House price growth continues
Record low interest rates continue to fuel strong gains in capital city house prices with growing clamour from experts that a property bubble is developing. Meanwhile the ever rising Sydney house prices have provided a bumper stamp duty windfall for the NSW government which had done little in the recent budget to help first home buyers despite a bigger-than-expected surplus.
Real Estate figures
House prices have risen solidly through the first quarter according to the Australian Bureau of Statistics. Capital city house prices are up by 6.9 per cent. Sydney house prices have grown by 3.1 per cent in the March quarter, up 13 per cent in a year.
Melboure rose by 0.6 per cent for the quarter, up 4.7 per cent over 12 months. Brisbane was up 0.4 per cent in the first quarter, posting a 3.9 per cent gain for the year.
Adelaide was up 0.7 per cent in the quarter and 2.5 per cent for the year whilst Canberra saw a 1.1 per cent lift over the first three months of 2015 and 3 per cent for the 12 month period.
Hobart managed a quarterly gain of half a percent, up nearly 2 per cent for the year. Meanwhile prices dropped in perth, down 0.1 per cent for the quarter and 0.3 per cent for 12 months, Darwin recorded a quarterly loss of 0.2 per cent, down 0.4 per cent over the year.
Meanwhile the NSW government has recorded a $2.1 billion surplus due in part to a growing stamp duty windfall. Revenue from the residential tax has grown by around 20 per cent over 2014/15.
Stamp duties now account for more than 28 per cent of the government tax revenue and there was little in the latest budget to help first home buyers with the NSW Treasurer Gladys Berejiklian claiming a reduction in stamp duty would worsen the housing affordability crisis.
FNN spoke to Marc-Andre Flageole from Presima Global Property Fund about the comparison between Australian property markets and those overseas.
Australia has been a very strong REIT market over the last two years. And that’s really a function of strong demand we’re seeing on the private real estate side, which really drove up valuation levels of assets. And also, easier monetary conditions that we’ve seen with the RBA lowering the rates, and interest rates level in general that have come down, so very supportive of property here in Australia. It compares very well on a global basis. If you look at markets that actually outperformed the Australian market over the last two years, the US and the UK are standouts. These markets have seen quite positive fundamentals, but also very strong demand from an institutional perspective, on the direct real estate side.
And contrasting that with markets that didn’t do so well, my own country of Canada REITs have been struggling and underperforming global peers, on relatively weak fundamentals in the retail or the office space. But also due to the fact that Canadian REITs are typically offering the investor very, very little growth and they’re also highly levered, compared to the global counterparts selling at leverage superior to 40 per cent, on average.
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded an 83 per cent clearance rate from 686 properties for auction, Melbourne cleared 81 per cent from 899 properties, Brisbane had a 47 per cent clearance rate from 89 properties listed and Adelaide cleared 62 per cent from 61 listed auctions.
Commercial property sector
DEXUS Property Group (ASX:DXS)
is set to acquire the Waterfront Place office tower and Eagle Street Pier in Brisbane’s CBD for $635 million.
Aspen Group Limited (ASX:APZ)
will buy the Mandurah Gardens Estate, a residential village in Western Australia for $10.2 million.
Federation Centres Limited (ASX:FDC)
revealed it expects to change its name to Vicinity Limited after a shareholder vote in October.
And Cedar Wood Properties Limited (ASX:CWP)
is expected a record net profit of $41 million for the 2015 financial year.