Australian home hunters appear to have shrugged off warnings from the RBA [Reserve Bank of Australia] and Moody’s Investors Service about the property market and were buying up over the weekend. The central bank’s governor Glenn Stevens last week highlighted Sydney’s surging real estate market and cautioned buyers to take care. However, auction clearance rates stayed above 70 per cent in the harbour city over the weekend and house prices have spiked more than 15 per cent over the year to June 2014.
Mr Stevens said people should not assume prices will always rise when choosing to buy property and cautioned investors to remember prices also fall. The comments come as Moody’s said the Australian housing market appears to be overheating and increasingly likely to get caught up in a positive price feedback loop. The rating agency says this could eventually lead to a correction just as The International Monetary Fund last month ranked Australian property as among the most expensive in the world
Construction jumps in June
Australian's construction sector activity was boosted by house building last month, helping to offset softer mining construction. The Australian Industry Group’s performance of construction index rose into expansion territory to 51.8 points in June, from a read of 46.7 points in contraction territory the month before.
Building approvals gain in May
Australian building approvals have seen the strongest monthly gain in eight months. The Australian Bureau of Statistics (ABS) reports building approvals for the construction of new homes gained 9.9 per cent in May and are now 14.3 per cent stronger over the year to May.
Low rates to offset lingering budget fears
With Australia’s new senators sworn in this week lingering fears about the Abbott government’s ‘tough’ Federal Budget have come back in the spotlight. Following a weekend of more protests about May’s budget the Abbott government will now test the Senate for support. FNN asked AMP Limited’s
(ASX:AMP) AMP Capital Investors Head of Investment Strategy and Chief Economist, Dr Shane Oliver how a dip in consumer confidence following the budget will impact the property sector:
“I think it’s probable that a hit to confidence from the budget will impact the property market but I think it will be a short term hit. I think people will realise that maybe the budget’s not going to be as tough as they feared. Many of the measures will take a while to kick in and in any case once the budget goes through the Senate, many of the tougher measures in the budget will be likely to be softened a little bit.
The underlying reality here of course is that interest rates are low. They’re still at very low levels, generational lows in fact. It’s usually only when interest rates rise quite a bit, usually after a few rate hikes that the property market really starts to slow down on a sustained basis. So I think given we are still in an environment of very, very low interest rates it’s likely that that will overwhelm any confidence effects flowing from the budget and therefore enable property prices to keep rising.”
Australian auction results
Auction clearance rates in Sydney and Melbourne are now about 10 per cent lower from last year’s average of 80 per cent but are still showing strong momentum. Over the weekend auction results across Australian capital cities saw Sydney record a 73 per cent clearance rate from 437 properties for auction, Melbourne post a 72 per cent clearance rate from 457 properties for auction, Brisbane book a 58 per cent clearance rate from 88 properties for auction and Adelaide book a 62 per cent clearance rate from 42 properties for auction.
Commercial property
Property developer Mirvac Group
(ASX:MGR) launched its fourth Harold Park precinct with all apartments sold off the plan over the weekend. The Altivolo precinct is located 2.5 kilometres from Sydney’s central business district.
Sydney based landlord Desane Group Holdings Limited
(ASX:DGH) has sold almost half the residential apartments it is developing in the Sydney suburb of Rozelle for $11.5 million.
Property developer Sunland Group Limited
(ASX:SDG) has boosted its profit guidance for the 2014 financial year on the back of its successful return to the multistorey residential sector and ongoing capital management initiatives.
Property investor CFS Retail Property Trust
(ASX:CFX) says an independent valuation has increased its total book value by 1 per cent or $54.1 million.
