Here’s this week’s property market wrap…
APRA recently sent a letter to all Australian authorised deposit-taking institutions (ADIs) about reinforcing sound residential mortgage lending practices.
The letter states that APRA has been discussing with other members of the Council of Financial Regulators (CFR) further steps that could be taken to reinforce sound lending practices and mitigate any speculative pressures that may be building.
APRA are stepping up their surveillance but are not introducing any specific macro prudential tools.
They note concerns around lending with a high loan-to-income (LTI) ratio and high loan-to-valuation ratio (LVR) as well as interest-only lending to owner-occupiers on a long term basis.
They are also watching carefully those ADIs that are growing the investor segment of their portfolio rapidly and have set a benchmark at annual growth ‘materially above’ 10% per annum.
Finally they have also stated that ADI policies should include a serviceability buffer of 2% above the loan product rate with a minimum floor assessment rate of 7% in order to ensure borrowers can repay mortgages at higher interest rates.
If these benchmarks are not being met, APRA has indicated that they would then consider the need for additional steps including the consideration of individual Pillar 2 capital requirements for individual ADIs and (i.e. making ADIs hold more capital against their mortgages).
They may also consider more direct controls such as regulatory limits on lending activities, this may include limits on higher LVR lending or limits on higher LTI lending.
Consumer Sentiment Index results
Westpac and the Melbourne Institute released their Consumer Sentiment Index results for December earlier this week.
The Consumer Sentiment Index fell by 5.7% in December 2014 to 91.1 points which is its lowest level since August 2011.
The index has now consistently shown higher levels of pessimism than optimism over the past 10 months – a period of consistent pessimism not seen since the depths of the GFC.
The quarterly survey showed that 40.3% felt it was wise to place savings in a financial institution with 7.0% choosing shares, 20.0% choosing real estate and 17.6% choosing to pay down debt.
The figure for a financial institution was at its highest since September 2012.
Shares were at their lowest since December 2012, real estate was at its lowest point since September 2012, and paying off debt was at its highest level since March 2013.
Weekly Clearance Rates
CoreLogic RP Data recorded 3,507 auctions results across last week which accounted for 87% of all auctions held.
The weighted average auction clearance rate remained below the 70% mark for the 10th week running, recorded at 63.7%.
At the same time last year the weighted average clearance rate was slightly higher at 64.5%.
With 3,507 capital city auctions, volumes were 9% higher than a year ago but -10% lower than over the previous week.
Auction clearance rates fell over the week in Sydney but rose in Melbourne.
Sydney’s auction market saw a success rate of 66.1% across 1,294 auctions, which was its lowest clearance rate since June last year in and Melbourne recorded a clearance rate of 66.0% across 1,733 auctions, which was an increase from 63.0% from 1,635 auctions the previous week.
Capital city auction clearance rates
Week ending December 7, 2014
Weekly Advertised Listings
Over the four weeks to the 7th of December, there were 48,607 newly advertised properties added the national market which marks the 3rd consecutive weeks that new listings have fallen.
New listing numbers are lower than at the same time a year ago (-1.5%) nationally and are -1.1% lower across the combined capital city markets.
New listings are now lower than they were a year ago in all cities except for Brisbane (+7.0%), Adelaide (+2.7%), Perth (+1.9%) and Darwin (+1.7%).
Total advertised stock levels have started to trend lower over the past three weeks and are lower than they were at the same time last year.
Nationally there are 254,938 homes being advertised for sale (-2.3% lower than a year ago) and across the capital cities there are 110,857 listings (-3.9% compared with last year).
With the Christmas slowdown imminent we would expect both new and total listings to continue trending lower over the coming weeks.
Note that sales listings are based on a rolling 28 day 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 7/12/2014
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