The rise of Malcolm Turnbull to Prime Minister of Australia has put housing affordability firmly on the national agenda. The Liberal Party under Tony Abbott has long argued that there is nothing wrong with house prices and that a ‘housing bubble’ does not exist. This is despite the fact that the Sydney’s median house price has now passed the one million dollar mark while in Melbourne the average house prices is approaching close to $700,000.
Interesting then that Treasurer Joe Hockey will be replaced by Social Services Minister Scott Morrison in a decision that has some shaking their heads at the lack of Mr Morrison’s financial expertise. Morrison has his backers however and previously said that the lack of housing stock and affordability were at the heart of most social issues in Australia.
Real estate economic news
Minutes from the Reserve Bank show the central bank feels that house price inflation has grown since the beginning of the year however most of the strength was concentrated in Sydney and Melbourne and mainly for detached houses. Inflation was modest elsewhere and rapid growth in the construction of apartments was holding down pricing there. The bank had also observed a notable decline in growth of investment lending in July saying that dwelling investment had declined slightly during the June quarter however it remained strong.
Meanwhile the Reserve Bank Assistant Governor Financial Markets Guy Debelle has warned of pain to come in the housing market when rates eventually start rising again. Speaking at a seminar in Sydney last week Dr Debelle said that a sizeable number of people currently in the housing market, “…. had not experienced an environment when interest rates were rising’’. Dr Debelle went on to warn that ‘.. some behaviours have probably evolved which are not going to be sustainable when interest rates are no longer at zero’.
FNN spoke to John Flavell from Mortgage Choice about his thoughts on what is driving home price growth.
“I think at the end of the day it’s like most markets, fundamentals are driven by supply and demand. A lot drives the market and then you have also had an extended period of low interest rates. That lends to the individual’s ability to pay higher prices in the absence of a whole lot of options in terms of purchasing. Individuals can access high levels of funding with those lower interest rates so lack of supply and continued strong growth and demand and inexpensive credit leads to price growth’
Australian auction results
Looking at this week’s auction results across Australian capital cities – Sydney is coming off the sizzle recording its lowest clearance rate so far this year and the lowest spring Saturday rate in three years. Sydney recorded a 71 per cent clearance rate from 832 properties for auction. Next week could see that result challenged further with the first Super Saturday of 1000 auctions booked. Melbourne cleared 75 per cent from 995 properties, Brisbane had a 47 per cent clearance rate from 120 properties listed and Adelaide cleared 80 per cent from 74 listed auctions.
Commercial property sector
Cedar Woods Properties (ASX:CWP)
say they have been chosen as a preferred partner to negotiate the redevelopment of the 16.5 hectare Glenside site located two kilometres south of the Adelaide CBD.
Australian Industrial REIT (ASX:ANI)
says it has received an indicative non- binding cash proposal of $2.40 per share from a consortia of offshore investors. The board committee has now recommended unit holders reject a current offer from 360 Capital Investment which is open till September 28.
Mirvac Group (ASX:MGR)
has confirmed that a case study considered by the Trade Union Royal Commission involved suspicions of misconduct by employees no longer with the company.
Growthpoint Properties (ASX:GOZ)
has announced an 8-year extension in the lease of a property at Cordelia Street South Brisbane to Jacobs Group.