City’s apartments reach for the sky amid thinning demand

MELBOURNE’S apartment market is marching towards a period of oversupply at a time when the national one continues to weaken.

“There is a risk of oversupply, particularly rental oversupply, given that the majority of these apartments are owned by private investors,” said Angie Zigomanis, senior manager of residential property at BIS Shrapnel.

Recent data from the Australian Bureau of Statistics shows Victoria is charging ahead with construction despite clear signs of thinning demand.

According to the ABS, commencements on private-sector units and apartments shot up from 3000 at the start of the 2010 calendar year to more than 5000 units in the September quarter.

New construction on apartments for the March quarter of 2011 hit 5168 — the second-highest on record.

Victoria is well ahead of NSW and Queensland, with 4099 and 2189 respectively. At the same time, SQM Research noted the number of units on the market in Victoria from March to June at more than 10,000.

Last month, the number of apartments listed for sale fell 1 per cent to 10,547 apartments. But that was a year-on-year increase of 47 per cent.

Mr Zigomanis said it would be a few years before the impact of high supply levels on the market was noticed.

“There’s also a chance some of these projects might not get finance and might not proceed,” he said. “I think we’ve seen some projects with pre-sales back on the market of late.”

However, despite the number of apartments hitting the market, demand was strong. Population growth was “very sound”, Mr Zigomanis said.

According to research from the Australian Chamber of Commerce and Industry and Westpac, white-collar employment in Melbourne is still growing, yet another key driver of demand, the overseas student market, has shown considerable weakness.

The decline was more apparent in the vocational student numbers after the federal government changed the legislation that provided an avenue for permanent residency upon completion of specified courses, including hairdressing and hospitality.

“Despite the fall in the number of vocational students, university enrolment numbers are holding up,” Mr Zigomanis said.

Despite talk of a Victorian-centric population boom, statistics compiled by the ABS show NSW continues to grow at a similar rate. At the end of the June quarter last year, NSW’s population hit 7.23 million as Australia recorded 0.3 per cent growth.

Mr Zigomanis said the ability of developer-builders to obtain financing was also key to whether an oversupply would emerge.

Date: 21 July 2011 | For the full report, please visit http://www.theaustralian.com.au

Home loans rise by 4.4 per cent in May, housing market bouncing back from rate rise

A 4.4 per cent rise in home loans in May suggests the housing market is starting to pick up after the slowdown earlier in the year following November’s rate rise.

The number of home loans approved in May rose 4.4 per cent, to a seasonally adjusted 49,437, official data shows.

Economists’ forecasts had centred on a 4.5 per cent rise in housing finance commitments for the month.

The Australian Bureau of Statistics (ABS) said total housing finance by value rose 2.9 per cent in May, seasonally adjusted, to $20.497 billion.

ANZ Banking economist David Cannington said May’s figure meant there had been two months of fairly positive data after the sharp downturn early in 2011.

“The initial softening after the November rate hike is fading out of the market,” he said.

He added that the numbers suggested investors were coming back to the market after the drop off earlier in the year.

Mr Cannington also said bank lending had returned to be the highest in about two years, suggesting a recovery from the global financial crisis.

Refinancing had also recovered, Mr Cannington said.

“Competition between banks, that’s made it attractive for mortgage holders to refinance,” he said.

ANZ had revised its outlook for interest rates and now didn’t expect a rate rise from the Reserve Bank of Australia until February.

“That will be a boost for housing finance,” Mr Cannington said.

The RBA increased the overnight cash rate to 4.75 per cent last November.

Date: 11 July 2011 | For the full report, please visit http://www.perthnow.com.au

Refinancing for renovations surges

REFINANCING to renovate is back in vogue as the sluggish property market means people are opting to do up their home rather than turn it over.

New Australian Bureau of Statistics figures show refinancing existing home loans for established dwellings rose to $3.17 billion in April across all the banks, up 22 per cent on the $2.6 billion of refinancing a year earlier.

Non-banks experienced a 52 per cent jump in refinancing to $339 million in April, while building societies had a 53 per cent spike to $89.5 million.

Refinancing now accounts for about one in three home loans sold.

Resi Home Loans chief executive Lisa Montgomery says Australians are a nation of “next-project people” and not deterred by the current property market malaise.

“Renovating makes us feel better and putting something new into our home is something that makes us feel better, particularly if we can’t move,” she says.

“If we cannot sell and move then we want something new, and if Mum wants a new kitchen, so she should have it.

“Our parents sat still for a long time but we are told we can have it all.

“Generally speaking, property prices are very sluggish.

“People are not looking to sell or increase their mortgage substantially, so what do they do? They renovate.

“Borrowing to improve is good but the risk is that some people will over-capitalise. So if you are planning major renovations, check with a real estate agent first that the money you are spending will get you some sort of return.”

Valuers are being conservative and some properties are being valued at less than they would have been just a few years ago.

Montgomery says it is important, when refinancing, not to exceed 80 per cent of the value of your property to avoid Lenders Mortgage Insurance.

Ron Hancock, chief executive of the Wide Bay Australia building society, says he’s never seen so many people refinancing to renovate.

“We’ve seen a big increase in borrowing, which reflects the sluggish property market, so people are renovating,” Hancock says.

“People are deciding to stick with what they’ve got and spend an extra $40,000 or $50,000 on doing up their house. We are seeing much more of this than ever.

Date: 20 June 2011 | For the full report, please visit http://www.perthnow.com.au

WA building approvals drop almost 10pc

RESIDENTIAL building approvals in WA fell by almost 10 per cent in April, seasonally adjusted, the second highest nationwide according to the Australian Bureau of Statistics (ABS).

Approvals dropped by 9.6 per cent in WA last month, second to New South Wales which led the country with a fall of 12.9 per cent in the same period.

Nationwide, residential building approvals fell 1.3 per cent to 13,377 units in April, seasonally adjusted. This compares to a downwardly revised 13,546 units in March.

In the year to April, building approvals were down 11.5 per cent, the ABS said.

CommSec chief economist Craig James said the figures were very soft.

“With building approvals, the decline is worse than it actually looks because there was a significant rebound in Queensland and we know that was probably influenced by rebuilding (after the floods),” Mr James said.

“So once you strip out Queensland, approvals are down by 5.6 per cent.”

Date: 31 May 2011 | For the full report, please visit http://www.perthnow.com.au

Queensland residential construction numbers at national low

QUEENSLAND has recorded the worst level of residential construction activity in the country, according to new figures.

But the poor results contain a silver lining for home buyers, with rates increasingly likely to stay on hold as the non-resource economy continues to splutter.

Data from the Australian Bureau of Statistics shows for the March quarter the overall value of construction work in Queensland was down 3.8 per cent, while nationally it was up 0.7 per cent.

But singling out residential activity and Queensland activity fell 5.2 per cent, compared with a national decline of 4.9 per cent.

Director of Economic Research and Policy for the Urban Development Institute of Australia (Qld) Duncan Maclaine said while the natural disasters in early-2011 impacted on construction activity, the latest figures showed a longer-term slump.

“Residential construction activity in Queensland in particular has been subdued for quite some time, with average quarterly declines of -2.0 per cent in the last year. In contrast, the corresponding quarterly average growth for Australia was +1.5 per cent,” Mr Maclaine said.

“The residential construction sector has been particularly weak for quite some time now in Queensland, with activity in the first quarter of 2011 still 35 per cent below the pre-GFC peak.”

In contrast, activity in the national residential construction sector has recovered to be about equal to, or higher than, the levels observed pre-GFC in every other state.

Mr Maclaine said the increased level of caution among potential homebuyers and investors could see the sector remain subdued “for quite some time”.

Frazer Dean of Insite Constructions said the first few months of the year had seen significant downtime due to poor weather. But he said bureaucracy and financing were ongoing issues.

“Finance is a big one because banks aren’t lending the money like they used to,” the Sunshine Coast-based builder said.

“Government bureaucratic red tape and blue tape and white tape and whatever other coloured tape they want to put out there. That’s all conspiring against us.”

He said the longer term was looking “bright”, but some short-term stimulation was needed.

Date: 25 May 2011 | For the full report, please visit http://www.perthnow.com.au

Mortgage holders in all brackets are struggling

MORTGAGE pain is not just for Aussie battlers, with a hidden but growing number of high-income households suffering financial stress this year.

The chief executive of Resi Mortgage Corporation, Lisa Montgomery, says evidence is mounting that high-income earners are experiencing mortgage problems but nobody, especially the affected borrowers, is talking about it.

“High-income earners who are financially overstretched are quietly making lifestyle changes, deleveraging (cutting debt) and selling investments in their bid to reduce loans and other debt, and avoid unwanted public attention they would have if they had to foreclose on their mortgage,” Montgomery says.

Statistics released in recent weeks highlight the problems facing borrowers. Major banks have warned that loan arrears have increased, real estate data shows house prices in affluent suburbs have fallen more than the overall market and new loans have dropped sharply.

Banks are traditionally more willing to lend large sums to high earners, for both expensive homes and extra investments in shares and other properties, which means the 2 per cent rise in mortgage rates in the past two years has had a nasty effect on their repayment levels.

Montgomery says these borrowers are finding their incomes have not kept pace with rises in repayments and they now need to take action.
But their attempts to sell quietly are being thwarted by tough conditions in the real estate market.

CommSec chief economist Craig James says Australian Bureau of Statistics data released last week showed the number of new owner-occupier housing loans was 5 per cent lower than a year ago.

“The housing sector has well and truly come off the boil,” James says.

“Home prices have been falling, albeit modestly, while the number of new loans have fallen to the lowest level in a decade. Clearly, buying interest has dried up.”

The only positive to come from the latest soft numbers is a view that interest rate rises may be on hold.

“It certainly looks like the Reserve Bank will remain on the interest rate sidelines for at least a couple more months.”

Mortgage broker Loan Market has also noticed many high earners are suffering as much as lower-income households.

Loan Market chief operating officer Dean Rushton says the spectre of future rate rises is hurting consumer confidence.

“Another rate rise could unnecessarily punish mortgage holders,” Rushton says.

Date: 23 May 2011 | For the full report, please visit http://www.perthnow.com.au

Home loan approvals fall to 10-year low

THE number of home loans approved in March fell to a 10-year low, dragged down by the Queensland floods and by the November rate hike.

The number of home loans approved in March fell 1.5 per cent, to a seasonally adjusted 44,968, its lowest level since February 2001.

Economists’ forecasts had centred on a 2.0 per cent rise in housing finance commitments for the month.

The Australian Bureau of Statistics (ABS) said total housing finance by value fell 0.1 per cent in March, seasonally adjusted, to $19.300 billion.

JP Morgan economist Ben Jarman said the number was soft and the housing sector was weak throughout the March quarter.

“There were a couple of things going on that we can obviously point to in Queensland, so the numbers are fairly soft,” he said.

“In January, we had the Queensland floods and pushed down approvals nearly 15 per cent and the numbers have failed to come back from that.

“It does seem the Queensland floods are exhibiting a fairly long-lasting drag on that market.”

Mr Jarman said many households also refinanced their home loans at the end of 2010 after the Reserve Bank of Australia (RBA) raised the cash rate by a quarter of one per cent to 4.75 per cent.

“That rate hike in November was supersized by the banks,” he said.

“So you’ve got a couple of elements that are contributing to the weakness, but even if those factors start to fade, there will still be some pretty intense headwinds for the sector.

“You’ve got borrowing rates now above average and the prospect of more rates hikes to come. So we expect the housing data to be pretty subdued for some time to come.”

Mr Jarman said he expected the RBA to next hike in August.

Date: 16 May 2011 | For the full report, please visit http://www.perthnow.com.au

‘Double first-home buyer grant to give state a lift’

THE Property Council wants the West Australian government to double the first-home buyers grant in the coming state budget to lure buyers back into Perth’s stagnant property market.

But there are warnings the move could lead to a similar increase in house prices, wiping out any benefits for buyers, as happened in Sydney in 2009 after the federal government temporarily tripled the grant for new houses.

There has been a sharp fall in housing sales and construction in the west, with housing finance approvals falling to 68,000 last year, the lowest level in a decade.

Perth was also the second worst performing capital city, after Brisbane, in this month’s Australian Bureau of Statistics house price index, dropping 3.2 per cent since March last year.

In its submission for next Thursday’s state budget, the Property Council of Australia has called on the Barnett government to contribute $7000 to the existing $7000 first-home buyers grant for 12 months. It would apply only to new houses up to $400,0000.

The council’s state executive director, Joe Lenzo, said it would be a one-off incentive to jump-start the market.

“What we’re trying to do is make it as easy as possible for first-home buyers to enter the market,” Mr Lenzo said.

“That’s what’s lacking at the moment. Demand has dropped right away. There’s a lack of confidence still. What we’re saying is get that latent demand that’s there for first-home buyers and the industry will pick itself up.”

But JPMorgan chief economist Stephen Walters warned that when the federal government tripled the first-home buyers grant for new houses and doubled it for existing houses in 2008, prices adjusted by the same amount.

Mr Walters said he could see the merits in the idea, but it did not work in the long term.

Date: 12 May 2011 | For the full report, please visit http://www.theaustralian.com.au

Builders busy on units as homes lag

BUILDING approvals took steps towards improvement in March with a 9 per cent rise despite a negative result over the previous year.

Australian residential building approvals rose 9.1 per cent to 13,627 starts in March, seasonally adjusted, from an upwardly revised 12,492 starts in February.

But compared to March 2010, building approvals were down 18.1 per cent, the Australian Bureau of Statistics (ABS) said.

The growth in activity over February came most notably came in non-housing, such as apartment blocks, with 5473 started in March compared to 4233 in February.

But home starts remain sluggish, falling from the previous month and over the year in an indication of the continuing impact of last November;s interest rate rise on potential home owners and the building industry.

Home building saw 8154 starts in March, a drop of 0.8 per cent compared to 8258 in February and still well below the 10,188 in March last year.

St George Bank chief economist Bed deda said the building approval numbers were strong for the month of March but the housing sector was experiencing some soft conditions more generally.

Date: 05 May 2011 | For the full report, please visit http://www.heraldsun.com.au

Renters willing to pay a little more to stay put

SEVEN out of 10 tenants are looking to buy a home, but until that happens most want to stay in their present accommodation and are willing to pay more in rent to do so, according to a recent rental market survey.

Property commentator Michael Matusik says two-thirds of the renters surveyed say they are prepared to pay up to 5 per cent more in rent to stay put, with a further 30 per cent saying they would accept an even bigger increase. Those who live in apartments seem more willing to accept a steeper increase than those renting detached dwellings.

Two out of five renters think the rental market in their area is balanced, with another one-third saying it is undersupplied.

Asked what they would do to avoid an increase, 43 per cent said they would move to a less expensive area, 37 per cent said they would move to a lesser property in the same area and 19 per cent said they would sub-lease or share to meet the costs.

Matusik says renters, similar to owners, don’t really move that far when it comes to finding new digs.

Close to one-third find new accommodation in the same suburb they already live in, while nearly one-half move to a neighbouring suburb.

While the same survey last year found a strong move towards the inner areas, this year’s survey has found that more are choosing to move a bit farther out.

Unsurprisingly, the dollars forked out in rent is top of the seven most important things tenants consider with regard to rental accommodation.

This is followed closely by the general location, then the number of bedrooms, the lease arrangements, the type of property, off-street parking and how quiet the immediate area is.

Matusik’s survey found 42 per cent of respondents say they will buy within the next 12 months, 16 per cent in the next six months and 12 per cent in the next one to two years.

The lack of a deposit is what is stopping most, says Matusik, but various data show many Australians are shy of assuming debt. Data from the Australian Bureau of Statistics in mid-April shows ongoing weakness in lending finance, reflecting overall consumer conservatism.

This is also supported by the Westpac and Melbourne Institute monthly measure of consumer confidence released last week. It finds caution among Australian consumers, and the index indicates Australians are only slightly more optimistic than pessimistic and have a lower propensity to take on debt. The April index reading was 9.3 per cent lower than at the same time last year.

Date: 23 April 2011 | For the full report, please visit http://www.theaustralian.com.au