Rate stability continues to support housing

Real Estate

The 13th straight month of record low interest rates continues to support the property market amid expectations rates will only move higher in 2015. No surprises with the Reserve Bank of Australia (RBA) again deciding to keep rates at a record low of 2.5 per cent this week. The RBA has noted strong expansion in housing construction and given no indication any change in monetary policy is coming. The central bank says, “On present indications, the most prudent course is likely to be a period of stability in interest rates”. Commenting on the rate call the Housing Industry Association says the RBA had taken every possible opportunity to bed down the expectation interest rates are set to stay this low for some time. 
 
RP Data sees rates moving up in FY15
 
RP Data Senior Research Analyst Cameron Kusher: “I think we’re probably going to see interest rates on hold for the rest of this year. Obviously economic data changes a lot month to month and even week to week. Our general view is on hold for the rest of this year, and probably sometime next year an increase in interest rates. 
 
But, we certainly don’t think it is going to be a rapid increase in interest rates from here. It is probably going to be quite slow and steady. And a lot is really going to depend on what happens with economic growth and that GDP data over the coming quarters.”  
 
House prices continue to head higher
 
Capital city dwelling values continued to rise over the last three months. RP Data reports values gained 1.1 per cent over the three months to the end of July, driven by strength in Sydney and Melbourne. Canberra was also a standout performer while Adelaide dragged. The most expensive city was Sydney with a median dwelling price of $650,000. The most affordable city was Hobart with a median dwelling price of $300,000.
 
Building approvals cooling-off
 
Australian dwelling approvals fell more than expected last month after a strong rise in May. The Australian Bureau of Statistics reports total dwelling approvals dropped 5 per cent in June following a gain of 10.3 per cent in May. Westpac Banking Corporation (ASX:WBC) says the data confirms a cooling-off in the housing sector this year. The bank believes a large pipeline of approved projects will support strong activity in the near term. 
 
RP Data Senior Research Analyst Cameron Kusher explains what was behind the recent pull back in approvals: “If you have a look at four of the five months we’ve actually seen falls in dwelling approvals. They are still at a very high level on a historic basis but definitely some weakness there. There is obviously still a very strong pipeline of properties to be constructed at the moment. And, we’ve seen unit approvals starting to fall away more so than house approvals. Which is probably not the end of the world, because a house approval was much more likely to ultimately be completed. 
 
But, the data is very volatile on a month to month basis. If you have a look on an annualised basis there is more than 190,000 dwellings approved for construction over the last twelve months. And, that is the highest level since late 1993. So we’ve got a very good response but we probably won’t be able to keep it at that level for all that long. We have seen a bit of a pull back in terms of dwelling approvals. I still think they will remain high, but just not quite as high as what we’re seeing at the moment.” 
 
To watch more of the interview click here
 
Australian auction results
 
Sydney recorded a 79 per cent clearance rate from 426 properties for auction
Melbourne posted a 76 per cent clearance rate from 528 properties for auction
Brisbane booked a 43 per cent clearance rate from 78 properties for auction
Adelaide saw a 56 per cent clearance rate from 49 properties for auction 
 
Commercial property
 
Mirvac Group (ASX:MGR) has welcomed the completion of Harold Park’s first precinct, Locarno, and the opening of the first stages of roads and public domain. Locarno includes 298 apartments and terraces and is the first of six precincts at Harold Park.  
 
BWP Trust (ASX:BWP) has divested four non-core properties across Queensland, New South Wales, Victoria and South Australia for $41 million. The real estate investment trust says it has sold the properties to re-focus on its portfolio of growth assets. 
 
Sunland Group Limited (ASX:SDG) has bought a 4.7 hectare site in Palm Beach on the Gold Coast. The property developer will pay $18.4 million for site is earmarked for a master planned residential community.  
 
Folkestone Limited (ASX:FLK) has acquired development land for a new residential community. The real estate funds manager and developer has bought the land in Melbourne’s Western growth corridor.