The Reserve Bank (RBA) released the minutes of its March monthly board meeting earlier this week. At the meeting the RBA board decided to keep official interest rates on hold at 2.5% and flagged that a period of interest rate stability was the most likely course of action from here.
Perhaps the most interesting portion of the minutes was relating to financial stability and the housing sector.
‘Members noted that rising housing prices and household borrowing were expected results from the monetary easing that had taken place.
While these factors were helping to support residential building activity, they also had the potential to encourage speculative activity in the housing market.
Lending to housing investors had been increasing for some time in New South Wales, and over the past six months it had also picked up in some other states.
While such a pick-up would be unhelpful if it was a result of lenders materially relaxing their lending standards, current evidence indicated that there was little sign of this occurring.
Members noted that the recent momentum in households’ risk appetite and borrowing behaviour warranted close observation, but agreed that present conditions in the household sector did not pose a near-term risk to the financial system.
Members discussed the experience in other countries where macroprudential tools had been utilised to slow demand for established housing and their possible application in Australia.’
[sam id=41 codes=’true’] Of course, it is important to remember that the Australian Prudential Regulation Authority is in charge of overseeing ADIs in Australia and it would largely be their responsibility to implement and manage any macroprudential tools in Australia.
The Australian Bureau of Statistics (ABS) released lending finance data for January 2014 late last week. The data showed that lending by Australian ADIs continues to ramp up. The total value of lending finance increased by 1.7% in January and was 28.3% higher in January 2014 than it was in January 2013.
Year-on-year, lending for owner occupier housing has increased by 18.3%, personal finance has increased by 5.3%, commercial finance is up 40.2% however, lease finance is -18.8% lower over the year.
The rise in lending finance indicates that households and businesses are showing a greater preparedness to borrow which bodes well for an ongoing economic improvement.
Weekly Clearance Rates
There were 2,293 auctions held across the combined capital cities last week and the weighted average auction clearance rate was recorded at 70.8%.
In comparison, over the previous week, there were 1,520 capital city auctions with a clearance rate of 70.2%. Across Melbourne, Australia’s largest auction market, the auction clearance rate was recorded at 67.0% last week, down from 67.0% over the previous week.
The number of properties taken to auction was much higher due to a long weekend the previous week, increasing from 329 the previous week to 1,085 last week.
There were 868 Sydney properties taken to auction last week, with a clearance rate of 79.8%, up from 78.8% the previous week when 1859 auctions were held in the city. RP Data is expecting just over 2,297 auctions over the current week.
Weekly Advertised Listings
Over the four weeks to 16 March, there were 49,520 newly advertised properties listed for sale nationally. The number of newly advertised property listings increased by 2.4% over the week and they are currently 15.2% higher than at the same time last year.
Across the combined capital cities, new listings were 3.3% higher over the week and they were 19.8% higher than a year ago.
There are currently 250,449 properties listed for sale across the country. Total listings at a national level were 0.6% higher over the week but -1.0% lower than they were at the same time last year.
Across the combined capital cities, total listings have increased by 1.7% over the week and they are -5.8% lower than they were at this time a year ago. Capital city listings account for just 42% of all listings nationally.