This Week in Real Estate: 22 Oct 2017

By October 22, 2017News

Long-term Price Rises Lead World

The long-term rise in Australian house prices since the early 1960s has been the most sustained property market upswing in the world, new research says.

Researchers at the Switzerland-based Bank for International Settlements have analysed long-run trends in house prices, finding upswings have been more common than downswings across the 47 countries.

“The upswings lasted on average 13 years; with the longest one, in Australia, still continuing after half a century,” the report said.
From 1961 to 2016, the report says Australian house prices have grown by an average of 8.1% a year.

Since 1961, it says the cumulative gain in Australian property prices is 6,556%. That compares with a cumulative 1,332% rise in United States house prices.

Confidence in Property Sector Up

Confidence within the property industry has risen to its highest point in four years, according to the ANZ/Property Council Survey for the December quarter.

The lift in mood was consistent across states and the industry became more optimistic on the capital growth prospects of all key asset classes. Sentiment strengthened across the mining states and the eastern seaboard.

“The remarkable thing about these results is how strong they are,” said Property Council of Australia chief executive Ken Morrison.

The upbeat tone seems contradictory to recent gloomy signs, including a slump in retail sales and warnings from the Reserve Bank over rising household debt.

The positive indicators include a pick-up in economic growth, a rise in business investment plans – particularly by non-mining industries and an easing jobless rate.

Quote of the week

“Is housing a good long-term investment? Our data suggests that the answer is an unqualified Yes. Real house prices increased on average by close to 7% per annum in the sample of 20 advanced economies for which there are 45 years of data on average.”
Bank of International Settlements research paper.

Jobs Market Boosts Optimism

Optimists outnumber pessimists for the first time since November 2016, according to the latest Westpac consumer sentiment survey.

Westpac chief economist Bill Evans says consistent reports of an improving global economy may have been a factor behind this lift in confidence.

“It is also likely that concerns about rising interest rates associated with overheated housing markets have eased,” he says.

Other factors boosting confidence include ongoing improvements in the labour market – especially for tradies, paraprofessionals (typically in the health and education sectors) and labourers.

However, views on family finances remain a weak spot. Compared to a year ago, the overall Index is down 1%, respondents’ assessments of their own finances have fallen by 6.1% and the outlook for finances over the next 12 months is down by 2.6%.

Investor Lending Rebounds

Investor mortgage lending rose 4.3% in August, higher than the 0.9% rise in owner-occupier loans.

ANZ senior economist Daniel Gradwell said the monthly increase in investor lending was the largest since APRA told the biggest banks to limit interest-only lending to 30% of new mortgages.

The rise merely offsets the fall in the previous month, and investor borrowing is still lower than it was earlier this year, said Gradwell. “In annual terms, investor growth of 6.5% is well below the peak of 26% recorded in January.”

Demand for interest-only loans has dropped so substantially that some banks are reducing their rates to try and entice more borrowers.

Earlier in the year, banks lifted their rates on interest-only loans to deter that type of borrowing and comply with APRA’s conditions.

Chinese Defy Capital Clampdown

The Australian housing market remains strong, as Chinese buyer demand manages to defy a clampdown on capital outflows, according to Credit Suisse.

A boom in wealth creation in China appears set to support prices of Australian residential property, with local incomes becoming less relevant to the housing market, research by the investment bank found.

Foreign buyers are purchasing 25% of the value of new housing supply in NSW, 17% in Victoria and 8% in Queensland, Credit Suisse said, adding that almost all the demand was from China.

The figures are based on levies paid by foreign buyers to state revenue offices: NSW levies an 8% surcharge on foreign residential property purchases, up from 4% previously. In Victoria the tax is 7%, up from 3%, and in Queensland it is 3%.

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