Australia Property

[edragon]

Media Release
Number 2014-11
Date 1 July 2014
Embargo For Immediate Release
Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Growth in the global economy is continuing at a moderate pace, helped by firmer conditions in the advanced countries. China's growth slowed a little earlier in the year but remains generally in line with policymakers' objectives. Commodity prices in historical terms remain high, but some of those important to Australia have declined.
Financial conditions overall remain very accommodative. Long-term interest rates and risk spreads remain low. Emerging market economies are once again receiving capital inflows. Volatility in many financial prices is currently unusually low. Markets appear to be attaching a very low probability to any rise in global interest rates over the period ahead.
In Australia, recent data indicate somewhat firmer growth around the turn of the year, but this resulted mainly from very strong increases in resource exports as new capacity came on stream; smaller increases in such exports are likely in coming quarters. Moderate growth has been occurring in consumer demand. A strong expansion in housing construction is now under way. At the same time, resources sector investment spending is starting to decline significantly. Signs of improvement in investment intentions in some other sectors are emerging, but these plans remain tentative as firms wait for more evidence of improved conditions before committing to significant expansion. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend over the year ahead.
There has been some improvement in indicators for the labour market in recent months, but it will probably be some time yet before unemployment declines consistently. Growth in wages has declined noticeably. If these and other domestic costs remain contained, inflation should remain consistent with the target over the next one to two years, even with lower levels of the exchange rate.
Monetary policy remains accommodative. Interest rates are very low and for some borrowers have edged lower over recent months. Savers continue to look for higher returns in response to low rates on safe instruments. Credit growth has picked up a little, including most recently to businesses. Dwelling prices have increased significantly over the past year, though there have been some signs of a moderation in the pace of increase recently. The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy.
Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.
In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.
Enquiries:

Media Office
Information Department
Reserve Bank of Australia
SYDNEY
Phone: +61 2 9551 9720
Fax: +61 2 9551 8033
Email: rbainfo@rba.gov.au

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Glass is half empty for the RBA
THE AUSTRALIAN JULY 02, 2014 12:00AM

Glenda Korporaal

Editor, The Deal
Sydney
THE cautious tone in yesterday’s Reserve Bank statement epitomises the economic mood in Australia today.

The stockmarket is booming and interest rates are at record lows. The housing market is going strong and growth in the world economy is doing OK. Commodity prices remain high by historical standards.

The sharp swings we have seen in financial markets in recent years have abated. Volatility remains almost eerily low.

The Australian economy is doing a lot better than many other developed countries.

So how come we don’t feel so good about things?

Yesterday’s statement used much the same language as the RBA used on June 3, when it also decided to keep the official cash rate at 2.5 per cent.

A word by word comparison of the statements shows no improvement in any economic variable.

But this month the bank chose to remind the market that it “still expects growth to be a little below trend over the year ahead”.

It was far cry from the chirpy end-of-financial year analysis we got on Monday from economists at CommSec, who pointed out that “it has been a very good 12 months for our economy and ­investments”.

The economists at CommSec took a decidedly glass-half-full ­approach, pointing out that the Australian economy is recording “above-average growth”, inflation is contained, interest rates are at a 54-year low, the current account “is the best in 34 years” and the stockmarket has just finished two very robust financial years of growth. “While people may fret about the budget, if they took a big-picture view they would realise there is very little to worry about,” they declared happily.

In contrast, yesterday’s glass-half-empty statement from Martin Place reveals a sense of frustration at the RBA with the stubbornly high dollar.

A month ago, the bank was hopeful that some easing in the exchange rate could “assist in achieving balanced growth in the economy”, but now it’s not so sure.

“The exchange rate remains high by historical standards, particularly given the declines in key commodity prices” (which is what it said last month) “and hence is offering less assistance than it might in achieving balanced growth in the economy”. (Read: now we are really getting impatient that the dollar isn’t coming down).

The comments outline the dilemma facing the RBA. The hoped-for strengthening of the US dollar — and weakening of the Australian dollar — on the back of the Federal Reserve cutting back on quantitative easing has not quite emerged.

It leaves our central bank sitting on the sidelines while house prices in most capitals are taking off — and skyrocketing in Sydney — unable to increase interest rates because it would put upward pressure on the Australian dollar.

While it is pointing the finger at the robust Aussie dollar, the bank is not making any comment about the other fly in the ointment: the budget.

Malcolm Turnbull was right. The budget was not well sold and its negative impact on confidence remains a drain on expectations. It is too glib to dismiss the budget as something to ignore, as it goes to the very heart of how a new government is conducting itself and there are very real fears from different segments of the electorate about what’s ahead.

Those on lower incomes worry about potential cuts to government benefits while the middle class worries about other changes: potentially skyrocketing university fees and ongoing job cuts in our big companies.

The sharp fall in support for the Abbott government is associated with uncertainty among both businesses and consumers.

Yesterday’s statement also makes it clear that the RBA is watching the iron ore price very closely, with its continued reference to the fact that “some of those (commodities) important to Australia have declined”.

And there’s the rub.

Australia spent the years after the global financial crisis congratulating itself on how well it did — but the strong growth relied very heavily on commodity exports to China and the strength of the iron ore price.

Now the US is beginning to come out of its economic downturn and Australia’s heavy reliance on iron ore exports — and continued high prices — is being revealed as the tide goes out.

Investment in the resources sector is dropping but the hoped-for upturn in investment in non-mining sectors has not yet materialised, except in housing.

The US recorded a negative economic growth rate in the March quarter but this is being downplayed because of the bad weather and restocking changes.

Australia reported stronger-than-expected March quarter economic growth but the RBA continues to downplay its import, attributing it to new resource capacity coming on-stream.

The stockmarket is booming, but in the broader economy there’s one element missing — confidence.

Media Release
Number 2014-11
Date 1 July 2014
Embargo For Immediate Release
Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Growth in the global economy is continuing at a moderate pace, helped by firmer conditions in the advanced countries. China's growth slowed a little earlier in the year but remains generally in line with policymakers' objectives. Commodity prices in historical terms remain high, but some of those important to Australia have declined.
Financial conditions overall remain very accommodative. Long-term interest rates and risk spreads remain low. Emerging market economies are once again receiving capital inflows. Volatility in many financial prices is currently unusually low. Markets appear to be attaching a very low probability to any rise in global interest rates over the period ahead.
In Australia, recent data indicate somewhat firmer growth around the turn of the year, but this resulted mainly from very strong increases in resource exports as new capacity came on stream; smaller increases in such exports are likely in coming quarters. Moderate growth has been occurring in consumer demand. A strong expansion in housing construction is now under way. At the same time, resources sector investment spending is starting to decline significantly. Signs of improvement in investment intentions in some other sectors are emerging, but these plans remain tentative as firms wait for more evidence of improved conditions before committing to significant expansion. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend over the year ahead.
There has been some improvement in indicators for the labour market in recent months, but it will probably be some time yet before unemployment declines consistently. Growth in wages has declined noticeably. If these and other domestic costs remain contained, inflation should remain consistent with the target over the next one to two years, even with lower levels of the exchange rate.
Monetary policy remains accommodative. Interest rates are very low and for some borrowers have edged lower over recent months. Savers continue to look for higher returns in response to low rates on safe instruments. Credit growth has picked up a little, including most recently to businesses. Dwelling prices have increased significantly over the past year, though there have been some signs of a moderation in the pace of increase recently. The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy.
Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.
In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.
Enquiries:

Media Office
Information Department
Reserve Bank of Australia
SYDNEY
Phone: +61 2 9551 9720
Fax: +61 2 9551 8033
Email: rbainfo@rba.gov.au

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RBA warns over house prices, Aussie dollar
AAP JULY 03, 2014 12:18PM

RBA governor Glenn Stevens has cautioned investors against assuming housing prices will always rise, and that the Australian dollar might not fall.

In a speech to a conference of economists in Hobart today, the RBA governor downplayed the significance of the central bank’s recent changed description of the Australian dollar.

It had described the exchange rate as “uncomfortably high” but dropped the description as the currency fell earlier in 2014.

DOLLAR PLUNGES AFTER STEVENS COMMENTS

There has since been speculation that, with the currency since recovering, the phrase might be resurrected by the RBA.

“It hasn’t been, though I don’t regard that to be as significant as many people seem to think it is,” Mr Stevens said.

He repeated the view that the exchange rate remains high by historical standards and said that some trade-exposed sectors still find it “quite uncomfortable”.

“When judged against current and likely future trends in the terms of trade, and Australia’s still high costs of production relative to those elsewhere in the world, most measurements would say it is overvalued, and not by just a few cents.”

He acknowledged that it was an unusual time, with interest rates near zero in major economies, factor supporting the Australian dollar in recent years.

“Nonetheless, we think that investors are underestimating the likelihood of a significant fall in the Australian dollar at some point.”

On housing prices, Mr Stevens said that some recovery after falls from 2010 to 2012 was no particular cause for concern.

But it would be a different matter if there were to be a further run-up in prices combined with “overconfident expectations of continuing gains” and significant increases in household debt. Growth in the amount of debt owed by households is currently running at 6 to 7 per cent per annum, only slightly above the growth rate of national income, he said.

“It’s hard to mount the soap box to complain about that pace.”

Still he warned investors to “take care” in the Sydney market, where most of the big rises in borrowing had been seen.

He warned banks to maintain strong lending standards.

And he warned that in making their financing and investment decisions, people should not assume that prices always rise. “They don’t; sometimes they fall,” he said.

Mr Stevens also said the bank still had “ammunition” on interest rates but said previous cuts were still working their way through the economy.

The full effects of Australia’s record low 2.5 per cent cash rate are yet to be seen and will continue supporting demand for some time, Mr Stevens said.

Low interest rates had been having their intended impact on the economy but he suggested that the RBA retained scope to cut again if it needed to.

“We still have ‘ammunition’ on interest rates — we have not got close to the zero lower bound that has afflicted some other countries,” he said.

Although the RBA board’s language had evolved since it last cut rates in August, that did not suggest it was considering a rate hike, Mr Stevens said.

“People may react by thinking that, if the bank is not thinking about easing, then it must be thinking about tightening. But we were not contemplating tightening,” Mr Stevens said.

“In fact, the conclusion we had reached was that we might be on the brink of sitting still for some time.

“That is why we adopted language about stability in interest rates, the intended effect of which was to be clear to people that we did not think that higher interest rates were imminent.

“That has not stopped people from opining about the timing of possible future increases or, indeed, decreases.”

Mr Stevens said the federal budget was unlikely to affect the near-term outlook.

While consumer confidence appeared to have taken a hit in the wake of the budget, the 2013 budget had had the same impact but that wore off within a few months, he said.

The rebalancing of the economy as the mining investment boom winds down was a greater source of uncertainty, he said, but there were some encouraging early signs that rebalancing was taking place.

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Kids do have the guts, just not the cash: Harry Triguboff told to get real
RICK WALLACE THE AUSTRALIAN JULY 04, 2014 12:00AM

BILLIONAIRE developer Harry Triguboff has ignited a firestorm of criticism, saying young people frozen out of home ownership lacked the guts to buy houses and should borrow from their parents.

The remarks have been criticised by welfare groups, buyer’s agents and a federal MP, who ­accused Mr Triguboff — whose net worth is estimated at $5.5 billion — of being “hopelessly out of touch with the realities of life in 2014 for most young people and their parents”.

Federal MP Kelvin Thomson said: “Many parents would like to help their children more, but they do not have a lazy million dollars lying around doing nothing.’’

Mr Triguboff was speaking at a parliamentary inquiry into the ­effect of foreign investment in housing. The inquiry has exposed the impact of illegal foreign purchases on affordability in capitals.

The Meriton boss used his ­appearance to lash out at young Australians striving for a foothold in the overheated markets.

“The young ones who cannot buy in the area they want — and they are not many, by the way — talk a lot,’’ he said. “They talk a lot because they would like to buy cheap and sell dear, but they have not got the guts or they have not got the money.

“The parents have to learn to help them, too, with the money. The parents, the old ones, have to learn that they have to mortgage their properties.”

Melbourne buyer’s agent David McRae said anyone with that opinion was “living in another world’’.

“They are borrowing 80 per cent of the purchase price and sometimes they are borrowing more. If that’s not guts, I don’t know what guts is,’’ he said. Many younger people got help from their families with stamp duty or a deposit, but “not everybody can borrow from their parents”, he said.

Jacqueline Phillips, a spokeswoman for Australians for Affordable Housing, said many parents were unable to help their children.

“Rather than looking to parents to fix the affordability crisis, we should be asking governments who control key policy levers to take action,’’ she said. “Firstly, by reforming housing tax concessions so that we stop ­rewarding speculative investors for driving up prices without increasing supply, and secondly through innovative strategies to increase housing supply and affordability.’’

Mr Thomson, an advocate for cheaper housing, said: “Many, many young people cannot afford to buy in or near the community they grew up in. The vast majority (of parents) are flat-out paying their own bills, and are … still paying off their own mortgage.”

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Strong growth picture for NSW housing
Michael Bleby
502 words
3 Jul 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Housing commencements in NSW are likely to jump over the 50,000 mark next year – more than double their trough of 22,344 five years ago – as the state takes the lead in the growing residential market, according to forecasts from the Master Builders Association.

The rise in dwelling commencements over the next three years, which will peak at 58,942 in 2015-16, means the increase in housing supply will be sufficient to meet the state's annual underlying population requirement for the first time in more than a decade.

Expectations of interest rates that won't rise until well into 2015 are a key reason for a stronger growth picture in NSW than six years ago, MBA chief executive Wilhelm Harnisch told The Australian Financial Review. "Residential is stronger," he said. "Residential is where the major difference is." NSW benefiting from pent-up demand

The predictions, published ahead of Thursday's release of building approvals for May, show that while NSW growth lagged that of resource-heavy states like WA and Queensland, it is now benefiting from the pent-up demand that was compounded by poor land-release policies, cumbersome development processes and inefficient developer levies.

A further boost to construction in the most populous state will come as demand retail, office, health and aged-care facilities pushes the value of non-residential building to a peak of $12.5 billion by 2016-17, a level last seen in the run-up to the Sydney Olympics, the MBA says. Engineering construction will also get a boost from the state's planned infrastructure spend.

In contrast, Victoria, which has performed better than its northern rival by virtue of low-cost land and more efficient land-release policies, is likely to take a breather. Housing starts in Victoria are likely to peak at 55,655 in 2016-17, the last of the three years in the planning horizon from a likely figure this year (financial year 2015) of 52,459.

"It was always going to be a challenge to maintain strong growth after such a golden period," the report says. "After a correction in residential building, Victoria will do well to maintain the growth momentum."Stronger industrial, retail building work

Likely growth in non-residential building of 10 per cent in past financial year and 11 per cent this year will come from stronger industrial and retail building work. Engineering work will also be boosted by planned infrastructure spending, peaking at just under $15 billion in 2016-17, the report says.

House construction in Queensland is picking up, and provided interest rates remain low, housing starts at a level of 41,644 in 2016-17 will be getting back towards the peak levels of 2007-8, it predicts. Engineering construction will continue to fall.

WA faces a decline in building starts. After sharp growth, the figure likely peaked last year (FY14) at 27,601 and will tick down over the next three years.


Fairfax Media Management Pty Limited

Document AFNR000020140702ea7300011

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Investors go off the plan as auctions cool
PUBLISHED: 06 JUL 2014 14:37:00 | UPDATED: 07 JUL 2014 06:22:25

MERCEDES RUEHL
Auction clearance rates stalled in Sydney and Melbourne over the weekend, ­averaging 70 per cent compared with 80 per cent a year ago, although investor enthusiasm for buying apartments off the plan continued unabated.

Property developer Mirvac launched its fourth precinct, called Altivolo, at ­Sydney’s Harold Park, and all 84 apartments were sold off the plan in one day.

Mirvac is transforming the former Harold Park Paceway, located 2.5 kilometres from the central business district, into a $1 billion infill housing development. Sales of apartments – it is due to see its first precinct opened at the end of this month – now total more than 900.

Mitchell and Judy Chapman from the northern beaches bought a one-bedroom unit for $690,000 on behalf of their New York-based son. He wanted to invest in Sydney and felt Glebe was an ­exciting suburb, close to the city and to the harbour. This purchase gave him a property he could rent out while he is overseas and live in when he returns, they said.

“There’s a lot of competition in the market right now but the demand for Harold Park has not let up since the day we launched the first precinct in 2011,” Mirvac chief executive, residential, John Carfi said.

Construction of Altivolo is expected to begin this year with completion set for 2016. Studios started at $550,000 and $1.395 million was the starting price for three-bedroom apartments.

AUCTION CLEARANCE RATES STALL
A preliminary weighted average ­clearance rate of 69.4 per cent was recorded this week across capital cities compared to 66.6 per cent last week. However, the levels have generally been lower since the start of winter.

“This time last year auction clearances were starting to rise to the 80 per cent mark, a sign of a boom market,” Domain group senior economist Andrew Wilson said. “Now we are seeing a falling trend and this is expected. Once those interest rates washed through the system, we have not had the income growth and other factors needed to stimulate the market much further this year.”

ABOVE-AVERAGE CLEARANCE RATES
Auction clearance rates across the capital cities nonetheless remain well above the levels of the last several years.

This week a preliminary clearance rate of 74.6 per cent was recorded in Sydney, a on the 71.1 per cent result last week

A couple from Noosa, in Queensland, were among the successful buyers over the weekend, securing a two-bedroom house in the popular Sydney suburb of Paddington for $1.3 million. The buyers had been renting in Leichhardt and had only inspected the house a few minutes before the auction on Saturday. Belle Property agents Mark Foy and Christian Zade said 79 groups inspected the 79 Cambridge Street property and 11 contracts were issued.

In Melbourne, there was a preliminary clearance rate of 68.4 per cent recorded compared to 68.3 per cent last week. Melbourne has had strong results over the past four weeks.

But the real estate market remains more favourable for investors than first home buyers, with the number of first-time buyers is still far below average levels according to data from the Australia Bureau of Statistics.

“It’s not entirely clear why first-home buyers are at such low levels, given affordability will be an issue for any for home buyer,” Robert Larocca, RP Data housing market specialist, said.

“It is a problem for the market in the medium term because it means in a ­decade or so there will be less people moving into the market.”

Last week Reserve Bank governor Glenn Stevens told property investors to take care in Sydney’s strong housing market, advocating slower growth in house prices.

Mr Wilson he was not sure these “megaphone” economics would work with investors who tend be highly speculative anyway.

The Australian Financial Review

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No end in sight for foreign cash
Samantha Hutchinson
373 words
8 Jul 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
A wave of investment from China and south-east Asia has boosted competition for Australian development sites to a fever pitch.

But the buoyant market conditions aren't confined to Australia; developers in major European and Asian capital cities are being forced to fight harder to secure land, Frasers Property Australia chairman Stanley Quek said.

"It's difficult for developers all over the world, this flush of money that's starting to hit . . . there's a lot of liquidity around," he said.

"All the big developers like Greenland are [in Australia] now, but they're in London and the rest of the world too . . . everywhere you go, you will find it's a difficult market to acquire anything."

One of Australia's most prominent residential developers, Frasers ­Property Australia is controlled by ­Frasers Centrepoint, the Singapore-based, international developer ­controlled by Thailand's third-richest man, Charoen Sirivadhanabhakdi.

Dr Quek is dismissive of reports competition for local development sites is pushing prices too high. "I think prices are fine, and I think they are ­sustainable . . . quite clearly everywhere in the world prices have gone up, and there's still some growth to go," he said. "London prices particularly have gone up quite highly, and the flow of money into safe havens like Singapore has also pushed prices there tremendously high." Dr Quek spoke to The Australian Financial Review from the $2 billion Central Park project, on the same day French botanist Patric Blanc, who ­created its striking facade of green walls or 'vertical gardens, presented his work.

His comments come at the same time the group is awaiting the outcome of its $2.6 billion cash bid for local ­residential and industrial developer Australand. He could not be drawn to comment on the offer, but reaffirmed his bullishness on prospects for local house prices, particularly in Sydney and Brisbane. "The market is strong, and that's definitely because more people are moving closer into the city. I don't think there will be a slowdown at all," he said. Frasers Property and joint venture partner Sekisui House have generated more than $1.1 billion in sales so far at the Central Park precinct.


Fairfax Media Management Pty Limited

Document AFNR000020140707ea780001f

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http://www.theage.com.au/business/proper...zt1jy.html

Carolyn Cummins
Commercial Property Editor

Property investors cheered by housing boom
Date
July 9, 2014 - 4:28PM

Investor confidence has hit its stride with a range of data indicating that the only way is up.

The boost for property investors has come from a residential market with higher house prices, while the stable employment sector has given office market developers a more positive outlook.

But there are some grey clouds gathering on the horizon, including concerns about the new federal Senate and how it will affect the implementation of government policies, the long-term impact of the warm weather on retailers and the loss of jobs, particularly in the public service.

The latest Property Council/ANZ property industry confidence index to September 2014 shows property industry confidence remains steady at 131 points, compared with 132 for the previous quarter.

This comes at the same time as the Westpac/Melbourne Institute index of consumer confidence rose by 1.9 per cent to 94.9 points in July, despite being down 7.1 per cent over the past year.

The decline was attributed to concerns arising from the federal budget released in May.

Property Council of Australia acting chief executive Glenn Byres says in the report that the September quarter expectations reveal an industry confident about its future, despite low expectations for national economic growth.

''After reaching a record high of 140 points at the start of 2014, property industry confidence has moderated amid concerns around the trajectory of economic growth and the fate of the federal government's budget in the Senate,” Mr Byres says.

In NSW, the Property Council/ANZ property industry confidence survey index sits at 143 for the September quarter (where 100 is considered neutral), thanks to the booming housing market.

Retail, office and industrial market capital growth expectations were all positive in NSW and Victoria, but flat across the other states and territories.

In Victoria, the survey index was steady at 132, up from 131 the previous three months. Fears of public service job losses meant the ACT recorded some of the lowest levels across all the survey categories.

The PCA/ANZ survey is the largest national business confidence survey. It polled about 2300 professionals from the property and construction sector in all states and territories, including more than 650 from NSW, for the forward-looking view.

Craig James, the chief economist at CommSec, said the Reserve Bank would carefully watch consumer confidence to ensure that it continues to recover and the decline in confidence driven by the federal budget does not have a lasting effect on consumer spending and home purchase/construction. Interest rates are solidly on hold.

''The global economy is in a much better position than it was 12 months ago,'' Mr James said. ''Downside risks are diminishing and now the Chinese economy is showing signs of lifting after a period of malaise.''

According to Colliers International research, Australia's strong economic growth at a time when other developed countries are experiencing recession makes the local property sector particularly attractive to many offshore and local investors.

John Marasco, Colliers International managing director of capital markets and investment services, said in the past year there has been a significant rebound in the rest of the developed world, which had led to speculation that capital may start to leave Australia and look elsewhere for opportunity.

''At present, groups leaving the Australian market are still in the minority, outweighed by the new capital entering the market,'' Mr Marasco said.

''Local groups remain in acquisition mode with high levels of available funds and low costs of borrowing. An interesting trend to watch will be local and offshore groups moving up the risk curve and into either secondary CBD assets or metro office markets. Sydney and Brisbane, in particular, offer scale in metro office markets, and are already attracting interest from offshore groups.''

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Urban rents rising despite yields falling: report
KYLAR LOUSSIKIAN THE AUSTRALIAN JULY 10, 2014 12:00AM

MELBOURNE and Sydney rents are going up even as yields are coming down, according to new quarterly figures released today by Australian Property Monitors, reflecting capital growth continuing to exceed outpacing rent rises.

The median weekly asking price for a house in Sydney is $510, up 2 per cent for the year, while apartment rents are $500 a week, up 5.3 per cent. In Melbourne, house rents are up 5.6 per cent to 380, while apartment rents grew 2.8 per cent to $370.

Brisbane recorded yearly increases for houses, up 2.6 per cent to $400, and apartments, up 1.4 per cent to $365, while Perth and Canberra recorded declines.

Median asking rents in Perth are $460 per week for houses — down from $493 — and $400 for units, down 5.9 per cent for the year.

But the results showed that “despite some rental growth, rental yields for houses and units have fallen in most capital cities, reflecting the impact of prices growth.”

Rent increases in Sydney were more than offset by increasing prices, with house rent yields falling 4.6 per cent for the year, and apartments falling 5.6 per cent.

Perth and Canberra saw bigger falls, where some price growth combined with rent declines saw yields fall by nearly 6 per cent for houses and nearly 9 per cent for apartments.

The mixed rental statistics come as the number of Melbourne apartments under construction hits 12,600. A Knight Frank Melbourne update issued yesterday put annual capital growth for apartments in the metropolitan area at 5.9 per cent, with vacancies falling to 2.8 per cent for May.

The highest capital growth was in the Bayside region at 7.3 per cent, followed by the north east at 7.2 per cent.

“Together with the resilient Australian economy throughout the recent global downturn, foreign investors continue to favour Melbourne as a safe haven within the Asian Pacific region,” the report concluded.

[greengiraffe]

Land shortage boosting house prices: CIS
AMBER PLUM JULY 10, 2014 12:30AM
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Strong housing prices are the result of strong fundamentals and government policies that have boosted demand without addressing supply barriers, and do not imply a bubble, according to a new Centre for Independent Studies report.

The report, Eight Housing Affordability Myths, pointed to a “critical lack” of new housing, as well as strong incomes and population growth and lower mortgages, as the causes of long-term price increases.

It found new land supply declined by an average 21 per cent across Australia’s five largest capital cities in the past decade, pushing prices up by an average 148 per cent to $504 per square metre.

Meanwhile, house prices have increased by an annual 3 per cent after inflation since 1970, while home ownership has slipped from 71 per cent of households in 1995 to 67 per cent in 2012, the report said.

“'Foreign investors and domestic investors have been made scapegoats when it comes to housing affordability, but they are no more to blame for rising house prices than first-home buyers,” report author Stephen Kirchner said.

“Land supply and the intensity of land use need to be freed-up to accommodate rising demand.”

The report called for a sweeping overhaul of zoning, planning and building approval processes to reduce direct and indirect costs of new dwelling construction, increase land use intensity, and accelerate new land release.

Tax reform should also be a part of any government efforts to improve affordability, the CIS report advised.

"The focus of public policy needs to shift to lowering tax and regulatory barriers to new dwelling supply. Reducing the incidence or eliminating entirely taxes on housing transactions such as stamp duty and capital gains tax should be an important part of any broader tax reform effort and reform of federal-state financial relations," Mr Kirchner said.
"Public policy should also avoid demand-side policies, such as financial assistance to first home owners or allowing access to superannuation account balances for the purposes of buying a home.
"The most effective way of increasing housing affordability for first home and other buyers and renters is to ensure a plentiful supply of new dwellings to reduce upward pressure on prices."