The Australian Bureau of Statistics this week released home loan approvals data for October, indicating that first-home buyers continue to struggle to enter the housing market even as it grows, with investors tackling record unprecedented levels of borrowing. Loan approvals for first home buyers dropped to a record low in Victoria while lifting slightly in NSW during October. Across the country, meanwhile, approvals for owner-occupiers increased by 1 per cent in October to 52,305, boosting the annual growth rate to 13.3 per cent. While first home buyers, as a ratio of total borrowers, climbed off its record low of 12.5 per cent from September, however remains subdued after merely edging up to 12.6 per cent in October.
Overall, the value of home loans increased by 4.1 per cent in the month, hitting $26.5 billion, on the back of a boisterous lift in investor activity. Investor loans shot up 8.2 per cent to reach $10.3 billion, a record high. Owner occupied loans, meanwhile, saw a 1.7 per cent lift. The value of home loans to investors rose by an annualised pace of 47 per cent over the past six months.Westpac’s senior economist Matthew Hassan says the increase in investor activity is a significant step up and one worth further monitoring. In other figures released by the ABS, housing construction increased by one per cent, supported by strong growth in building approvals in recent months, low interest rates and house price gains, a trend which is set to continue.
Real Estate figures
Taking a look at real estate economic news: Firstly, recapping the main points of the approval data released this week:
The Australian Bureau of Statistics says demand for home loans rose in line with expectations in October. The number of home loans granted in October rose one per cent to 52,305. Economists had tipped a one per cent rise. Total housing finance by value rose 4.1 per cent to $26.48
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (PCI) rose 0.8 points to 55.2 in November, on the back of an improvement in new orders and deliveries. It was the highest reading since November 2010 and the second straight month of expansion. All the major sub-sectors grew for the month, although house building and apartments lost some ground.
FNN asked Loan Market CEO Sam White for his outlook for the property market in 2014:
"I think a lot of the signs are very strong, we’re seeing stock return to the market, clearance rates obviously very strong. So we’re not seeing a build up of excess stock, that’s all been cleared out, so the stock coming on is relatively new and fresh. There’s so many facets to the housing market in Australia, so many markets within Australia. We see Sydney being strong and Sydney’s really only catching up for what’s been a lost decade. You see that over the ten years, we’re probably looking at 3-4, maybe 5 per cent growth- not much more than inflation for Sydney housing, though the last 12 months have been significant. I think going forward we’re going to see Queensland start to get quite strong, they’ve typically lagged New South Wales- but maybe over 12 months- we’re not currently seeing the international or interstate activity happening there as much as what we normally see in a cycle, that’s still to come I think. Victoria has really had three strong spurts since the mid 2000’s- this is the third jump they’ve had- I think that’s showing signs of maybe being a little bit toppy."
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 540 properties for auction, Melbourne cleared 67 per cent from 962 properties, Brisbane had a 60 per cent clearance rate from 5 properties listed and Adelaide cleared 6 per cent from 6 reported auctions.
Commercial property sector
The latest headlines from the commercial property sector:
Commonwealth Bank of Australia (ASX:CBA)
is forging ahead with plans to spin-off the $6 billion CFS Retail Property Trust, with the new vehicle likely to be called Centre Retail Management. Doubts about the deal had emerged over questions about the value of the trust's management rights. There were reports that the bank's hopes for a price of about $400 million for the rights would not be met. But a series of corporate moves ahead of the bank's December board meeting due today point to an agreement being reached and the rights could be bought by the new entity for between $400 and $500 million.
Westfield Group (ASX:WDC)
will buy the remaining 50 per cent interest in the World Trade Center retail premises in New York for $US800 million. The retail property developer and manager says it will own 100 per cent of the retail project after the acquisition from the Port Authority of New York and New Jersey. The sale brings Westfield's total investment in the site to more than $US1.4 billion and is expected to close within the next 30 to 45 days.
DEXUS Property Group (ASX:DXS)
has upgraded its earnings guidance for the 2014 financial year, predicting 7 per cent growth. Funds from operations guidance for 2014 have increased to 8.29 cents per stapled security from 8.15 cents, driven by the property company’s on-market security buy-back in August and September. Dexus also credited the higher guidance to the net impact of its investment in the Commonwealth Property Office Fund, in which it has a 14 per cent stake.
Sunland Group Limited (ASX:SDG)
has been ordered to pay costs of $6.82 million to two Australian property executives, Angus Reed and Matthew Joyce, by the Supreme Court of Victoria. The court made the order after finding against Sunland's claim that the pair had duped the company during a property deal gone wrong in Dubai. The costs go above the $5.74m Sunland has set aside in trust to cover legal costs.