these positive metrics are a spill over of declining home values, whereby vendors are reducing their initial expectations in order to meet buyer offers. While not definitive, the downward performance of the capital city index in parallel to upward trends in vendor specific metrics provide indications of the sector’s fragmented nature at this stage of the year.
RP Data’s Craig Mckenzie intimated as much when he spoke to FNN:
“There’s a lot of positive metrics for the housing market at the moment; auction clearance rates, time on market, vendor discounting and the number of transactions being up seven per cent over a year ago, yet we’ve now seen values come off for two consecutive months. Primarily that could be caused by a number of factors but I guess it highlights the fragmented and uneven nature of the housing market recovery. We expect to see home values continue to grow throughout the rest of 2013, but we think it’s going to be a bumpy ride.”
Real Estate figures
The ABS has also given an upbeat picture of the housing market- Building approvals rose by more than expected last month. The ABS has shown building approvals gained 9.1 per cent in April after rising 5.5 per cent the month before.
As we touched on earlier, The RP Data-Rismark home value index fell for the second consecutive month in May, following a drop in the nation’s consumer confidence reading. The index dropped 1.2 per cent in the month, following a 0.5 per decline in April. The downward results follow a 2.8 per cent increase in the first quarter of 2013.
Commentary
RP Data’s Craig McKenzie shares his view on housing finance credit growth’s development in the coming months given the historically low interest rate settings.
“Housing credit growth is still fairly anaemic in the market, we’re still seeing a large number of transactions across our mortgage platforms, primarily driven by investors who are increasingly active in the market. I think the missing link in terms of credit growth are first home buyers, they remain largely on the sidelines and until we see first home buyers returning to the market in greater numbers, which will in turn drive upgraders, I don’t think we can expect to see strong housing growth for the foreseeable future.”
That was Craig McKenzie from RP Data.
To watch more of the interview click
here.
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 78 per cent clearance rate from 302 properties for auction, Melbourne cleared 73 per cent from 295 properties, Brisbane had a 45 per cent clearance rate from 57 properties listed and Adelaide cleared 70 per cent from 37 reported auctions.
Commercial property sector
Lend Lease Group’s
(ASX:LLC) consortium has reached a financial close with the Victorian State Government to enter into a $630 million Public Private partnership to construct the Bendigo Hospital.
FKP Property Group
(ASX:FKP) has backed its 86 per cent owned Forest Place Group Limited’s
(ASX:FPG) proposal to rebrand. Forest Place Group is a pure play retirement group who will seek shareholder approval in July to rebrand and trade as Aveo Healthcare Limited.
The head of Westpac Banking Corp’s
(ASX:WBC) institutional division, Rob Whitfield says more cuts by the central bank would be unlikely to boost demand for loans. The RBA this week held its cash rate at 2.75 per cent, as many economists had predicted, and Mr Whitfield believes there will be two further cuts before the current easing cycle concludes. However he concedes the low interest rate environment, with the prospect of even lower rates later this year, will do little to reverse stagnant credit demand.
