Here’s what the RBA thinks about Australian property – Michael Matusik

Here’s what the RBA thinks is going on with regard to Australia’s housing market.  Yes, I know it might be a bit boring, but I have added some comments (to help lighten the load), and well… it seems to me, to be on the money.

Well worth a couple of minutes of your time.Housing prices have risen strongly in recent months, with nationwide prices increasing by around 2.75 per cent (the RBA like two decimal places – it goes with the Martin Place persona) over the September quarter & 5.5 per cent over the past year.

Prices picked up further in October. Over the three months to October, housing price inflation was particularly marked in Sydney, with prices rising by more than 5 per cent.  Melbourne also recorded a strong increase & prices in Brisbane (SEQ) have started to pick up

(We told you so – so we were about 12 to 18 months early.  You know what they say – the early bird gets the worm, but the second mouse gets the cheese).

While housing prices in Sydney & Perth have surpassed their peaks of 2010, the ratio of nationwide prices to household income remains below the levels seen over much of the past decade.

Other indicators point to strong conditions in the established housing market; auction clearance rates remain elevated, while the degree of vendor discounting & the average time taken to sell a property have both fallen substantially & are now close to their lowest levels in about ten years.

(Well, well, well isn’t that a nice positive sentence)

Surveys indicate that households view buying conditions for dwellings as favourable & expectations of future housing price growth have increased.

Turnover in the housing market, as a share of the housing stock, has risen from relatively low levels over the past two years.

This higher turnover can be expected to boost demand for a range of services including real estate, legal & financial services.  (We can only hope so!)

Demand for housing finance has risen as the value of housing turnover has increased.  Nonetheless, housing loan approvals remain relatively low as a share of household debt.  (Something, sometime & maybe soon will open our purse strings again.[sam id=34 codes=’true’]

What it will be I don’t know, but it will happen.  Maybe a new kinda Hula-Hoop or something from Apple or Samsung.  Maybe Clive Palmer can start something – a dinosaur in every yard.

Yes that’s it.  We will all want one, taking out loans to secure the biggest & most ugliest.

I want one that talks – like Siri – but in a much deeper voice.  She needs to growl too!)

In contrast to the market for established dwellings, conditions in the rental market appear to have eased slightly in recent quarters from the relatively tight position a year ago.  The nationwide rental vacancy rate increased a little in the June quarter to around 2.25 per cent, but is still below the long-run average.

Rent inflation has slowed to around 3.25 per cent annually, although this is still above CPI inflation & rental yields remain higher than the average of the past decade. (Yawn)

Dwelling investment increased over the past year, despite a pause in growth in the first half of 2013, which mirrored an earlier softer patch in building approvals.  (I blame the previous Labor Governments)

Forward-looking indicators point to a resumption of growth from the second half of 2013.  The number of private residential building approvals rose by 9 per cent in the September quarter.

Liaison contacts (interestingly phrased) have noted the increasing presence of overseas buyers & developers for high-rise developments in inner-city areas, although survey evidence suggests that the share of overseas buyers in the housing market overall is little changed.  (A new Missive will cover this in coming weeks.)

In aggregate, building approvals are expected to increase further over the period ahead, aided by a continued recovery in the established housing market, relatively high rental yields, low lending rates & (some) government support to first home buyers that is increasingly directed towards purchases of newly built, rather than existing, dwellings.  (Remove GST on new homes please, Glenn – that would really do the trick!)

Rising house prices & the increase in housing turnover is also expected to underpin a pick-up in renovation activity.

What does this mean?

  • There is no housing bubble (yet)
  • Recovery is somewhat limited to Sydney, Melbourne & Perth (so far)
  • Despite what Sydneysiders think – “you either live in Sydney or you are camping” – it looks like history is repeating & Sydney’s recent gains should become more wide spread next year
  • South east Queensland is starting to recover (But don’t wait too long, as their is only so much cheese to go around)
  • Chinese buying is getting a lot of media attention, but I suspect it’s largely smoke & mirrors; nationwide, overseas buying is still very limited
  • New housing approvals are increasing, yet new actual starts are still lacklustre (more on this next week)
  • Housing is affordable (but you won’t live in your dream home until you have endured about 20 years or so of hard mortgage slog, kiddies)
  • Rental growth could track sideways next year (oh dear, Michael, you are now leaving the script)
  • Investment in property is quite attractive (when taking the long term view)

PS Some alcohol was consumer during the composition of this post.  Some guitar picking too, but I was only trying to get into the Glenn Stevens frame of mind – guitar playing that is, not the drinking.

For the full drum go here – http://www.rba.gov.au/publications/smp/2013/nov/pdf/1113.pdf

[post_ender]



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Michael Matusik

About

Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive


'Here’s what the RBA thinks about Australian property – Michael Matusik' have 3 comments

  1. November 13, 2013 @ 3:20 pm Juliana Bradley

    Very interesting- thanks for sharing this. Hopefully the recovery starts to expand to other major cities and isn’t so limited. God knows the entire country’s market has suffered enough over the past few years!

    Reply

  2. November 13, 2013 @ 8:31 pm Robert.a

    Evening Michael,what are your thoughts when it comes to investing in Melbourne cbd or st.kilda rd boulevard in long term leased offices approx 50m2.with approx 10% return.approx 250k through a super purchase.or am I better off investing in an outer south east property spending 280k with a 5%return.cheers

    Reply

  3. November 13, 2013 @ 8:44 pm Robert.a

    Evening Michael,what are your thoughts when it comes to investing in Melbourne cbd or st.kilda rd boulevard offices returning 10% with long term lease through a super purchase or a outer south east property returning 5% on a development on amstel golf course in a prime location in cranbourne.cheers.

    Reply


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