The Reserve Bank (RBA) released the minutes of their July board meeting earlier this week. At the meeting the RBA board decided to keep official interest rates on hold for the 11th consecutive month at 2.5%.
In their minutes they indicate that interest rates are likely to remain on hold longer stating, ‘Accordingly, with the significant degree of monetary stimulus already in place to support economic activity, the Board judged that, on present indications, the most prudent course was likely to be a period of stability in interest rates.’
Relating to the housing market the minutes noted: ‘Dwelling investment increased noticeably in the March quarter and, over the six months to March, was running at close to the fastest pace seen in around a decade.
Residential building approvals had declined somewhat in recent months, but they remained at relatively high levels and both work yet to be done and loan approvals for new dwellings pointed to further strong growth in dwelling investment in coming quarters.
At the same time, there had been signs of a tempering in conditions in the established housing market. Members observed that, looking through the monthly volatility, housing price inflation had slowed over recent months, auction clearance rates had fallen from the high levels seen late last year, and loan approvals had been little changed over the past six months.’
The RBA also released a research discussion paper this week entitled ‘Is Housing Overvalued’. The paper examined whether it is cheaper to own a house or rent factoring in all costs of both renting and buying.
The paper found that real house prices (i.e. inflation adjusted) have increased at an average annual rate of slightly less than 2.5% since 1995.
[sam id=37 codes=’true’]If that rate of appreciation was to continue then they estimate that housing is fairly valued. If growth is below that level in the future the paper suggests that the average household is probably financially better of renting rather than buying.
The Financial System Inquiry (FSI) delivered their Interim Report this week. For the housing market the notable findings were that the increasing level of housing debt is a potential systemic risk to the financial system.
The Report suggests that perhaps the Big 4 Banks may have to hold more capital against their loans which would somewhat even the playing field between larger and smaller mortgage lenders.
No doubt the final report will have much more on the risks around high house prices and high levels of housing debt.
Weekly Clearance Rates
Auction clearance rates increased over the week with the capital city weighted average clearance rate recorded at 67.2%, slightly down from 68.9% over the previous week.
There were 1,421 auctions held over the week compared with 984 over the same week a year prior however, auction numbers were lower than the 1,442 the previous week. RP Data collected 89% of all auction records.
The major auction markets of Sydney and Melbourne continued to record healthy auction results which were higher than the previous week.
Sydney’s clearance rate was 75.6% across 513 reported auctions, the city’s highest auction clearance rate in 15 weeks. Melbourne’s auction market recorded a clearance rate of 66.4% across 521 collected auction results.
The clearance rate in Melbourne last week was down sharply from the 71.4% over the previous week and at its lowest level in 5 weeks.
Weekly Advertised Listings
Over the four weeks to 13 July, there were 35,432 newly advertised properties listed for sale nationally. New listing numbers have continued to trend lower, which is likely to be mostly a seasonal phenomenon.
Nationally, new listings have moved to be -12.5% lower than a year ago, while across the combined capital cities new stock being added to the market is -7.3% lower than at the same time last year.
There are currently 227,399 properties listed for sale across the country. Total listings at a national level were -7.6% lower compared with the same time last year.
Across the combined capital cities, total listings remain -12.3% lower than a year ago, highlighting that total stock levels have reduced.