Interest rates remained on hold last week, but low rates are still fuelling activity in the housing market, despite a disappointing drop in residential building approvals for August, released last week by the Australian Bureau of Statistics.
The number of residential building approvals fell by 4.7% in August, following a jump of 10.2% in July. CommSec economist Gareth Aird said the magnitude of the August fall was disappointing.
But house prices, particularly on the east coast and most obviously in Sydney, continue to rise. Sydney has shown an almost 10% increase in home values for the year to date, compared to 7.1% for Melbourne and 5.9% for Perth, according to RP Data (see table 1 below). The combined five capitals have seen a year to date increase of 6.7% and an annual rise of 5.5%.
Table 1: capital city home value changes
[1]The long weekend brought plenty of auction activity, with RP Data reporting 1,483 auctions scheduled across the country in capital cities, compared to 1,243 the previous week. The preliminary capital city weighted average clearance rate fell to 69.8%, compared to 73.5% the week before.
It was Sydney’s turn to be affected by footy fever on the weekend, as auction activity there was lower, with just 256 properties listed for auction, compared to 585 the week before. The clearance rate was still strong at 81.8% (see table 2 below) and Melbourne recorded a solid 75%.
Table 2: This Saturday, 5 October 2013
[2]The week before saw a revised clearance rate of 80% for Sydney and 70.7% for Melbourne. The median house price for Sydney was $920,000 and that compares to $842,500 recorded a year ago (see table 3 below). AMP Capital Investors head of investment strategy and chief economist, Shane Oliver, says the increase in house prices is providing a boost to household wealth.
“Australian economic data added to confidence that rate cuts, helped by the confidence boost from the change in Government, are getting traction and that economic growth is bottoming,” he said in his weekly report.
Table 3: Saturday 28 September, 2013
[3]This time last year, auction clearance rates were still unimpressive, with Sydney recording a clearance rate under 60% and Melbourne just over 60% despite over 500 properties being listed (see table 4 below).
Table 4: Saturday 6 October 2012
[4]Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
Also in the Switzer Super Report:
- Peter Switzer: Could stocks blow up 13% plus — Hindenburg-style? [5]
- James Dunn: The return of Macquarie – has it run too far? [6]
- Chris Cuffe: Fundie’s Favourite on Third Link [7]
- Rudi Filapek-Vandyck: Buy, hold and sell – what the brokers say [8]