Warnings of Sydney house bubble

Real Estate


Sydney & Melbourne set the pace
 
It’s been a big week on the housing front starting with claims from Treasury secretary John Fraser that Sydney was unequivocally in a house price bubble along with the high end parts of Melbourne. His words, at a Senate estimates hearing, go down as one of the strongest official warnings yet. 
 
Sydney house prices have risen over 39 per cent since they bottomed out in 2012. A year ago, Sydney’s auction clearance rate was at 73.1 per cent. Now, the average clearance rate is sitting nearly eleven per cent higher than that. But still, it’s a tale of two cities with Sydney and Melbourne far outstripping the rest of the country. However top real estate agents are tipping Brisbane will be the next major city to go on the boil. 
 
Real Estate figures

New research from the Property Council of Australia shows that the property sector is now adding more to gross domestic product than mining, home ownership and financial services. The property is now estimated to generate 11.5 per cent of GDP, employ 1.1 million people and pays taxes of around $72.1 billion across both state and federal coffers. The industry now has the largest economic footprint in Australia. 
 
The Reserve Bank of Australia has kept the official cash rate on hold at a record low of 2 per cent at its June Meeting. Whilst rising Sydney house prices were highlighted, the RBA says ‘trends have been more varied in a number of other cities…and the bank is working with other regulators to assess and contain risks that may arise from the housing market.’
 
Meanwhile, the latest research from CoreLogic RP Data shows that home values fell by 0.9 per cent in May. It’s the first drop in 6 months. So far this year values are up by 3.8 per cent and the 12 month reading shows a rise of 9 per cent. However strong auction clearance rates, are painting a different picture. 
 
Commentary

FNN spoke to Tim Lawless from CoreLogic RP Data about the fall in home values and whether it shows if house prices have hit their peak. 
 
I think that when we see the June figures, we wouldn't be surprised if we do see positive results and that based on the very strong data that we are seeing atm. So probably a temporary effect here, we are seeing in May and would be surprised if we see most of that 0.9 per cetn fall if not all of that correct next month.  
 
Australian auction results
 
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 87 per cent clearance rate from 853 properties for auction, Melbourne cleared 83 per cent from 1098 properties, Brisbane had a 60 per cent clearance rate from 141 properties listed and Adelaide cleared 74 per cent from 56 listed auctions.
 
Commercial property sector
 
Australian Industrial Real Estate Investment Trust (ASX:ANI) says that the 360 Captial Investment Management’s unsolicited off-market takeover offer has been extended till 3rd June. 
 
Federation Centres Limited (ASX:FDC) says the NSW Supreme Court has approved its merger with Novion Property Group and the merger is expected to be implemented on Thursday 11 June. 
 
Aveo Group Limited (ASX:AOG) says it has increased its stake in Retirement Villages Group fund from 23.3 per cent to 38.7 per cent. 
 
And Axiom Properties Limited (ASX:AXI) has announced a new division that will diversify into student accommodation.