The central banks latest interest rate call has been seen as a delaying of an inevitable further cut by leading property analysts and real estate agents, who are confident another reduction will be announced in August. Property buff’s believe the current holding pattern of the RBA merely buys time for them to keep an eye on the currently erratic performances of the Australian dollar, commodity prices and the Chinese economy. However, this is viewed as a temporary measure, given a further cut will bolster property buyer confidence in Australian markets over the traditionally tough winter period.
Australian Property Monitors senior economist Andrew Wilson is confident a winter rate cut is a conceivable option, given the bias is slightly downwards on rates over the short term. So far in 2013, the property market has been in good shape, leaving little room or need for the RBA to insulate the sector with rate reductions beyond the current cash rate of 2.75 per cent, incidentally the lowest level we’ve seen in over 50 years. Examples of reassuring data include RP Data’s national dwelling values, which saw a 3 per cent rise over the first half of the year, and notably, increased values in all capital cities aside from Hobart. Statistics like this will make the RBA feel reasonably comfortable with the nation’s property market, according to the firms research director Tim Lawless.
LJ Hookers deputy Chairman L Janusz Hooker says mortgage holders should expect a cut next month following the July hold. Mr Hooker says a cut is more likely to occur in August to sustain property and encourage investment in the non-mining sector, however agrees the central bank will be keen to wait until the latest quarterly inflation figures are released later this month, while continuing to monitor the performance of the Australian dollar.
Real Estate figures
Construction activity in Australian continues to remain weak, but did improve over last month. The Australian Industry Group and Housing Industry Association’s Performance of Construction Index rose 4.2 points to 39.5 in June, but remained well below 50, indicating contraction in the sector.
Australian building approvals dropped by more than expected last month. The Australian Bureau of Statistics reports approvals for the construction of new homes declined 1.1 per cent in May from the month before, compared to expectations of a 1 per cent fall.
Commentary
Turning to commentary, and with takeover plays making headlines in the property sector this week, FNN asked lender Resimac’s Chief Operating Officer Allan Savins if consolidation was the most effective way to capture more market share or credit.
According to Mr Savins, it was a more internally based decision than a response to wider competition for a slice of the credit market. He said:
“Acquisition is important to Resimac, as not only does it increase portfolio size it also helps with further acquisitions, introduce new process efficiencies and competitive funding for new customers. Resimac will continue to seek acquisition opportunities to complement its existing operations which continue to grow and perform well. Acquisition is only one part of a holistic, diversified strategy for asset growth, provided there are sufficient synergies with the existing operation to extract maximum value.”
Australian auction results
This week’s auction results across Australian capital cities - Sydney recorded a 77 per cent clearance rate from 223 properties for auction, Melbourne cleared 66 per cent from 196 properties, Brisbane had a 53 per cent clearance rate from 28 properties listed and Adelaide cleared 58 per cent from 19 reported auctions.
Commercial property sector
The latest headlines from the commercial property sector:
RHG’s Limited
(ASX:RHG) board has unanimously recommended a takeover bid from a syndicate including Resimac and Australian Mortgage Acquisition Company. RHG says it has recommended the bid in the absence of a better proposal and subject to an independent expert concluding that the offer was in the best interests of RHG shareholders. RHG, formerly RAMS Home Loans, has entered into a merger implementation deed with the syndicate, that will see it acquire 100 per cent of all ordinary RHG shares for a cash consideration of 44.1 cents per share.
Meanwhile, mortgage lender Pepper Australia has launched a rival takeover offer for RHG, just two days after the Resimac bid was board recommended. Pepper has made a cash offer of 46 cents per share, eclipsing the Resimac pitch by 1.9 cents per share. Pepper will also offer RHG shareholders a fully franked final dividend of 3 cents. Under the implementation deed, RHG must allow Resimac the opportunity to consider a counter-proposal.
Charter Hall Retail REIT
(ASX:CQR) has announced a half year Distribution Reinvestment plan issue price of $3.72 per share, based on a ten day ASX weighted trading average. The REIT plans to raise approximately $16 million from its Reinvestment Plan, which it will apply to its redevelopment pipeline and Australian acquisition opportunities.
