Property peak predicted

Real Estate


Property hits its peak
 
Signs are pointing to a revival in the Melbourne property market with a strong increase in houses on offer and strengthening clearance rates. Sydney is also seeing a pre-spring rush with 839 homes on the auction block on August 8, nearly double the 357 scheduled auctions the same weekend a year ago. John McGrath, CEO of McGrath Real Estate came out this week to say he believes Sydney property is close to its peak. And there are other voices adding to a chorus the property boom is ending and the only way from here is down.   
 
Home loan data from the ABS shows that first-home buyers are borrowing more than ever before to get into the market. The average first-home buyer loan was $340,200 in June, ten per cent up on last year and the highest figure on record. In NSW the average figure was $398.600, the most expensive in any state. The same report also showed a 6.8 per cent jump in first home loans in the past quarter which could be an early sign of improvement for that particular sector. 
 
However The Housing Industry Authority is predicting the end of the strong run of construction in Australia. The 2014/2015 financial year saw around 214,000 new dwelling commencements across the country, easily the highest yearly total on record. However industry body says that excessive taxes combined with slow land releases and over-zealous planning restrictions will lead to a decrease in new home building.

Commentary
 
FNN spoke to HIA Senior Economist Shane Garrett about what the future holds.  
 
“ The outlook for the 15/16 financial year is that activity will decline to just below 200,000 new dwelling commencements and that the equivalent decline of about 7 per cent for the year. And we are going to see further declines of about 7 per cent over the years following that because of the fact the cycle will take a downturn. We estimate at this stage, the cycle will bottom out at around 175,000 new dwelling commencements and that will occur during the 2018/19 financial year. So we achieved a record level by a wide margin during the 14/15 financial year but the cycle at this stage is likely to move downwards from now”. 
 
Australian auction results
 
Looking at this week’s auction results across Australian capital cities - Sydney recorded a 75 per cent clearance rate from 848 properties for auction, Melbourne cleared 79 per cent from 954 properties, a new winter record, Brisbane had a 64 per cent clearance rate from 89 properties listed and Adelaide cleared 80 per cent from 56 listed auctions.
 
Commercial property sector
 
Finbar Group Limited (ASX:FRI) says it has received development approval for an apartment project in West Perth with an estimated end value of around $125 million.
 
Cedar Woods Properties Limited (ASX:CWP) has paid $26.25 million for 50 hectares of land approximately 30 mins from Perth. 
 
Genworth Mortgage Insurance Australia (ASX:GMA) announced first half profit was down 25 per cent on the previous first half result at $113 million due to losses in mining areas like Queensland and Western Australia. 
 
And Watpac Limited (ASX:WTP) has signed a $62 million contract to deliver 127 apartments on the Summer Hill Flour Mill site in Sydney’s inner west.