Australia’s new home building recovery is on the rise and helping to support the economy as it transitions from the mining investment boom. The Housing Industry Association’s latest forecast update has upwardly revised its forecast for residential building activity. HIA now expects Australian dwelling commencements to grow 8.2 per cent in 2014 and for activity to remain at elevated levels beyond 2014. The recovery is poised to be driven by New South Wales and Western Australia while Victoria’s elevated level of new home building is expected to wane in the near term.
Property starts 2014 strongly
Construction work lifted in the first three months of this year despite expectations for a fall. The Australian Bureau of Statistics reports construction work rose 0.3 per cent in the March quarter. Commenting on the numbers Westpac Banking Corporation
(ASX:WBC) says, “Record low interest rates have led to record high approvals, setting the stage for a strong upswing this year and into 2015.”
Record low interest rates have also helped lift housing affordability to its most favourable level in 12 years. The Housing Industry Association and Commonwealth Bank of Australia’s
(ASX:CBA) Affordability Index rose 2.1 per cent in the first three months of this year and is 10.8 per cent more favourable over the year.
New home sales have also gained at the beginning of this year. HIA reports new home sales rose 2.9 per cent in April and gained 6 per cent in the three months to April. HIA says momentum in new home building activity will carry over into the June quarter.
Property prices coming off highs
Housing Industry Association’s Chief Economist, Harley Dale details how the property market has started 2014: "I think you’ve seen over the March quarter overall and the very preliminary estimates for the month of April that there has been just a tiny bit of momentum if you like come out of the property price market in 2014. Now in the first place that was primarily driven by Sydney and Melbourne and to a lesser extent Perth. The ten per cent or so price rise for capital cities doesn’t reflect a great deal of price movement in Brisbane, certainly very little in your smaller markets of Adelaide, Hobart and Canberra. But the overarching story of strong momentum has come off a little bit and that’s probably most noticeable in Melbourne where you did have previously very strong growth but the rate of that growth has already begun to ease."
Global luxury residential prices weaken
A recent study has shown prime residential prices in key global cities weakened at the beginning of this year. Property research group Knight Frank has reported prices rose by 0.8 per cent average in the first quarter of this year, the slowest growth since the third quarter of 2012. The index is still 6.1 per cent stronger year-on-year. Over the quarter Jakarta came in at the top of the ladder for prime price performance, followed by Dublin, Miami, Tokyo, Beijing. Rounding out the top ten came Los Angeles, San Francisco, Dubai, Tel Aviv, New York followed by Bangkok, London and in 13th position Australia’s largest city Sydney.
Australian auction results
Sydney recorded a 79 per cent clearance rate from 816 properties for auction
Melbourne posted a 74 per cent clearance rate from 1,056 properties for auction
Brisbane booked a 41 per cent clearance rate from 109 properties for auction
Adelaide saw a 69 per cent clearance rate from 81 properties for auction
Commercial property sector
Australia’s largest listed investment bank Macquarie Group Limited
(ASX:MQG) has this week attracted speculation it is pushing ahead with ambitions to gain a bigger share of the lucrative mortgage market.
Property developer Stockland
(ASX:SGP) has sweetened its bid for industrial property investor Australand Property Group
(ASX:ALZ) to $2.5 billion.
Supermarket giant Woolworths Limited
(ASX:WOW) has confirmed it is currently investigating divestments in its property holdings in hotels and co-located retail liquor stores.
Real estate developer Mirvac Group
(ASX:MGR) has bought $144.2 million worth of future residential projects across Sydney, Melbourne and Brisbane.
