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Property prices in Australia up the most in Sydney and Melbourne
Property prices in Sydney and Melbourne continue to be the highest in Australia although the two cities are seeing growth ease slightly, the latest index shows. Prices increased by 0.3% in Sydney and 0.6% in Melbourne in October compared with a national average of 0.2%, according to the CoreLogic RP Data index. Overall prices increased by 1.4% quarter on quarter and are 10.1% higher year on year although the combined capitals index has been easing since July this year when the index was rising at 11.1% per annum. According to CoreLogic RP Data’s head of research, Tim Lawless, a range of factors are contributing to the slowdown. ‘It’s not just the fact that mortgage rates have recently risen outside of any lift in the cash rate. We are also seeing approximately a 30% premium on investment related mortgage rates, tighter lending standards and borrowers generally requiring a larger deposit,’ he said. ‘Gross rental yields at record lows and affordability constraints are acting as a further disincentive, particularly in Sydney where the median unit price is equal to, or higher than the median house price in every other capital city,’ he explained. ‘Additionally, new housing supply is moving through record levels which should help to ease the upwards trajectory of home values,’ he added. He pointed out that since the end of 2008, the Sydney housing market has recorded a cumulative capital gain of 77% while Melbourne values have moved a cumulative 66.6% higher over the same time frame. Based on the median selling price at the end of 2008, Sydney home owners have accrued approximately $316,000 in gains from the housing market compared with around $246,000 in Melbourne. ‘While the rate of growth is significant, it is important to remember that this growth is across two cycles. Dwelling values were broadly tracking backwards during both the 2008 calendar year and between late 2010 through to the middle of 2012,’ said Lawless. The only capital city where home owners have seen the value of their homes move lower since the end of 2008 is Hobart where the CoreLogic RP Data index is down 0.4% since the end of the global financial crisis. The weakest housing market conditions continue to be found in Darwin and Perth where values are down 3.7% and 3.6% respectively over the past 12 months. According to Lawless, the slowdown in resources related infrastructure spending has caused ripples of economic weakness that are likely to persist for some time. ‘Capital expenditure relating to the mining and resources sector has fallen substantially which means tougher labour conditions and little in the way of migration which has previously fuelled housing demand in these areas,’ he said. Continue reading
Demand for prime rental property in central London falls
Demand for rental property in central London’s prime market has fallen in recent months as global companies curb costs resulting in rental values falling in October. Rents in this sector were down 0.5% last month, the steepest decline in two years and annual rental value growth slowed to 1.5% after peaking at 4.2% in May. The data from the latest rental report from real estate firm Knight Frank also shows that the number of tenancies agreed in September was 12% lower than the same month in 2014 and average prime gross rental yields were flat at 2.95%. According to Tom Bill, head of London residential research at Knight Frank, it has been a year of two halves for the prime central London lettings market. Annual rental value growth peaked at 4.2% in May, the month of the general election, as demand transferred from the sales market. ‘The cause was uncertainty around property taxation and increased rates of stamp duty mean it remains a live issue, particularly in the super prime £5,000 plus per week price bracket. However, anxiety around the global economy has dampened demand since the summer,’ he said. ‘The uncertainty has centred on events in China, which has caused companies to curb relocation budgets and recruitment plans. The falling oil price has also impacted sentiment among energy companies,’ he added. He pointed out that advertising giant WPP, whose performance is a useful barometer of how much companies are either cutting costs or spending, said in October firms were feeling risk averse due to geo-political concerns. Rival Publicis said there had been an ‘unusually large’ number of clients postponing or cancelling campaigns. ‘Adding to the sense of a weaker global economy, speculation has grown that the European Central Bank is likely to extend or increase its quantitative easing programme in December in order to stimulate inflation. Against this backdrop, demand for prime rental property has slowed,’ Bill explained. The largest monthly drops were a fall of 2% in South Kensington and a decline of 1.2% in Chelsea, two areas where demand has been traditionally strong among financial services tenants. However, Bill also pointed out that despite these near term uncertainties, the UK economy is performing strongly and the longer term outlook is positive. ‘London will remain one of the most attractive places on earth to do business,’ he concluded. Continue reading
South east and east of England and Scotland seeing strongest house price growth
The south east and east of England are likely to see the strongest house price growth in the UK in 2015 with Scotland also likely to be a strong performer, according to the latest outlook report. The south east is expected to see overall growth of 5.8% this year with the east of England and Scotland both at around 5.8%, according to the report from Strutt & Parker, with Greater London at 5.1%. The firm’s five year outlook also sees these regions having some of the strongest growth with price inflation of 22.8% predicted for the east of England, 22.7% for the south east, 19.8% for Greater London and 18.5% for Scotland. Other areas of interest include the south west with five year growth of 16.5% expected. ‘From our Housing Futures research we know that there is a huge aspiration to live there,’ said Stephanie McMahon, Strutt & Parker’s Head of Research ‘Our national survey showed that 15.6% of respondents who said they had plans to move within the next five years wanted to live in the south west, particularly for retirement and lifestyle reasons,’ she explained. ‘That said, our survey also showed that taking into account all respondents, and analysing by age, that the south west was one of the areas that would experience a large exodus of people between the ages of 18 to 29, indicating that older people have perhaps greater flexibility in their working styles,’ she added. The outlook report predicts house price growth of 15.7% for Northern Ireland over five years, 15.4% for the east midlands, 14.2% for the west midlands, 13.4% for the north west, 11.7% for Yorkshire and Humber, 11.3% for Wales, and 10% for the north east. The report also explains how major developments and events are likely to affect house prices. For example, central London, most notably locations such as Farringdon and Shepherd’s Bush are seeing rises due to the Crossrail infrastructure project. Outside of London, the electrification of the Great Western line with the first stages due to open in 2017 between London, Oxford, Newbury, Bristol and Cardiff means that property prices could rise and homes in the south east, Oxford and Bicester could benefit from the train line from Marylebone being brought into Oxford. The report mentions that there is real concern about potential interest rate increases in 2016 even although they are likely to come incremental shifts. This could affect first time buyers and also home owners with interest only mortgages. Another concern on the horizon is the Bank of England having powers over the buy to let market which could limit the sector and looking further ahead the referendum on whether the UK should remain in the European Union has the potential to have an effect on markets. ‘The EU Referendum will take place before the end of 2017. The lobbying has already begun and will escalate over the coming months. Although an immediate and direct impact on the majority… Continue reading
