Elite AgentINDUSTRY NEWSNEWS

Market Update 28 March

The Reserve Bank (RBA) released its bi-annual Financial Stability Review this week. The document always makes for good reading and provides valuable insight into the financial system. This release had 5.5 pages dedicated to the household sector which was largely focussed specifically on housing.

Some of the key points to note from the Review follow:

  • The non-performing share of banks’ domestic housing loan portfolios edged lower over the six months to December 2013, to 0.6 per cent.
  • It is important for banks’ risk management that they are vigilant in maintaining prudent lending standards, given that a combination of historically low interest rates and rising housing prices could encourage speculative activity in the housing market and encourage marginal borrowers to increase debt.
  • Housing demand has been particularly strong in Sydney and Melbourne and the strengthening in these markets is evident in a range of indicators. For instance, investors now make up more than 40 per cent of the value of total housing loan approvals in New South Wales – similar to the previous peak reached in 2003 – and the share is also approaching earlier peaks in Victoria. In addition, in Sydney the auction clearance rate remains at a historically high level and housing turnover (sales) has picked up since the middle of 2013. Improved market conditions are also boosting dwelling construction, particularly for higher-density housing in Sydney and Melbourne.
  • Stronger activity in the housing market, particularly by investors, can be a signal of speculative demand, which can exacerbate property price cycles and encourage unrealistic expectations of future housing price growth among property purchasers.
  • More generally, an upsurge in speculative housing demand would be more likely to generate financial stability risks if it brought forth an increase in construction of a scale that led to a future overhang of supply and a subsequent decline in housing prices. At a national level, Australia is a long way from the point of housing oversupply, though localised pockets of overbuilding are still possible. While the recent pick-up in higher-density dwelling construction approvals in Sydney and Melbourne warrants some monitoring, the nearterm risk of oversupply in those cities seems low.

There were 2,466 auctions held across the combined capital cities last week and the weighted average auction clearance rate was recorded at 69.4%, the lowest clearance rate over the past six weeks. In comparison, over the previous week, there were 2,293 capital city auctions with a clearance rate of 70.8%. Across Melbourne, Australia’s largest auction market, the auction clearance rate was recorded at 69.4% last week, up from 67.0% over the previous week. The number of properties taken to auction was slightly higher over the week, increasing from 1,085 the previous week to 1,160 last week. There were 982 Sydney properties taken to auction last week, with a clearance rate of 76.1%, down from 79.8% the previous week when 868 auctions were held in the city. RP Data is expecting just over 2,845 auctions over the current week.

capital-city-auction-clearance-rates-march-23-2014

Over the four weeks to 23 March, there were 49,735 newly advertised properties listed for sale nationally. The number of newly advertised property listings increased by 0.4% over the week and they are currently 17.9% higher than at the same time last year. Across the combined capital cities, new listings were 1.6% higher over the week and they were 25.8% higher than a year ago.

There are currently 245,661 properties listed for sale across the country. Total listings at a national level were -1.9% lower over the week and -3.6% lower than they were at the same time last year. Across the combined capital cities, total listings have fallen by -2.0% over the week and they are -8.2% lower than they were at this time a year ago. Capital city listings account for just 42% of all listings nationally.

Number of homes for sale
Residential property listings advertised for sale over the four weeks ending 23/03/2014
Note that sales listings are based on a rolling monthly count of unique properties that have been advertised for sale.

State No of new listings 12 mth change (%) No of total listings 12 mth change (%) Capital city No of new listings 12 mth change (%) No of total listings 12 mth change (%)
NSW 14,912 32.7% 60,282 -5.4% Sydney 9,631 44.7% 23,204 -8.9%
Vic 12,840 22.3% 61,035 -1.0% Melbourne 9,362 28.7% 33,547 -5.1%
Qld 10,486 4.0% 65,995 -2.6% Brisbane 4,373 12.5% 19,402 -9.2%
SA 3,136 7.7% 16,839 -8.4% Adelaide 2,270 10.8% 8,138 -17.1%
WA 6,313 17.0% 27,522 -4.2% Perth 4,545 16.9% 13,620 -6.2%
Tas 1,101 4.3% 10,601 2.3% Hobart 506 20.5% 3,140 2.4%
NT 334 7.4% 1,527 16.0% Darwin 255 8.1% 1,111 23.0%
ACT 613 -13.5% 1,850 -35.6% Canberra 606 -9.4% 1,831 -33.0%
National 49,735 17.9% 245,651 -3.6% Combined capitals 31,548 25.8% 103,993 -8.2%

Each week RP Data collects the most comprehensive set of auction results available in Australia. Thank you to our vast network of real estate professionals who assist us with aggregating these results. The statistics show how many auctions were reported by RP Data as well as the total number of auctions that were scheduled over the last week (due to the large number of auctions we are unable to report 100 percent of the results). ‘Sold‘ properties indicate those properties that were either successfully auctioned on the day, sold before the auction or sold after the auction. Properties ‘Not Sold’ were either passed in at auction or withdrawn. The ‘Market Activity Index’ monitors activity on the rpdata.com professional system including the volume of Comparative Market Analysis (CMA) reports being undertaken. On average, CMA volumes lead sales activity by about two months providing one of the most timely leading indicators available in the residential property market.

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Tim Lawless

Tim Lawless is the Research Director at CoreLogic Asia Pacific. Tim has been in the Australian housing market industry for more than 20 years with a focus on research.