Housing market to spark economic growth
The housing market continues its advance with close to record auction numbers in Melbourne this past weekend. In Sydney, the market has softened marginally for the second consecutive week showing lower auction volumes. Clearance rates are still strong however they came in below 80 per cent for the third consecutive week.
Meanwhile, there are signs that property could lead Australia into stronger growth with a strong uptick in residential land sales during the June quarter. This implies a rise in single dwelling constructions within the next six months which could spawn new jobs as well as lead to a lift building materials and white goods sales. However whether the quarterly improvement can develop into a trend remains to be seen.
Land sales lead the way
The HIA-RP Data Residential Land Report shows quarterly land sales have grown by 10 per cent in 2014 financial year. Regional land sales lifted 13 per cent while the six state capitals posted a rise of 5.5 per cent. This indicates a broadening of the geographical recovery in residential lands sales, an encouraging sign for residential dwelling construction into next year.
The Housing Industry Association has also welcomed the removal red tape surrounding the accreditation requirements for constructing single dwellings. The reforms to the expensive tendering process will make it far more affordable for small to medium builders to compete for work. Smaller builders are also now allowed to work under partner accreditation in joint ventures on larger projects.
And RP Data is reporting that a weighted average auction clearance rate of 70.5 per cent was recorded this week across the capital cities. This compares to 68.6 per cent last week and 71.8 per cent last year.
Commentary
Turning to commentary and FNN spoke to AMP Capital Investors, Head of Investment Strategy and Chief Economist, Dr Shane Oliver. We asked Doctor Oliver if the strength in the property sector would continue and if so, where the support would come from.
“I certainly don’t see a collapse in property prices and I think until we start to see a rise in interest rates in Australia, property prices will continue to rise, probably at a slower pace than we have seen over the past 12 to 18 months. I think the national average is up to about 10 per cent and I think that pace will slow down through time. Several reasons for that, one is the Reserve Bank wants it to slow down, if they don’t get it to slow down then they won’t raise interest rates but they will slap controls on banks to make it harder for them to lend to investors. Secondly we have seen a deterioration of affordability in some cities and that’s pricing some buyers out of the markets so I think, still up, for at least the next 12 months but the pace will slow.”
That was Shane Oliver from AMP Capital Investors.
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 79 per cent clearance rate from 552 properties for auction, Melbourne cleared 75 per cent from near record 1558 properties in a traditionally busy auction weekend sandwiched between the AFL Grand Final and Derby Day races, Brisbane had a 58 per cent clearance rate from 37 properties listed and Adelaide cleared 53 per cent from 76 listed auctions.
Property sector news
Centuria Capital Limited
(ASX:CNI) says investors in the Centuria Diversified Property Fund have approved the listing of the Centuria Metropolitan real estate investment trust.
Federation Centres
(ASX:FDC) reported annual sales growth for the year to 30th September of 1 per cent with specialty retailers recording a rise of 1.6 per cent.
Stockland
(ASX:SGP) has issued Australia’s first corporate green bond - a EUR300 million 7 year issue providing further diversification of funding sources at competitive long-term pricing.
And the first auction of former coal billionaire Nathan Tinkler’s Patinack Farm properties has failed with each property being passed in.
