Hilton Parkes Real Estate
12th January 2019

Prices Rise In 5 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%. The capital city average was a decline of 6.7%, according to these figures, weighed down by a 10% fall in Sydney and a 9% decrease in Melbourne. It’s important to note that other major research sources disagree with these figures. The latest ABS data records an annual decline in Sydney house prices, but by 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 House Price Index, SQM Research reports an annual decline of 0.9% while reiwa.com reported that the Perth median house price rose slightly in both October and November and remained unchanged in December. This compares with CoreLogic’s claim of a 4.3% annual decline in Perth.

Borrowers Reject Major Banks

Home loans by the major banks are growing at their slowest annual rate in over 10 years, as banks tighten their serviceability criteria and more borrowers switch to smaller lenders. Investment bank Morgan Stanley’s analysis of lending data finds that annual growth in home lending by the big four banks was only 3.6% in November, while loans by the smaller banks grew 8% and non-banks grew 16%. “In our view, tighter lending standards are creating a competitive disadvantage for the banks,” Morgan Stanley analysts said in a research note.  Criteria used by the big banks to assess loan applications has been criticised at the Royal Commission. That is seeing a greater flow of customers to smaller banks and non-bank lenders. Some big lenders are, however, using their challenger brands to compete in the investor loan market. Commonwealth Bank has reduced the rate on investor loans at subsidiary Bankwest, while Westpac has cut a raft of investor interest rates across its St George, Bank of Melbourne and BankSA loans.

Queensland Pips Victoria For Migrants

A stronger housing market and improving job prospects has helped net migration levels to Queensland overtake Victoria, according to a report from real estate group CBRE. Victoria was Australia’s most popular state to move to from 2013 to 2017. The trend was supported by the state’s strong economy and buoyant jobs market, with an average of 14,000 people per annum making the change. But population growth eased in FY2018, with falls in both net interstate and overseas migration figures. Deloitte Access Economics says that over the next five years the Queensland economy is expected to grow 3.6%, outpacing the 3% growth predicted in NSW and Victoria. In Sydney and Melbourne, people are being turned off by the spike in property prices over the five years to 2018. CBRE associate director Craig Godber says the housing market will continue to support migration to Queensland. “It has only been since the price differential between Sydney and Brisbane approached its widest point in early 2017 that a clear upward trend in net interstate migration to Queensland emerged,” says Godber.

Treasurer Predicts Lending Pick-Up

Treasurer Josh Frydenberg has predicted lending from the banks into the housing market will pick-up after an easing of regulations across the sector. Frydenberg says regulations put in place by the Australian Prudential Regulation Authority – and recently lifted – are “building resilience” for the future. He says that while the rate of growth in home lending has fallen, the recent move by APRA to wind back its intervention will soon be evident. “Now that APRA has lifted some of its restrictions on investor lending, we should see a pick-up,” he says. Frydenberg says targeted and short-term ¬interventions from APRA in the housing market has, according to the RBA, ‘increased the resilience of the economy to future shocks’. “However, now these interventions have been wound back, it is vitally important that the banks continue to provide affordable and timely access to credit,” he says. “Keeping open their loan books to borrowers will help maintain the strength of the Australian economy.” According to the RBA figures, lending to owner-occupiers grew 6.8% to an outstanding debt total of $1.2 trillion. However, this is the lowest annual rate of growth since the end of 2015.

Brisbane To Lead Rise In Units 

Brisbane’s recovering apartment market is set to lead the nation over the next two years, with values forecast to grow more than in any other major capital city. Moody’s Analytics expects apartments to outperform houses throughout Greater Brisbane in 2019. It predicts apartment values will grow 2.8% in 2019, followed by sharper growth of 6.5% the following year – a performance equalled only by Darwin among the capital cities. In terms of specific sub-markets, a rise in unit values of more than 7% is expected in the inner city, Logan City and Moreton Bay regions in 2019. House values are tipped to grow the most in Brisbane’s western suburbs this year (4.5%). Moody’s Analytics is forecasting a 6% correction in house values in Melbourne this year, while Sydney house values are expected to fall a further 3.3% in 2019 following a 5.2% drop last year. The report says the cooling trend in the biggest cities in the final months of 2018 saw a sharper decline in house values than for apartment values.

Quote Of The Week 

“Now that APRA has lifted some of its restrictions on investor lending, we should see a pick-up. My message to the banks is still very clear – keep the books open. You have a social and economic responsibility to do so. It’s in the economy’s interests and the public’s interests.”

Federal Treasurer Josh Frydenberg, the latest to urge banks to ease their criteria on lending in the housing market.