Non-major lenders making presence felt

Real Estate

Australia’s largest mortgage broker group AFG, processed 25 per cent more mortgages in July than the corresponding period last year, and one in four of them were for non-major lenders. The is the first time such a figure has been uncovered since the group began collating competitor trends three years ago. According to AFG, non-major lenders have grown market share among borrowers looking to refinance and investors, while maintaining their stronger market share among first home buyers. 
 
Non major lenders have increased their collective share of home loans to 26.4 per cent in July, from 20.7 in March, according to the latest AFG Mortgage Index. Last month AFG processed in excess of $3.4 billion worth of mortgages last month, and given July is traditionally a softer mortgage month than August, the robust figures confirm an active winter property market. Given that major lenders and their subsidiaries are responsible for more than 90 per cent of all home loans in Australia, the involvement of non-major lenders in these figures suggests greater competition and greater choice for borrowers. 
 
The big news of the week is of course the Reserve bank’s interest rate call, in which it lowered the key cash rate to an all time low of 2.5 per cent, a decision not without its risks to the housing market according to RP Data’s Tim Lawless. Mr Lawless believes the RBA will face difficulty keeping a lid on what may be viewed as excessive housing market growth while providing a sufficient level of stimulus to the broader economy via their monetary policy settings. Mr Lawless says low mortgage rates tend to drive housing demand which in turn drives prices higher, and rising values will make life more difficult for first home buyers to find their way to a deposit, particularly without equity behind them. The ABS’ house price index released this week confirmed house prices are already responding to low interest rates, with the key cash rate now 1 per cent lower than it was in June last year. 
 
Real Estate figures
 
Australian housing values rose last month - boosted by better conditions in Sydney, Perth and Melbourne. RP Data-Rismark's home value index showed capital city dwelling values increased 1.6 per cent in July, after rising 1.9 per cent the month before. Values are now 6.5 per cent higher since May 2012. 
 
Meanwhile, the ABS released June quarter house price indexes for the eight capital cities , indicating a rise of 2.4 per cent. In the year to June the house price index rose 5.1 per cent.
 
Construction activity has fallen for the 38th straight month, however the pace of decline has moderated somewhat. The Australian Industry Group -Housing Industry Association Australian Performance of Construction Index (PCI) rose 4.6 points to 44.1 in July. A reading below 50 indicates decline, however the month saw solid improvements in house building and engineering construction, suggesting the building industry has put the worst behind it.
 
The Australian Bureau of Statistics has released housing finance data for June, revealing a 2.7 per cent rise. There were 51,001 approvals in the month, up from 49,642 in May. The result slightly surpasses economist expectations of a 2 per cent rise. Total housing finance by value increased by 2.1 per cent to $23.69 billion.
 
Commentary
 
FNN spoke to Tim Lawless from RP Data about the thinking behind borrowers approaching non-major lenders and the pro’s associated with sticking with the big banks:
 
“You’ll find that a lot of households and consumers are out there trying to find the best home loan rates. One of the difficulties though is when you move outside of the big four is you quite often lose out in the additional benefits of the types of mortgages and the packages that are on offer, so most borrowers these days are looking for offset accounts, for example, to maximise the deficiency of their earnings, and a lot of the non-majors simply don’t offer a lot of those type of packages. I think a lot of people are also seeing the big four as a safe harbour.”
 
Australian auction results
 
Looking at this week’s auction results across Australian capital cities - Sydney recorded an 81 per cent clearance rate from 252 properties for auction, Melbourne cleared 69 per cent from 239 properties, Brisbane had a 37 per cent clearance rate from 26 properties listed and Adelaide cleared 60 per cent from 24 reported auctions.
 
Commercial property sector
 
Commonwealth Property Office Fund (ASX:CPA) has commenced federal court proceedings against DEXUS Property Group (ASX:DXS) following the acquisition of a 14.9 per cent stake in the fund, claiming that Dexus’ ASX released documents didn’t comply with the relevant legal requirements. Dexus says it believes disclosure requirements were met and no further details needed to be released. 
 
Perpetual Limited (ASX:PPT) is having its $220 million takeover offer for the Trust Company scrutinised by the competition regulator due to concerns it may raise competition concerns in relation to certain corporate trust services. ACCC Chairman Rod Sims says Perpetual and the Trust Company are both strong providers of particular types of custody services, and feedback about the ability of other parties to constrain the merged entity has been mixed. 
 
Lend Lease Group (ASX:LLC) will embark on a $1.5 billion mixed-use development in Melbourne's Docklands after signing an agreement with the Victorian government. In a widely expected deal, Lend Lease will develop an office, retail and residential complex over a 2.5ha site in the Batman's Hill precinct on the cusp of Melbourne's CBD.

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