This week’s property market wrap from RPData | Tim Lawless

Early this week the Reserve Bank announced that the official cash rate would remain on hold at 2.5%, taking us into the fourteenth consecutive month of this historically low interest rate setting.

The average variable home loan rate remains at 5.95%, however the more realistic average discounted variable rate is a lower 5.1%. property interest-rates

Without doubt, the low interest rate environment is one of the key factors driving the demand for housing higher and causing the high rate of capital gain, which is particularly evident in Sydney and Melbourne.

While a rate hike would alleviate some of the upwards pressure on dwelling values, it would also push the Australian dollar higher, stifle dwelling construction and dampen household consumption; all factors the RBA definitely wants to avoid.

The timing of a lift in rates is still well and truly up in the air, however most economic commentators seem to agree that interest rates will move higher in the first half of next year.

The RBA also fronted the Senate Economics Committee last week where assistant governor, Malcolm Edey indicated there was a high likelihood that new rules would be issued (by APRA) before the end of the year to limit the extent of investor lending.

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This announcement is clearly in response to the surge in investment housing demand where investor loans recently reached a record proportional high, comprising 38.8% of all housing finance commitments over the year to July 2014.

New regulations from APRA are likely to take the form of higher risk weightings (or capital) for investment loans, although this is unclear at this stage.

In any event, the goal would be to slow the level of speculative investment across the housing market, particularly in Sydney and Melbourne, alleviating the pressure on the RBA to raise interest rates in order to dampen housing market conditions.

In other news, RP Data has released the latest Pain and Gain report which tracks the value and proportion of profit making and loss making sales across the country.

The headline findings show that the proportion of loss making sales continued to fall across Australia with 9.0% of all dwelling sales over the June quarter recording a gross loss compared with their previous purchase price.

The proportion of loss making sales is down from a previous peak of 13.0% over the three months ending January 2013. The proportion of loss making sales was highest across regional Queensland at 21.6% and lowest across Sydney at just 2.7%.

Weekly Clearance Rates

Auction numbers were lower last week due to the NRL Grand Final which saw only 473 auctions held across the Sydney market.auction3

The overall weighted average clearance rate across the combined capitals was 66.9%, the lowest reading since the last week of June this year (66.6%).

In Sydney, despite the NRL Grand Final, the auction clearance rate was recorded at 76.4% which is still well above the long term average.

The nation’s largest auction market, Melbourne, saw 912 auctions held with a clearance rate of 69.1% which is the lowest rate of clearance since the first week of August.

With grand finals now behind us, it will be interesting to see if auction numbers and clearances return to their previous highs.

Capital city auction clearance rates

Week ending October 5, 2014

Weekly auction clearance rates

Weekly Advertised Listings

Over the four weeks to the 5th of October, there were 46,059 newly advertised properties added to the market nationally. New listing numbers are continuing to trend higher as Spring progresses.

Nationally, new listings are -2.1% lower than a year ago, while across the combined capital cities new stock being added to the market is -0.5% lower than at the same time last year.

There are currently 237,596 properties listed for sale across the country. Total listings at a national level were -5.2% lower compared with the same time last year.

Across the combined capital cities, total listings are -9.4% lower than a year ago, highlighting that total stock levels have reduced substantially over the year.

Note that sales listings are based on a rolling monthly count of unique properties that have been advertised for sale.

Number of homes for sale

Residential property listings advertised for sale over the four weeks ending 5/10/2014

Advertised listings



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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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