Strong Growth – October 2017

Australian Scene

According to AAP, home prices across Australia’s capital cities, based on median sales prices in each market and potentially skewed by more higher end sales and fewer mid and low market sales, have continued to increase, rising an average of 10.2 per cent in the year to June, thanks to strong growth in Sydney and Melbourne. Melbourne tied with Sydney – historically the capital with greatest growth in values – with home prices in both cities lifting 13.8 per cent.

Hobart had the third highest growth, with prices rising 12.4 per cent, followed by Canberra with 7.9 per cent, Adelaide with 5 per cent and Brisbane increasing 3 per cent. Perth and Darwin were the only cities that saw prices fall, decreasing by 3.1 and 4.9 per cent respectively, largely impacted by conditions in the mining sector.

Looking at the quarterly results, Australian capital city house prices rose 1.9 per cent in the June quarter, after a 2.2 per cent rise in the three months to the end of March and a 4.1 per cent lift in the December quarter. This gradual easing of growth highlights the fact that some of the heat has come out of the market, namely in Sydney and Melbourne where overheated conditions had been pushing prices sky high. With these markets starting to level out, which was only a matter of time, conditions now present a more balanced playing field for buyers and sellers and a more sustainable environment.

As we moved into July we saw a 15.7 per cent drop in new apartment sales volume across Australia, which contributed to a slide of 3.7 per cent in total new home sales during the month, according to Housing Industry Association figures. In comparison, new detached house sales only declined by 0.4 per cent. Victoria was the only state in which sales of new properties grew in July, increasing by 9.8 per cent.

Heightened restrictions on both foreign investment and lending to investors was likely a contributing factor behind this fall in new home sales, primarily apartments but also outer suburb rental properties. The new rules announced by the Australian Prudential Regulation Authority (APRA) limit higher-risk, interest-only lending to 30 per cent of all new residential mortgages and require strict controls on interest-only loans with deposits smaller than 20 per cent.

It marks the latest escalation of a sector-wide clampdown on loose underwriting standards, excessive investor lending and property speculation, as the banking industry and regulators attempt to curb the spiraling house prices and exploding household debt that threaten the stability of the $1.6 trillion housing system.

 

New Zealand Scene

The number of homes sold in August was down compared to the same time last year in every region of the country, something that has only occurred three times in the last seven years, according to the REINZ. “Overall, the number of properties sold across the country fell by 20% during August, a reduction of 1472 properties when compared to the same time last year,” REINZ said. The biggest reductions were in Southland -37.3%, Northland -29.4%, Taranaki -25.9%, Waikato -25% and Auckland -21.5%.

However, the REINZ’s national median sale price rose slightly to $530,000 in August, up from $525,000 in July and up 8.2% compared to a year ago, but it was still below the peak of $542,500 seen in March. The median price is often skewed upward by fewer sales in the mid and low end of any market and a consistent volume selling at the higher end.

In Auckland the median price rose $10,000 to $840,000 yet was still down from its peak of $905,000 in March and below the August 2016 median of $850,000, suggesting that prices may have flattened out.

In the Wellington region the median rose by $10,000 to $500,000, but remained below its April peak of $540,100. In the Waikato the median price dropped to $480,000 from $489,000 in July and in the Bay of Plenty the median rose to $538,000 from $490,000 in July but remained below its June peak of $557,500. In Canterbury it rose to $427,000 in August from $420,000 in July, but remained below its March peak of $450,000.

The market remains ‘in limbo’ following the confused result of the election, with the public and funders in tenterhooks as to which major party leads government and what policy amendments they’ll have to make to ensure minor party cooperation. A particularly vicious winter has held activity back also.

That said, appraisal activity has increased in line with seasonal changes plus an apparent frustration by many potential vendors, at the ongoing interference in the market that politics, particularly an election, continues to deliver.