Hilton Parkes Real Estate
26th January 2019

FHB Loans Continue To Rise
The housing downturn in the two biggest cities, plus government incentives, are creating new opportunities for first-home buyers. New ABS data shows that the market share of first-home buyers is now at its highest level in seven years. Overall the value of new housing loans dropped 2.5% in November and was 16% below the level of a year ago, which was close to the market peak, but loans to FHBs continued to rise. The ABS report shows the value of lending to investors nationally dropped 4.5% to $9.3 billion, the lowest level in six years and down almost 30% from the peak reached in early 2017. But in some states investor loans are still rising, notably in Queensland and South Australia. Owner-occupiers upgrading their homes arranged $10.1 billion in mortgage commitments in November, down 3.1% from the previous month and 17% below the peak in the middle of last year. The fall in the Sydney and Melbourne markets, together with state government tax breaks, is encouraging a lift in purchases from first-home buyers, whose share of housing finance has risen to 18.3%.

Building Boom Boosts Affordability 
Australia’s home-building boom continues to improve affordability, according to HIA Senior Economist Geordan Murray. Affordability in six of the eight capital cities is now better than the 20-year average. The HIA Affordability Index for the capital cities registered 75.4 in the December Quarter. This is 1.5% higher than in the previous quarter and 3.3% higher than a year earlier. “2018 was the fifth consecutive year where the industry started construction of over 200,000 homes and it was a record year for new dwelling completions,” Murray says. “This strong flow of new housing supply is one of the key factors behind the moderation in price pressures in housing markets, which has ultimately improved housing affordability.” Another key factor is the modest improvement in wages. Strong growth in employment in the last two years has boosted the demand for workers. “We are seeing the early signs that this is translating into rising wages,” he says. The combination of those factors and low-interest rates creates a situation where affordability in most capital cities is more favourable than the 20-year average.

REIV Records Growth In Melbourne Median

Amid the negative media about the Melbourne housing market, the city’s median sale price actually rose last year, according to the Real Estate Institute of Victoria.
It says Melbourne’s house median rose 1.4% from $815,000 in 2017 to $826,500 in 2018. The figure was pulled up by booming outer suburbs like Mt Martha and Cranbourne North. Melbourne’s unit median also increased – up 1.8% to $597,000. REIV president Robyn Waters says despite sluggish clearance rates, a 20% drop in sales and low confidence, vendors who sold homes achieved good prices in 2018. “It might take you a bit longer to sell and you might have to put in a bit more effort,” she says. “But the big picture is showing house prices have increased slightly.” Other research sources have different numbers for Melbourne house prices in 2018 – the realestate.com.au website says they fell 1.9%, while both Domain and SQM Research record a 3% decline. CoreLogic claimed a 9% decrease, a figure out of step with all other research sources.

Loan Curbs Likely To Ease: Macquarie

Clamps on mortgage lending imposed on the banks in recent years could be loosened as an alternative to cutting interest rates, leading market analysts have predicted. As markets bet there is a 50-50 chance the next move in official interest rates will be a cut, some experts say there is also room for APRA to take action to ease “macroprudential” policy. APRA helped slow the $1.6 trillion home loan market in recent years by capping lending to investors and customers with interest-only loans, and forcing banks to more thoroughly vet customers. In December, however, the Council of Financial Regulators, which includes APRA and the RBA, raised concerns banks were being “overly cautious” in their lending decisions. APRA has also scrapped a limit on interest-only loans (from 1 January), after also axing a cap on loans to investors earlier in 2018. Macquarie economists Justin Fabo and Ric Deverell predict APRA will further loosen curbs on the mortgage market. One possible change is to lower the 7% minimum interest rate at which banks are required to test all new customers (much higher than actual interest rates).

Chinese Tipped To Buy In 2019 

The number of Chinese buyers of Australian homes is likely to remain steady this year in a major boost for the weakening markets in Sydney and Melbourne. Continued wealth growth in China (with dollar-worth per adult having risen four-fold over the past six years), an eye for an Australian bargain, a weak yuan and the trade war between the US and China are all factors in keeping investment in Australia strong. The forecast comes even as foreign buyers face extra state taxes on their purchase, says the Australia 2019 Outlook for Chinese Residential Real Estate Buying report by Juwai.com. “Chinese lack appealing alternative investments at home,” says Juwai CEO Carrie Law. “Bank deposits earn low rates, Chinese stock exchanges were the world’s worst performing in 2018, Chinese real estate is tightly regulated and peer-to-peer lending and private equity funds have collapsed.” The report says Chinese buyers spent $US129.3 billion on global real estate last year, up 8% on the previous year. That level is likely to remain stable this year, with Melbourne to get the highest share of investment, Sydney second and Brisbane third.

Quote Of The Week 

“2018 was the 5th consecutive year where the industry started construction of over 200,000 homes and it was a record year for new dwelling completions. This strong flow of new housing is one of the key factors behind the moderation in price pressures in housing markets, which has ultimately improved housing affordability.”

HIA Senior Economist Geordan Murray