Lower interest rates to fuel ongoing home investor boom

Latest ABS home investor loan data confirms the unrelenting boom in residential l investment activity.

The original value of home loans for investors approved nationally surged by 18.2 percent over December to a new record high $13.8bn.  Investor activity now accounts for 50.8 percent of all home loan approvals.

NSW and Victoria each recorded new monthly record highs for investor loan approvals in December.  NSW loans increased by 12.3 percent over the month to $6.3bn, with Victorian loans up by 32.3 percent to $3.7bn.

Investor home loans in New South Wales increased strongly by 35.5 percent over 2014 – clearly the best performance of all the states.

NSW now accounts for 45.1 percent of all national home loan activity for investors with Victoria accounting for 26.7 percent. 

NSW investors are responsible for 59 percent of home loan approvals in that state with Victorian investors accounting for a 50.2 percent total local market share.

Lower interest rates are set to increase investor activity particularly in the strong Sydney market reinforced by rising rents and prices, low vacancy rates and low and falling bank deposit rates. 

Latest unemployment data from the ABS reporting a national rate of 6.4 percent – the highest in 12 years – indicates more interest rate cuts on the horizon.

Dr Andrew Wilson is Domain Group Senior Economist Twitter@DocAndrewWilson 

Vacancy rates tighten over holidays

Capital city vacancy rates tightened over January largely reflecting the seasonal impact of lower listing numbers during the holiday period.

The Domain national vacancy rate for houses and units combined fell to 2.2 percent down from the 2.4 percent recorded for December. The house vacancy rate was reported at 1.9 percent with units at 2.8 percent.

All capitals reported a fall in vacancy rates with the exception of Perth where the rate was steady despite seasonal effects and indicating a continuation of the recent easing in the local rental market.

Hobart, Canberra, Darwin and Adelaide all recorded low vacancy rates for houses below 1.5 percent with Sydney also tight at 1.8 percent. Perth reported the highest house vacancy rate over January at 2.4 percent.

Vacancy rates for units were generally higher than houses although similarly falling over January as a result of seasonal impacts on listing numbers.

Melbourne, Brisbane, Canberra and Darwin all reported unit vacancy rates over 3 percent reflecting the recent surge in inner city apartment developments in those cities. Darwin reported the highest unit vacancy rate at 4.5 percent – the same recorded by that city over December.

Although headline vacancy rates are likely to ease as the impact of seasonal effects on listing numbers moderates, an underlying shortage of house rentals is set to remain in all capitals with the exception of Perth.

Lower interest rates will encourage increased activity from investors, particularly in the strong Sydney market, but this is unlikely to impact rental market dynamics significantly in the shorter-term. Continuing upward pressure on house rents can be expected as a consequence.

High levels of new supply of inner city apartments in some capitals however will continue to keep vacancy rates higher for the unit rental market with the prospect of some relief in rent growth for tenants.

Dr Andrew Wilson is senior economist for the Domain Group Twitter @DocAndrewWilson

Home loans recover over December as investors surge to record levels

Latest ABS home loan data reports that the number of home loans approved for owner-occupiers in Australia increased by 2.7 percent over December. 

All states recorded a rise in home loan activity and is a significant rebound following the falls reported over November.

New South Wales was the clear leader however in the recovery with home loans for owner-occupiers increasing strongly by 6.6 percent over December.  Other capitals recorded more modest growth outcomes with the exception of South Australia where home loans increased by 4.5 percent over the month.

Tasmania recorded the strongest annual growth rates for owner-occupied housing loans seasonally adjusted over 2014 at 9.3 percent.  Next best was Queensland at 7.0 percent with NSW up by 5.7 percent and Victoria at 3.2 percent in front of only South Australia recording annual growth of 2.0 percent.

National residential investor loan activity has surged to a new monthly record high following the falls recorded over November.   Investor finance seasonally adjusted increased by 6.0 percent over December to $12.6 Billion.  National home investor finance has increased by 24.6 percent over 2014 reflecting strong activity from this sector.  Lower interest rates are set to intensify investor activity particularly in the Sydney market.

Residential investor finance now accounts for a record 41 percent of all home loan activity

Dr Andrew Wilson is Domain Group Senior Economist Twitter@DocAndrewWilson

ABS house price index confirms strong Sydney but modest Melbourne

The ABS December quarter established house price index results released today confirmed Sydney remains the clear runaway leader for capital city housing market performance. 

The Sydney index increased by 3.4 percent over the quarter, well ahead of the next best Melbourne and Brisbane that increased by 1.5 percent.

Unsurprisingly, Sydney also recorded the highest increase in the index over 2014 – up by 12.8 percent.  This was again well ahead of the equal second placed Melbourne and Brisbane markets where established house price indices increased by 5.4 percent.

Although recording the strongest annual result of all the capitals, the Sydney index increase last year was nonetheless below the rise of 16 percent recorded over 2013. 

The Brisbane market recorded a similar annual result to the 5.7 percent increase recorded over 2013.  The Melbourne established house price index however weakened sharply over 2014 reporting nearly half of the 10 percent recorded over 2013.

Other capital city markets produced patchy results with Perth, similar to Melbourne, also falling sharply over 2014.  The Canberra established house price index however increased by 2.6 percent over 2014, a significant improvement over the fall of 0.3 percent recorded over 2013.

Dr Andrew Wilson is senior economist for the Domain Group Twitter @DocAndrewWilson

Reserve Bank unsurprisingly cuts rate

Interest rates cut as Reserve Bank acts to lift economy

Interest rate cut video commentary (CLICK HERE TO VIEW)

• Official rates cut at first meeting of the year
• Economic decline drives Bank to act after 17 months sidelined  
• Housing market activity remains modest - except Sydney
• More cuts if economy continues to weaken 

At its first meeting for the year, the Reserve Bank unsurprisingly announced that official interest rates would be cut to a new 60 year low falling by 0.25 percent to 2.25 percent. 

Today’s actions by the Reserve Bank follows 17 months on the sidelines since it last cut rates in August 2013.  The Bank’s decision reflects concerns over deteriorating economic activity clearly evident over the past 6 months.  Lower interest rates have been implemented to stimulate a weak economy and restore consumer confidence.

Although ABS unemployment data for December was encouraging, the series has been volatile recently and overall jobless numbers remain relatively high.

Other recent economic indicators such as house building approvals and retail sales remain underwhelming given the significant stimulus of lower rates over the past 2 years.  Lower inflation over the December quarter reflects subdued economic activity notwithstanding reduced fuel costs and will act to further constrain already flat incomes and profit growth.

A significantly lower dollar, a largely directionless stock market, lower resource prices and growing concerns over the performance of the international economy will act to keep a downward bias on interest rate settings over the shorter term.

Housing market activity remains modest to moderate generally with the exception of the strong Sydney market.  Despite lower interest rates, market activity is likely to remain largely benign over 2015 as the impact of improved affordability is offset by low incomes growth and concerns over job security. 

Notwithstanding housing market activity, lower rates if passed on by the banks to mortgage holders are good news for home owners despite it signalling growing concerns by policy makers over Australia’s economic outlook.

Dr Andrew Wilson is Domain Group Senior Economist Twitter@DocAndrewWilson

Property market still sizzling - Channel 10 reports

 Property market still sizzling - Channel 10 reports (click this link)

Domain Group December quarter house price report

House prices rise as Sydney boom rages on

All capitals with the exception of Darwin reported houses price rises in a late Spring revival that followed the falls generally recorded over the September quarter.

The Domain Group reports that the national median house price increased by 2.1 per cent over the December quarter   - its strongest result for the year. The national median unit price also recorded a solid rise over the quarter increasing by 1.7 per cent.

Read the full report here Domain Group December quarter house price report

2014 house price growth