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New home building in Australia set to increase in 2015 before falling off
New house building in Australia is forecast to increase for a third consecutive year in 2014/2015 with growth of 7.7%, according to the latest outlook report from the Housing Industry Association. This level of growth would take commencements to a record level of 195,936 but the HIA also believed that this is likely to represent the peak in the current cycle, although the heightened uncertainty that comes with breaking records means further growth shouldn’t be ruled out. Indeed, the HIA central forecast shows that after three consecutive years of strong growth, dwelling commencements are set to decline by 5.7% in 2015/2016 and a further 4.7% in 2016/2017. It also says that from a national perspective, renovations investment continues to disappoint and only grew by 0.5% in 2013/2014, from a decade low. Renovations activity is forecast to grow by 0.2% in 2014/2015. However, the report suggests that momentum to the renovations recovery should build in coming years and projects an increase of 2.8% in 2015/2016, followed by a growth of 3.2% in 2016/2017, taking the value of renovations to $30.3 billion. Meanwhile, the latest data from the Australian Bureau of Statistics shows home prices continued to rise at a sustainable rate during the December 2014 quarter, up 1.9% on the previous quarter. Compared with the same period 12 months earlier, home prices were 6.8% higher. Established house prices increased by 7% over the past year, with other types of dwelling seeing growth of 6.1%. ‘The ABS figures show that dwelling price growth is now comfortably sustainable. In inflation adjusted terms, the rate of home price growth is now around 5% annually,’ said HIA senior economist Shane Garrett. ‘This is exactly the kind of home price growth that prevails over the long term. Australian home price growth is now striking the right balance. The housing industry has played a vital role in bringing price growth onto a more even keel,’ he explained. ‘During 2014, new home commencements reached the highest level on record. This has been a vital factor in assisting housing affordability, as well as providing crucial support for demand in the domestic economy,’ he pointed out. ‘We need to ensure that new home building is allowed to make a full contribution to improving affordability and living standards in the economy. The current design of taxation in the residential construction sector is not consistent with this goal. We need to see greater urgency in terms of easing the tax burden on new housing, and we look forward to potential remedies being included in the forthcoming Tax White Paper,’ he added. Continue reading
House purchase lending in London slowed in fourth quarter, says CML
Greater London saw a decline in the level of house purchase and remortgage lending both year on year and quarter on quarter at the end of 2014, according to the latest data from the Council of Mortgage Lenders. First time buyers in Greater London borrowed £2.9 billion, down compared to the third quarter by 11% in value and down 7% in number of loans. Compared to the fourth quarter of 2013, the total number of loans was down 10% and the amount borrowed decreased by 4%. Home movers saw a decrease in numbers to 8,800 loans, valued at £2.9 billion, which was down 15% by volume and down 20% by value compared to the third quarter. Compared to the fourth quarter of 2013, there was a decrease of 15% by volume and down 9% by value. Remortgage lending declined in the fourth quarter totaling 9,800 loans at £2.5 billion, which was down 12% by volume and down 13% by value. Compared to the fourth quarter of 2013, remortgage lending in London was down 13% by volume and 11% by value. The data also shows that overall lending in Greater London accounted for 21.5% of UK wide house purchase activity, down from 22.6% in 2013. First time buyer affordability changed slightly in Greater London quarter on quarter with first time buyers typically borrowing 3.84 times their gross income, less than the 3.86 income multiple in the third quarter but more than the UK average of 3.38. The typical loan size for first time buyers was £216,000 in the fourth quarter, down from £222,275 in the previous quarter. The typical gross income of a first time buyer household was £56,314 compared to £58,000 in the third quarter. The CML says that first time buyers' payment burden remaining relatively low in the fourth quarter at 20.8% of gross income being spent to cover capital and interest payments, lower than the third quarter's 21%. Home mover affordability changed fractionally, with home movers typically borrowing 3.64 times their gross income compared 3.69 in the third quarter and to 3.03 for the UK overall. The typical loan size for home movers was £276,355 in fourth quarter, up from £289,999 in the previous quarter. The typical gross household income of a home mover was £80,160 in fourth quarter compared to £83,592 in the third quarter. Home movers' payment burden in London was on average 20.5% of gross income being spent to cover monthly capital and interest payments, less than the 20.9% in the third quarter but more than the 18.8% UK average. ‘London is a unique market, with equally unique conditions and challenges, which will need a focus on all types of housing tenure going forward,’ said Paul Smee, director general of the CML. ‘Last year had the highest annual level of borrowers buying a home in London since 2007, with first time buyers leading that growth, but there have been recent signs of the market cooling. The dip in the last quarter of… Continue reading
More UK homes selling for less than asking price, new research shows
Nearly three quarters of houses sold in the UK in January went for less than their asking price as buyers started to negotiate again, according to estate agents. Overall the housing market is cooling down in the lead up to the general election in May with supply and demand both down from levels seen throughout 2014, the report from the National Association of Estate Agents (NAEA) also shows. NAEA member agents found that 73% of homes were sold for less than asking price in January, 17% more than the same period last year when 56% homes were sold for less than originally priced, suggesting that power is returning to the buyers’ hands and they’re in a better position to negotiate. Room for negotiation may have given the help the housing market needed, as an average of eight houses were sold per branch in January, compared to the seasonally low five in December. ‘The Autumn Statement’s stamp duty reforms have already created movement. Following this, sellers may have hiked up prices to take advantage of buyers’ increased budgets,’ said Mark Hayward, NAEA managing director. ‘But it seems buyers are counter-acting this by negotiating prices back down to original asking price opposed to paying over the odds for their dream home, creating a real buyers’ market,’ he explained. ‘Hopefully further reforms around the general election will help to balance the deficit in supply and demand but only time will tell,’ he added. The report points out that supply and demand were both down at the start of the year, indicating that the market is cooling off. Supply was down to 44 properties available per member branch, compared to an average 47 for the whole year in 2014 and 45 in December. Demand saw a 2% jump too, with the number of potential buyers registered per branch falling from 360 in December to 353 in January. ‘The housing market is based solely on sentiment and so if consumers feel an ounce of uncertainty and this will result in a temporary lull. With the general election on its way, we’re starting to see the different political parties stowing up policies around housing, which is undoubtedly causing uncertainty in the property market,’ Hayward concluded. Continue reading
