This Week in Real Estate: 23 Sep 2017

By September 23, 2017News

House Prices Continue to Rise

The annual pace of dwelling price growth across Australia’s eight capital cities increased to 10.2% during the June 2017 quarter, according to the latest data from the Australian Bureau of Statistics.

The ABS Residential Property Price Index released this week shows acceleration in the average dwelling price growth in the capital cities, although there are major differences from one city to the next.

HIA Senior Economist, Shane Garret says dwelling price growth is still strongest in Sydney and Melbourne, but Hobart and Canberra are also showing robust price growth. The markets most affected by the resources investment downturn, like Perth and Darwin, continue to be affected by falling dwelling prices.

Between the June 2016 and the June 2017 quarters, Sydney dwellings experienced the largest increase in price (+14.4%) followed by Melbourne (+13.4%) and Hobart (+11.3%).

Banks Cut Fixed Interest Rates

Banks are re-entering the market for interest-only home loans, cutting fixed interest rates as they grow more comfortable with a regulatory cap on higher-risk lending.

Lenders including Commonwealth Bank, ANZ Bank and Suncorp have cut some of their fixed interest rates, including for customers with interest-only loans.

The Australian Prudential Regulation Authority has this year forced banks to cut the proportion of new home lending that is interest-only to less than 30%. However, there are signs some of this pressure is easing. Interest rate comparison website Mozo says almost a third of the lenders in its database had cut one of their fixed rates since the start of August.

CBA, the nation’s biggest bank, last week cut four and five-year fixed rates by between 0.1 and 0.2 percentage points, including for interest-only customers, amid a flurry of similar cuts over the last month.

Quote of the week

“As well as we’re doing, the Australian economy is still operating below its potential. So long as that is the case, why would anyone be suggesting tightening monetary policy when the economy is operating below potential?
I mean – hello?”
Reserve Bank board member Ian Harper

Slow Growth Stops Rate Rise

Economic growth isn’t strong enough to justify an interest rate increase, says Reserve Bank of Australia board member Ian Harper.

The positive improvements of falling unemployment and rises in full-time employment are offset by slow growth in household income.

“Consumption is two-thirds of gross domestic product,” Harper says. “If households as a group were suddenly to decide that we really can’t afford this now, we’re going to start to slow up consumption to keep ourselves on an even keel and that will certainly pull GDP growth away from where we want it to be.”

The economy is transitioning from mining-driven growth to services-driven growth, the jobs market is strengthening and investment intentions are improving. The resurgent currency is a new headwind.

But the Australian economy is still operating below its potential, says Harper.

House Listings on the Rise

The number of houses listed for sale in Sydney is on the rise, but not enough to cause a flood or pull prices down dramatically, according to Ray White chairman Brian White. “One of the best litmus tests of market change is a surge in listings,” he says. “We are seeing adequate listings, but no surge for Spring.”

Chairman of Century 21, Charles Tarbey, says the market is starting to weaken with a modest rise in stock and this was expected to continue in coming weeks.

In Sydney, the number of homes advertised for sale increased 5% in August compared with the previous month and was up 12.4% compared with August 2016, SQM Research says.

In Melbourne, listings rose 3% for August but fell 15% compared with a year ago.

An increase in first-home-buyer numbers, after the Victorian and NSW Governments increased grant for first-timers, is expected to underpin demand and prices.

Brokers Slam Liar Loans Claim

The Finance Brokers Association of Australia (FBAA) has challenged Investment bank UBS’s report which says ‘liar loans’ have reached $500 billion.

UBS has said that its survey of 900 mortgage applications over the last 12 months reveals that about one third of home loans contained misinformation.

Referring to the UBS report, FBAA executive director Peter White questioned the validity of the data, saying the figures were based on interpretation of their own research and asked that the data be justified.

“We need to see the questions they asked participants and we need to know how much and under what conditions they were paid,’ says White.

“UBS must prove there is no steering of answers or influences to produce outcomes which are not factual or fair or commercially sound.”

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