Hilton Parkes The Week In Real Estate

City House Prices Rise 10%

Home prices in the capital cities rose an average of 10.2% in the year to March 2017, although there are major differences from one city to the next, according to the ABS.
Sydney led with an average annual home price lift of 14.4%. Melbourne was only just behind on 13.4%, while Hobart recorded an increase of 11.3%.

Darwin and Perth
had the weakest outcomes, being the only two cities to post a fall in prices in both the March Quarter and the year to March. Darwin slipped 5.9% for the year while Perth dropped 3.5%.

Overall, residential property prices rose 2.2% in the March Quarter, marking the fourth consecutive quarter of growth.

The ABS says the total value of Australia’s 9.9 million dwellings is now $6.6 trillion, only six months after reaching the $6 trillion mark.

The mean house price in Australia stands at around $670,000. NSW ($886,800) remains at the top of the country for the mean house price, with Tasmania ($357,000) recording the lowest.

Westpac Offers Cut For P&I

Westpac is raising variable rates on its interest-only mortgages by 0.34 percentage points. But it’s also reducing
variable rates on Principal & Interest (P&I) home loans by 0.08 percentage points from June 30.

Westpac Consumer Bank chief executive George Frazis says the move is not a response to the Federal Government’s bank levy, but to ensure interest-only lending remains within the APRA limit imposed in March.

“APRA’s limit on new interest-only lending is 30% of new residential mortgage lending, so we have to continue to make changes to meet this benchmark,” he says.

Westpac’s standard rate for owner-occupier customers paying P&I will drop to 5.24%. Its interest-only owner-occupier rate will rise to 5.83%, with the interest-only investor rate at 6.3%.

Variable rates at
Westpac subsidiary St George will move by similar amounts. Rival ANZ adapted its rates mix along similar lines almost two weeks ago.

Vacancy Rates Fall in Most Cities

Data released by SQM Research this week reveals the number of residential vacancies fell nationally in May, giving a national average vacancy rate of 2.2%, down from 2.4% in April.

Vacancies fell again in Melbourne to a 7-year low of just 1.5%, down from 1.6% in April and 1.9% a year earlier. The vacancy rate remains very tight in Hobart at 0.6%, while the vacancy rate is steady in Sydney at 1.8%.

The trend for asking rents for units in Sydney and Melbourne is still up and they are
rising well above the inflation rate, thanks to a shortage of rental properties. That’s also the case in Canberra and Hobart where a more acute shortfall of rental properties has pushed vacancy rates down to 1% and 0.6%, respectively.

The vacancy rate remains very low in Melbourne despite new apartment supply coming on to the market. Only in Brisbane do we see new unit supply pressuring vacancy rates higher at 3.1%, up from 2.7% a year earlier.

Banks Profit From RBA Rate Cuts

The nation’s banks have taken for themselves almost two full percentage points worth of cuts in official interest rates, with half going to their bottom lines at the expense of customers.

In a sign of what major banks are likely to do with the Federal Government’s planned $6.2 billion levy, research by the Reserve Bank shows mortgage holders and businesses have borne the brunt of years of bank cost shifting.

Reserve Bank researchers Tim Atkin and Belinda Cheung found that since the
outset of the GFC in mid-2008, the RBA had sliced official interest rates by a total of 5.75 percentage points. But mortgage rates offered by the banks had fallen only 3.9 percentage points.

The researchers said some of the difference was because of an increase in global borrowing costs, but at least 1.1 percentage points was because of a grab for profits.

On a 25-year, $300,000 mortgage, the 1.1 percentage points is equivalent to almost $200 a month or more than $56,000 over the life of the loan.

Survey Reveals Dream Is Still Alive

Half of Aussies polled for a recent survey believe the property dream is still alive and well, according to the CommBank Connected Future Report.

The survey asked Australians about how they perceive their future, the property market, adapting to a changing workforce and life for younger
generations. Just over half of the respondents said the Australian dream is being re-defined.

Demographer and futurist Claire Madden, who authored the CommBank Connected Future Report, says a remarkable insight from the data is the resilience and tenacity Aussies have in the face of economic uncertainty.

“While the Australian property dream looks markedly different in 2017, the majority of Australians either fully own or are paying off their home,” she said. “This has remained constant over the past five decades so, despite uncertainty, the Australian dream has clearly lived through time.

But she says the Australian ‘dream home’ is no longer a weatherboard standalone house. It is an architecturally designed product, as the quality of dwellings has risen over time.

Hilton Parkes The Week In Real Estate

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