The latest housing approval figures from the ABS were released this week, and whilst they beat general expectations, they also revealed that the proportion of first-home buyers in the housing market has fallen to a record low. With increased investor activity causing property prices to surge across the city, a mere one in eight borrowers were entering the market for the first time in September. That’s the lowest ratio in over twenty years, and comes as record low interest rates stimulate a booming recovery in the property market.
Citi economist Josh Williamson says that the widening gap between aspiring first home buyers and their first homes in Australia’s major capital cities will affect productivity and opportunity in the economy. Taking a close look at the figures from the Australian Bureau of Statistics: The number of home loans approved rose 4.4 per cent to 51,928 in the month, ahead of economist expectations of 4.3 per cent.
Owner-occupied finance approvals are up 12.6 per cent for the 12 months to September, while investors took out 5.2 per cent more loans in the month. This makes for yearly growth of 21.9 per cent in investor loans. Meanwhile the percentage of first home buyers slipped to 12.5 per cent in September, from 13.7 per cent in August, its lowest reading since 1991 and considerably lower than its average of 18.5 per cent. While monthly mortgages are becoming more affordable, first-home buyers are struggling to put down a deposit as property prices continue to rise, particularly in the Sydney and Melbourne markets.
These two red-hot markets look unlikely to slow any time soon following another bumper auction weekend, with a combined total of $668.9 million worth of properties going under the hammer last weekend. According to Australian Property Monitors senior economist Andrew Wilson, Sydney is leading the way in record breaking fashion, having cleared 80 per cent on 16 of the past 18 weekends, while Melbourne has been tracking around 74 per cent. On the weekend just gone, Sydney cleared 84 per cent and Melbourne 83 per cent. On the corresponding weekend last year, both cities recorded rates under 60 per cent.
Real Estate figures
Australia’s housing sector recovery has pushed the construction sector into expansion territory for the first time in more than three years. The Australian Industry Group’s policy director Peter Burn says the sharp lift is a welcome indication we could be on the cusp of a long-awaited recovery in the construction sector. AIG and the Housing Industry Association’s Performance of Construction Index surged 6.8 points to 54.4 in October, lifting above the 50-level which separates expansion from contraction.
The Westpac Melbourne Institute Survey of Consumer Sentiment has been released, revealing that consumer confidence has been boosted by a strengthening housing market and continued to lift after the federal election. The index rose by 1.9 per cent in November after a dip in October, returning to 2010 levels.
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 84 per cent clearance rate from 448 properties for auction, Melbourne cleared 73 per cent from 692 properties, Brisbane had a 55 per cent clearance rate from 29 properties listed and Adelaide cleared 58 per cent from 22 reported auctions.
Commercial property sector headlines
DEXUS Property Group
(ASX:DXS) has formally lodged an offer for the Commonwealth Property Office Fund
(ASX:CPA), alongside JV partner Canada Pension Plan Investment Board. The offer is for approximately $1.21 a share for CPA and is now set to be subjected to a process of due diligence. The Commonwealth Managed Investments board is recommending the sweetened takeover bid, which values CPA’s stock at $2.42 billion, subject to the approval of an independent expert.
Mirvac Group
(ASX:MGR) is looking to acquire a trio of key property assets for a total cost of $552 million. The property group says it will acquire two Melbourne office assets - 367 Collins Street for $228 million and 477 Collins Street for $72 million - as well as the Harbourside Shopping Centre in Sydney for $252 million. Mirvac says the acquisitions are fully debt funded with pro forma gearing of 27.7 per cent, within the target gearing range. The group predicts the purchases will be earnings accretive in fiscal 2014. Mirvac chief executive officer Susan Lloyd-Hurwitz says the acquisitions are in line with its strategy to hold income producing, CBD office assets.
ANZ Banking Group
(ASX:ANZ) has kept its home mortgage rates steady this week, making the call just days after the Reserve Bank of Australia's (RBA) Melbourne Cup rate day decision kept Australia’s key cash rate on hold. ANZ’s has maintained its standard variable rate at 5.88 per cent per annum while the RBA kept rates at a record low of 2.5 per cent on Tuesday.
