End of Week Property Market Update: RPData- Tim Lawless

The Governor of the Reserve Bank (RBA) Glenn Stevens gave an interesting speech earlier this week at Citi’s 5th Annual Australian & New Zealand Investment Conference.

The full transcript of the speech is available from the RBA’s website however, some highlights of the speech relating to the housing market are provided following.

‘One force helping household and business confidence has been a positive trend in asset markets. Over the past year, the stock market, as measured by the ASX 200 accumulation index, has returned about 25 per cent.

The median price of a dwelling in Australia has risen by about 8 per cent over the past 18 months, reversing a previous decline. Overall, the net worth of Australians has increased by around 15 per cent, or more than $800 billion, since the end of 2011.

The pace of new dwelling construction is starting to respond to higher prices in the established property market, as we need it to. In the interim, some commentators have taken the view that the property market dynamics are worrying.

My own view, thus far, has been that some rise in housing prices is part of the normal cyclical dynamic, that it improves the incentive to build, and that a price rise reversing an earlier decline probably isn’t something to complain about too quickly.[sam id=36 codes=’true’]

Moreover, credit growth, at between 4 and 5 per cent per annum to households, and less than that for business, does not suggest that rising leverage is so far feeding the price rise. Hence it has been a little too early to signal great concern.

There are, however, two caveats. The first is that, notwithstanding the above comment, credit growth may pick up somewhat over the period ahead. So this is an area to which we will, naturally, pay close attention.

Secondly, while overall credit growth remains low at present, borrowing is increasing quite quickly in some pockets. Investor participation in housing in Sydney, in particular, is becoming noticeably stronger. Over the past year, the rate of finance approvals for this purpose has increased by 40 per cent.’

John Laker, the Chairman of the Australian Prudential Regulation Authority (APRA) also gave a speech earlier this week which is available from their website, some highlights of his speech follow. 

‘In the short-term, this outlook bodes well for mutual ADIs with their substantial housing loan portfolios. Low interest rates reduce interest payments and facilitate faster repayment of principal on existing loans.

As monetary policy does its job, low interest rates will also stimulate demand for new lending. There are already encouraging signs in housing loan approval data and consumer and business confidence indicators. But, of course, things could play out differently.

A sustained period of low interest rates can mask the creditworthiness of borrowers, and the combination of keen borrowers and buoyant housing markets can be temptations to brake the shackles of low volume growth and lend aggressively.

If the benefits of low interest rates are to prove enduring, it is essential that ADIs, mutual and otherwise, maintain prudent lending standards and a clear understanding of borrowers’ circumstances and their capacity to service debt.

Low interest rates can also encourage a ‘search for yield’ to compensate for lower returns from traditional investments and other activities. Such a search should not take ADIs into new markets or activities without robust due diligence and appropriate risk management.’

 

National Auction Clearance Rates

The number of auctions across the combined capital cities increased last week from 2,370 over the previous week to 2,941 last week, its highest level since RP data has been tracking results. The auction clearance rate increased over the week from 70.4% the previous week to 71.8%.

In Melbourne, there were a total of 1,619 auctions over the week, up from 1,124 auctions the previous week. Melbourne’s clearance rate increased from 68.6% the previous week to 71.9% last week.

Auction volumes across Sydney increased over the week from 913 the previous week to 927 last week, however, the clearance rate remained virtually unchanged, from 79.5% the previous week to 79.7% last week. There are currently 1,535 capital city auctions scheduled for the current week.

http://image.e.rpdata.com/lib/fe591570776d03757d17/m/5/2013_11_01_clearance-rates.png

 

Weekly Advertised Listings

Over the four weeks to 27 October 2013, there were 48,872 newly advertised properties listed for sale nationally, the highest number since December last year. The number of new property listings increased by 2.2% over the week and are 1.9% higher than at the same time last year. Across the combined capital cities, new listings were 2.7% higher over the week and are 4.3% higher than they were a year ago.

There are currently 262,757 properties listed for sale across the country again, the highest number of property listings since December last year. Total listings at a national level have increased by 0.2% over the week and they are -4.6% lower than they were at the same time last year.

Across the combined capital cities, total listings have increased by 0.5% over the week and they are -12.0% lower than they were at this time a year ago. Capital city listings account for around 44% of all listings nationally.

http://image.e.rpdata.com/lib/fe591570776d03757d17/m/5/2013_11_01_weekly-listings.png

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Tim Lawless

About

Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au


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