Approvals pointing to construction downturn
Things are not looking good for building approvals, according to the latest results.
Approvals suggest weakening
Let’s cut through the bear porn to unpick the May 2018 building approvals figures.
Unit approvals held up surprisingly well in the month, mainly supported by Melbourne.
House approvals were down by 8.6 per cent in seasonally adjusted approvals in the month.
At the capital city level, not much was different from a year earlier, save for a slight decline in Perth and Brisbane.
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Here’s where housing rents are rising the fastest in Australia
Rent are on the rise – but where are they rising the fastest?
An article on Business Insider looks at the results.
The cost to rent a home in Australia is increasing, albeit not as fast as was the case this time last year.According to CoreLogic’s Quarterly Rental Review, the average rent nationally rose 0.3% to $429 in the June quarter (all figures per week), leaving the increase on a year earlier at 1.8%.
The quarterly change was less than half the 0.7% increase recorded during the same period a year ago.
CoreLogic said average capital city rent rose by 0.3% in the three months to June, outpaced by a 0.4% increase in regional markets over the same period.
Those trends were also seen over the year with the average capital city rent lifting by 1.4%, less than half the 3.1% increase in regional areas.CoreLogic
Cameron Kusher, Research Analyst at CoreLogic, said the divergence partially reflects an increase in housing supply in capital cities, especially in the eastern capitals.
“The first two quarters of 2018 have seen softer rental growth than the same two quarters of last year highlighting the slowing rental growth across the nation,” he said.
“With rental stock continuing to rise as off-the-plan unit settlements continue, it is anticipated that the softening rental growth will continue over the coming months.”
Average rental rates for houses nationally increased by 1.9% over the year, faster than the 1.7% lift for units over the same period.
Interestingly, the national rent for units is higher than for houses, sitting at $434 and $427 respectively.
By individual capital, rents climbed in all capital cities aside from Darwin and Sydney during the June quarter.
Hobart, currently the hottest capital city market in terms of price growth, also registered the largest increase in rental rates, jumping by 1.9%. Canberra, at 1.3%, also registered a hefty increase during the quarter.
As seen in the table below, Hobart also topped the list for rent increases over the past year, soaring by a massive 10.7%.CoreLogic
Gains in other capitals ranged from 4.5% in Canberra to just 0.1% in Sydney. Darwin, at 1.7%, was the only capital to register a fall in average rents over the year. Darwin’s median home price has also fallen the most of any capital over the past 12 months.
By dollar value, and despite lagging the increase in the national average over the past year, Sydney remains the capital with the highest average rent across the country at $583.
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What’s different about this market slow down?
It’s no secret that the market has paused it’s breaks a little – but how is this different from previous slowdowns?
In this article for Switzer, John McGrath gives an inside look at what we need to know.
The key difference between the current market slow down occurring in Sydney and Melbourne and previous market corrections is that this one has been largely engineered through increasing restrictions on residential lending that are compromising buyers’ ability to purchase property.
Previous market slowdowns following a boom have typically been the result of rising interest rates or a change in economic conditions.
Not this one.
Interest rates remain very low with no prospect of a rate rise in sight and the economy is doing well with low unemployment and good growth.
While normal market cooling factors are certainly at play, such as affordability and reduced yields for investors, the biggest factor dampening our market right now is the availability of finance.
Tighter lending policy for residential property began in 2014 and was initially aimed at investors.
APRA imposed a 10% limit on investor credit growth, which meant the banks couldn’t lend to as many investors.
Then they told the banks they had to limit new interest-only loans.
This resulted in banks putting a premium on investment interest rates (typically about 0.6%) and interest-only loans (typically 1%), which dampened investors’ enthusiasm.
This had the greatest impact in Sydney and Melbourne, where investor activity has been highest in recent years.
Now the banks have tightened their serviceability checks on all borrowers – not just investors.
The way they calculate what a borrower can comfortably afford has changed.
There is far more scrutiny around living expenses and debt to income ratios, which makes it tougher for borrowers in our most expensive markets to get approval.
APRA suggested that banks limit loans on “very high” debt to income ratios of six or more.
According to CoreLogic figures, the ratio of home values to income in Sydney and Melbourne is 9.3 and eight.
Not only does this mean fewer people are getting loans, but more significantly, the time it’s taking for good borrowers to be approved is blowing out, and this is directly reducing auction competition.
We are hearing many stories of buyers not being able to get loans approved in time to bid.
They see the property in week one, they commence the formal loan approval process and by week four they are still waiting for the rubber stamp.
You can’t bid without your finance, so they don’t compete.
This is a problem in a cooling market where many auctions are typically attracting one to three bidders instead of five or more during the boom.
It is no doubt contributing to falling clearance rates (although a great price can still be achieved later when buyers are able to participate).
While tighter credit policy is frustrating the marketplace, it is making our banking system stronger.
After seeing what can happen when the sector fails, as it did in the US in 2008 triggering the greatest financial crisis of our time, the long-term benefits of a strong system outweigh everything else.
If you’re currently looking to buy and you’re in a good financial position where securing finance shouldn’t be too difficult, the market presents good opportunities for you today.
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Town for sale – all of it for $500,000 – and you get 16 homes
Why be a lord or lady of the manor – when you can be king or queen of the land!
For a cool 500k – you can own a small town and the houses to boot, according to this article from Queenslandcountrylife.com.au.
Fancy being king or queen of your own burgher, with fishing and forests at your doorstep and clean air?
Well you can, for just $500,000 and you get 16 homes thrown in as well.
The small township of Allies Creek near Monogorilby, about 400km north-west of Brisbane, is up for sale by its owner Natali Williams.
The real estate comes with a community hall, a dam full of fish and two industrial sheds.
Mrs Williams husband died a few years ago and she has decided to put it on the market through Danielle Meyer Rural.
The agent says the town has a future as a potential conference venue.
But real offers haven’t exactly been flooding in, although the agent says hundreds of people have rung up about it.
Mrs Williams told The Land on Thursday that no “specific offers have been made” despite the sale being publicised on national television stations.
“It seems like everyone is trying to get their money together or something,” Mrs Williams said.
“We’ll see what happens.”
The town was a saw milling camp until 2008, with a state forest nearby.
The camp was closed by the government after changes to forestry management.
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