Terry’s View

One of the core problems afflicting real estate is dodgy price data. Media reports press release information on prices from individual research companies as factual, apparently oblivious to the reality that figures from other sources will be different – and, in some cases, quite contradictory. Here’s where there is broad agreement: the ABS, SQM Research and CoreLogic all agree that house prices have risen in the past 12 months in Hobart, Canberra, Adelaide and Brisbane. Some suggest that Perth and Darwin are recovering, but others disagree. All have prices down in Sydney and Melbourne but there is major disagreement on how much they have fallen. CoreLogic claims Sydney house prices fell 10% in 2018, but the latest data from the ABS records an annual decline of only 4.9% while SQM Research has Sydney down 5.8%. In Melbourne, the ABS records an annual decline of 2.1% while SQM Research reports 1.8%, compared to the 9% claimed by CoreLogic. In Perth, the latest ABS figures report no change in the House Price Index, SQM Research reports a small annual decline of 0.9% while reiwa.com says the Perth median rose slightly in both October and November and was unchanged in December. This compares with CoreLogic’s claim of a 4.3% decline.

Prices Rise In Five Capital Cities

Prices rose in five of the eight capital cities in 2018, according to the latest figures from CoreLogic.

The growth was led by Hobart, where the Home Value Index grew 8.3% last year. Darwin was up 3.7%, Canberra 3.6% and Adelaide and Brisbane were up by about 1% in annual terms.

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Banks Too Cautious, Say Regulators

The nation’s biggest financial regulators say the major banks are being “overly cautious” in their lending decisions, after the royal commission created pressure to scrutinise customers more closely. Regulators reaffirmed the importance of banks continuing to lend money as they change their processes.

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Affordability Up Across The Nation

The Adelaide Bank/REIA Housing Affordability Report shows that every state and territory saw housing affordability improve in the September Quarter of 2018 – except Queensland, where affordability remained stable.

NSW saw the greatest improvement, with the proportion of income required to meet loan repayments dropping 1.5 points to 36.6%.

Following this was Western Australia, with a decrease of 1.2 points to 22.7%, then the ACT‘s 0.9 percentage point drop to 20%.

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APRA Scraps Cap On I-O Loans

APRA will remove its 30% limit on interest-only residential mortgage lending for banks and other lenders from 1 January. This cap was originally put in place in March 2017 in a bid to reinforce sound lending practices and has resulted in a cooling of the interest-only lending market. According to APRA, the introduction of the benchmark has led to a marked reduction in the proportion of new interest-only lending, which is now significantly below the 30% threshold. The new move opens up opportunity and competition in the lending market for investors in 2019.

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2018 Forecasts Hit The Mark

Hotspotting’s broad predictions for real estate markets across Australia in 2018 have been proven to be generally on the mark.

In the Feb edition of Money magazine, Terry wrote a 3 page feature on property prospects for 2018. As predicted, many of the Sydney and Melbourne markets went into decline, but other capital cities showed good growth, including Hobart and Canberra. Moderate increases were recorded in Adelaide and Brisbane, while Perth showed the first signs of recovery from its post-resources-boom slump.

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OECD: Soft Landing Most Likely

The Organisation for Economic Co-operation and Development says Australia’s long span of economic growth, 27 consecutive years, is likely to continue – and that the Sydney and Melbourne housing markets are “on track for a soft landing”.

In its latest Australian economic survey, the OECD says: “Life is good, with high levels of well-being, including health, and education. Robust economic growth is set to continue. New capacity coming on stream in the resource sector will support exports and business investment will pick up.”

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