Wednesday, 07 April 2010
RP Data’s national research director Tim Lawless has slammed claims Australia is currently in a housing bubble.
According to Mr Lawless, a housing ‘bubble’ suggests housing values increased too rapidly and are set to experience a rapid decline, a fate not likely to come to fruition in Australia.
“Bubble is a word that has been used pretty loosely in relation to Australia’s real estate market since about 2003. Generally I would disagree with using this term,” he told Real Estate Business.
“Across Australia’s capital cities, home values have increased by just 6.2 percent per annum over the last five years – a rate of growth that is in line with wages growth which has been 6.0 per cent per annum over the same time frame.
“Rather than experience a rapid decline, my view is that home values will continue to show modest growth due to the ongoing under supply of dwellings and rapid population growth that creates demand for housing.”
Mr Lawless said despite the fact that 14,000 new homes are approved for construction each month, the rate of new dwelling approvals is much lower than what is required – approximately 17,400 new homes need to be approved each month.
“With such strong demand for new housing and an ongoing undersupply together with improving consumer and business confidence, it is reasonable to expect that the building industry will lift their game and start producing more housing stock. The strategic imperative is to deliver stock to the market that is aligned with consumer demand. That means a focus on developing affordable and well located housing stock,” Mr Lawless said.
Wednesday, April 7, 2010
Tuesday, April 6, 2010
Wow ! Property is still the flavour in Australia.
Record home prices; Consumers curb spending
Home prices; Retail trade; Building Approvals; Private sector credit
• The RP Data-Rismark Hedonic Australian Home Value Index – the largest property database in Australia – reported that home prices rose by 1.4 per cent in February to record highs, after rising by a upwardly revised 2 per cent in January. Home prices are up 12.7 per cent on a year ago – the fastest rate in 25 months.
• Aussie consumer pared back on spending, with retail sales falling by 1.4 per cent in February. Department stores, retail chains and other large retailers recorded trend growth of just 0.1 per cent in February – the weakest reading in records going back almost 16 years.
• Dwelling approvals fell by 3.3 per cent in February, with the majority of the weakness centred on a slump in private sector apartments and houses. Dwelling approvals are still up 34.2 per cent on a year ago.
• Private sector credit rose by 0.4 per cent in February. Personal and housing credit were the key drivers, but business credit fell again. In annual terms personal credit was up 1.4 per cent - a 17 month high.
What does it all mean?
• Are below normal interest rates creating a housing bubble? Clearly that is likely to be a question that will be discussed by Reserve Bank policymakers at the interest rate meeting next week. And the latest round of data has added further colour to the debate.
• Despite four rate hikes house prices are continuing to defy the global property slowdown, rising by a further 1.4 per cent in February, with the annual growth rate at a 25-month high. While on the other side of the coin the withdrawal of stimulus has resulted in a slide in retail spending and building approvals.
• The latest round of retail sales data clearly highlights the difficult landscape faced by retailers. Consumer confidence maybe buoyant, however it certainly is not translating into robust spending. The anecdotal evidence suggests that retailers are continuing to discount in an attempt to entice consumers and CommSec would expects this trend to continue over the next few months.
• Department stores and large retailers which have been more successful in the past, compared to smaller retailers (given their ability to trim prices) have this time round highlighted the weak trading environment. Trend growth for the large retailers posted at a meagre 0.1 per cent in the latest month – marking the weakest reading in almost 16 years
• The weakness in the latest retail sales result effectively suggest that retail sales has been pretty flat since the start of the year – a result that has also been evident in the release of our Commonwealth Bank Business Sales Indicator (BSI).
• Dwelling approvals have slumped for the second consecutive month, with the majority of the weakness centred on private sector apartments and homes. It is understandable that a period of consolidation is to be expected after what has been a phenomenal run over the last year and given the expiry of the first home buyer boost. Looking forward the housing sector is likely to cool over the next few months, however the sharp surge in construction loans over the past year will continue have multiplier effects through the economy – a result that has shown up in the retail sales data with furniture, home improvement retailers recording the best annual gains in more than three years.
• The healing process continues for lending, but it will be some time before growth rates are restored to normal levels. Personal lending is now starting to tick higher with the annual growth rate holding at a 17-month high, though early days still an encouraging sign on future activity.
• The latest figures on home prices indicate that a move to a more neutral interest rate setting will be on the agenda over the next few months. However given the weakness in consumer spending and building approval, the Reserve Bank should not rush the rate rise – especially given that the inflation environment remains very weak. On balance, CommSec believes that a pause in the rate hiking profile is likely to be the most likely outcome at the April meeting.
What do the figures show?
House Prices
• The RP Data-Rismark Hedonic Australian Home Value Index rose by 1.4 per cent In February after rising by a revised 2 percent in January.
• Home prices are up 12.7 per cent on a year ago from a low base. Annual growth is the fastest in 25 months.
• Over the three months to February the fastest price growth occurred in Melbourne (up 5.4 per cent) followed by Darwin (up 4.2 per cent), Sydney (up 3.8 per cent), Canberra (up 2.7 per cent Adelaide (up 3.2 per cent), Brisbane (up 1.8 per cent), and Sydney (up 1.7 per cent). Perth prices fell by 0.6 per cent while Hobart prices fell 0.1 per cent.
• In all capital cities home prices are higher than a year ago. Leading the way is Darwin (up 19.7 per cent) followed by Melbourne (up 19.3 per cent), Canberra (up 14.7 per cent), Sydney (up 12.3 per cent), Adelaide (up 9.1 per cent), Perth (up 7.5 per cent), and Brisbane (up 6.5 per cent).
• RP Data-Rismark calculates the median capital city house price across Australia at a record high of $548,413 with the median unit value at $450,619.
Retail trade:
• Retail trade fell by 1.4 per cent in February after a 1 per cent fall in January. In annual terms retail sales is up 3.4 per cent on a year ago – well below the long term average of 6.5 per cent.
• Sales by chain stores and other large retailers fell by 1.2 per cent in seasonally terms in February while sales by smaller retailers fell by 1.8 per cent. In annual terms sales at chain stores were up 5.3 per cent on a year ago while smaller retailers saw spending rise by just 0.3 per cent.
• Sales rose most at Furniture, floor covering and home ware store (up 1.9 per cent). In annual terms sales at furniture, floor covering and home ware stores rose by 11 per cent – the biggest annual increase in over 3 years.
• Sales fell the most at liquor retailers (down 5.1 per cent), department stores (down 3.9 per cent) and clothing and footwear retailers (down 3.9 per cent).
• Retail trade was down across all states except Tasmania (up 1.5 per cent) and Northern Territory (up 0.9 per cent). Spending fell most in NSW (down 2.5 per cent), South Australia (down 1.7 per cent), Western Australia (down 1.4 per cent), Victoria (down 0.9 per cent), ACT (down 0.8 per cent), and Queensland (down 0.8 per cent).
Building Approvals:
• New dwelling approvals fell by 3.3 per cent in February after falling 5.5 per cent in January. Dwelling approvals are now up 34.2 per cent on a year ago.
• House approvals rose by 0.7 per cent (private sector down 0.9 per cent) after rising 0.4 per cent in January. Apartment approvals fell by 12.3 per cent in February (private sector down 10.9 per cent) after sliding by 16.6 per cent in January. In annual terms apartment approvals are up 30.3 per cent on a year ago.
• Overall, the total value of building approvals (new houses, alterations and commercial) fell by 4.5 per cent in February to $5.9 billion. Commercial approvals fell by 13.0 per cent after sliding by 40.1 per cent in January. New residential approvals rose 0.5 per cent while renovations rose by 6.2 per cent.
• Over the year to January, total building approvals totalled $80.1 billion.
Private sector credit
• Private sector credit rose by 0.4 per cent in February after rising by 0.4 per cent in January. But the annual growth rate rose from 1.3 per cent to 1.6 per cent.
• Housing credit grew by 0.7 per cent in February with annual growth holding at a 17-month high of 8.5 per cent. Personal credit rose by 0.4 per cent in February after a 0.5 per cent increase in January. Personal credit is up 1.4 per cent over the past year – a 17-month high. And business credit fell for the 13th straight month, down by 0.1 per cent in February. Business credit is down 7.6 per cent on a year ago.
What is the importance of the economic data?
• The RP Data-Rismark Hedonic Australian Home Value Index is based on Australia’s biggest property database including over 280,000 sales during 2009. Unlike the ABS Index, which excludes terraces, semi-detached homes and apartments, the RP Data-Rismark Hedonic Index includes all properties.
• The monthly RP Data-Rismark Hedonic Index compares month-to-month index results. Quarterly results are measured comparing end months rather than averaging each month in the quarter. For example, the first quarter of 2009 index results compare the end of March index with the end of December index.
• The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
• The Bureau of Statistics' monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.
• Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.
What are the implications for interest rates and investors?
• For home-owners, the strong gains in house prices represent great news, serving to boost wealth levels and confidence. With most of the stimulus being pared back and the likelihood of further rate hikes, it is likely to dampen enthusiasm in the housing sector.
• CommSec expects that home prices will rise 5-8 per cent over 2010 and movements in prices over the last few months are consistent with those forecasts.
• The weakness in building approvals and volatility in retailers will ensure that the Reserve Bank treads warily in the rate hiking cycle.
Source Savanth Sebastian, Economist, CommSec
Home prices; Retail trade; Building Approvals; Private sector credit
• The RP Data-Rismark Hedonic Australian Home Value Index – the largest property database in Australia – reported that home prices rose by 1.4 per cent in February to record highs, after rising by a upwardly revised 2 per cent in January. Home prices are up 12.7 per cent on a year ago – the fastest rate in 25 months.
• Aussie consumer pared back on spending, with retail sales falling by 1.4 per cent in February. Department stores, retail chains and other large retailers recorded trend growth of just 0.1 per cent in February – the weakest reading in records going back almost 16 years.
• Dwelling approvals fell by 3.3 per cent in February, with the majority of the weakness centred on a slump in private sector apartments and houses. Dwelling approvals are still up 34.2 per cent on a year ago.
• Private sector credit rose by 0.4 per cent in February. Personal and housing credit were the key drivers, but business credit fell again. In annual terms personal credit was up 1.4 per cent - a 17 month high.
What does it all mean?
• Are below normal interest rates creating a housing bubble? Clearly that is likely to be a question that will be discussed by Reserve Bank policymakers at the interest rate meeting next week. And the latest round of data has added further colour to the debate.
• Despite four rate hikes house prices are continuing to defy the global property slowdown, rising by a further 1.4 per cent in February, with the annual growth rate at a 25-month high. While on the other side of the coin the withdrawal of stimulus has resulted in a slide in retail spending and building approvals.
• The latest round of retail sales data clearly highlights the difficult landscape faced by retailers. Consumer confidence maybe buoyant, however it certainly is not translating into robust spending. The anecdotal evidence suggests that retailers are continuing to discount in an attempt to entice consumers and CommSec would expects this trend to continue over the next few months.
• Department stores and large retailers which have been more successful in the past, compared to smaller retailers (given their ability to trim prices) have this time round highlighted the weak trading environment. Trend growth for the large retailers posted at a meagre 0.1 per cent in the latest month – marking the weakest reading in almost 16 years
• The weakness in the latest retail sales result effectively suggest that retail sales has been pretty flat since the start of the year – a result that has also been evident in the release of our Commonwealth Bank Business Sales Indicator (BSI).
• Dwelling approvals have slumped for the second consecutive month, with the majority of the weakness centred on private sector apartments and homes. It is understandable that a period of consolidation is to be expected after what has been a phenomenal run over the last year and given the expiry of the first home buyer boost. Looking forward the housing sector is likely to cool over the next few months, however the sharp surge in construction loans over the past year will continue have multiplier effects through the economy – a result that has shown up in the retail sales data with furniture, home improvement retailers recording the best annual gains in more than three years.
• The healing process continues for lending, but it will be some time before growth rates are restored to normal levels. Personal lending is now starting to tick higher with the annual growth rate holding at a 17-month high, though early days still an encouraging sign on future activity.
• The latest figures on home prices indicate that a move to a more neutral interest rate setting will be on the agenda over the next few months. However given the weakness in consumer spending and building approval, the Reserve Bank should not rush the rate rise – especially given that the inflation environment remains very weak. On balance, CommSec believes that a pause in the rate hiking profile is likely to be the most likely outcome at the April meeting.
What do the figures show?
House Prices
• The RP Data-Rismark Hedonic Australian Home Value Index rose by 1.4 per cent In February after rising by a revised 2 percent in January.
• Home prices are up 12.7 per cent on a year ago from a low base. Annual growth is the fastest in 25 months.
• Over the three months to February the fastest price growth occurred in Melbourne (up 5.4 per cent) followed by Darwin (up 4.2 per cent), Sydney (up 3.8 per cent), Canberra (up 2.7 per cent Adelaide (up 3.2 per cent), Brisbane (up 1.8 per cent), and Sydney (up 1.7 per cent). Perth prices fell by 0.6 per cent while Hobart prices fell 0.1 per cent.
• In all capital cities home prices are higher than a year ago. Leading the way is Darwin (up 19.7 per cent) followed by Melbourne (up 19.3 per cent), Canberra (up 14.7 per cent), Sydney (up 12.3 per cent), Adelaide (up 9.1 per cent), Perth (up 7.5 per cent), and Brisbane (up 6.5 per cent).
• RP Data-Rismark calculates the median capital city house price across Australia at a record high of $548,413 with the median unit value at $450,619.
Retail trade:
• Retail trade fell by 1.4 per cent in February after a 1 per cent fall in January. In annual terms retail sales is up 3.4 per cent on a year ago – well below the long term average of 6.5 per cent.
• Sales by chain stores and other large retailers fell by 1.2 per cent in seasonally terms in February while sales by smaller retailers fell by 1.8 per cent. In annual terms sales at chain stores were up 5.3 per cent on a year ago while smaller retailers saw spending rise by just 0.3 per cent.
• Sales rose most at Furniture, floor covering and home ware store (up 1.9 per cent). In annual terms sales at furniture, floor covering and home ware stores rose by 11 per cent – the biggest annual increase in over 3 years.
• Sales fell the most at liquor retailers (down 5.1 per cent), department stores (down 3.9 per cent) and clothing and footwear retailers (down 3.9 per cent).
• Retail trade was down across all states except Tasmania (up 1.5 per cent) and Northern Territory (up 0.9 per cent). Spending fell most in NSW (down 2.5 per cent), South Australia (down 1.7 per cent), Western Australia (down 1.4 per cent), Victoria (down 0.9 per cent), ACT (down 0.8 per cent), and Queensland (down 0.8 per cent).
Building Approvals:
• New dwelling approvals fell by 3.3 per cent in February after falling 5.5 per cent in January. Dwelling approvals are now up 34.2 per cent on a year ago.
• House approvals rose by 0.7 per cent (private sector down 0.9 per cent) after rising 0.4 per cent in January. Apartment approvals fell by 12.3 per cent in February (private sector down 10.9 per cent) after sliding by 16.6 per cent in January. In annual terms apartment approvals are up 30.3 per cent on a year ago.
• Overall, the total value of building approvals (new houses, alterations and commercial) fell by 4.5 per cent in February to $5.9 billion. Commercial approvals fell by 13.0 per cent after sliding by 40.1 per cent in January. New residential approvals rose 0.5 per cent while renovations rose by 6.2 per cent.
• Over the year to January, total building approvals totalled $80.1 billion.
Private sector credit
• Private sector credit rose by 0.4 per cent in February after rising by 0.4 per cent in January. But the annual growth rate rose from 1.3 per cent to 1.6 per cent.
• Housing credit grew by 0.7 per cent in February with annual growth holding at a 17-month high of 8.5 per cent. Personal credit rose by 0.4 per cent in February after a 0.5 per cent increase in January. Personal credit is up 1.4 per cent over the past year – a 17-month high. And business credit fell for the 13th straight month, down by 0.1 per cent in February. Business credit is down 7.6 per cent on a year ago.
What is the importance of the economic data?
• The RP Data-Rismark Hedonic Australian Home Value Index is based on Australia’s biggest property database including over 280,000 sales during 2009. Unlike the ABS Index, which excludes terraces, semi-detached homes and apartments, the RP Data-Rismark Hedonic Index includes all properties.
• The monthly RP Data-Rismark Hedonic Index compares month-to-month index results. Quarterly results are measured comparing end months rather than averaging each month in the quarter. For example, the first quarter of 2009 index results compare the end of March index with the end of December index.
• The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
• The Bureau of Statistics' monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.
• Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.
What are the implications for interest rates and investors?
• For home-owners, the strong gains in house prices represent great news, serving to boost wealth levels and confidence. With most of the stimulus being pared back and the likelihood of further rate hikes, it is likely to dampen enthusiasm in the housing sector.
• CommSec expects that home prices will rise 5-8 per cent over 2010 and movements in prices over the last few months are consistent with those forecasts.
• The weakness in building approvals and volatility in retailers will ensure that the Reserve Bank treads warily in the rate hiking cycle.
Source Savanth Sebastian, Economist, CommSec
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