The Reserve Bank (RBA) released the minutes of their May board meeting earlier this week. At the meeting, the RBA reduced official interest rates by 25 basis points to 2.75%, their lowest level in more than 50 years.
Specifically relating to the housing and construction sector the minutes noted:
‘Dwelling prices were around 4 per cent above their trough in mid 2012, and auction clearance rates had increased. New borrowing for housing had also picked up, while forward-looking indicators and the Bank’s business liaison suggested that demand for new housing was improving – notwithstanding a decline in building approvals in the March quarter – with enquiries from prospective purchasers and visits to display homes increasing.
New dwelling investment had increased since the middle of the previous year, with members observing that approvals for higher-density dwellings had increased, while approvals for detached dwellings had been flat over this period.’
The RBA is obviously keen to see dwelling construction pick up in order to take up some of the slack of a slowing mining sector and they would be eager to see more of a sustained recovery and are obviously hopeful that lower interest rates will assist.
With regards to value growth, we believe the RBA is likely to be reasonably comfortable with the fact values have risen by 2.7% over the first four months of the year and values have recovered by 4.2% between the market trough in May last year through to the end of April 2013.
They are also likely to be reassured with the rate of home value growth moderating in April after a strong first quarter.
Westpac and the Melbourne Institute released the results of their monthly consumer confidence survey for May earlier this week.
The Consumer Sentiment Index was recorded at 97.6 points in May, down -7.0% over the month and at it’s lowest level since August 2012 (96.6 points).
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The consumer sentiment index has now fallen over consecutive months and sits below 100 points indicative of higher levels of pessimism than optimism by respondents. Consecutive monthly falls in the index have not been recorded since March and April of 2012.
Although the index has fallen, it is 2.4% higher than it was in May 2013. Each component of the index fell over the month and the only components now showing higher levels of optimism than pessimism are family finances over the next 12 months and time to buy a major household item.
Latest National Auction Clearance Rates
Last week there were 1,520 capital city auctions, up from 1,582 the previous week.
The combined capital city auction clearance rate was recorded at 67.3% last week, up from 65.6% over the previous week. RPData collected results for more than 89% of all capital city auctions which took place last week.
Auction clearance rates have now been above 60% for seven consecutive weeks, the last time this occurred was in June 2010.
In the Melbourne property market, Australia’s largest auction market, the clearance rate was recorded at 71.9% last week which was up from 71.3% the previous week however, the number of auctions which took place fell to 738 from 807 the previous week.
In Sydney, the auction clearance rate increased to 72.1% last week from 67.7% over the previous week. Auction volumes across the city were unchanged over the week with 516 auctions. Auction activity is set to fall slightly this week, with our figures indicating that there will be 1,541 capital city auctions this week.
Advertised Stock on the Market
The number of new listings being added to the market fell by -2.0% over last week. 42,451 new listings were added to the market nationally, with 25,768 of these located in a capital city.
With the number of new listings falling over the week, there was also a decline in the number of total listings. There were 283,754 homes advertised for sale over the past four weeks. Across the combined capital cities, there were 127,526 homes available for sale, 45% of the total stock available for sale.
New listings nationally are now -10.8% lower than they were a year ago and total listings are -1.9% lower than they were at the same time last year.
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