The biggest property gains look to be in the past with the Reserve Bank of Australia (RBA) noting prices have come off their highs over the same week new homes sales posted a fall but home values showed resilience.
Steady rates as housing moderates
A period of interest rate stability has continued with the RBA deciding to once again keep the key cash rate at a record low of 2.5 per cent for the eleventh straight meeting. The good news for investors is that many economists do not believe rates will heading higher for some time. Westpac Banking Corporation’s
(ASX:WBC) Chief Economist Bill Evans only sees rates rising in the second half of 2015.
The RBA’s monetary policy statement noted dwelling prices have increased significantly over the past year but pointed to signs of a moderation in the pace. The observation came hot on the heels of new figures showing new home sales posted the first downturn in five months. The Housing Industry Association reports sales of new homes in Australia fell 4.3 per cent in May but are still 3.8 per cent higher in the three months to May and 21 per cent stronger from the year before.
Home prices show resilience
House prices have continued to show strength with June house prices recovering some of the losses experienced in May. The RP Data – Rismark home value index shows home prices across capital cities rose 1.4 per cent in June following a fall of 1.9 per cent fall in May. Despite the rebound home prices are still 0.2 per cent lower for the quarter signalling the possibility that the biggest gains are now past.
Where to now for property prices?
AMP Limited’s
(ASX:AMP) AMP Capital Investors Head of Investment Strategy and Chief Economist, Dr Shane Oliver provides an outlook for property prices this year:
“I know there was some weakness more recently in the real estate market in Australia, particularly in Sydney which has seen a bit of softness coming through. I think that was partly a reaction to the huge surge we saw last year, partly the fact that affordability has deteriorated a little bit so buyers hold back a little bit and maybe also budget-related softness, people a bit fearful after the budget. But I think this year we will see probably gains in the order of perhaps five to seven per cent for overall property prices so not as strong as they were last year which was around ten, in Sydney, up 15 per cent so slowing down a little bit but still a reasonable price growth in the real estate market.”
Australian auction results
Sydney recorded a 74 per cent clearance rate from 598 properties for auction
Melbourne posted a 75 per cent clearance rate from 692 properties for auction
Brisbane booked a 37 per cent clearance rate from 87 properties for auction
Commercial property sector
Property developer Stockland Limited
(ASX:SGP) tied up a number of transactions in the last week of fiscal 2014 with the purchase of industrial properties in Perth and Sydney and additions to its residential portfolio in Western Australia.
Real estate investment trust Investa Office Fund
(ASX:IOF) has bought a 25 story office tower in Sydney’s CBD for almost $135 million to target the smaller tenant market where it currently has no exposure.
Property investor Arena REIT
(ASX:ARF) has sold 10 childcare centres located across Victoria, New South Wales and Queensland for $14.2 million which it will reinvest into its childcare centre development pipeline.
Australand Property Group’s
(ASX:ALZ) directors have unanimously backed a $2.6 billion takeover offer from Singapore-listed Frasers Centrepoint Limited (SGX:TQ5).
