Rpdata.com’s measure of real estate agent’s pre-listing activity the Market Activity Index has continued to trend lower over the last week. The results suggest that the market is quieting down for winter with pre-listing activity at its lowest level since late April when the market first started to slow. We anticipate that the slowdown in pre-listing activity will persist until at least spring.
Industry Market Wrap
Housing finance data released by the Australian Bureau of Statistics (ABS) this week surprised on the upside with an increase in owner occupier commitments during May after they have trended downwards since September 2009. During May the total number of owner occupier commitments increased by 1.9% comprised of a -2.2% fall in finance for the construction of new homes, an increase of 4.7% in commitments for the purchase of new dwellings and a 2.3% increase in finance for the purchase of existing dwellings. Despite these generally positive results for the month, commitments for all categories have fallen on an annual basis. New construction is down -15.2% for the year, purchases of new dwellings are down -10.3%, purchase of established dwellings is down -26.1% and total owner occupier commitments are down -24.4% for the year. The standout statistic continues to be the total value of investor finance commitments which are at their highest level since October 2007 with $7.7 billion committed to during the month. Investor finance commitments accounted for 35.9% of the total value of all finance commitments during May which was its highest level in more than five years.
Westpac and the Melbourne Institute released their Consumer Sentiment Index this week and like housing finance, it surprised on the upside. For the month of July consumer sentiment increased by 11.1% and the Index now sits at 113.1 points indicating that consumers have become much more optimistic during the last month despite sovereign debt fears in Europe and share market volatility.
Advertised Stock on the Market The volume of newly advertised property entering the market over the last week increased by 1.0% after a significant fall the previous week. The total volume of listings increased again last week, up 2.0%, total listings are now at their highest level since December 2008 which was when property values were at their lowest point following the GFC. The mounting number of total listings is cause for some concern given that market indicates suggest a cooling market, ideally total listings would begin to fall in coming weeks given that market activity is anticipated to continue to slow.
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Latest National Auction Clearance Rates Nationally, capital city auction clearance rates have shown a further easing last week with the weighted average auction clearance rate recorded at 56.2%. With clearance rates continuing to ease we have finally started to see a decline in the volume of auctions taking place with slightly more than 1,200 capital city auctions last week compared to almost 1,500 the previous week. Auction clearance rates in Melbourne recorded a slight improvement last week at 62.6%. Sydney’s clearance rates fell again last week and were at their lowest level since the beginning of February last year, recording a clearance rate of 57.8%.
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Number of Properties Advertised for Rent New rental listings have seen a sharp increase over the last week, increasing by 7.6%. Total rental listings have also increased over the week and are up 4.9% compared to last week. Total rental listings are currently at their highest level since the first week of April. We continue to anticipate a tightening of rental markets in coming months as sales volumes fall and renters find it more difficult to move into home ownership due to affordability constraints.
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After the Government has seemingly found a solution to the Resources Super Profits Tax (RSPT), is now the time to consider an investment in a mining or resource driven town?
Investing in a mining town could be described as the property equivalent of investing in a high risk stock. The returns can be significant however, there is also significant downside risk which is why timing and market knowledge is everything.
Now that the Government and the resources sector seem to have come up with an amiable solution to the RSPT a greater level of certainty is likely to improve market conditions in the mining and resource intensive areas. For this reason it may be a good time to consider investing in resource markets.
A retail and residential property in Drummoyne, New South Wales, was sold under the hammer by agents of Colliers International.
The suburban cafe with a three-bedroom unit at the rear, located at 58a Thompson Street, Drummoyne, is understood to have attracted 29 bids at its auction.
Colliers International director of investment sales, Matthew Meynell, and associate director, Brian McInally, sold the property for $1.086 million on behalf of vendor, Nathan Merchant.
An income of $62,400 per annum is generated from the leases to the 57 sqm café and 90 sqm rear unit, giving the sale a yield of approximately 5.75%.
The café is on a three year lease until 2012 with a three year option, while the unit is on a new lease until mid next year.
Mr Meynell said the purchaser, a local investor, specifically targets suburban retail and residential holdings with solid tenants and leasing profiles.
“The Inner West and Drummoyne, in particular, is currently a property hot spot thanks to close proximity to the CBD and limited supply,” said Mr Meynell.
“There has been limited investment property opportunity for quality commercial stock in the area.”
“Given its excellent presentation and condition, and generating steady cash flow and consistent capital growth, I wasn’t surprised by the spirited bidding at auction and its ultimate sale.”
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Blog: Confidence in residential property improves in July
Consumer sentiment data published by Westpac and the Melbourne Institute this month shows there has been a bounce back in confidence amongst Australians during July. The Index gained 11.1% in July and has remained above 100 points (an index value of 100 is where optimists and pessimist are equally weighted) since June last year. Since interest rates started rising in October last year the Index had been trending downwards, however the July result brings the confidence measure back well above the five year average.
The latest figures show that Australians remain reasonably optimistic about Australian economic prospects. A stabilisation in interest rates, strong jobs figures and some improvement in global financial markets are likely to be the main drivers behind the improvement.
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The suburban cafe with a three-bedroom unit at the rear, located at 58a Thompson Street, Drummoyne, is understood to have attracted 29 bids at its auction.
