The Reserve Bank (RBA) held their April 2017 monetary policy meeting earlier this week and at the meeting the board decided to keep official interest rates on hold at 1.5%.
In the statement accompanying the announcement of their decision the commentary around the housing market was much more pointed than it has been in the past.
The key points noted were:
‘Growth in household borrowing, largely to purchase housing, continues to outpace growth in household income.
By reinforcing strong lending standards, the recently announced supervisory measures should help address the risks associated with high and rising levels of indebtedness.
Lenders need to ensure that the serviceability metrics that they use are appropriate for current conditions.
A reduced reliance on interest-only housing loans in the Australian market would also be a positive development.’
The RBA comments come on the back of the prudential regulators’ policy announcement which is aimed at reducing interest only lending from 40% of new mortgage originations to 30% as well as pushing for more investment loans to be written based on deposits of at least 20%.
Furthermore it has also been announced that APRA is pushing for lenders top hold more capital against their mortgages.
The cost of the additional capital requirement is likely to be pushed on to mortgage holders in the form of higher mortgage rates.
Despite the steady cash rate, mortgage rates have been edging higher over recent months, particularly so for investors.
The Australian Bureau of Statistics (ABS) released building approvals data for February 2017 earlier this week.
The data highlighted that over the month there were 18,995 dwellings approved for construction, of which 9,530 were houses and 9,466 were units.
Although dwelling approvals have increased over the past two months, they are -4.9% lower year-on-year.
House approvals are -4.4% lower than they were at this time last year and unit approvals are -5.4% lower.
The data suggests that the recent rebound in dwelling approvals has been driven by increases in approvals for houses and units in both Sydney and Melbourne.
In the other capital cities approvals have continued to trend lower over recent months
CoreLogic collected results for 90.1% of the capital city auctions held over the past week.
Based on these results, the combined capital city auction clearance rate was recorded at 75.9% across 2,657 auctions last week.
Clearance rates increased on lower volumes last week, with the clearance rate recorded at 74.5% the previous week from 3,171 auctions.
Auction clearance rates last week were the highest they’ve been in five weeks and were higher than they were a year ago when they were recorded at 66.6%.
Melbourne’s auction clearance rate rose from 78.9% the previous week to 79.6% last week while auction volumes fell from 1,607 to 1,143.
In Sydney, clearance rates were also higher last week than over the previous week, increasing to 78.0% from 75.8%.
Sydney auction volumes were higher over the week increasing to 1,104 from 1,098.
Outside of the major auction markets, clearance rates increased in most of the other capital city markets last week.
The number of new and total residential properties advertised for sale has fallen again over the past week however, new advertisements are higher than a year ago and total advertisements are lower.
Keep in mind that this week last year was Easter which generally results in a fall-away in advertised properties, so the year on year comparison has been affected by this timing.
Over the 28 days to April 2, there were 43,269 newly advertised residential properties for sale nationally and 26,842 across the combined capital cities.
Newly advertised properties for sale are 4.6% higher than a year ago nationally and 8.7% higher across the capital cities.
Interestingly, although newly advertised stock is higher than a year ago in most capital cities, the number for sale is actually lower than last week across all capital cities.
Nationally over the past 28 days there were 230,443 properties advertised for sales and 106,331 across the combined capital cities.
Total advertised is -2.3% lower than a year ago nationally and 2.8% higher across the combined capitals.
Again, the comparison to last year shows that total stock for sale is generally higher than a year ago across the capital cities, whereas, listing numbers have in fact fallen across most capital cities over the past week.