HSBC Tips 5% Growth in Soft Landing
House prices are predicted to grow, on average across the nation, 4-5% this year, according to HSBC which expects a soft landing following the Sydney boom.
HSBC chief economist Paul Bloxham says tighter regulations on lending to investors, the level of new unit development and new state taxes on foreign buyers will weigh on housing prices.
“We are forecasting national housing price growth to slow from 9% in 2015 to around 4-5% in 2016,” he says.
ABS figures for the March Quarter showed Melbourne (9.8%) and Sydney (9.7%) were still neck and neck for the fastest rate of price growth. Brisbane prices were up 4.1%, Canberra 4.6%, Hobart 4.2% and Adelaide 3.1%, while Perth prices fell 4.5% and Darwin recorded a 4.9% drop.
Figures from researcher CoreLogic suggest price growth has picked up pace since the March Quarter and HSBC notes that prices “bounced back strongly in April and May”, led by Sydney and Melbourne.
“We expect that apparent oversupply in the apartment markets in Brisbane and Melbourne may see some unit price declines in these cities, but we expect the detached housing market to continue to see modest price gains,” HSBC says.
A cooling of the housing market would leave the Reserve Bank with room to cut its cash rate further, it says. HSBC has predicted a 25-basis-point cut to the cash rate in August.
ALP Plan Would Hit Market: Report
The number of properties sold in Australia would fall by up to 20% in the first year of Labor’s negative gearing changes and states could lose up to $3.8 billion in stamp duty revenue, according to a new report.
At the same time house prices would drop by up to 8% and rents would rise 6% in a “worst-case scenario”, the paper by SQM Research finds.
The analysis highlights one of the major policy differences between the two major parties in the Federal Election campaign. The Government is keeping the present tax arrangements for negative gearing and capital gains, saying any change would hurt the market and undermine people’s chief asset – their home. Labor has gone for big changes, restricting negative gearing to new homes and reducing capital gains tax concessions.
Labor said it would make housing more affordable but denies that house prices would fall – a clear contradiction.
SQM, a Sydney-based property research firm, says a market slowdown might prompt the Reserve Bank to step in and reduce interest rates.
“There will be market impact if Labor’s negative gearing policy is legislated,” SQM’s Louis Christopher says. “Our analysis suggests the market impact would last around three years, with the sales falling significantly in year one and a correction to take effect, with dwelling prices falling the most in the second year.
“We don’t think the market will crash per se, but it will be felt by the economy. We then expect the market to return to equilibrium from year three.”
Victoria Leads Building Starts
More than 220,000 dwellings were started in Australia last year, a record number. Victoria led the nation on residential building activity, with nearly 70,000 dwellings started in 2015, according to the Housing Scorecard report by the Housing Industry Association.
The tally is consistent with the latest demographic statistics from the Australian Bureau of Statistics, which show Victoria posted the strongest population growth of 1.9% for last year.
NSW was edged into second place for housing starts, which is in line with that state showing the second-highest population growth at 1.4%.
“Victoria and NSW have seen the strongest rates of population growth and the population influx has increased demand for housing,” says HIA economist Geordan Murray. “The residential building sector in these two states is responding accordingly.”
Across the country, more than 220,000 dwellings were started during 2015, a record amount.
“There were significant divergences in conditions for residential building around the country,” Murray says. “The eastern seaboard states have been the strongest performers, the mining states are sliding down the order, while South Australia and Tasmania are facing the most challenging conditions.”
Brexit Boosts Property Safe Haven
Brexit will boost Australia’s residential property market as the UK decision to leave the European Union will increase perceptions of the market’s safe-haven status, observers say.
Nerida Conisbee, the chief economist at REA Group, shrugged off a question that uncertainty created by the UK’s vote to leave the 28-nation EU bloc would impact the Australian property market. If anything, it would boost demand for Australian real estate assets.
“If you’re a pension fund in Europe, and you’re looking at London or you’re looking at Australia, then all that turmoil makes Sydney or Melbourne look like a great investment,” she says.
Property markets typically suffered large, sudden falls only after large macroeconomic events such as a surge in unemployment or drop in economic growth and neither of these was likely. “Overall, I’m pretty optimistic about Australian property,” she says.
The referendum result will create an opportunity for markets seen to offer more stability, but nothing will happen straight away, says Chris Mourd, LJ Hooker’s head of real estate.
“The reality is there isn’t going to be an immediate impact to Australian property,” Mourd says. “What you’re probably going to see is the investor saying, ‘We want to go somewhere we can project out over the next few years and with some level of stability’.”
Falling prices of equities and other more liquid investments would also prompt local investors to take another look at real estate, he says.
School Zone Homes Fetch More
HOMES zoned for Melbourne’s most sought-after public schools are fetching up to $600,000 more than those just outside catchment areas, new research shows.
Real Estate Institute of Victoria data reveals parents are paying the biggest property premium to get their kids into Parkville’s University High School.
Homes inside the boundary fetched a median price of $1.395 million in the year to March 31 — $596,000 higher than the median for properties in a 1km radius outside it.
Median prices for homes within the McKinnon Secondary College, Cheltenham Secondary College and Frankston High School catchments were also $305,000, $150,000 and $114,000 higher than those just missing out.
The Box Hill High School, Mount Waverley Secondary College and Balwyn High School zones, all favoured by Chinese families, bumped up house prices too, as did top primary schools in Auburn and South Yarra.
REIV chief executive Geoff White says parents are increasingly choosing to shell out for public school-zoned houses rather than pay private school fees. With capital growth strong in the top school catchments, White says this is a smart investment.