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New home building sector in Australia sees three years of growth
The new home building sector is the star performer of the Australian economy having seen three years in a row of growth, according to the Housing Industry Association (HIA), the voice of Australia’s residential building industry. The latest data from the Australian Bureau of Statistics show that despite a modest decline in new dwelling commencements in the June 2015 quarter, there was still a record number of 211,976 new homes started in 2014/2015, an increase of 16.9%. ‘That is a phenomenal result which caps three consecutive years of growth for new home building, only the fifth time in the last 60 years that this feat has been achieved,’ said HIA chief economist Harley Dale. ‘Through its broad reach the new home building sector has delivered a strong economic dividend to Australia during a period when many other sectors of the economy have struggled,’ he pointed out. He also explained that while new dwelling commencements will fall in 2015/2016 they should remain elevated at what would still be the second highest level on record. ‘The key to the short term prospects for new home building is how much work in the pipeline is converted into actual activity and it’s not coming through as quickly now. An orderly decline in commencements in 2015/16 remains the most likely outcome,’ Dale added. A breakdown of the figures shows that there were 53,314 dwellings commenced during the June 2015 quarter, a decline of 3.2% from an upwardly revised March quarter. Detached house commencements fell by 2.9% to 28,046, while ‘other dwelling’ commencements declined by 4.9% to 24,482. But there are regional differences. New dwelling commencements increased in South Australia by 12% in the quarter, by 54% in Tasmania and by 76.4% in the Australian Capital Territory. But they fell by 1.6% in New South Wales, by 0.5% in Victoria, by 9.6% in Queensland, by 10.5% in Western Australia and by 36.1% in the Northern Territory. Meanwhile, the latest data shows that prices growth for land for building new homes has eased off slightly. The latest HIA-CoreLogic RP Data Residential Land Report shows there was some relief from the tight conditions in Australia’s residential land market in the June 2015 quarter. National residential land sales increased by 17.6% while the weighted median residential lot price increased by 0.6% over the quarter to 5.2% higher than 12 months earlier. ‘A rise in land sales was accompanied by an easing off in the pace of price increase in Australia’s residential land market. This compares with previous quarters which saw strong price increases amid declining land sales,’ said HIA economist, Diwa Hopkins. ‘While the June quarter result is an encouraging development, what needs to occur is similar results being sustained over the longer run. That is, a larger and more consistent flow of shovel-ready land needs to be brought online,’ she explained. ‘For this to happen, policy reform needs to address the key land supply bottlenecks including unnecessarily long planning delays, slow… Continue reading
Tighter buy to let regulation could push up rents in UK
Measures which discourage investment in the private rented sector in the UK in the face of population growth and low housing supply can only push up rents and harm tenants more than landlords, a new report suggests. The report from the Intermediary Mortgage Lenders Association (IMLA) which examines the key issues facing the main segments that make up today’s mortgage market, warns that tighter buy to let regulation could restrain supply. Assessing the possible impacts of July’s buy to let tax changes, the IMLA argues that a higher tax burden for landlords, which will push some into losses after tax and raise the effective tax rate on their buy to let above 100%, may slightly skew the market in favour of owner occupied house hunters, by reducing the price that landlords are prepared to pay for any given property. The risk, however, is that these changes and the threat of tighter buy to let mortgage regulation will constrain the supply of available rental properties at a time when the fundamentals of population growth and low housing supply are driving an increase in demand, and that institutional investment will fail to make up the gap. The IMLA report shows total lending across the mortgage market this year was running below its 2014 level from January to May. Since then, there has been a sharp recovery and 2015 may be shaping up to be a mirror image of 2014. Subdued lending in the first half of the year may have reflected uncertainty in the run up to the general election but a clear cut election result has removed this level of doubt. The bedding down of the Mortgage Market Review (MMR), which disrupted some lending with its introduction in 2014, has also contributed to the recovery, it explains. By far the most robust recovery has come in buy to let, but this must be placed in context of an 81% decline after the recession between 2007 and 2009, the report points out. This compares with a 60% drop in remortgaging volumes, 56% among home movers and 53% among first time buyers over the same period. Buy to let lending volumes remained 40% below their 2007 peak in 2014, and the IMLA argues that it is responding to rather than driving growth in tenant demand in the private rental sector. While buy to let has rebounded, the remortgage market has been slow to respond, but conditions are ripe for a resurgence. IMLA’s analysis shows that in the second quarter of 2015 remortgage volumes were up 11% on the previous quarter to record the best performance since 2009. At just under 3%, the price differential between standard variable rates (SVRs) and discounted variable rate deals is greater this year than ever before. Interest rates are also expected to rise, and for the first time in the second quarter households’ aggregate housing equity surpassed the £5 trillion mark. Only 20% of gross UK housing wealth is now… Continue reading
UK asking price reaches all time high but growth is slowing
October has seen a new all time high for the price of property coming onto the market in the UK at £296,549, according to the latest index figures to be published. However the month on month rise of 0.6% was relatively modest for the time of year and it the lowest October increase since 2010, the data from Rightmove shows. Year on year prices are up 5.6% and the new record asking prices is being fuelled by high demand for first-time buyer properties, with prices in this sector up 4.9% on last month and 9.6% over the past 12 months, the firm’s report says. It also points to a ‘vicious circle’ as high tenant demand leads buy to let investors to go head to head with first time buyers and many letting agents report ‘same day’ rentals and little or no property to rent. At the same time the number of first time buyer properties, usually regarded as two bedrooms or fewer, coming to market is down by 8% on same period a year ago, exacerbated by first time sellers struggling with second step price gap. ‘There are signs of a slowing pace of price rises in some sectors of the market, with the overall October rise the lowest we’ve recorded at this time of year for five years. We still have another national average record however, as prices continue their upward trend,’ said Miles Shipside, Rightmove director and housing market analyst. ‘This is mainly being fuelled by the heady price rises of typical first time buyer homes. A near 10% price surge in this category in the last year proves that despite tighter lending criteria in last year’s Mortgage Market Review, some first time buyers can still afford the higher prices being asked for by sellers in this sector,’ he explained. ‘It’s also symptomatic of a shortage of properties coming to market with two bedrooms or fewer, combined with demand from both first-time buyers and landlords investing in reaction to the huge rental demand for smaller properties,’ he added. Letting agents report extraordinary demand from tenants in many parts of the country, with new or existing households looking to the rental sector to fulfil their need for quick and flexible housing arrangements. A growing number of people like the transience of renting, without the complications, commitments and costs of buying and then selling, the report says. With inadequate supply from housing associations and the public sector, private landlords are one of the few active providers of smaller homes for rent. However, when this need is combined with first time buyer demand, boosted by the return of low deposit mortgages and lenders competing to reduce their rates, it creates a vicious circle due to the limited supply of suitable properties for sale in this most active sector. ‘With local authorities, housing associations and developers no longer satisfying the country’s housing needs, those in particular looking to rent or buy smaller homes must hope for… Continue reading
