Real estate gains in danger of fading

Real Estate

A Morgan Stanley report has suggested Australian real estate market prices have peaked and are set to pull back from record highs. House prices have climbed more than 15 per cent since the Reserve Bank of Australia’s rate cut cycle began in November 2011. The report claims the housing cycle is in danger of gradually fading without further interest rate cuts. 
 
Rates set to hold for some time
 
The Reserve Bank of Australia’s June board meeting minutes have affirmed a neutral policy bias. The central bank highlighted the impact of the Federal Budget but downplayed the latest upbeat GDP figures and claims its decision to keep rates at a record low of 2.5 per cent is “likely to be appropriate for some time yet.” 
 
Home building ready to boom
 
While steady rates may not stimulate more home buying new home building in Australia is predicted to hit a 10-year high this year. The Housing Industry Association’s National Outlook has forecast dwelling commencements to rise 7.1 per cent to almost 180,000 this year, building on from a gain of 10.9 last year. The anticipated result would come in second to a record result of 187,000 dwellings commenced in 1994. HIA says, “Residential construction is making a vital contribution to the re-balancing of growth in the nation’s economy”. 
 
HIA housing price growth forecast 
 
Housing Industry Association’s Chief Economist, Harley Dale forecasts how long house price growth will continue rising - predicting a moderating pace of growth this year following on from last year’s rate near 10 per cent:
 
“I would suspect we will probably be in the high single digits [in 2014]. So if you have had ten per cent growth or a bit more in some markets over the last 12/18 months, put another say seven to eight on top of that in 2014 and you’ve got a pretty positive story on residential property. But I think it’s unlikely that in aggregate that you’ll see another double digit pace of in 2014 the way that you did in 2013.” 
 
To watch more of the interview click here
 
Australian auction results
 
Sydney recorded a 76 per cent clearance rate from 614 properties for auction
Melbourne posted a 74 per cent clearance rate from 856 properties for auction
Brisbane booked a 38 per cent clearance rate from 84 properties for auction
Adelaide saw a 58 per cent clearance rate from 49 properties for auction
 
Commercial property divestments
 
Engineering company UGL Limited (ASX:UGL) has sold its global property services business DTZ for $1.2 billion to US private equity group TPG. 
 
Construction contractor Fletcher Building Limited (ASX:FBU) has inked a deal to sell its building materials distribution business for about $18.5 million. 
 
Commercial property contract awards 
 
Property developer Watpac Limited (ASX:WTP) has won a $60 million contract to build a 14 level, 648 bed student accommodation facility for University of Melbourne. 
 
Land developer and home builder Devine Limited (ASX:DVN) has secured a construction contract for Walker Corporation’s $150 million Westmark Milton apartment project development in Brisbane.  

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