Transcription of Finance News Network interview with RP Data Senior Research Analyst Cameron Kusher Lelde Smits: Hello, I’m Lelde Smits for the Finance News Network and joining me from Australian property data provider RP Data is Senior Research Analyst, Cameron Kusher. Cameron, welcome back to FNN.
Cameron Kusher: Thanks for having me.
Lelde Smits: RP Data has just released its July home value index results. Where there any surprises?
Cameron Kusher: At a combined capital city level home values increased by 1.6 per cent and maybe the strength of that increase was a little bit of a surprise. Again, we’re not seeing that growth across the board. We saw increases in Sydney and Melbourne and in Canberra and Darwin but the other four capital cities all actually recorded falls over the month. So, a little bit surprised how strong the overall headline figure is. But, we’re still seeing quite a divergence between each market in terms of how the capital growth performance is going.
Lelde Smits: Clearance rates have also been remaining strong. Where is the demand coming from?
Cameron Kusher: The demand is very strong at the higher end of the market and what we have seen over the last probably four to six weeks is a bit of a rebound in auction clearance rates. They were starting to ease but we’re seeing a very high level of properties taken to auction at the moment for this time of year. You typically find through the winter months much lower levels of activity in the auction market. But, it’s very strong this year. Obviously there is momentum there and we know that investors are very active in the market at the moment. And obviously, a lot of competition, a lot of pent up demand in both Sydney and Melbourne and the low interest rates are clearly encouraging buyers out of the woodwork.
Lelde Smits: Now Cameron you mention interest rates. Despite interest rates remaining steady for almost one year the housing market continues to remain resilient. Where should investors be looking for value?
Cameron Kusher: From an investors perspective we’ve seen a huge amount of activity in Sydney. New South Wales housing finance data shows that about one in every two property purchases in by an investor at the moment. And, I think clearly when you look at rental yields they are extremely low in both in Sydney and in Melbourne. So, it’s a capital growth play that investors are looking for at the moment, not a rental return play. So, given that the best time to invest in Sydney and Melbourne would have been probably 24 months ago. They’ve probably missed their best opportunity for growth in this phase. So again, I think that’s why we may see some investors switching their attention to other markets.
Lelde Smits: And which markets would you suggest are looking attractive?
Cameron Kusher: Brisbane is obviously a prime candidate, higher yields, only about 8.5 per cent growth so far this growth phase compared to 25 per cent in Sydney. But, you also might find some of the cities adjoining Sydney and Melbourne – so you might find some activity in Geelong for example or Bendigo and Ballarat in Victoria. In New South Wales you might start to see more activity in areas such as Wollongong and Newcastle and the Hunter region as people are priced out of the Sydney market. And, as those markets start to pick up, looking to ride potential capital growth in the future.
Lelde Smits: Finally Cameron, some of Australia’s biggest banks [ANZ Banking Group
(ASX:ANZ), Commonwealth Bank of Australia
(ASX:CBA), National Australia Bank Limited
(ASX:NAB), Westpac Banking Corporation
(ASX:WBC)] have just cut fixed mortgage rates. How does this support your interest rate outlook?
Cameron Kusher: Well, it’s an interesting one because a lot of those banks are still calling for interest rate hikes next year but obviously if you’re going to offer a lower fixed rate mortgage than what we are at the moment it means that they think the interest rate environment is going to be quite low for some time. Obviously funding costs have reduced as well, and probably there is a lot of competition out there in the mortgage market at the moment. These guys are just fighting for some market share at the moment. I don’t know how long we’re going to see these fixed rate mortgage rates at these levels, probably not too long. But, it does suggest that they do think that mortgage rates are going to continue to be fairly low for the next few years.
Lelde Smits: Cameron Kusher, thank you so much for the update from RP Data.
Cameron Kusher: Thanks for having me.
Ends
