Approvals fall for first time in 2013: ABS

Real Estate

This week we’ve seen home loan approvals fall for the first time this year, however economists remain confident the housing sector remains set to strengthen in the coming months. The ABS says home loan approvals dropped by 3.9 per cent in August, well ahead of the 2.5 per cent fall expected by economists. CommSec’s chief economist Craig James is adamant that one month’s poor performance is not of major concern in the context of a year of strength for the housing sector. Mr James pointed out that the August data came ahead of the federal election, with a number of buyers likely to be keeping their powder dry ahead of polling day. With auction results in both Sydney and Melbourne remaining strong over the past weekend, Mr James noted that there is no anecdotal evidence of the housing market losing pace. While a number of analysts remain cautious of the excessive vigour of the housing market over the past month, the August data seems to point to some buyers turning away from the market due to higher prices. Royal Bank of Canada fixed income and currency strategist Michael Turner believes a correction in August was expected on the back of a run of increases in home loan approvals data, and is unlikely to represent the onset of a weak trend. Mr Turner says RBC expects to see modest residential construction growth over coming quarters, with the Reserve Bank’s most recent rate cut- to 2.5 per cent in August- primed to give housing finance figures a kick towards the end of the year. 
 
Real Estate figures
 
Recapping those approval figures: 
 
The demand for home loans fell more than expected in August. The number of home loans granted dropped 3.9 per cent to 49,912. Total housing finance by value fell 1.2 per cent in the month, to $23.8 billion.
 
Also this week, the RBA released the minutes from its October board meeting, repeating that it retains the option of further rate reductions as policy makers assess the impact of the already substantial policy stimulus on the Australian economy. 
 
The central bank said- “The effect of low interest rates was evident across a range of indicators and had further to run.’’ 
 
Commentary
 
Turning to commentary and FNN spoke to Stephen Nash of fixed income investment group FIIG securities, who reaffirmed the general sentiment surrounding the direction of the RBA’s economic stimulus measures:
 
Looking at the RBA’s statements of late; they’ve strategically cut the bullish or dovish tone down in each statement and I think at this point the RBA have a lot of stimulation in the system and they want now to evaluate what that stimulation is doing in terms of stimulating non mining growth. As a result I think the RBA may not do anything for three to six months as they evaluate not only their stimulation but also a long period of caution as a result of a very long election period- nine months- a very long election period. We’re going to get a bit of a surge here, I think the RBA want to evaluate that as well as what their stimulation has done.”
 
To watch more of the interview click here:
 
Australian auction results
 
Looking at this week’s auction results across Australian capital cities - Sydney remains in the 80’s, recording an 86 per cent clearance rate from 480 properties for auction, Melbourne cleared 76 per cent from 569 properties, Brisbane had a 33 per cent clearance rate from 38 properties listed and Adelaide cleared 59 per cent from 28 reported auctions.
 
Commercial property sector
 
The latest headlines from the commercial property sector:
 
Stockland Corporation Limited (ASX:SGP) is preparing to develop a new residential community in Perth’s South West after a local government rezoning approval. The rezoning signals important progress for Stockland’s proposed new community, to be known as Calleya. The development features 1,800 homes and will be the closest new land release south west of Perth’s CBD. Stockland says it’s already received more than 200 enquiries from buyers interested in buying land at Calleya and has begun a register for interested customers.
 
Commonwealth Property Office Fund (ASX:CPA) investors must now wait for details from independent directors on the proposed internalisation by Commonwealth Bank before any new takeover offer can be made. Dexus Property Group (ASX:DXS), which owns an option over 14.9 per cent of CPA, has made an indicative joint offer for CPA with the Canadian Pension Plan Investment Board equal to $1.15 a security, which investors say is too low. This was rejected by funds manager, Commonwealth Managed Investments Limited independent directors, who said the board has determined that the Dexus proposal does not provide a compelling value proposition. But analysts say that until details emerge of the privatisation and how that affects CPA's net tangible assets, Dexus has no comparison value to bid against.
 
RHG Limited (ASX:RHG) has entered a trading halt ahead of an announcement regarding a further takeover proposal from the Resimac and Australian Mortgage Acquisition Company syndicate. RHG says it is not clear whether it will accept the proposal, having last week received an addendum to a rival bid from Pepper Australia and Cadence Capital Limited (ASX:CDM).