On Tuesday, the Reserve Bank of Australia announced that it is keeping the official cash rate on hold. At its monthly Board meeting, the RBA decided it was appropriate to keep the cash rate at 2.50 per cent.
The next meeting of the RBA Board will be held on August 5, 2014.
Herron Todd White’s summary on the Melbourne residential market.
– The overall Melbourne residential market has steadily increased over the first half of 2014.
– Auction numbers have been high with nearly 3,000 auctions held in April 2014, higher than the historic ten year average of 2,510 for April, while March was a record- breaking month in terms of auctions with 4,750.
– A further 3,700 auctions are scheduled for May pointing to market optimism amongst vendors.
– Clearance rates so far in May have been steady averaging 70%, which is an increase from 68% in April which endured both the Anzac Day and Easter long weekends, and also marks a return to similar levels recorded in March and February with 71% and 70% respectively.
– Stable clearance rates have reinforced the good demand in the overall market with the median house price growing at 5.4% on average across metropolitan Melbourne during the first four months of 2014.
– A high volume of sales transactions have been recorded in the $500,000 to $800,000 price point, especially in suburbs such as Bentleigh East in the middle south-east, Thornbury in the middle north, and Yarraville in the inner west.
– While optimism and demand have remained quite stable in the overall market both buyers and sellers should remain cautious of the apartment- dominated markets of Melbourne CBD, Docklands, and Southbank.
– While the housing market has seen an overall 5.4% increase in prices, the apartment market has experienced just a 0.9% increase in 2014.
– The alarm bells are highlighted by Docklands recording a 43% clearance rate from only seven auctions in 2014, with a further 370 properties currently on the market by private sale.
– Between 2009 and 2013 off the plan apartment releases in the CBD increased by a staggering 103% from 7,000 to more than 14,000, in the same time first home buyers have gradually left the market with Melbourne currently experiencing its lowest number of first home buyers in 23 years.
– However, sales recorded over the three months to May 2014 have totalled $510.9 million, an increase from the $126.8 million recorded to February 2014 and also an increase on the $166.8 million recorded to November 2013.
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Thanks to Alphabroker
Commentary On Melbourne Property Market Feb 2014
– Now that the federal election is behind us and mixed views loom on the up or down movement of current historically low interest rates, the expectation overall is that there will be moderate growth across the inner and outer suburbs of Melbourne.
– The later months of 2013 demonstrated market recovery and increase in buyer confidence with a median house price increase of 9% for the September quarter
– However the unemployment rate has not improved and with the high Australian dollar, buyer confidence is questionable as pressure is placed on the manufacturing industry within Victoria. Therefore we can expect growth to be moderate throughout this year.
– The prestige market within the inner city, inner east and bayside area over the years has been susceptible to volatile price movements. However as a result of continued economic growth, the median house price for 2013 increased 15%.
– While growth is expected in the suburban housing sector unfortunately the same cannot be said of the inner city apartments
– With numerous developments recently completed or due for completion this year, we will see an oversupply of apartments within the inner city with key areas being Docklands, Southbank and the CBD. The oversupply of apartments in these areas will see pressure being added to the rental market with the knock on effect of reduced prices.
– The same can be said for Melbourne’s developing outer urban fringe suburbs such as Truganina and Tarneit which could expect a decline in property prices as the newly developed areas face over supply of housing stock with developers offering incentives to purchasers
– Growth will remain steady as a result of continuing low interest rates contributing to the affordability for existing mortgage borrowers as well as private investors who benefit from the tax incentives
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Thanks to Alphabroker
HTW Commentary On Melbourne Property May 2014
– With interest rates at record lows and property prices in many regions beginning to increase, now may be the perfect time for first home buyers to enter the market.
– Suburbs such as Werribee, Deer Park and Cranbourne are fast becoming a mecca for first home buyers and young families due to the affordability of these suburbs.
– However there may be an oversupply of new house-and-land packages in the western suburbs, which could intensify given the recent job losses in the surrounding area.
– Investors on the other hand are seeking properties with different characteristics than those of first home buyers such as proximity to public transport, infrastructure and strong rental demand. Investors therefore are interested in different suburbs.
– Many investors are seeking out properties in established suburbs such as Bayside’s Highett, where they can manufacture equity by renovating an existing dwelling.
– Both domestic investors and first home buyers are steering clear of the CBD, as international purchasers from countries such as China, Malaysia and Singapore are paying premiums for off the plan inner city apartments.
– The oversupply of certain properties has resulted in Melbourne now having the softest rental yields of any of the capital cities.
– In order to overcome the affordability issue, first home buyers have been using various strategies in order to enter the property market.
– A popular method at the moment is to purchase a property and then lease it out.
– The rent helps cover the mortgage and the owner can take advantage of tax savings through negative gearing.
– Another way of easing the financial burden of a property is to purchase it with someone else, such as a parent, sibling or partner.
– This assists with another income helping meet monthly repayments and can also avoid incurring extra bank fees.
– When parents or family help out when gathering a deposit, Lenders Mortgage Insurance (LMI) potentially can be avoided, by insuring your loan-to-value (LVR) is below 80%, thereby save you thousands of dollars.
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Thanks To Alphabroker
“2013 – The year that was” is the Theme of this month’s HTW Month in Review
– Opinion on the Melbourne residential market begins at page 30. Here are some highlights:
– The Melbourne property market has experienced overall steady growth throughout the year.
– Melbourne continues to recover and has reached a new median house price peak of $595,500 for the September quarter (in contrast to $518,500 for the same period last year) indicating an annual increase of 14.9%.
– The house price index for Melbourne also shows steady recovery rising by 4.7%.
– The combination of the RBA’s decision to keep interest rates low, continued strong immigration and international investment has contributed to increased sales activity for the year.
– The market has also benefited from increased demand from SMSFs and small movements from the return of first home buyers.
– With building activity being in decline since the last quarter of 2012 this year has proven to show a steady recovery with increased numbers of building approvals reflecting a seasonally adjusted increased trend of 18%.
– Consumer uncertainty this year has been mainly driven by the unemployment rate increasing by 1.2%, largely as a result of the downturn in the manufacturing industry (Ford announcing its production plant closures in Broadmeadows and Geelong) and potential policy changes still expected to filter through.
– Despite the effects of consumer uncertainty the rate of annual housing finance experienced an 11.5% growth over the same period last year. Auction clearance rates have demonstrated strong demand with clearance rates at 72% YTD
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Thanks to Alphabroker for this summary
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