CoreLogic says Sydney, Melbourne house prices up in June despite cooling

Sydney and Melbourne housing prices continue to defy a cooling, posting another price rise in the month of June, according to Corelogic’s June Home Value Index.

While foreign buyers were once thought to be mainly responsible for the the rise in house prices in the last three years, local homebuyers and investors showed their buying power buoyed by record low interest rates. The major banks have all ceased foreign lending.

“The impact of interest rate cuts from May is working its way into the system now,” Corelogic senior research analyst Cameron Kusher said.

“It’s not exclusively foreign buyers but local buyers…who have seen their home prices increase by half, so the wealth effect is high.”

Sydney house prices have risen another 1.2 per cent in June, but lower against the May rise of 3.1 per cent.

Melbourne rose 0.8 per cent versus 1.6 per cent last month.

Hobart also continues to show strong capital growth scoring a 1.8 per cent rise in housing prices in June.

But the rest of the other capital cities recorded a fall in housing prices; as a result, capital city dwelling values barely rose at an overall 0.5 per cent in June.

 For the first half of the year, capital city dwelling values have moved 5.5 per cent with the most substantial capital gains located in Sydney at 8.9 per cent, Hobart, 8.5 per cent and and Melbourne at 5.8 per cent. These numbers were smaller than the same time last year.

“While the higher rates of capital gains in Sydney and Melbourne can be tied back to strong economic conditions, and high rates of population growth, the same cannot be said for Hobart where economic conditions and migration rates are gradually improving from a low base,” Mr Lawless said.

“The strength in the Hobart market comes after a long period of underperformance…potentially, the Hobart housing market is being fuelled by the sheer affordability of housing and a renewed trend towards Melbourne and Sydney buyers unlocking their equity to make lifestyle housing purchases.”

Gains starting to slow

 While the rebound in the last few months watered down the cooling that started in the final quarter of 2015, Corelogic research director Tim Lawless said the those gains are starting to slow.

“The monthly growth rate reduction is likely to be very much welcomed by state and federal government policy makers and regulators who may be concerned about a sustained rebound in capital gains,” he said.

Mr Kusher also predicted there would be reprieve for Sydney and Melbourne in the second half of the year and spring, the traditional property buying season, could be a “fizzer”.

The uncertainty caused by the Brexit vote is likely to slow down price growth as is the slower turnover of stock in Sydney and Melbourne, Corelogic said.

 “Some positive news for Sydney buyers is that there are early signs that Sydney’s housing market may be starting to turn in favour of the buyer,” Mr Lawless said.

“We’re seeing homes in the city taking longer to sell and vendors are starting to offer larger discounts on their asking prices in order to make a sale.”

“The typical Sydney home is now taking 40 days to sell compared with 26 days a year ago and discounting rates have risen from 5.5 per cent a year ago to 5.6 per cent.”

“In balance, Australia’s two largest cities are facing increased affordability challenges that are likely to negatively impact the trajectory of dwelling values and activity as more prospective buyers are blocked from the market.”

 As a consequence of rising prices, gross rental yields continue to slip nationally, pushed mainly by the deterioration in Sydney and Melbourne.

The gross yield on a house is now averaging 3.2 per cent and units are averaging 4.1 per cent.

 

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L Murphy- Singapore

Hi David,  Thank you so much for all your help getting the mortgage for the land purchase arranged and for helping ensure the settlement happened so quickly.

 

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David Moss talks Non-Resident lending with Straits Times

Singaporeans looking to buy homes in the popular market of Australia may face more hurdles after major Australian banks tightened lending criteria to non-residents in recent months.

The Commonwealth Bank said it will no longer approve applications that cite self-employed foreign currency income. “The Commonwealth Bank has tightened requirements for some temporary residents in the areas of self-employed applicants and temporary visas who are seeking to borrow for residential purposes,” a bank spokesman told The Straits Times.

The lender will also reject foreign-currency income of temporary Australian residents, and temporary Australian residents with Australian-dollar incomes can now borrow only up to 70 per cent of the value of the property, down from 80 per cent previously.

Another major bank, the National Australia Bank (NAB), has cut the maximum loan-to-value ratio from 80 per cent to 60 per cent for non-resident home loan applicants. It will also take a “shading” – or a discount – of up to 40 per cent on the applicant’s income when assessing the borrower’s ability to service the loan.

Mr Andrew McCasker, NAB head of property financing for South and South-east Asia, said: “NAB, through our Singapore office, is still supporting borrowings for Singaporean residents who are looking at investing in the Australian and New Zealand market.”

 Westpac, meanwhile, has said it will stop making home loans to non-residents, temporary visa- holders or those with foreign self- employed income. The lender also told The Straits Times that it can offer Australian property loans to “nationals and residents of Singapore” via branches here.

However, analysts say investors should note that loans originating from Singapore will be subject to the total debt servicing ratio (TDSR) framework.

Despite the more stringent lending rules, mortgage brokers and property agents do not think Singapore investors will be badly hit.

“Singaporeans, in general, are still viewed rather favourably as they are able to produce income or bank statements from reliable sources,” said PropNex International head of international markets Anson Tay.

Australian mortgage advisor David and Partners, which counts Singaporean investors as a big portion of its clientele, said there are still avenues to obtain home financing.

Said its managing director David Moss: “We have 20 lenders in Australia on our panel, and they are still lending… Probably the biggest change is not so much that they are not lending, it is the additional documentation required for loans.”

Reapfield Property Consultants, which focuses on marketing Australian property, said some investors have turned to creative options. “Some clients will take advantage of the lower interest rate here by borrowing against their property in Singapore, provided they are not affected by TDSR. They then take the cash to fully pay for the Australian property,” noted Reapfield Property Consultants executive director Peter Thng.

The firm has marketed various landed home projects in Melbourne, including Manor Lakes, Jubilee and Bridgefield estates.

Mr Thng said local investors are more concerned about the additional stamp duty surcharges on foreign property buyers in Australia.

From last Tuesday, foreigners buying homes in New South Wales have been required to pay a new 4 per cent stamp duty surcharge, making it the second state in Australia to impose such a duty.

In the state of Victoria, the additional levy – currently 3 per cent but set to rise to 7 per cent from July 1 – was implemented on foreign property purchases last year.

In Queensland, with Brisbane as its state capital, the state government is planning a new 3 per cent foreign property surcharge, expected to kick in this October.

Australian government data showed that Chinese investment in Australian real estate doubled to A$24 billion (S$24.3 billion) last year, from A$12 billion in 2014.

China was the top property investor, followed by the United States with A$7.1 billion, Singapore with A$3.8 billion and Malaysia with A$3.4 billion. Large Singapore companies have invested in the property market in Australia.

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Brexit to boost Aus property’s safe-haven status

Brexit will boost Australia’s residential property market as the UK decision to leave the European Union will increase perceptions of the market’s safe-haven status, observers say.

Nerida Conisbee, the chief economist at property-listing company REA Group, shrugged off a question that uncertainty created by the UK’s unexpected vote to leave the 28-nation EU bloc would trigger a sharp fall in Australian property prices.

If anything, it would boost demand for Australian real estate assets, Ms Conisbee said.

 “If you’re a pension fund in Europe, and you’re looking at London or you’re looking at Australia – whether Sydney or Melbourne – then all that turmoil makes Sydney or Melbourne look like a great investment,” she said at a lunch hosted by the Australian Israel Chamber of Commerce.

The local property market typically only suffered large, sudden falls as a consequence of large macroeconomic events such as a surge in unemployment or drop in economic growth and neither of these was likely, Ms Conisbee said.

“Overall, I’m pretty optimistic about Australian property. I’m really optimistic about Sydney, just given the supply issues, and Melbourne, to a limited extent.”

The referendum result that will keep rattling markets this week and in time reshape the position of Britain, the world’s fifth largest economy, will create an opportunity for markets seen to offer more stability, but in contrast to financial markets nothing will happen straight away, said Chris Mourd, LJ Hooker’s head of real estate.

 “The reality is there isn’t going to be an immediate impact to Australian property,” Mr Mourd said. “What you’re probably going to see is the investor saying, ‘We want to go somewhere we can project out over the next few years and with some level of stability’.”

Falling prices of equities and other more liquid investments would also prompt local investors to take another look at real estate, he said.

“Most people would have woken up following the Brexit announcement and been very concerned about their superannuation,” Mr Mourd said. “People will be seriously looking at bricks and mortar as a serious option. A lot of people will be doing the numbers on that.”

But the benefit to Australia’s property market may not be uniform. Buyers’ agency Secret Agent said demand for top-end properties could stall as global high net-worth investors – who typically buy prestige bolt holes in a handful of different cities – could go into lockdown while they wait to see the effect of the Brexit vote on their UK holdings.

 Low stock levels are already pushing prices of premium homes higher. On Saturday, a four-bedroom house at 7 Lambeth Avenue in prestigious Melbourne suburb Armadale sold for $2.76 million, a price buyers agent David Morrell said was “silly”.

“People are paying $7300 per square metre for land that was selling at $4000 only 18 months ago,” Mr Morrell said.

Brexit-related uncertainty meant more potential vendors would keep their premium homes off the market for longer while they assessed the fallout, he said.

“What it will do is cause vendors not to put properties for sale,” Mr Morrell said. “This exit thing will keep it a lot harder. And I think it’s the same in Sydney.”

 

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SG Chua-Singapore

Thanks David for the smooth loan application, approval and settlement. My other mortgage agent screwed up even though I got an IPA from them before committing on the property. After 11 days of waiting, thru and fro with the other agent, I applied through David and got my loan approved in 5 days. I have not got any approval via the other mortgage agent but got a $280 valuation charge for nothing.

So I would recommend you speak to David first.

 

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NSW unveils tax plan for foreign investors

NSW unveils tax plan for foreign investors 
The New South Wales government hopes to claim an additional $1 billion in revenue over the next four years after formally announcing its taxation plans for foreign property buyers.

It had been speculated that the NSW government were considering hitting foreign investors with a higher rate of land tax in the upcoming budget, but Treasurer Gladys Berejiklian has announced the tax increases will go further than that.

Berejiklian yesterday announced that from 21 June foreign buyers of residential real estate in NSW will face an additional stamp duty surcharge of 4%, while the start of the 2017 land tax year will bring 0.75% additional surcharge for foreign buyers.

The announcement means that NSW’s tax plan for foreign buyers will fall in the middle ground between that of Queensland and Victoria.

Victorian Treasurer Curtis Pitt has recently announced that foreign buyers will face a stamp duty surcharge of 7% and a land tax surcharge of 1.5%, while Queensland Treasurer Curtis Pitt last week announced a stamp duty surcharge of 3% for foreign buyers in his state.

Aussie house price growth falls down global rankings 
Despite house prices across the country recording near double-digit growth in the 12 months to March 2016, Australia has fallen out of the world’s top five locations for house price growth.

According to the latest edition of the Knight Frank’s Global House Price Index for the first quarter of 2016, house price growth in Australia was the sixth best in the world over the year to March at 8.7%.

While still an impressive rate of growth, that annual increase was not enough for Australia to keep the fourth place it had recorded in the previous edition of the index across the December 2015 quarter.

Michelle Ciesielski, Knight Frank’s Australian residential research director, house price growth in Australia has likely entered a more healthy point in the cycle.

“Overall growth in annual capital values has returned to more sustainable levels in 2016 – close to that experienced just over two years ago in the Australian mainstream housing market,” Ciesielski said.

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RBA announces cash rate decision

The Reserve Bank of Australia has left the official cash rate on hold at 1.75%, after a surprise drop in May.

Economists and analysts unanimously expected the cash rate to remain steady today, according to finder.com.au’s monthly Reserve Bank survey.

However, CoreLogic’s head of research, Tim Lawless, said today’s decision was made despite conflicting economic trends.

“On one hand we have an economy that is growing at just over 3% per annum, low unemployment and a re-accelerating housing market,” Lawless said.

“On the other hand the RBA is confronted with a core inflation reading which is at a record low as well as the lowest wages growth on record.”

He said the prospect of a further rate cut later this year is “still well and truly on the cards”, and he is not alone. According to the finder.com.au survey, more than two thirds (68%) of those surveyed predict there’s a further cut on the way this year.

Like Lawless, most believe the cut will come in August after inflation figures are released in July.

“If the June quarter inflation data, which is out a week before the RBA’s August board meeting, provides another weak reading, the chances of a rate cut in August are high,” he said.

But the housing market will be a concern for the central bank, Lawless said.

“CoreLogic reported a 1.6% rise in capital city home values last week, following a 1.7% rise in April.  The stronger housing market conditions have been enough to reinflate the trend rate of growth which is something the RBA and the banking sector regulator are likely to be keeping a close eye on.

“Strong housing market conditions probably wouldn’t be enough to block a further rate cut, however, if the renewed growth trend continues, there is the potential for a further regulatory response that could cool housing market demand while at the same time allowing monetary policy to stimulate the broader economy.”

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