‘Staying put’ owners cause house sales crash

Posted on March 16, 2009 by peter 
Filed under Australia Real Estate News · Tagged:

House sales have crashed on a national level as middle and high-end owners avoid listing their properties as the financial turmoil continues.

While property clearance rates – the proportion of auctioned properties being sold – continued to improve in the southern capitals over the weekend, property volumes reveal a grimmer story.

In Sydney the auction clearance rate was 63 per cent, up from 47 per cent the same weekend last year. But the number of properties sold slumped from 229 last year to just 127 at the weekend.

In Melbourne the auction clearance rate remained steady – at 66 per cent – but the number of properties listed for sale crashed from 1265 the same weekend last year to just 396.

In Brisbane and Adelaide, markets dominated by private-treaty sales, the cupboard had almost been stripped bare, with clearance rates and property volumes both taking a dive.

In Adelaide only 25 properties were put up for auction compared with 108 for the corresponding weekend in 2008, and with eight auction results yet to be reported, 17 properties had already been passed in.

Only 38 properties were placed on the market in Brisbane compared with 115 for the same weekend last year.

Real Estate Institute of Victoria head Enzo Raimondo said it was the decline in properties available for sale that had driven the recovery in clearance rates. “We’ve seen a decrease in transactions right across the board,” Mr Raimondo said.

He said home owners had become unwilling to sell unless they were forced to. “While we’re seeing a lot of increased activity in the lower end of the market, the median to higher end where most of the action usually takes place has slowed down to a whimper,” he said.

SQM Research managing director Louis Christopher said first-home buyers had buoyed lower-end sales, but he cautioned them not to rush into the market because prices were likely to fall.

“Buying a property because of the increase to the first-home buyer’s grant is like having a baby because of the baby bonus,” Mr Christopher said. “It’s not a wise move.”

But despite the slowdown in sales, research from the Market Intelligence Strategy Centre found the “real” home lending market had proved far more robust than official data suggested.

According to MISC, the value of new mortgage settlements rose 18.5 per cent to $46 billion in the December quarter, which it attributed to the Reserve Bank’s three rate cuts during the quarter, totally 2.75 percentage points.

MISC cuts its figures from actual mortgage settlements derived from state governments’ stamp duty data. This method differs from that of the Australian Bureau of Statistics, which uses mortgage commitment data provided by selected lenders.

The ABS data showed a 20 per cent fall in December-quarter residential building approvals, seasonally adjusted, while the value of owner-occupied housing finance rose 3.49 per cent.

Mr Raimondo said if the unemployment rate steadied and confidence was restored into the economy, the market would see an upturn in the spring quarter. “(But) if the financial crisis worsens and unemployment rises then it’s going to put a real damper on the market.”

Home buyers forced to purchase in outer Melbourne suburbs

Posted on March 7, 2009 by peter 
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First time home buyers are being being forced to buy a record distance from the city as low interest rates and higher first homeowner grants push up prices in once affordable suburbs.

Only 316 of Melbourne’s 2720 suburbs and towns have a median price below the average first home buyer’s budget of $277,000, new figures released by home seeker website Our Home Sweet Home.

“It is driving up prices and pushing many first-time buyers out of the market.”

Many traditional first home buyer suburbs have moved out of reach, including Derrimut, Caroline Springs, Bacchus Marsh, East Geelong, Sunshine North and West, St Albans, Hallam, Dandenong South and Campbellfield.

The median price in Caroline Springs, for example, rose 16.4 per cent to $324,500 last year while in Derrimut it rose 7 per cent to $365,500.

Mr Boehm said many first-time buyers were being forced to look farther out to find a home they could afford.

Many were being forced to buy up to 40km from the city in places such as Cranbourne, Frankston North and Melton.

The figures show that between the September and December quarters last year 46 Victorian suburbs or towns moved out of reach of the average first home buyer despite across-the-board affordability improvements. Only 19 new areas became affordable.

“It is a bit of a surprise that more suburbs are coming off the list than coming on to it,” Mr Boehm said.

He expected strong buying by first home buyers to continue to push up prices in their favoured areas as long as interest rates remained low.

“Interest in properties in the $250,000 to $350,000 bracket is intense, with demand often outstripping supply, fuelling bidding wars in some areas,” said the firm’s chief executive, Peter Boehm.

1st time purchasers create property surge

Posted on February 25, 2009 by peter 
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Amid the economic gloom, at least one group of consumers is out in the market, with housing developers reporting a surge in first-home buyers after the federal housing grant was boosted in October. Companies such as Stockland, Mirvac, Lend Lease and Australand have reported a spike in sales to first-home buyers in their otherwise disappointing half-year results.

That was reflected in weekend auction data, which showed first-home buyers were the most active in the market. Sales to first-timers are up by 25 per cent to 30per cent at Craigieburn in Melbourne’s northern growth corridor, which Lend Lease and Stockland dominate.

“We’re actually selling off the plan in Craigieburn, because we don’t have enough physical product to cope with demand from the first home owners,” Stockland managing director Matthew Quinn said.

“It’s all contingent on bank lending. Interest rates in England are the lowest they’ve been since 1694, but who cares if you can’t get any money?”

There is a risk that demand could plunge again after June30, when the grants are cut from $21,000 back to $7000. Industry pundits, however, are confident the Federal Government will extend the first home buyer grant in some form, but that won’t be clear until the May budget.

The head of the residential division at Lend Lease, David Hutton, said sales had fallen, then stabilised since October.

“I think you’ve got a government here at the moment looking to create sales. The reality is the housing market in Australia is not oversupplied – it’s very different from other markets overseas.”

ANZ chief economist Saul Eslake said he was not surprised developers were stemming supply. “These are market conditions … that is why I am normally sceptical about these grants, as in many cases they do result in just simply pushing up the price of houses.” But in the “unusual circumstances”, in which buyers have the upper hand, grants can work, he said.

Over the weekend, the general market auction clearance rate was a strong 77 per cent but on only 436 properties, well down on the 1146 offered at the same time last year.

More than a quarter of all properties were sold before auction, which agents said reflected vendors’ continuing apprehension about the market.

Building industry begins slow recovery

Posted on February 24, 2009 by peter 
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WORK will start on an extra 26,000 homes over the next two years as the building industry slowly lifts from the bottom of the cycle.

But 2008-09 looks bleak for builders, with sods expected to be turned on only 132,190 homes, 17 per cent fewer than the previous year and 50,000 fewer than underlying demand, according to the Housing Industry Association’s national outlook, released yesterday.

Queensland has been hit particularly hard by the weakening economy.

“Tasmania, South Australia and the Australian Capital Territory all look to be riding out these tough times a little better than their larger state rivals,” the HIA report said.

Housing starts are expected to rise to 149,150 in 2009-10 and 158,100 in 2010-11, according to the peak industry body.

HIA chief economist Harley Dale said: “The first-home owners’ boost, mortgage rates at a 40-year low, and the housing components of the federal Government’s national building and jobs plan have the capacity to deliver a moderate recovery in residential activity.”

Earlier this month, the Reserve Bank cut official interest rates to 3.25 per cent, a 45-year low, wiping four percentage points off since September.

“Current housing conditions remain very weak, notwithstanding some spark from the first-home buyer market,” Mr Dale said.

Last week, the HIA said housing affordability for first-home buyers was at its best compared with any time in the past five years. However, it warned rising unemployment posed the biggest risk to a housing market recovery.

The HIA said a worst-case scenario would be the nation’s jobless rate reaching 9 per cent. This would depress the number of housing starts and lengthen any recovery.

The value of property sold at auction is down drastically despite auction clearance rates remaining solid.

In Sydney last weekend, 63.9 per cent of homes sold at auction, for a total of $94.9million. This compared with a clearance rate of 56.3 per cent, but $238.3million worth of property, a year ago, according to researcher Australian Property Monitors.

In Melbourne, $34 million worth of homes sold at auction last weekend compared with $352.1 million a year ago with clearance rates of 73.9 per cent and 70.1 per cent respectively.

For the renovation sector, which accounts for 47 per cent of the money spent in the housing industry, spending was expected to be flat in 2008-09, the HIA said.

Renovation spending was expected to total $32 billion in 2010-11, compared with its previous record of $30 billion in 2007-08, the HIA said.

13% housing market recovery predicted for Australia

Posted on February 23, 2009 by peter 
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The Housing Industry Association is forecasting a recovery in the housing market next financial year.

Its latest report on the outlook for the sector predicts new home construction to fall by 17 per cent this financial year.

But it forecasts a 13 per cent rebound in the next financial year.

The association’s chief economist Harley Dale says conditions in the market have been buoyed by the sharp fall in interest rates and the Government’s fiscal stimulus packages.

“Certainly at the moment the situation remains very weak, and unfortunately there’s no sign of that changing in the next couple of months,” he said.

“But with the amount of stimulus out there in the economy, there’s cause for optimism moving a little bit further forward.”

The Housing Industry Association says the shortage of homes should begin to narrow in the second half of this year, as the rate cuts and stimulus take effect.

Mr Dale says the rebound from July will help to reverse a substantial undersupply of houses.

“There I think is a lot of years of work ahead of us to completely bridge the gap,” he said.

“But if we can actually get the industry growing again over the next couple of years, then we will slowly be getting back towards the number of homes that we ideally need to be building each year.”

Improving Victorian homes energy efficiency

Posted on February 23, 2009 by peter 
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Environmental efficiency of residential property is an issue being closely examined by the property profession and the state and federal governments.

An enormous opportunity exists to significantly reduce Victoria’s carbon emissions.

At present new dwellings in Victoria must comply with the five-star standard. This requires a five-star energy rating for the building fabric, water-saving measures, and the installation of either a rainwater tank or solar hot-water service.

New dwellings comprise a small percentage of the housing stock, therefore the challenge is how to lift the energy rating of existing houses.

In Victoria a range of subsidies are available for property owners to install energy and water-saving devices. The Federal Government’s program to insulate 2.7 million homes will provide further impetus to the overall goal of carbon reduction.

The real challenge is implementing a reporting system that will allow prospective buyers to easily understand and compare the energy efficiencies of different properties. Currently, before a buyer signs a contract of sale, the vendor must provide a statement (often referred to as a Section 32) of matters affecting the land to be sold.

The Real Estate Institute of Victoria is working with a range of stakeholders to determine whether Section 32 should contain environmental ratings and what standards the ratings should be set at, or if another means for reporting a house’s environmental standard can be introduced.

It’s only a matter of time until we move to a more transparent system of energy rating for residential houses.

Melbourne property market shows revival

Posted on February 22, 2009 by peter 
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Real Estate agents say that plummeting interest rates are reviving Melbourne’s property market.

The Reserve Bank has cut rates 5 times since August, slashing the official rate from 7 per cent to 3.25 per cent.

While those who fixed their home loan at last year’s higher rates have seen no relief, falling home loan rates have helped contribute to a clearance rate of 77 per cent this weekend.

But Real Estate Institute of Victoria data shows there are still fewer than half as many auctions than the number achieved during the boom times a year ago.

There were 436 auctions over the weekend, compared to 1146 at the same time last year, as tight-fisted vendors opt for private sales to avoid expense.

About $289 million worth of property was sold by private sale at the weekend, compared with $207 million sold under the hammer.

Top-end property again struggled, with few auctions in the prestige suburbs of the inner south-east.

Hocking Stuart Carlton agent Scott McElroy said low rates made buying a house more attractive compared to renting.

“To think that home loans rates could be under 5 per cent has made buying a house look very attractive,” he said.

Treasurer Wayne Swan won’t apologise to families who fixed their mortgages when he was warning of an inflation crisis.

Reserve Bank Governor Glenn Stevens has revealed a 20 per cent surge in those fixing their mortgages in the first half of last year, before interest rates started to tumble.

They are now paying well over the standard variable rate and face $20,000 fees to unfix their loans.

Mr Swan said economic conditions changed rapidly and it wasn’t the Government’s fault.

“Those people are certainly in a very difficult position,” he told Channel Ten’s Meet the Press.

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