Budget benefits real estate
Spurred by last week’s interest rate cut the Melbourne auction market proved spirited over the weekend with more high clearance rates and well above reserve prices. And real estate agents are predicting the cut will add further fuel to the already red hot Sydney auction market which is also seeing some of the highest clearance rates on record.
Meanwhile real estate agents and property owners alike are breathing a sigh of relief that the Federal Government didn’t abolish negative gearing in the recent budget. The new asset depreciation measures are also tipped to benefit the real estate sector.
Real Estate figures
The Reserve Bank of Australia cut the official cash rate to a record low of two per cent at its May board meeting. The bank last cut interest rates to 2.25 per cent in February, fuelling the Sydney auction clearance rate above 80 per cent. Analysts are now 50/50 on whether the RBA would lower the cash rate even further later this year.
The latest housing finance figures from the ABS show that March home loan data came in well above expectations. Owner-occupier loans were up by 1.6 per cent on February. Loans for existing dwellings were up 2 per cent whilst loans for new homes jumped 2.9 per cent. Investment loans were up a whopping 6.4 per cent for the month to $12.9 billion, a 41 per cent cut of the total monthly lending figure. Investment lending has leapt 21 per cent in the past 12 months.
And the HIA New Home Sales Report shows that new home sales increased 4.4 per cent in March. There was an 11.3 per cent jump in multi-unit sales, far outstripping the 2.6 per cent rise in detached house sales. Over the past 12 months multi unit sales have been the main driver behind growth in new home starts.
Turning to commentary and FNN spoke to Amanda Lynch from the Real Estate Institute of Australia about how the latest Federal Budget will benefit real estate.
“Real estate businesses welcome the news that they will be able to depreciate some of their equipment and assets and that this will actually increase from $1,000 to $20,000 of depreciation. We are also pleased that communication devices like telephones and tables will have reduced fringe benefits tax and thirdly there’s a tax cut for small business of 1.5 per cent and that’s very welcome for the real estate industry. The retention of negative gearing is a very important part of the property investment market and we have been fighting for negative gearing and we are very pleased the government has actually listened to our views and the government understands that any changes to negative gearing would actually increase rents and it would reduce opportunities for low to middle income earners to create wealth for self-funded retirement.
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 89 per cent clearance rate from 738 properties for auction, Melbourne cleared 80 per cent from 919 properties, Brisbane had a 47 per cent clearance rate from 118 properties listed and Adelaide cleared 56 per cent from 59 listed auctions.
Commercial property sector
Finbar Group Limited (ASX:FRI)
will go ahead with a $380 million Civic Heart Project in South Perth with completion expected sometime in 2018.
Dexus Property Group (ASX:DXS)
reported a slip in occupancy but a boost in 12 month returns at the end of the March quarter.
Scentre Group Limited (ASX:SCG)
posting a 5.8 per cent jump in sales growth and confirmed its annual funds from operations guidance.
And Property developer Stockland (ASX:SGP)
has confirmed it is on track to deliver improved earnings over the 2015 financial year and noted strong momentum going into the following financial year.