It looks as though the housing market is reaching a tipping point. The combination of low supply levels and very low interest rates continue to see price surges in Sydney and Melbourne while other areas languish. The RBA seems to think recent changes to investor loans by the banks are enough to keep a lid on the speculated ‘property bubble’ while signs are pointing to an easing in the booming construction market.
The Reserve Bank kept the official cash on hold at 2 per cent in its August meeting. The decision came after two rate cuts already this year in February and again in May. Explaining the decision the central bank noted key commodity prices have been weak but put this down to increasing supply.Emphasis was placed on the likelihood of the US Federal Reserve raising rates later this year but it was qualified with a suggestion that other countries are still pushing rates lower.While heat in the housing market was mentioned the RBA says trends have been more varied across cities. But for now the RBA says the current cash rate is appropriate and it will assess conditions in the period ahead before making any changes.
Official figures from the ABS show a bigger than expected drop in building approvals for June. The numbers show an 8.2 per cent slump in building approvals across the board. The sectors tell a different story however. Apartment building approvals slumped 20.4 per cent while detached house approvals rose by 4.3 per cent. Seasonally adjusted figures were down 1.2 per cent for the month and having now fallen for four consecutive months the peak in new housing projects may have passed.
The CoreLogic RP Data Home Value Index shows house prices leapt 2.8 per cent in July and 11.1 per cent over the past 12 months. Sydney and Melbourne continue to be standout performers with Melbourne growth outpacing Sydney in the last quarter up 6.1 per cent in the 3 months compared with a 5.4 per cent gain in Sydney. Perth and Darwin continue to record falls with home values in Darwin down 5.3 per cent over the past year.
So with house prices on the rise and interest rates at historically low levels FNN spoke to Professor Steve Keen from Kingston University London about when we might see interest rates start to climb higher again
“Australian interest rates rising... never. We’ve got ourselves locking into exactly the same sort of situation Japan got itself caught up in its bubble economy burst back in 1990. They are still effectively at zero and they’ve been at zero for close to a quarter of a century. Only when we deal with the private debt bubble that has caused this entire catastrophe will you ever be able to get back to interest rates that we through were normal back in the 1990’s”
Australian auction results
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 79 per cent clearance rate from 644 properties for auction, Melbourne also cleared 79 per cent from 648 properties, Brisbane had a 54 per cent clearance rate from 108 properties listed and Adelaide cleared 79 per cent from 47 listed auctions.
Commercial property sector
Aspen Group (ASX:APZ)
will pay $10.5 million for the Tomago Van Village around 18km north of the Newcastle CBD.
Abacus Property Group (ASX:ABP)
will put up the bulk of the equity in a 75/25 joint venture with Zenonos to pay Federation Centres $65 million for the LutWyche shopping center in Brisbane.
Also in Brisbane, Watpac Limited (ASX:WTP)
has won $95 million contract with JGL Properties to work the $195 million Newstead residential project.
Cedar Woods Properties Limited (ASX:CWP)
has purchased 50 hectares of land located next to another landholding it already owns approximately 30 mins north of Perth.