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Property price growth in Australia easing to a more sustainable level
Home price growth in Australia eased again during the September 2014 quarter but are up 9.1% compared to a year ago, the latest data from the Australian Bureau of Statistics show. Sydney continues to drive residential property price increases with the Residential Property Price Index (RPPI) for Sydney up 2.7% in the September quarter of 2014 and 14.6% in the previous year. As well as the rise in Sydney, the RPPI rose in Melbourne, Brisbane, Adelaide and Hobart by 1%, and by 0.3% in Darwin and Canberra. Perth was the only city to show a decrease in prices with the RPPI decreasing 0.1%. The total value of Australia's 9.4 million residential dwellings increased to $5.3 trillion. The mean price of dwellings in Australia is now $563,100, an increase of $8,300 over the quarter. Established house prices for Sydney rose 3.2% and attached dwelling prices rose 1.8% while overall the RPPI for the weighted average of the eight capital cities rose 1.5% in the September quarter of 2014 and 9.1% in the previous year. This includes growth of 9.2% in established house prices and an 8.5% increase in attached dwelling prices over the year. The figures indicate that price growth is easing to a much more sustainable rate, according to Shane Garrett, senior economist at the Housing Industry Association (HIA). ‘The annual rate of home price growth nationally is back in single figures for the first time in a year. At the same time, new home building is stretching to its busiest year in two decades. This is no coincidence,’ he explained. ‘Clearly, the housing industry has risen to the challenge in terms of seeking to meet Australia’s increased housing requirements. However, capacity is bursting at the seams. Any home builder will tell you of the difficulties in sourcing crucial trades like bricklayers, at a time when training budgets in the industry are being slashed by government,’ he added. Garrett also pointed out that the situation around residential land supply is also stifling new home building. It is important that federal and state governments ease the bureaucracy around the release and development of land for new housing. This will help ensure that strong dwelling price pressures do not emerge again in future,’ said Garrett. ABS figures also show that new home lending reached a fresh high for the cycle in the September 2014 quarter, reaching its highest level in 20 years. But Harley Dale, HIA chief economist, said that the aggregate number of loans for first home buyers is still very low from a historical perspective. ‘Policy reform is vital to turning this situation around and needs to be aimed at the excessive and inefficient taxes and regulation levied on housing. First home buyer loans reached conspicuous troughs in the early months of 2011, 2013, and 2014, although these levels were 12% higher than the record low in the early 1990’s recession. Loan numbers have only lifted by 5.1% from this latest 2014 trough,’ he explained. The total number… Continue reading
General election set to slow UK prime property market
The UK’s prime housing market is expected to slow in the run up to next year’s election and resume steady growth thereafter, but a mansion tax could change the outlook dramatically. According to international real estate adviser Savills in its five year forecast report a mansion tax could negatively impact five year growth by an average of five percentage points. The high value prime markets, that is the top five to 10% of homes by value, have already been impacted by increased stamp duty, the introduction of an annual tax on enveloped dwellings (ATED) and the closure of certain tax loopholes. The rate of price growth has begun to slow, particularly in London. After five and half years of price growth and having absorbed a number of tax rises, London looks fully valued, particularly given the uncertainties surrounding the mansion tax as election year approaches. On this basis, Savills has issued two forecast scenarios: a central scenario and a second based on its estimates of the number of properties in different price bands over £2 million and the scale of possible mansion tax charges given current Labour party proposals. ‘Two out of the main political parties still favour some form of mansion tax so owners and buyers will be rightly factoring it into their decisions as the election approaches,’ said Sophie Chick, senior research analyst as Savills. ‘It would take some time for the markets to accurately price in the impact of a mansion tax, but the threat of it has already slowed the market. If it becomes clear that a mansion tax is to be introduced after May 2015, we would expect an immediate price adjustment before the market more rationally finds its level,’ she added. Without a mansion tax the Savills central forecast would see average prime UK house prices slipping 0.5% in 2015, assuming no further increases in the taxation of high value properties. Growth would be expected to resume post election, averaging 22.7% over the next five years across all prime London markets. Regionally, the recovery is yet to become fully established and the market has capacity for price growth to continue through next year, albeit averaging just 1%, the report says. Five year growth is forecast to average 23.9% across the UK, outperforming prime London, with prime commuter and lead city locations expected to show the strongest growth. Savills believes that a mansion tax, if implemented in the form most recently discussed, would trigger average price falls of 5% across prime London in 2015 and a fall of 3% across the prime regions. In a worst case scenario, the value of prime London properties over £10 million could fall by 10% and homes worth over £3 million regionally would fall 7%. Homes below the mansion tax threshold would not escape its effect, but the proposed progressive structure of the tax would limit the trickledown effect, with small falls of 2% anticipated. By 2017, the top end… Continue reading
Property price growth in UK set to slow to 2% next year
UK house price growth is predicted to slow to 2% in 2015 and 19.3% to the end of 2019, according to the latest five year forecast from Savills. Prices in London are expected to flat line having hugely outperformed the rest of the UK and is likely to end this year at 15%. The South East is set to be the strongest market seeing price growth of 26.4% by 2019 as buyers take advantage of the relative value of the market. In the short term Scotland is expected to see the biggest price growth in 2015 at 3.5% but slowing to annual growth of 2.5% in 2019 and over the five years seeing growth of 17.6%. The east of England is also likely to see strong growth with the forecast predicting 3% in 2015 and 5% in 2016 with a combined five year growth of 25.2%. The forecast also predicts an increase in the private rented sectors. It says some 1.2 million more households in England and Wales will be private renters by 2019 and 24% of all homes will be privately rented with all the opportunities and challenges that brings for investors and policymakers Only one in six under 35s will be home owners compared to 28% in 2014 and in London there will be around 250,000 more private rented homes, rising to 1.24 million or 36% of all homes. ‘Stress testing of borrowers’ ability to service a mortgage and loan to value lending caps will increasingly limit the amount buyers can borrow, making it more difficult to access or trade up within the market,’ said Lucian Cook, UK head of residential research at Savills. ‘Not only will this suppress price rises, particularly in London, it will also reduce the potential for transaction volumes to return to anything close to a pre crunch norm,’ he added. The report says that the London market now looks relatively fully valued and this has already prompted a change of sentiment among buyers. Savills is therefore forecasting that mainstream London house prices will flat line next year, with five year price growth totalling just 10.4%, the lowest of any region. By contrast, the South East and East of England are expected to show the strongest growth, at 26.4 and 25.2% respectively, as buyers priced out of London seek relative value beyond the capital. At the other end of the scale, the North of England has greatest capacity for growth based on affordability measures, but the strong economic drivers are not in place to support it. ‘Mainstream market performance will be limited by buyers’ capacity to borrow and service debt, but we don’t believe rate rises will be severe enough to trigger a wholesale market correction, so are not forecasting price falls,’ explained Cook. ‘We expect wage rises, an improving economy and greater recycling of existing housing wealth between generations to support growth, while mortgage regulation is likely to prompt greater reliance on the bank of mum & dad with more equity released… Continue reading
