Let’s look at some clues in the news for what’s ahead for property | Property Insiders [Video]

Key takeaways

This year is going to surprise many people who made forecasts earlier this year, as our housing markets finished the first quarter generally much stronger than many were expecting.

Home loan commitments rose 1.4% over the month of February, and total new loan commitments grew 13.3% over the last year. The total value of new housing loans to investors rose 1.2 per cent in February 2024.

The number of loan approvals for first-time home buyers has been broadly resilient, suggesting that higher mortgage rates are not proving that much of a hurdle.

The rate of annual growth of national house building costs was lower over February, but remains at relatively high levels, placing pressure on home builder profitability.

Auction sales have surged this year, especially in Sydney, where close to 40% more properties sold at auction compared to the same period last year. The national weekend auction market reported a clearance rate of 69.5%, higher than the 64.7% reported over the previous weekend.

Just as last year – 2023 - defied the forecasts of economists and news media, delivering solid price growth around Australia, it looks like this year - 2024 - is going to surprise many of those who made forecasts earlier this year.

Our housing markets finished the first quarter of the year generally much stronger than many were expecting, rents have kept skyrocketing, and those who forecasted falling interest rates are now changing their minds.

Each week, Dr Andrew, Wilson and I look for clues in the news.

Ones that will give us an indication of what’s ahead and today is no different as we discuss what’s happening to the cost of housing, finance approvals, our auction markets and why interest rates won’t fall any time soon.

Home loans rising

We keep a careful eye on home lending approvals as these are a good indication of what’s likely to drive our property markets in the months ahead.

Watch this week’s Property Insider video as Dr Andrew Wilson explains that Home Loan commitments rose 1.4% over the month of February.

In fact, housing lending grew 13.3% over the last year but has tracked broadly sideways over recent months.

The total value of new housing loans to investors rose 1.2 per cent in February 2024, according to the Australian Bureau of Statistics.

In fact, the value of new investor loans in February was 21.5 per cent higher compared to a year ago.

This made up over half of the growth in total new loan commitments over the past year.

Interestingly, lending approvals for first-home buyers have been broadly resilient, suggesting that in aggregate higher mortgage rates are not proving that much of a hurdle (at least relative to the alternative of renting).

The average loan size for first-time home buyers continues to trend higher than that for dwelling price growth, but the number of loan approvals compares reasonably favourably to the pre-pandemic environment.

Higher mortgage rates and affordability constraints are being offset by tightness in rental markets and underlying strength in housing demand.

House building costs lower

During Covid, the government’s Home Builder Program accelerated demand for the construction of homes at a time when supply just couldn’t keep up, causing an explosion in home building costs which has been one of the factors driving inflation and also creating challenges in our housing market, with builders going bankrupt and new projects not coming out of the ground because they are not financially feasible.

Watch this week’s Property Insider Chat as Dr Andrew Wilson explains that the rate of annual growth of national house building costs was lower over February following the rise reported over the previous months but remains at relatively high levels and continues to place pressure on home builder profitability.

When broken down by state, home construction costs in Sydney are considerably higher than in other states.

Auction sales surge to begin 2024

Each week, Dr Andrew Wilson and I dissect the weekend auction results because they are good “in-time” indicators of both buyer and seller sentiment.

High auction clearance rates are also a good indicator of higher property values moving forward.

So far this year, the number of properties sold at auction has surged, especially in Sydney, where close to 40% more properties sold at auction compared to the same period last year.

This weekend resulted in more positive auction results despite school holiday distractions

Weekend auction markets have reported more solid to strong results generally despite the distractions of school holidays now underway in all capitals.

Adelaide had the strongest auction clearance rate of 89.1%.

Auction clearance results for the other capitals were:- Melbourne - 65.7%; Brisbane -61.3%; Sydney - 71.8% and Canberra - 59.4%.

The national weekend auction market reported a clearance rate of 69.5% which was higher than the 64.7% reported over the previous weekend – but lower than the 74.9% recorded over the same weekend last year.

National auction numbers were predictably lower with 1719 listings versus the previous weekend 1863, but significantly above the 1426 listed over the same weekend last year.

Weekend auction markets have continued to report positive results despite the April school holiday period, with continuing high numbers of listings compared to the same time last year.

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.