Written by Mark Thomas
11 September, 2019
It is amazing how fast the turnaround in the residential property market has been. But is it a turning point or are the press really just pumping up the story? We have looked at the recent press and to say that the press are upbeat is an understatement.
Fuelling this turnaround was interest rates, then clearance rates and now… news headlines. Let’s have a look at this recent news:
Buyers are piling back into the housing market and they’re taking on the debt to prove it — as home loans spike the most since 2016.
“In July, the value of Australian home loans increased by 5.1% on the previous month, ten times greater growth than what was expected and its biggest monthly gain in four years.
“That’s been spearheaded by owner-occupiers. Their lending was up 5.3% in July on June which was in turn 4.1% up on May. In fact, as others retreated during price declines, it was first home buyers that took their opportunity to get into the market.”
Shane Oliver – AMP
“… first home buyer share of housing finance is well up from lows. Helped by stamp duty concessions and better affordability in WA”
Property market showing signs of recovery with surge in owner-occupier and investor lending
“Australia’s housing market is showing further signs of recovery, thanks to a surge in the number of people who are borrowing — and taking out bigger mortgages.
- Value of new loans to owner-occupiers lifted 5.3pc in July, but fell 8.3pc in the past year
- Loans to property investors rose 8.3pc during the month, but experienced an annual drop of 20.4pc
- Rise in borrowing activity coincides with rebound in property prices and auction clearance rates
“The value of new loans issued to households jumped 3.9 per cent to $32 billion in July, its sharpest increase in four-and-a-half years, according to the latest data from the Australian Bureau of Statistics (ABS).
“It was driven, in particular, by owner-occupiers (excluding those who are refinancing). The amount of money they borrowed rose 5.3 per cent to $13.3 billion since the previous month, seasonally adjusted — the strongest result since August 2015.”
Sales prior to auction rise as Sydney and Melbourne buyers look to avoid the competition
“More people are selling their homes before their scheduled auction with the number of these sales now similar to those seen during the property market boom.
“Just over a quarter of Sydney sellers – 28 per cent – sold their home before auction in August, while 14.5 per cent sold their property prior to it going under the hammer in Melbourne, Domain data shows.
“The share of pre-auction sales is back close to where it was during the 2012-17 boom.”
Auction clearances show a market in turnaround
“Auction clearance rates in Sydney and Melbourne continued to rise in the first week of spring, and according to new research it’s not just because there is nothing to buy.
“Sydney’s preliminary auction clearance rate closed at 83.1 per cent, while Melbourne’s figure was 76.6 per cent, according to Corelogic, and the final numbers are likely to settle in the 70s.
Of course it is not all good news. ABC reporters using a clever pun on the Structural defects in high-rise apartment blocks have outlined that:
Apartments could be the crack in the housing market recovery.
“Many thousands of buildings are impacted, not only of course those being currently built, and there were 270,000 to 300,000 [units] now, but also those that were sold over the last 20 years.”
All I can say is Caveat Emptor (buyer beware)….
It seems that falling interest rates have led to rising auction clearance rates causing the printing of positive headlines. These falling interest rates have also been accompanied by a rise in borrowing activity. So the news here is that the banks are lending more, creating buying demand in the marketplace. It’s that easy… more demand, limited stock (supply) and up go the prices and clearance rates.