Investment
New home sales and lending in Australia ended 2015 strongly
Seasonally adjusted new home sales in Australia finished last year strongly, recording a 6% increase in December, according to the latest data from the Housing Industry Association. The growth has bee driven by both the detached house and multi-unit segments of the market. Data shows detached house sales increased by 2.2% while multi-unit sales were up by 21.1%. HIA chief economist Harley Dale said the current healthy national construction volumes are expected to continue throughout the first half of 2016 but there are likely to be very large differences in new housing conditions across States. ‘The updates we receive for leading indicators in coming months will be closely watched to determine the magnitude of any risk that the second half of 2016 is materially weaker for new home building than the first half of the year,’ he added. A breakdown of the figures show that detached house sales increased in three of the five mainland states, up 5.2% in Queensland, up 5% in Western Australia and up 1.1% in Victoria. Sales fell 2.1% in South Australia and by 0.1% in New South Wales. During the December 2015 quarter detached house sales increased in Queensland by 4.3% and by 0.3% in New South Wales. Sales fell 15.4% in Western Australia, 10.2% in South Australia and 4% in Victoria. Meanwhile, the latest figures from the Australian Bureau of Statistics show that the monthly volume of new home loans to owner occupiers hit a six year high during December 2015. That means that the pipeline of new home building is likely to remain strong during early 2016, according to HIA senior economist, Shane Garrett. He pointed out that the December data is the best since November 2009. ‘This time around, new home building is benefitting from record low official interest rates, strong demographic demand and resurgent labour markets in New South Wales and Victoria,’ he added. During December, the number of owner occupier loans for the construction of new homes increased by 1.8% with growth of 12.4% in loans for newly constructed homes. Compared with a year earlier, total owner occupier loans for the construction and purchase of new dwellings are 5.3% higher. ‘During November, the major banks unilaterally increased their variable mortgage interest rates. While the figures seem to suggest no immediate impact on new home lending, the risk remains that such tactics could undermine our industry’s ability to meet Australia’s long term housing needs,’ Garrett explained. A breakdown of the figures shows that the number of new home loans increased, in annual terms, most strongly in the Northern Territory with growth of 29.3%, up 21.7% in New South Wales and up 12.3% in Victoria. New home lending volumes also rose in Queensland by 4% but lending volumes fell in Tasmania by 29.6%, in Western Australia by 19.8% and in the Australian Capital Territory by 0.5%. Continue reading
UK property prices broadly stable with policy changes and a potential EU vote on horizon
Average UK house prices rose by 0.3% in January, and are up 4.4% year on year, remaining broadly stable, according to the latest analysis report. Prime central London prices rose by 0.1% last month to take annual growth to 1.2% while prime central London rents dipped by 0.3%, says the report from real estate firm Knight Frank. The data also shows that price growth for prime property in some regional hubs continues to outperform the wider prime country house market. The stability in UK property prices is likely to be underpinned by a further period of ultra-low interest rates and a solid, although slowing, economic recovery but the report warns that the political outlook is less clear as an European Union referendum draws closer. Grainne Gilmore, head of UK residential research at Knight Frank, pointed out that interest rates being left unchanged by the Bank of England for the 83rd consecutive month in February was not a surprise. ‘But the data released by the Bank when announcing its decision has led economists and markets to change their expectations about when rates may start to rise. Whereas many had forecast a rise around the middle of the year, the verdict is now that rates are on hold until the final quarter of the year, if not 2018,’ she said. ‘This change was prompted by the Bank’s forecasts, showing muted inflation and wage growth in the coming years as well as a downgrade in forecast GDP growth. The central bank now expects 2.2% GDP growth this year, instead of 2.5%. The slower growth is attributed to global economic conditions, not least the effect lower oil prices are having on many economies around the world,’ she explained. ‘However, senior bank officials were clear that the UK economy was still experiencing a solid recovery and that the fall in oil prices was a net good for UK consumers, helping boost consumption and therefore wage growth,’ she added. Households expect prices to continue rising this year according to the latest House Price Sentiment Index (HPSI) from Knight Frank and Markit Economics. Any reading above 50 on this index, which is a bellwether for house prices, suggests prices are rising, or are set to rise. The future index has now been above 50 for 35 consecutive months. However, Gilmore also said that the outlook for 2016 must take into account the policy changes and political decisions which will be made this year, not least another change to the stamp duty regime in April, the Mayoral Elections in London in May and a possible decision on whether the UK should stay in the European Union. ‘As seen following the stamp duty changes in December 2014, and last year’s General Election, the market can adjust to political and policy changes, but periods of uncertainty can take their own toll on market activity,’ she added. While prime central London property prices edged up by 0.1% in January, taking the annual increase to 1.2%, a breakdown… Continue reading
UK mortgage arrears at lowest rate for more than a decade in 2015
Mortgage arrears in the UK are at their lowest for more than a decade with fewer than one in 1,000 ended in repossession in 2015, according to the latest data from the Council of Mortgage Lenders. Beneath the headline figures, the CML quarterly data shows home owner mortgage arrears running at 1.03% of all loans at the end of 2015, with buy to let at a lower rate of 0.31%, continuing the recent trend of a lower prevalence of arrears in the buy to let market. However, the picture is reversed on repossessions, with around one repossession per 2,500 mortgages in the buy to let market in the fourth quarter of the year, compared with one in 5,000 in the homeowner market. Across the whole market, most had relatively modest levels of arrears at under 5% of the mortgage balance. The number of loans with arrears in the most severe band, representing 10% or more of the mortgage balance, was 23,700, down from 24,200 at the end of 2014. The CML report says that the modest decline in the most serious arrears band may partly reflect distortions in the timing of possessions, but the overall arrears trend is clearly down. At 10,200, the total number of repossessions in 2015 was less than half the number in 2014, down from 20,900 but the report says that caution is needed on the year on year comparison, because the timing of some possessions may have been affected by the aftermath of a court case which has been causing lenders to review their processes. However, it is likely that the underlying trend is still emphatically down. ‘It is good news that the levels of mortgage arrears and repossessions remain low and falling. But, at the risk of sounding as if we are crying wolf, we would continue to urge all borrowers to plan ahead for a time when the interest rate environment may be less benevolent. Lenders do not wish to see borrowers who are coping currently falling into difficulty if and when rates do eventually rise,’ said CML director general Paul Smee. The figures are a sign of a period of relative stability for both owner occupiers and landlords when it comes to managing borrowing, according to Kevin Purvey, chairman of the Intermediary Mortgage Lenders Association (IMLA). ‘Lending volumes forecast to rise, the rigours of lenders’ affordability checks will help borrowers avoid a future scenario where they become overstretched. However, continuing delays to the Bank of England’s first rate rise should not breed complacency,’ he explained. ‘With mortgage rates at record lows, there is still plenty of reason for households to think ahead, weigh up their monthly balance sheet and consider remortgaging to help prepare for the inevitable rise. Changes to tax allowances will give landlords added incentive to look at their remortgage options in 2016,’ he pointed out. ‘Lender competition remains high, which means intermediaries will be at the heart of the continuing… Continue reading
