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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
Research reveals how UK home owners are switching mortgage deals
Some 18% of borrowers in the UK have changed their mortgage details or come to a new arrangement with their lender in the last three years, new research has found. Meanwhile, one in 12 have moved to an interest only mortgage and the same number have extended their mortgage term, meaning they could end up paying more, according to the research by Ocean Finance. It says that despite enjoying more than five years of record low interest rates, the squeeze on real incomes over the same period has left many home owners struggling to keep on top of their monthly repayments. An interest only mortgage sees the borrower paying off the interest on the loan every month, but not repaying any of the capital, which makes the monthly repayments cheaper. However, this means that at the end of the term they do not own the property and will need to find a lump sum to repay the debt, perhaps by selling their home. Extending the term of a mortgage might mean extending the period of time they have to repay the loan from an initial 25 years to as much as 40 years. While this means they should pay less each month, it is likely to see them paying more overall due to the interest they will continue to be charged over the extended period of the mortgage. The firm points out that a longer mortgage term may also mean people have to rethink their future plans, such as working later in life to continue repaying their mortgage, rather than retiring. The research also found that 3.8% of home owners revealed they had agreed with their lender to make temporary lower payments. Meanwhile, 2.3% of home owners surveyed said they were taking a temporary holiday from making payments. ‘While repossession figures have been low, this has masked the real struggle that many borrowers have had to keep paying their mortgage. As incomes have been squeezed over the past few years, one in six borrowers has had to find a way to reduce their monthly payment,’ said Ian Williams, spokesman for Ocean Finance. ‘Switching to an interest only mortgage or extending the term are both being used as a way to lower repayments. While both of these can help provide short term relief and may serve to keep the roof over people’s heads, it may be that this is simply storing up problems for the future,’ he pointed out. ‘In addition, with the Bank of England currently predicting that it expects to start to raise the base rate of interest in the middle of next year, more home owners may find that they start to struggle, especially if they are still on a standard variable rate or tracker mortgage,’ he explained. ‘It might therefore be worth their while speaking to their existing lender or a mortgage broker about whether they could benefit from switching to a new mortgage now,’ he added. Continue reading
Home lending in UK reaches highest quarterly level for seven years
Lending for home buying in the UK has reached its highest quarterly level since 2007, according to the latest data from the Council of Mortgage Lenders (CML). However, first time buyers saw a month on month lending decline for the second month in a row, down 3% compared to August, but still 16% up on September 2013. By value, there was £4 billion advanced to first time buyers in September, 2% down on August but 25% higher than September last year. Lending to home movers also weakened month on month for the second month in a row. In September, the number of loans advanced to movers was 31,700, a 10% fall on the previous month but up 11% on September last year. By value, lending to movers totalled £6 billion, 12% down on August but up 18% on September last year. Remortgage lending activity saw an increase month on month in September, with the number of remortgage loans totalling 28,300. This was 20% up on August but 12% down on September last year. The value of these loans at £4.4 billion was up 22% on the previous month but down 6% on September last year. There were 18,100 buy to let loans in September, representing lending of £2.5 billion. Following the August low of 15,700 loans worth £2.2 billion, this returned buy to let lending to levels very similar to July, up 24% by volume and 32% by value on September last year. The data also shows that first time buyer affordability changed fractionally, with first time buyers typically borrowing 3.4 times their gross income, compared to 3.42 in August and the typical loan size for first time buyers rose month on month to £125,999 in September, up from £125,375 in August. Home movers typically borrowed 3.06 times their gross income in September, compared to 3.05 in August. The typical loan size for home movers was £154,800 in September, down from £155,995 in August. The typical gross household income of a home mover was £53,291 in September compared to £54,150 in August. ‘We are approaching the end of 12 months of change, transition and growth. This has been a year when lenders and intermediaries have been put under increased spotlight from regulatory, political and media spheres and have risen to meet the challenges,’ said Paul Smee, director general of the CML. ‘The lending market is healthier than it was a year ago, and set to remain so. Remortgaging has returned as a driver of lending volume in the buy to let sector. But any fears of overheating in the housing market are now dissipating as house purchase lending activity seems to be softening,’ he added. Continue reading
