Countdown to Christmas
Auction rates have fallen for the third week in a row as a flood of listings to market ahead of Christmas keep a lid on prices and add to falling clearance rates. Sydney has already seen 4000 more properties to auction so far this year than in the whole of 2013 while Melbourne has record numbers of listings coming to market right through to the Christmas break. People are still paying top dollar for the right property however with a house at Sydney’s Tamarama Beach going for $5.5 million on the weekend and 95 per cent of the 220 apartments available in the new $250 million Sydney by Crown development selling in just four hours on Saturday.
Real estate driving economic growth
After a big increase in property sales with auction volumes up 14 per cent on last year, CoreLogic RP Data says that the strength in the auction market is easing as we approach the end of the year. Research has shown that the national clearance rate has clearly eased over the past two months and now hovers in the 60 percentile band. Volumes are still strong however with Melbourne listing more than 1000 auctions for 19 consecutive weeks now while Sydney has posted 11 weeks with more than 1000 auctions compared to just 7 in 2013.
With both residential sales and construction showing strong growth the latest ABS figures are indicating that housing is now a key source of economic growth for many states. With the 2013/2014 recovery in residential construction six of our eight states and territories have enjoyed increased activity with New South Wales lifted to the No. 1 economy in Australia as a result of the activity in the housing sector.
Renovation is also on the rise with the Westpac Renovation Report revealing home renovation increased 147 per cent since 2010 with NSW and Victoria leading the trend. The number of Australian home-owners undertaking renovations has hit a four year, post-GFC high with the value of household renovations approved in August 2014 hitting $600 million.
Meanwhile the Housing Industry Association is trumpeting a record high for new home starts. Nearly 190,000 new dwellings have been approved in 2014, 3000 more than the previous record of 187,000 set in 1994.
However, Chief Economist for HIA, Harley Dale, warns that not enough is being done to make the most of the uptick in housing construction with governmental red tape hampering continued growth into 2015/16.
We have two roadblocks that are the most prominent at the moment. One is the cost of bringing new housing to market. There is a lack of titled land in the system which means you have to have a large amount of capital to carry your holding costs and we also have a situation where there is a lot of development that is very difficult to bring onto the table because of a myriad of planning and zoning requirements, delays that just add to cost and effectively mean people opt out and choose to buy into an established dwelling instead.
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 73 per cent clearance rate from 874 properties for auction, Melbourne cleared 67 per cent from 1154 properties, Brisbane had a 45 per cent clearance rate from 154 properties listed and Adelaide cleared 71 per cent from 82 listed auctions.
James Hardie Industries plc (ASX:JHX)
reported a 145 per cent rise in operating profit in the second quarter. The building materials manufacturer says its dee to higher volumes and sales prices.
Charter Hall Group (ASX:CHC)
has bought a $171.4 million industrial portfolio currently under a 20 year lease to poultry producer Inghams Enterprises Pty Ltd.
Washington H. Soul Pattinson and Co. Limited (ASX:SOL)
has completed the sale of two distribution centres for $153 million reaping a pre-tax profit of $26 million.
Mirvac Group (ASX:MGR)
has signed up PricewaterhouseCoopers (PwC) for 82 per cent of the office space at its proposed 2 Riverside Quay development in Melbourne.