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- Sep 23 2015 at 5:55 PM
- Updated Sep 23 2015 at 5:55 PM
Housing 100: The growth in NSW and Victoria
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/i/x/n/4/q/image.related.afrArticleLead.620x350.gjt90q.png/1442994922678.jpg[/img]Building in Barangaroo: Australia's largest residential project on the Sydney CBD's western edge is just one project that is keeping housing construction strong in NSW. Cameron Spencer
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by Michael Bleby
For all the talk of a slowing in housing construction, all signs are that the two largest states will provide heavy lifting for some time to come, as population grows and NSW continues to make up for a lost decade of growth.
New housing starts rose 20 per cent in NSW in the year to June and 26 per cent in Victoria over the same period, the Housing Industry Association's Housing 100 report estimates.
This is giving a boost to many. Brookfield Multiplex, which does more commercial construction work than residential, jumped into seventh place on the NSW top-20 list from nowhere, with 663 housing starts during the year. The company was also the biggest absolute gainer during the year overall, with an increase of 1364 starts, a 62 per cent rise on the previous 12-month period.
Newcastle-based McDonald Jones Homes boosted its number of starts by almost a third, or 273 detached houses, propelling it to 14th position in the top 20 home builders nationally, with a total of 1165 dwellings.
The strong market is also rewarding interstate operators who have invested in the state. Melbourne-based volume builder Metricon held its position at No. 8 on the NSW list of home builders but increased its NSW housing starts to 600 from 453 in 2014 – a 32 per cent rise. In Victoria, Metricon also held third place but increased its number to 1898 from 1579 starts.
"We are particularly satisfied to improve our numbers in the growing NSW market and in Victoria," said Metricon chief executive Mario Biasin.
CHANGING MARKET
The changing housing market reflects the wider evolution of the Australian economy, with activity strongest in the non-resource states, in contrast to their languid performance just a few years ago, when WA and Queensland were the crucible of the two-speed economy in its last form. That performance was likely to continue, said Dale Alcock, managing director of Perth-based ABN Group, the country's second-largest home builder.
"The relative overheating of the Sydney market is very much around a catch-up," Mr Alcock said. "That market was off for many years and they were under building. The catch-up in Sydney is very much as a result of that. It may just slightly overshoot the runway but Melbourne is steady. It's a very steady economy and market. I don't see they're overbuilding. It's more that they'll be meeting the demand that's there."
ABN does not operate in NSW but it does in Victoria.
"There's a lot of overseas migration that might enter through Sydney but Sydney being a very expensive place, you'll find a lot of that makes its way to Melbourne incrementally," Mr Alcock said. "Melbourne's a net gainer out of that."
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Housing boom not over yet: Brickworks CEO
Kylar Loussikian
[Image: kylar_loussikian.png]
Journalist
Sydney
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Brickworks chief executive Lindsay Partridge. Picture: Britta Campion Source: News Corp Australia
[b]Australia’s home building boom would continue for longer than many market analysts expect, Brickworks chief executive Lindsay Partridge said as he announced a slid in net profit to $78.1 million for the financial year ending June.[/b]
Mr Partridge said key markets in NSW had been undersupplied for a decade, a situation that would take years to reverse.
Those comments are significantly more bullish than market consensus, with UBS estimating a peak of around 210,000 housing starts this year, falling to 175,000 by 2017.
Forecaster BIS Shrapnel also expects residential building to moderate by the end of the year, with commencements falling 6.2 per cent by next December. Despite this, building starts will remain significantly above the decade average.
“Every other housing boom has come to an end because of a credit squeeze,” Mr Partridge said.
“I don’t think anybody is forecasting a credit squeeze. What will happen in every other state bar NSW is that they will build out the demand in a couple of years.
“NSW has a much bigger backlog and I think it will be a number of years before we build the demand out,” he said.
Mr Partridge was speaking after Brickworks announced a 24 per cent fall in net profits, pushed down by a $10m goodwill writedown at its Austral Precast business, a $6.7m writedown of log licences at its Auswest Timbers division, and a $25.1m hit on investments related to Washington H Soul Pattinson.
Despite the fall in statutory profits, Brickworks increased its final dividend by 2c to 30c a share, taking full-year dividends to 45c per share. Shares fell marginally, closing 13c lower at $15.24.
The company’s Austral Bricks division delivered a 40.5 per cent increase in earnings, buoyed by an increasing use of brick in high-rise apartment developments.
Brickworks reported strong levels of supply from builders, with Mr Partridge yesterday telling investors new housing approvals suggested building activity could rise again in the next six months.
After the investor presentation, Mr Partridge said: “For every block that comes up for sale (in NSW), there are at least 10 people in line to buy it, and that would indicate that the demand is a long way from being satisfied.
“Part of that is a 10-year lull in NSW and the volume in there, there’s a massive number of people who would like to buy a house, but the backlog is about 100,000 and with a construction rate of 62,000 and a demand of 45,000 you can work out that there’s a lot of years of work to pull that back.”
Mr Partridge said the Austral Precast division, which had targeted the industrial warehouse sector, would be repositioned to focus on the residential market after recording flat sales in NSW and Victoria. The company’s property division reported marginally higher earnings in the financial year ending June, up 3.1 per cent to $64.4m.
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Lower house prices could hurt economy by sending builders broke
Robert Gottliebsen
[Image: robert_gottliebsen.png]
Business Spectator Columnist
Melbourne
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Builders in major cities have been stuggling to get finance for new projects. Source: News Limited
[b]Be careful what you wish for. Right now, among many things, young Australians are wishing for lower dwelling prices and bank regulators are wishing for banks to cut back on home mortgages to investors and increase their capital ratios.[/b]
We are also wishing for a lower dollar to help miners.
It is just starting to become apparent what those wishes might collectively actually mean to ordinary Australians. The collapse of the mining investment boom plus Joe Hockey’s motor closure set Australia on what seemed an inevitable path to a nasty high-unemployment recession.
What has so far saved us from that unpleasant fate is massive government overseas borrowing to fund big deficits and a housing boom that is boosted by Asian investment. Both those anti-recession pillars now look like being simultaneously knocked out. We will leave the plans of new Treasurer Scott Morrison for another day, to concentrate on the housing/banking pillars.
Suddenly we are finding that builders in our capital cities, but particularly Sydney and Melbourne, cannot get finance from banks for building projects. Having massive pre-sales is not a ticket to bank finance unless you can get a Chinese bank to help out. The difference between the number of approvals and what is actually built, particularly in Sydney, shows that many projects are either not going ahead or have been delayed.
I understand that many builders, in desperation, are going to non-bank lenders and paying much higher fees and interest charges to enable their projects to proceed. To remain solvent the builders have to charge more for their dwellings to cover the higher financing costs.
If we achieve much lower dwelling prices, then many of those builders — some are large — and their subcontractors will collapse, sending shockwaves through the economy at a time of planned lower government spending.
So now we turn to banks, whose shares represent four of the top five listed ASX companies. Banks are at the heart of our savings and business communities. This process puts them in a profits squeeze which they will try to mitigate with much lower costs and slugging depositors.
However, we just saw the Commonwealth Bank encounter a 50 per cent shortfall in its retail share offer subscriptions, and yesterday the shares fell close to the issue price. As we can see, the squeeze on the banks is affecting more than just the building community and as bank shares fall banks will become more and more cautious in their lending because equity capital raisings become more expensive.
Pressing banks to cut lending and to have more liquid assets sets us on a dangerous path because if we actually do cause dwelling prices to fall substantially and developers go broke, then bank bad debts rise.
As we have seen before, those forces can soon spiral out of control and you have a full credit squeeze. I personally experienced my first credit squeeze in 1960-61 but I remember my parents suffering in the mid 1950s. In Australia no one under 40 has really been through that sort of experience so they have no idea what can actually happen if you pull too many levers the wrong way at the same time.
And don’t forget the dollar lever. We all understand why we want a lower dollar but every time the Reserve Bank calls for a lower currency the shorters of the currency have a ball while the Chinese who have invested in our dwellings suffer. It makes the next generation of Chinese investors nervous.
Clearly we do not want dwellings in Sydney and Melbourne to keep skyrocketing but we currently have a series of people working on bank ratios, bank lending, government deficits and so on. No one is thinking about the overall collective dangers of what we are doing in our separate silos.
And remember, according to Infrastructure Australia we are going to need a lot more dwellings to cater for a rising population.
What if we decided to cut dwelling prices by dramatically increasing the supply of dwellings instead of contracting the supply at a time of shortage — particularly in Sydney? But that would take a cultural shift from federal, state and local politicians and the multitude of different regulators.
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Slow land supply driving up house prices, says Treasurer Morrison
- AAP
- SEPTEMBER 25, 2015 2:26PM
[b]Treasurer Scott Morrison believes the slow release of land is behind soaring house prices.[/b]
Mr Morrison said it was important to have a competitive regulatory system on housing development, commending the NSW government on its decision to release almost 8000 hectares of land for a new south-western Sydney community.
“If we have the pent-up supply issues and not being able to respond ... then night follows day and prices go up,” he told reporters on the NSW Central Coast today.
However, Treasury officials told a parliamentary committee the government was also looking at tax treatment of capital gains on investment properties.
People who own investment properties only pay half the normal amount of capital gains tax and can negatively gear, or count as tax deductions, money spent on maintenance.
Senior Treasury official Paul Tilley told the House of Representatives inquiry into home ownership on Friday that negative gearing did not cause a tax distortion.
But the department had spent a lot of time looking at the capital gains exemptions, and continued to do so, he said.
“The new prime minister and new treasurer have indicated they’re areas, together with superannuation, that we’ll look at,” Mr Tilley said.
The comments come as data released today showed purchasers were paying a lot more for vacant land and getting a lot less for their money in Australia’s cities, although prices in regional markets had fallen.
Vacant land selling prices have continued to rise in the capital cities, increasing by 6 per cent in the 2014/15 year, CoreLogic RP Data says.
In regional markets land prices fell by 3.4 per cent.
CoreLogic RP Data senior research analyst Cameron Kusher said median land prices in regional areas were now 39 per cent lower than in capital cities, the widest differential since August 1990. There has been a consistent trend towards smaller lot sizes but again regional areas have fared better with their lot sizes increasing.
“The cost of capital city land is still rising, as an extension this means the cost of new housing is also rising,” Mr Kusher said in a research note.
“While restricted land supply and excessive charges associated with new development remain, we anticipate that the cost of vacant land and subsequently new housing will continue to rise.”
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- OPINION
- Sep 25 2015 at 11:15 AM
- Updated Sep 25 2015 at 2:20 PM
The housing boom has not peaked
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/o/1/w/1/image.related.afrArticleLead.620x350.gjtdp8.png/1442545884281.jpg[/img]Fed chairwoman Janet Yellen got the yips on rates because she was worried, ironically, about the signals markets were sending her on global growth. AP
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by Christopher Joye
The same people who failed to predict the great Australian housing boom of 2013 to 2015, who dismissed the possibility of a bubble emerging, and who poured cold water over the idea that regulators would introduce unprecedented controls to cool conditions, are now screaming that the market has "peaked". I will explain later why there is absolutely no evidence to support this proposition. For better or worse, this boom has some way to go yet.
Our new Prime Minister, Malcolm Turnbull, has had an impressive week. Contrary to the preternatural media cynicism that is an echo chamber of the myopia that plagues politics, his first big interview with the ABC's Leigh Sales was not a warm and fuzzy puff piece.
Faced with a fresh leader who has yet to make fatal mistakes, Sales was appropriately respectful. Carefully controlling the conversation, she expertly drew Turnbull out on his defining philosophical principles, key policy positions and priorities, and learnings from past mistakes. It was encouraging to listen to a confident leader with a command of the economy who could clearly communicate a positive vision of the nation's prospects rather than a tit-for-tat vilification of political opponents.
Turnbull was right in making the point that, given Australia is experiencing one of the sharpest declines in capital investment (aka the "capex cliff") and export prices in history, the economy's performance has been resilient. Care of record low borrowing rates that have fuelled double-digit gains in the value of our bricks and mortar, the growth engine has migrated from mining to much-needed housing construction, which must increase to meet the accommodation demands implied by our population projections.
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In this context, the new Treasurer, Scott Morrison, who was once shadow housing minister, is correct to focus on liberating stubbornly inert housing supply to address the structural affordability problem that is attributable to artificially expensive urban land values rather than building costs. (I first highlighted this in a 2003 report I wrote for Turnbull and former prime minister John Howard.)
SCARE-MONGERING
Despite the scare-mongering surrounding the end of the resources boom, we did manage to expand the real value of Australian output (or gross domestic product) by 2 per cent over the year to June 30, which is only about half a percentage point short of recently revised estimates of "trend" growth. The jobless rate has likewise stabilised at a historically low 6 per cent, which is not miles above full employment, while the 37 per cent depreciation in the Aussie dollar is furnishing an exceptionally powerful tailwind for import-competing industries, exporters and tourism.
Turnbull argues that a headwind to unleashing our economic potential is the consumer and business uncertainty induced by petty politics and the leadership lacuna. When the parties responsible for running our $1.5 trillion economy cannot manage their way out of a paper bag, and are more interested in debasing the policy dialogue to the intellectual quotient of a schoolyard bully, the community is bound to become dispirited.
Of course the media eagerly amplifies this noise. During the week there was a sensational report that Turnbull has suddenly decided to ditch Treasury's tax reform process, to the detriment of our collective welfare. The digitally disposed Prime Minister immediately retorted on Twitter that the "story is not true". Thankfully, Fairfax Media's Peter Martin calmly explained that Turnbull was, in fact, revitalising a process "badly in need of a reset" after Tony Abbott had taken key reform targets including superannuation, the GST, capital gains tax, and home loans off the table. "Like the Black Knight in Monty Python and the Holy Grail, the Treasury was continuing to draft the paper after its arms and legs had been chopped off," Martin observed.
Turnbull believes government has become a handbrake on private ingenuity and enterprise – the only way to enhance long-term living standards – through unnecessarily invasive and often irrational decision-making. He's trying, therefore, to recalibrate the public narrative to inspire workers, owners and entrepreneurs to garner the conviction to invest in their futures. The idea is that government seeks to empower markets rather than distorting them and dulling productivity.
ADDICTIVE ELIXER
This is the single most important challenge of the post-global financial crisis era. That is, disentangling governments from markets and weaning investors off the addictive elixir of taxpayer bailouts every time a market signals that bad businesses need to fail to enable better ones to rise in their stead.
It's no coincidence that almost every crisis we've experienced in the eight years since the GFC has spawned directly or indirectly from the public sector. Recall the first European sovereign debt crisis that savaged all asset classes in mid 2012. Or the US Federal Reserve's "taper tantrum" 12 months later, when then Fed chairman Ben Bernanke canvassed the cessation of its unprecedented purchases of trillions of dollars worth of government bonds.
This year we've had huge shocks wrought in June by Greece's unsustainable finances and mooted exit from the euro zone, and then in August by the bursting of the immense asset price bubble in Chinese equities, which are dominated by state-owned enterprises. China's imbalances are the result of a highly opaque and centrally planned economy that pollutes savings and investment decisions. The exemplification of this was President Xi Jinping's crazy June prediction that the Shanghai Composite Index would "soon hit 10,000 points". The poor punters who followed their dear leader's prescriptions watched the value of their stocks slump some 40 per cent, with further losses cauterised by the government's preparedness to spend hundreds of billions of dollars of taxpayer mullah buying shares.
Global markets are currently in a fizz because of the Fed's decision not to rais interest rates from their near-zero base in September notwithstanding a US jobless rate of just 5.1 per cent, which is technically below chair Janet Yellen's "full employment" range of between 5.2 per cent and 5.6 per cent.
Yellen apparently got the yips because she was worried, ironically, about the signals markets were sending her on global growth. And even though investors only put a 30 per cent probability on a September increase, they are now having conniptions that Yellen knows something they don't. This illogical circularity is precisely what you get when governments interfere in markets for years to create an Alice-in-Wonderland-like alternative reality.
And so Aussie shares are down 3.6 per cent in September after a staggering 8.1 per cent loss in August, which has wiped out the gains in the first quarter of 2015 to bring the year to date drawdown to a painful 6.3 per cent.
GAINS WIPED OUT
According to Bank of America Merrill Lynch (and the Bank of England), we now have the lowest short- and long-term interest rates in 5000 years! And ANZ reckons the RBA will cut twice more in 2016.
Enter the mindless media. After missing the arrival of the housing boom-turned-bubble in 2013 and 2014, they are falling over themselves to report the market has "peaked", auction clearance rates are plummeting, and prices are dropping. The hard data suggests this is bollocks.
Aussie dwelling values have inflated a healthy 0.5 per cent in the first 24 days of September and by a super-strong 3.7 per cent over the past three months, which is a 15 per cent annual pace. Over the nine months of 2015 capital gains have annualised at an incredible 12.1 per cent, which is faster than the 10.8 per cent year-on-year growth through to end September.
Pity the Reserve Bank of Australia's Glenn Stevens, who in mid-2014 said "it would in my opinion be good" if a "slower pace of growth in dwelling prices … did persist for a while". Stevens was hoping for "unremarkable performance on [house] prices" for the "next couple of years". Yet this week the RBA revealed that, relative to household incomes, dwelling prices are now the most expensive on record, surpassing the high watermarks set during the 2003, 2007 and 2010 booms.
Much-maligned auction markets also remain in rude health. Last weekend's 70.7 per cent clearance rate was way above the 59.8 per cent average since 2008 and notably identical to the outcome achieved this time last year. With tighter lending rules and a temporarily frozen Chinese bid (their government is trying to thwart capital flight), capital gains will likely decelerate from their current double-digit pace back to around 3 to 4 times wages growth. Property prices will stay well supported by the cheapest home loan costs borrowers have ever seen, a much lower Aussie dollar that stimulates expat and foreign demand, and the illusion that bricks and mortar, which does not get regularly revalued, is safer than the high-frequency and brain damage-inducing volatility of the sharemarket (and super portfolios overexposed to it). With banks needing to maintain asset growth and the RBA dovishly neutral, this boom will continue for some time yet.
The author is a director and shareholder in Smarter Money Investments, which manages fixed-income investment portfolios.
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- Sep 27 2015 at 11:50 AM
- Updated Sep 27 2015 at 6:25 PM
'Sydney's great auction boom has clearly ended'
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/j/v/q/s/c/image.related.afrArticleLead.620x350.gjvqr2.png/1443342331619.jpg[/img]This three-bedroom apartment at East Esplanade, Manly sold for $1.355 million on Saturday after being passed in at auction. Christopher Pearce
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by Larry Schlesinger
Auction clearance rates rose in Sydney and held firm in Melbourne after one of the biggest auction weekends of the year, but did nothing to dampen expectations that boom conditions have ended and that price growth will continue to moderate over the coming months.
In Sydney, a preliminary clearance rate of 74.2 per cent was recorded by CoreLogic RP Data, with 1000 of the nearly 1200 scheduled auction results in. This was up on last week's calendar year-low of 70.7 per cent, but down on the 76.9 per cent achieved over the same weekend last year.
"Sydney's great auction boom has clearly ended. It is evolving into a buyer's market," said economist Andrew Wilson from Domain Group.
SQM Research director Louis Christopher said once all the results were in, the Sydney clearance rate was likely to be closer to 70 per cent, well down on results of more than 75 per cent achieved last spring and far off the 80 to 90 per cent clearance rates reported earlier in the year.
"The market has slowed down in Sydney. Buyers are still there, but they are a little more cautious and there are more sellers," he said. He added that there was also more disagreement between buyers and sellers about what represents fair market value.
But, he said, these conditions reflected a return to more normal market conditions, not an impending bloodbath as some analysts have predicted.
SLOWDOWN, BUT NOT DRAMATIC
"We will see a slowdown in price growth in Sydney and Melbourne, but not as dramatic as some are saying. The market is still rising, but at 7 to 9 per cent annually, instead of 15 to 20 per cent," Mr Christopher said.
He said clearance would have to fall below 60 per cent before there would be any rapid slowdown in the market.
The weaker buying conditions were also reflected in the more subdued launch on Saturday of One A Erskineville, a 172-unit project developed by the Linear Group and ASX-listed Abacus Property, just three kilometres from the Sydney CBD.
Priced from $625,000 upwards, less than half the available stock sold on the day [80 units] compared with same-day apartment sellouts earlier in the year.
Off-the-plan buyers included Emily Whittington, who paid $885,000 for a two-bedroom unit. "The market is crazy. Astronomical prices. I am trying to save and the prices keep going up. I just want to get on the ladder and get a unit here, as I don't like auctions," she said.
MELBOURNE CLEARANCE RATE FALLS SLIGHTLY
In Melbourne, where there were also nearly 1200 auctions scheduled, the clearance rate fell slightly from 73.7 to 73.4 per cent, making it the fourth-weakest result of the year. (Last year, the same weekend hosted the AFL Grand FInal with just 112 auctions recorded.)
Melbourne buyer's agent Richard Wakelin said a rebalancing of the market was under way, with a "definite reduction in investor activity" and more properties being either passed in, sold prior to auction or sold off-market.
"I think Melbourne clearance rates will continue to fall to between 65 and 70 per cent. There's nothing wrong with that. It's restoring Melbourne to a more healthy and balanced market," he said.
"In terms of price growth, there will be little or no price growth for the rest of the year, particularly in the second-hand unit sector," Mr Wakelin said.
But, he said, there was still strong demand for single-fronted period-style cottages under $1 million, which still pull big prices.
SYDNEY HARBOUR VIEWS STILL ABOVE RESERVE
In Sydney, buyers were willing to pay well above the reserve, for properties with harbour views. This was evidenced by the weekend's top auction result, the $7.75 million sale of a Darling Point duplex at 76 New Beach Road, which sold through Ettiene West of Morton Circular Quay with Damien Cooley the auctioneer. The buyer intends to knock it down and build a new home.
On the other side of the harbour, right at the tip of Cremorne Point, a Newtown couple paid $1.52 million, more than $300,000 above the reserve, for a two-bedroom 1920s apartment on Wulworra Avenue with panoramic views of the Sydney Opera House, Circular Quay and the Harbour Bridge. It sold through Belle Property Neutral Bay's Matthew Smythe, who attributed the strong result to the rarity of the location.
Nationally, the clearance rate rose to 71.3 per cent, up from 69.9 per cent last week, according to CoreLogic RP Data.
In the smaller auction markets, Brisbane's preliminary clearance rate rose to 58.9 per cent up from 48.9 per cent at the same time last year as auction numbers rose to 199.
Adelaide hosted 127 auctions with a preliminary clearance rate of 68.8 per cent recorded, compared with 65.6 per cent last year.
Perth's clearance rate was 36 per cent from 25 auctions, Canberra managed a 50 per cent clearance rate from 36 reported auctions, while in Tasmania just three out of 18 properties sold under the hammer, based on reported results.
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28-09-2015, 07:24 AM
(This post was last modified: 28-09-2015, 07:33 AM by greengiraffe.)
http://www.valuebuddies.com/thread-4380-...#pid120210
Home buyers look offshore for funds
Greg Brown
[Image: greg_brown.png]
Property Reporter
Sydney
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Frasers Property Australia chief executive Rod Fehring. Picture: Sam Mooy Source: News Corp Australia
[b]Off-the-plan home buyers are increasingly using alternative ways to settle if they can’t secure funding from the major banks, with more seeking finance from offshore institutions, according to Rod Fehring, chief executive of apartment developer Frasers Property Australia.[/b]
Mr Fehring said Frasers, which had $1.5 billion worth of contracts exchanged that were yet to settle, was not concerned that stronger regulations on property lending would force buyers to walk away from their purchase.
Westpac chief economist Bill Evans last week warned that many who bought off-the-plan two years ago would struggle to settle when the project was completed because of harsher lending regulations being applied by the Australian Prudential Regulation Authority.
But Mr Fehring said people were instead intent on going outside the big four banks, with more securing a mortgage through banks that were based overseas.
“We are seeing people avail themselves of other sources of funding. A lot of the prudential requirements that have been applied to the four main banks do not necessarily apply to offshore banks and they do not necessarily apply to the smaller onshore banks,” Mr Fehring told The Australian.
“Most of our contracts on hand were sold a year to two years ago and they are sitting on anywhere between 10 per cent and 23 per cent capital gain by virtue of the strength of what has happened in the Australian residential markets,” he said.
“The question is if you’ve got $60,000 to $80,000 invested in a deposit would you walk away from that on a $600,000 property when you are sitting on a $100,000 capital gain? No, you would not. You will find that you can finance it.”
Mr Fehring was formerly of the old listed developer Australand, which was last year taken over by Singapore’s Frasers Centrepoint in a $2.6 billion deal.
The $4.6bn group is developing the $2bn Central Park project in inner Sydney, while also having active projects in Brisbane, Melbourne and Perth.
Mr Fehring warned not to assume that buyers would “act as a flock” if they had initial trouble attaining finance. “There are all sorts of people involved and they make their own arrangements,’’ Mr Fehring said.
“Some are getting parental support (as) first-home buyers, some have got other assets that they are drawing on, some are borrowing on the basis that, because they have got the capital gain, the valuation is coming in well above what they paid a deposit on.” But he did believe that the new regulations would deter many new investors, and said there had been an increase in interest from owner-occupiers and even first-home buyers.
“We are seeing a relatively high proportion of first-home buyers surprisingly, which is the reverse of what you would (expect). Normally first-home buyers would run at 5-10 per cent of your sales; we are seeing that in the 15-20 per cent (range) over the past 12 months.”
His remarks come as auctions in the first spring “Super Saturday” improved from last week, despite signs that the market is slowing.
With a September record of 2390 homes put under the hammer during the week, 74.2 per cent of auctioned homes in Sydney found a buyer, while Melbourne posted clearance rates of 73.3 per cent.
Mr Fehring said he did not expect to see much further price growth in Sydney, while Brisbane would improve.
He said there were signs of an apartment oversupply in the Melbourne CBD, while there was also overbuilding of detached homes in the northern growth corridor.
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Sydney, Melbourne property markets 'moderating', not in downturn, says UBS
NaN of
[img=620x0]http://www.afr.com/content/dam/images/g/i/g/f/w/w/image.related.afrArticleLead.620x350.gjvy2m.png/1443397151609.jpg[/img]UBS economist Scott Haslem has dismissed talk of a real estate price slump, saying the bank sees a "moderation of strength", not a "downturn" in the property market. Glenn Hunt
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by Mark Mulligan
Softening auction clearance rates and a regulatory crackdown on lending to investors point to a cooling in the hot residential property markets of Sydney and Melbourne.
However, a range of experts has been quick to refute the idea that either city's market is a bubble set to pop, despite robust price growth over the past few years.
UBS economist Scott Haslem is the latest, writing in a note that the bank sees a "moderation of strength", not a "downturn", while cautioning that these "trends are a hard-to-quantify" downside risk.
"The outlook for housing depends on who and what you ask," he wrote.
[img=620x0]http://www.afr.com/content/dam/images/g/j/r/f/5/i/image.imgtype.afrArticleInline.620x0.png/1443396851531.jpg[/img]Foreigners are 'increasingly a key driver of Australia's housing market', says UBS. Erin Jonasson
"Worryingly, a consumer survey asking if it's a good time to buy a dwelling has slumped to a five-year low.
"Despite this, when asked the wisest place for saving, the share of respondents citing 'real estate' rebounded to a 12-year high of 28 per cent, albeit still only near its average."
On Saturday, Sydney's auction clearance rate fell below 70 per cent for the first time this year while Melbourne recorded a clearance rate of 73.3 per cent, lower than the previous Saturday.
His comments come ahead of this week's Reserve Bank of Australia's monthly credit figures, which provide a breakdown of growth in housing, consumer and business loans.
Of most interest will be the growth in lending to buy-to-let and buy-to-sell residential property investors. This slowed from 1 per cent to 0.6 per cent month-on-month in July after the regulatory crackdown on riskier market segments.
National Australia Bank notes weak growth in loan approvals to owner-occupiers, suggesting a broader slowdown in mortgage demand.
"After aggregate 0.6 per cent growth in July, when we saw a noticeable deceleration in investor credit growth, loan approvals in July for owner-occupiers have also been very soft, and investor loan approvals have been essentially flat for two months, [with the] softness pointing to some further incremental easing in housing credit growth," NAB wrote at the weekend.
NAB expects 0.5 per cent aggregate credit demand growth in August, in line with the average of economists surveyed by Bloomberg.
Wednesday also brings the latest building approvals survey, which is expected to show a 2 per cent month-on-month decline in August, according to the Bloomberg survey, compared with 4.2 per cent growth in July.
The year-on-year rate should ease to 7.4 per cent in August, compared with 13.4 per cent in July.
"Residential approvals remain near a record high at 232,000, and renovations recently rebounded," UBS's Haslem wrote.
"So even as commencements ease to 200,000 in 2016, dwelling investment should lift in coming quarters, but flatten in the second half of 2016."
Driving demand will be a shortage of supply in some states, despite slowing population growth.
Haslem estimates that even with this slowdown, some of the country's housing markets remain under-built. The preponderance of medium-density housing, particularly high-rise units, in current building approvals data means a lot of the new stock will take longer than average to come onstream.
"Hence, despite a moderation in commencements next year, completions are still likely to surge further to a record high peak above 200,000 in 2016," he wrote.
"This suggests a positive spill-over to consumption on furnishings and household equipment, albeit the fall in total housing sales, with established housing sales dropping, implies the peak in momentum is already passed."
The emerging mismatch between supply and demand will help slow price growth, he says
"The valuation of the housing market is clearly stretched, with the dwelling price to average household income ratio lifting to a record high of 5.6 now," Haslem wrote.
"However, with record low interest rates, housing affordability – proxied by the mortgage repayment share of income – is still only a bit around its long-run average, albeit the worst since since the first quarter of 2012," he wrote.
Countering these metrics, he says, will be the attractiveness of Australian housing markets to foreign, particularly Chinese, buyers because of the sharp depreciation of the Australian dollar.
"As we have highlighted previously, foreigners are increasingly a key driver of Australia's housing market, with approved investment more than doubling in 2013-14," Haslem wrote.
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Bank clampdown a risk to all, says Harry Triguboff
Turi Condon
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Property Editor
Sydney
Greg Brown
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Property Reporter
Sydney
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Property developer Harry Triguboff says ‘we must tell APRA that the whole building industry is based on investors’. Picture: Amos Aikman Source: News Corp Australia
[b]Australia’s banks will put their own businesses — and the fragile economy — at risk if they clamp down too heavily on investor lending that has stoked the housing boom, says billionaire developer Harry Triguboff.[/b]
“We must tell APRA (Australian Prudential Regulation Authority) that the whole building industry is based on investors.
“It is being underpinned by very low interest rates, and shares are no good (for investment),” the country’s second wealthiest person and founder of apartment developer Meriton Group said. Such actions could start a cycle of falling prices and declining building starts. “APRA thinks its is protecting the banks; I say they will send them broke,’’ he said.
Mr Triguboff’s comments come as banking giant HSBC quietly cut loans to buy investment property for new customers.
In late July, AMP scrapped lending to landlords while other major banks have raised investor mortgage rates as the banks move to comply with the banking regulator’s requirement that investor home loan growth be kept below 10 per cent a year.
With mining’s contribution to the economy waning and business confidence fragile, Mr Triguboff noted “we have nothing left but building”.
While some local and offshore Chinese investors borrowed internationally, Mr Triguboff said APRA and the banks actions would make foreign investors nervous. “Why should they buy in a country where prices could be pushed down,” he said, noting that a withdrawal of foreign investors would hurt housing prices. The proportion of lending to property investors in Australia is about 45 per cent of all home loans, but more than half in NSW, according to economists BIS Shrapnel.
The move from the Hong Kong-headquartered HSBC may come as a warning to many developers waiting for contracts to settle after the off-the-plan sales bonanza of the past two years.
The Australian reported on Monday that the chief executive of apartment developer Frasers Property Australia, Rod Fehring, said the availability of capital from offshore banks would mitigate any problem that buyers had securing finance from the major banks.
Yet even with news that offshore banks are toughening on lending, developers appear optimistic that buyers will not increasingly walk away from settling once the project is completed.
Grocon head of development Dan McLennan said only poorly designed apartments aimed purely at the investment market would have an increase of buyers walking away from an agreed purchase, but he did expect it to slow down the buying of new investors.
“It may impact on the sales velocities of new projects and … on the financing of new projects. We will return to more normal pre-sales. So the ‘all sold out in one day phenomenon’, that will be over and the projects will revert to more normal sales velocities of anywhere between three months to nine months, depending on the size of the project,” he said.
Mirvac Group head of residential John Carfi said that the group had not noticed a change in the ability of buyers to meet their settlement obligations.
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- Sep 30 2015 at 11:30 AM
- Updated Sep 30 2015 at 11:51 AM
Sydney, Melbourne house price growth to slow to 5pc
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by Michael Bleby
Sydney house prices are in for a bigger slowdown than Melbourne as both settle into a year of 5 per cent growth, property valuer Propell says.
The modest pace of growth that Propell predicts in its September residential report for the next 12 months is less than a third of the 18.6 per cent rise in values have enjoyed over the past year.
While demand remains strong, the slowdown is a reflection of the affordability problem of prices that have risen beyond the reach of many would-be buyers, said Propell head of research Linda Phillips.
In Melbourne, the predicted 5 per cent growth is also a slowdown, but less of a fall given that city's more-modest 11.5 per cent increase in house prices over the past year.
[img=620x0]http://www.afr.com/content/dam/images/1/1/f/7/v/t/image.related.afrArticleLead.620x350.gjxsrd.png/1443577913250.jpg[/img]While demand remains strong, the slowdown is a reflection of the affordability problem of prices that have risen beyond the reach of many would-be buyers, said Propell head of research Linda Phillips. Louise Kennerley
"We're going to see prices start to settle," Ms Phillips said.
The relative affordability of Melbourne, where the median house price was $620,000 - almost two-thirds that of Sydney's median $900,000 price - was likely to draw investors who were finding themselves priced out of the NSW capital, she said.
"If you want something below $600,000 you've really got to go out to Blacktown or beyond, whereas you can still buy in the eastern and outer suburbs in Melbourne," Ms Phillips said.
"It's looking good value for money at the moment. If you're getting priced out of Sydney, particularly for investors, Melbourne looks equally as attractive."
[img=620x0]http://www.afr.com/content/dam/images/z/r/x/n/x/image.imgtype.afrArticleInline.620x0.png/1443577682098.jpg[/img]Valuer Propell says: If you're getting priced out of Sydney, particularly for investors, Melbourne looks equally as attractive."
But while both houses and apartments in Sydney are likely to grow 5 per cent over the next 12 months, the oversupply that already means 20 per cent of Melbourne CBD properties are selling at a loss was likely to weigh on unit prices in Melbourne.
TWO-SPEED MELBOURNE
Apartments in the Victorian capital are likely to rise just 2 per cent over the the year to come, less than the 2.9 per cent gain they have made over the past year, Propell says.
Further, Melbourne residential real estate is likely to see a geographical split over the coming year, with the gap in price growth between east/southeast and west/northwestern suburbs widening, Ms Phillips said.
[img=620x0]http://www.afr.com/content/dam/images/1/3/o/h/l/l/image.imgtype.afrArticleInline.620x0.png/1443577682299.jpg[/img]In Melbourne, the predicted 5 per cent growth is also a slowdown, but less of a fall given that city's more-modest 11.5 per cent increase in house prices over the past year.
That gap already exists. Over the past 12 months, for example, the median dwelling price in Melton-Wyndham on the western side of Port Phillip Bay rose just 0.5 per cent to $373,000, while in Greater Dandenong City, southeast of Melbourne, the median price jumped 10 per cent to $496,000, the Propell figures show.
The southeast was currently benefiting from rising prices in the city's eastern suburbs that were pushing up prices in neighbouring suburbs, Ms Phillips said.
"We're seeing interest in Dandenong and Frankston," she said. "There will come appoint where people start turning their attention west and north, but it's not there yet."
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