Sydney and Melbourne lead the way in price growth

Real Estate

Boisterous house price growth in Sydney and Melbourne has driven national dwelling values to a record high, according to RP Data’s September Home Value Index. Sydney is at the top of the list, with home values increasing by 2.5 per cent last month, contributing to a 5.2 per cent rise over the September quarter. Meanwhile, Melbourne wasn’t too far behind, with values growing by 2.4 per cent for the month and 5 per cent for the quarter. Overall, capital city property values have lifted 0.7 per cent above their previous record high, from October 2010. Sydney finds itself 6.6 per cent above 2010 levels, while Melbourne finds itself 1.9 per cent lower. 
 
RP Data research director and analyst Tim Lawless described the results as a ‘technical’ recovery in the housing market, given that overall dwelling values dropped by 7.4 per cent from October 2010 to May 2012. In the last 15 months they’ve risen by 8.7 per cent. Mr Lawless believes these gains were due to the strong performance of Australia’s two biggest housing markets, as the majority of other capital cities recorded measured gains or losses over the period. According to Mr Lawless, the latest index is likely to be closely scrutinised by policy makers, with debate about unsustainable growth in housing markets sure to centre on Sydney and Melbourne, given other capital city housing markets are displaying only a modest growth trend.
 
Real Estate figures
 
The Reserve Bank of Australia says Credit growth in the private sector remained subdued in August, rising by just 0.3 per cent, below its 0.4 per cent growth in July. Credit was up 3.4 per cent in the 12 months to August.  The latest figures come despite expectations that an improved property market would spur increased borrowing levels. 
 
The Australian Bureau of Statistics says building approvals fell above expectations in August, with the number of buildings approved falling by 4.7 per cent to 13,687, down from 14,304 in July. Economists had anticipated a 0.5 per cent decrease. Despite the fall, building approvals are now 7.7 per cent higher than the corresponding period last year. 
 
Also, new home sales lifted in August due to a rise in detached house sales after a decline in July, according to the HIA New Home Sales report. Total seasonally adjusted new home sales lifted by 3.4 per cent in August, following a fall of 4.7 per cent in July. The overall rise was driven by a 5.8 per cent lift in detached house sales. 
 
Commentary
 
Stockland Corporation Limited (ASX:SGP) Boss Mark Steinert spoke to media this week, dismissing concerns surrounding the potential for a property bubble. Mr Steinert suggested that a rise in high-density apartments is tempering the rate of price increases. Mr Steinert said that in a lot of the metropolitan locations, the issues have been around pent-up demand and, certainly in Sydney, under-supply. According to Mr Steinert, governments have worked hard to fast-track urban growth corridors, to line that up with infrastructure, road and rail, education, and do that in the context of community requirements, but also to be pragmatic in that approach. 
 
Australian auction results
 
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 82 per cent clearance rate from 448 properties for auction, Melbourne cleared 76 per cent from 32 properties, Brisbane had a 46 per cent clearance rate from 49 properties listed and Adelaide cleared 76 per cent from 15 reported auctions. 
 
Commercial property sector

The latest headlines from the commercial property sector:
 
Watpac Limited (ASX:WTP) has won a $148 million contract to design and build a new Gold Coast Private Hospital. Watpac says construction of the 284-bed hospital is expected to commence late this year, with completion scheduled for late 2015. The group has also been awarded the stage one managing contractor services for the new Mater Private Hospital Springfield, west of Brisbane. The 80-bed hospital will span 10,000 square metres, with works to commence in January last year and to be complete by late 2015. 
 
Lend Lease Group (ASX:LLC) has taken out the number one spot in the Housing Industry Association- Cordell Construction 100 survey after securing $2.4 billion worth of contracts in the 2013 financial year. The survey found that Australia’s largest 100 construction contractors and non-residential builders won contracts to the value of $35.8 billion in the year, comprising 26 per cent of total construction work commenced. 
 
Charter Hall Retail REIT’s (ASX:CQR) key executives saw their pay packets boosted by around 45 per cent in fiscal 2013 as the property investor undertook multiple acquisitions. Joint managing directors David Harrison and David Southon saw their total packages go from about $2.2 million from $1.6 million in the previous corresponding period. This included salaries of $1 million plus bonuses. Charter Hall’s property portfolio reported an 18 per cent increase in Funds Under Management in the year to June 30. 

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