Property Market – Page 162 – Digital Finance Analytics (DFA) Blog

Affordability may still deteriorate despite a ‘cooling’ housing market

Much is being made of a cooling in key property markets, but a senior analyst warns that even a halving of price growth probably won’t help first home buyers.

Louis Christopher, head of SQM Research, said his company’s prediction of 6 to 10 per cent national price growth in 2017 was still looking “intact”, and that even much slower 3 per cent growth in 2018 would be unhelpful.

“Overall, I think affordability will still deteriorate a little in the second half of the year, and that will particularly be the case for Melbourne, where I don’t see a lot of evidence right now of a major slowdown occurring,” he told The New Daily.

“We haven’t made a forecast yet for 2018, but if we were to see smaller price rises but still, say, in excess of 2 to 3 per cent, you would still see affordability deteriorate, assuming interest rates stay where they are.”

Property prices were a huge topic of discussion this week, after Deloitte Access Economics said in its annual business outlook that “gravity may soon start to catch up with stupidity in housing markets”.

UBS also predicted that national price growth would slow to between zero and 3 per cent in 2018.

Treasurer Scott Morrison has even declared victory, saying recently that the Coalition government had achieved a “soft landing” for prices.

In May and June, plenty of data suggested that price growth slowed, auction clearance rates fell and the writing of new home loans, especially to investors, moderated.

But what really matters to first home buyers is price growth, and there is little evidence that affordability has stopped deteriorating, even if prices aren’t growing as ‘stupidly’ anymore.

As seen in the chart above, price growth according to CoreLogic’s measure is only barely moderating, if at all.

And according to SQM Research, Melbourne prices are growing strongly, even if Sydney is showing some weakness.

The blue lines are the asking prices for houses, the purple for three-bedroom houses, red for units and orange for two-bedroom units.

Domain also reported that the national median house price went up 1.7 per cent in the June quarter, and that this pushed the median price to a new record high of $818,416, which was 10 per cent higher than at the same time last year.

Mr Christopher attributed the recent slowdown to APRA’s regulatory intervention, and a blow to investor confidence from the federal budget’s surprise crackdown on negative gearing, via a restriction on tax deductions for plant and equipment depreciation.

“It basically turned thousands of properties from being cashflow positive after tax to being cashflow negative, and that was a direct hit upon negative gearing and fitted in with this view of the Libs being Labor-lite.”

However, prices in the two biggest markets of Sydney and Melbourne appear to be rebounding, and annual price growth rates are holding steady. According to Corelogic, annual price growth for the five capital cities was still sitting around 9 per cent, and monthly price growth for July was tracking around 2 per cent for Sydney and Melbourne.

Even the auction clearance rate is improving slightly. Nationally, the capital city clearance rate was 69.4 in the week ending July 16, up from 68.4 the week before.

Mr Christopher also noted that stamp duty concessions for first home buyers in Victoria and New South Wales were likely to offset any slowdown.

“Basically, it means a saving for a first home buyer of upwards of $25,000 in each state. That’s pretty big money and that type of saving in the past, through former first home owners grants, have moved the market.”

There is of course a sure-fire way to kill price growth: substantial rate hikes by the Reserve Bank. Mr Christopher said national prices could go backwards if we saw six rate increases in a row.

“If we were to see a 150 basis point rise over two years, that would be enough to create a correction in the national market.”

He also noted that even if national price growth continues, there are bargains to be found in Adelaide, Hobart and Perth.

“I can’t stress enough that it’s very much a mixed market and the national number masks a lot of what is happening on a city-by-city basis.

“It’s focussed on Melbourne and Sydney and look, yes, the majority of the population is in those two large capital cities. But affordability is better elsewhere.”

Why is Melbourne’s property market outpacing Sydney’s?

From The Real Estate Conversation.

Recent data suggests Melbourne’s property market is beginning to outpace Sydney’s, and this trend is likely to continue as affordability, higher interest rates and migration patterns all favour the southern city, say experts.

In June, Melbourne’s median dwelling price rose 2.71 per cent, compared with Sydney’s increase of 2.21 per cent, according to CoreLogic.

In the year to 30 June, Melbourne price growth also outpaced Sydney’s. Melbourne’s median dwelling price rose 13.7 percent (to $913,060), while Sydney’s median dwelling price rose only 12.2 per cent (to a median price of $1,118,020).

And there are other signs the Melbourne market is outpacing Sydney’s.

Melbourne’s clearance rate last week was higher than Sydney’s. Last week, Melbourne’s clearance rate was 77.4 per cent, compared with 72.9 per cent for Sydney. A total of 753 properties went to auction in Melbourne, compared with 600 in Sydney.

And Melbourne houses are selling slightly more quickly than Sydney’s. Melbourne houses are selling within 29 days, while Sydney houses are selling within 31 days. Vendors are discounting houses to achieve a sale to the tune of 4.5 per cent in Sydney, compared with the lower discount of 3.8 per cent in Melbourne.

Cameron Kusher, senior research analyst with CoreLogic, says there are four reasons the Melbourne real estate market is likely to see prices grow more strongly than Sydney’s prices.

Firstly, Melbourne prices are much lower than Sydney’s, so Melbourne prices are unlikely to see any correction to the same degree as Sydney.

Second, interstate migration into NSW is waning, while it is continuing to strengthen in Victoria, partly because of housing affordability, says Kusher.

The 2016 Census revealed that Melbourne is growing more quickly than Sydney, with the southern city adding 1,859 people per week between the 2001 and 2016, and Sydney adding only 1,656 people per week. And while Sydney remains the largest city, with a population of 4.8 million, Melbourne isn’t far behind with a population of 4.5 million.

The third reason Kusher gave for Melbourne’s relatively strong performance is there are more properties advertised for sale in Sydney. “There are currently 13.3% more properties advertised for sale in Sydney than at the same time last year, while in Melbourne listings are just 0.1% higher than a year ago,” said Kusher. So people looking to buy in Sydney have greater choice, which keeps price growth contained, he said.

And finally, Kusher says that higher interest rates are likely to have more of an impact in Sydney, because a higher proportion of the market is made up of investors. CoreLogic’s May data showed that investors accounted for 55.1% of new mortgage demand (excluding refinances) in NSW, and 44.6% of new mortgage demand in Victoria.

“If the higher interest rates are discouraging investment (as they appear to be),” says Kusher, “it is going to be having a much bigger impact on market demand in Sydney than in Melbourne given their much higher level of participation.”

Rick Daniel, agent with Nelson Alexander Fitzroy, told SCHWARTZWILLIAMS the Melbourne market is seeing strong interest from interstate.

“Towards the end of last year, we saw quite an influx of interstate investors” into the Melbourne market, he said.

“Melbourne provides quite a lot of value,” he said, adding that buyers also see lifestyle benefits of buying in Melbourne, because transport is easy, and the inner-city suburbs are eminently walkable.

Daniel said that even though the Melbourne market is experiencing the seasonal slow down, “there still seems to be some activity,” he said, adding that unique properties, such as the one at 6 Oxford Street, Collingwood, are still attracting strong interest, including from interstate.

Chris Wilkins, principal of Ray White Drummoyne, told SCHWARTZWILLIAMS the Sydney market is in a “holding pattern”, and the “feeling [in the market] is worse than last year”.

Wilkins said he has had several potential sellers sitting on their hands because there is nothing for them to buy.

Rod Fox of 1st City Real Estate Double Bay told SCHWARTZWILLIAMS the “urgency” has gone out of the Sydney market. Fox said that six months ago, any property that came onto the market sold very quickly, and often for higher-than-expected prices. Fox said that previously, 80 per cent of properties were selling before auction, and that figure has now halved.

But Fox said good quality properties are still selling quickly and for good prices, but overall, Sydney “buyers are more cautious”.

Australia’s retirement system on collision course with property market

From The New Daily

Australia’s retirement income policy is on a collision course with trends in home ownership and the result will be more older Australians struggling to support themselves in retirement. It will also make the superannuation system more inequitable.

The housing price boom is causing a major social change in Australia and the results of it are not being factored into policy making.

The latest figures from the 2016 census show that home ownership dropped markedly. Households renting rose to 30.9 per cent of the total, compared to 29.6 per cent in mid-2011. In the late 1980s, only 26.9 per cent of households rented.

Households owning outright dropped most markedly, from 32.1 per cent to 31 per cent while those owning with a mortgage dropped from 34.9 per cent to 34.5 per cent of households.

That is bad news for retirees because it means that more people will find themselves renting as they give up work.

“It’s a big thing because the family home is exempt from the pension assets test,” Grattan Institute research fellow Brendan Coates said.

“If you don’t own a home you will have to put aside more money to support yourself in retirement because of rental costs.”

The Association of Superannuation Funds of Australia recently found that to afford a comfortable retirement in a capital city a couple would need more than $1 million saved. That’s almost double needed by a couple who owned their home.

The trouble with saving large amounts like that is that it puts you outside the limits of the age pension assets test.

“Now most people in retirement get the pension,” Mr Coates said.

Holding a lot of assets outside the home means your pension will be discounted once you trigger the assets tests limits. And recent changes have made the situation worse.

In January this year, assets test limits for part pensions were cut by around $200,000. For single non-home owners the new limit is $747,000 and for couples $1 million, compared with $943,250 and $1.32 million previously.

So retiring without a home means many people will get less from the pension while they run down their retirement assets and will face rising rents as time goes by.

As this table from the Grattan Institute shows, renting leaves people far more vulnerable to financial stress.

While many renters on a pension may be be eligible for Commonwealth rent assistance, it maxes out at $132.20 per fortnight for a single and $124.60 for couples. Rents for a two-bedroom apartment average between $593 a week in Sydney and $329 in Adelaide (less in the regions), and have grown at around 1.6 times the rate of inflation over the past 30 years.

So being a renter will increasingly squeeze your income as your savings diminish and welfare won’t bridge the gap.

The toughening of the assets test and the rise of renting retirees “brings into stark contrast the treatment of home owners and non-home owners”, Mr Coates said.

Currently about half of age pension payments go to people with more than $500,000 in assets and 20 per cent to those with more than $1 million, most of whom are home owners.

It will also widen the gap between home owning and non-home owning superannuants as those without homes will struggle to build balances and have to spend what they have quicker to pay their housing costs.

Flood of new rental properties drives inner-Sydney vacancy rate to two-year high

From The Real Estate Conversation.

The rental market in inner Sydney appears to be softening, with the availability of rental properties increasing for two months in a row, and the highest vacancy rates seen in nearly two years, according to the latest data from the Real Estate Institute of New South Wales.

REINSW President John Cunningham said the June 2017 REINSW Vacancy Rate Survey saw Inner Sydney rise 0.3 percentage points to 2.2 per cent, while the overall Sydney metropolitan area remained steady at 1.8 per cent. since August 2015

“The rise in Inner Sydney was offset by a decline of 0.2 per cent at 1.4 per cent in Middle Sydney, while outer Sydney slipped 0.1 per cent at 1.7 per cent.

“More stock has entered the market place in Inner Sydney which has seen a rise in availability as tenants take time to fill the available accommodation,” Cunningham said.

Around the regions:

In the Illawarra, vacancy rates rose 0.7 percentage points to 2.5 per cent

Wollongong vacancy rates were up 1.2 percentage points to 2.4 per cent

In the Hunter, vacancy rates rose 0.2 percentage points to 2.3 per cent

Newcastle and Albury and the highest vacancy rates at 3.1 per cent, up 0.3 percentage points for Newcastle, and down 0.1 percentage points for Albury

Auction volumes continue to trend lower, but clearance rates lift

From CoreLogic.

The number of homes taken to auction across the capital cities has fallen for the 4th week in a row, with just 1,612 auctions held this week, down from 1,766 last week, although higher than this time last year when 1,391 properties went under the hammer.

The combined capital city preliminary clearance rate increased to 72.4 per cent this week, up from the final clearance rate of 68.4 per cent last week, although this will revise as more results are collected. The final clearance rate has nudged slightly higher over the last two weeks after reaching a year to date low of 66.5 per cent; it will be interesting to see if this is still the case on Thursday when the final figures are released.

Adelaide and Brisbane were the only cities to see a slight increase in auction volumes this week, while Melbourne had the highest number of auctions scheduled (753). In terms of preliminary clearance rates, Melbourne was the best performing city with 77.4 per cent of the 667 results recording a successful result, and although this result will revise lower as the final results are collected, it is likely to be stronger than what we have seen in Melbourne over the last month.

Taxing empty homes: a step towards affordable housing, but much more can be done

From The Conversation.

Vacant housing rates are rising in our major cities. Across Australia on census night, 11.2% of housing was recorded as unoccupied – a total of 1,089,165 dwellings. With housing affordability stress also intensifying, the moment for a push on empty property taxes looks to have arrived.

The 2016 Census showed empty property numbers up by 19% in Melbourne and 15% in Sydney over the past five years alone. Considering that thousands of people sleep rough – almost 7,000 on census night in 2011, more than 400 per night in Sydney in 2017 – and that hundreds of thousands face overcrowded homes or unaffordable rents, these seem like cruel and immoral revelations.

Public awareness of unused homes has been growing in Australia and globally. In London, Vancouver and elsewhere – just as in Sydney and Melbourne – the night-time spectacle of dark spaces in newly built “luxury towers” has triggered outrage.

This has struck a chord with the public not only because of its connotations of obscene wealth inequality and waste, but also because of the contended link to foreign ownership.

Early movers on vacancy tax

Against this backdrop, the Victorian state government has felt sufficiently emboldened to legislate an empty homes tax. Federally, the shadow treasurer, Chris Bowen, recently backed a standard vacant dwelling tax across all the nation’s major cities.

Similar measures have come into force in Vancouver and Paris. And Ontario’s provincial government recently granted Toronto new powers to tax empty properties .
Both Vancouver (above) and Melbourne now have a 1% capital value charge on homes left vacant. Tim Welbourn/flickr, CC BY-NC
Emulating Vancouver, Victoria’s tax is a 1% capital value charge on homes vacant for at least six months in a year. Curiously, though, it applies only in Melbourne’s inner and middle suburbs. And there are exceptions – if the property is a grossly under-used second home you pay only if you’re a foreigner.

Also, as in Vancouver, tax liability relies on self-reporting, which is seemingly a loophole. This might be less problematic if all owners were required to confirm their properties were occupied for at least six months of the past year. But that would be administratively cumbersome.

This highlights a broader “practicability challenge” for empty property taxes. For example, how do you define acceptable reasons for a property being empty?

In principle, such a tax should probably be limited to habitable dwellings. So, if you own a speculative vacancy, what do you do? Remove the kitchen sink to declare it unliveable?

How can we be sure a home is empty?

Lack of reliable data on empty homes is a major problem in Australia. Census figures are useful mainly because they indicate trends over time, but they substantially overstate the true number of long-term vacant habitable properties because they include temporarily empty dwellings (including second homes).
About 150,000 dwellings in Sydney and Melbourne, including many apartments, are ‘speculative vacancies’, but establishing tax liability isn’t simple. Dean Lewins/AAP
Using Victorian water records, Prosper Australia estimates about half of Melbourne’s census-recorded vacant properties are long-term “speculative vacancies”. That’s 82,000 homes.

Applying a similar “conversion factor” to Sydney’s census numbers would indicate around 68,000 speculative vacancies. Australia-wide, the Prosper Australia findings imply around 300,000 speculative vacancies – 3% of all housing. That’s equivalent to two years’ house building at current rates.

According to University of Queensland real estate economics expert Cameron Murray, a national tax that entirely eliminated this glut might moderate the price of housing by 1-2%. Therefore, although worthwhile, dealing with this element of our inefficient use of land and property would provide only a small easing of Australia’s broader affordability problem.

Making better use of a scarce resource

Taxing long-term empty properties is consistent with making more efficient use of our housing stock – a scarce resource. A big-picture implication is that tackling Australia’s housing stress shouldn’t be seen as purely about boosting new housing supply – as commonly portrayed by governments.

It should also be about making more efficient and equitable use of existing housing and housing-designated land.

Penalising empty dwellings is fine if it can be practicably achieved. That’s especially if the revenue is used to enhance the trivial amount of public funding going into building affordable rental housing in most of our states and territories.

But empty homes represent just a small element of our increasingly inefficient and wasteful use of housing and the increasingly unequal distribution of our national wealth.

One aspect of this is the under-utilisation of occupied housing. Australian Bureau of Statistics survey data show that, across Australia, more than a million homes (mainly owner-occupied) have three or more spare bedrooms. A comparison of the latest statistics (for 2013-14) with those for 2007-08 suggests this body of “grossly under-utilised” properties grew by more than 250,000 in the last six years.

Our tax system does nothing to discourage this increasingly wasteful use of housing. It’s arguably encouraged by the “tax on mobility” constituted by stamp duty and the exemption of the family home from the pension assets test.

A parallel issue is the speculative land banks owned by developers. The volume of development approvals far exceeds the amount of actual building. In the past year in Sydney, for example, 56,000 development approvals were granted – but only 38,000 homes were built.

In many cases, getting an approval is just part of land speculation. The owner then hoards the site until “market conditions are right” for on-selling as approved for development at a fat profit.

Properly addressing these issues calls for something much more ambitious than an empty property tax. The federal government should be encouraging all states and territories to follow the ACT’s lead by phasing in a broad-based land tax to replace stamp duty.

Such a tax will provide a stronger financial incentive to make effective use of land and property. The Grattan Institute estimates this switch would also “add up to A$9 billion annually to gross domestic product”. How much longer can we afford to ignore this obvious policy innovation?

Author: Hal Pawson, Associate Director – City Futures – Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW

Turbulent Times – The Property Imperative Weekly 15 July 2017

At the heart of the property market there is a paradox – prices are still rising in most centres and auction clearance rates remain elevated, yet mortgage lending momentum is easing. How can this be?

In our latest weekly review we look at lending momentum, property prices and mortgage industry innovation. We are living in turbulent times! Welcome to the Property Imperative Weekly to 15^th July 2017.

First, don’t believe all the noise about home prices collapsing. Latest data shows continued growth. For example, in Victoria, according to RIEV, the metropolitan Melbourne median house price rose 2.9 per cent in the three months to June 30, to $822,000. The top growth suburbs were spread right across Melbourne, and at both the low and high ends of the market, from Broadmeadows and Roxburgh Park in the north, to Malvern East and Toorak in the south-east. Croydon in the outer east experienced the city’s largest quarterly increase, up more than 20 per cent to a median of $810,000. Toorak was the most expensive suburb though half of the top-growth suburbs are priced below the Melbourne’s median, suggesting buyers continue to seek value further from the city.

Melbourne’s apartment sector performed similarly well in the June quarter, with the metropolitan Melbourne median apartment price increasing 4.3 per cent to $606,500. House prices in regional Victoria rose strongly for the second consecutive quarter, up two per cent in June to a record high $385,000.

Data from CoreLogic also showed that to 9^th July, prices in Sydney rose 3.4% in the past month, in Brisbane they rose 0.5% but fell in Adelaide by 1% and Perth 0.8%. In addition, the preliminary auction clearance rates increased to 70.7 per cent this past week, up from 67.3 per cent the previous last week, even though auction volumes fell week-on-week, there were 1,751 properties taken to auction this week, down from 2,001 last week, still higher than this time last year. All but two of the capital cities saw the clearance rate increase week-on-week while Melbourne recorded the highest preliminary clearance rate at 73.9 per cent.

There are a number of clouds on the horizon though. This week the Government released draft legalisation stemming from the 2017-18 Budget when the Treasurer said travel expense deductions relating to residential investment properties would be disallowed and depreciation deductions for plant and equipment used in relation to residential investment properties would be limited.

We released our Household Finance Confidence index to June 2017, and the news was not good. Overall the index dropped below the neutral setting and appears to be trending lower. The current reading is 99.8% compared with 100.6 in May. The fall is being driven by a confluence of issues, none new, but now writ large. Households are seeing the costs of living rising (especially power costs, child care costs and council rates), whilst household income remains depressed and is falling in real terms. Returns on deposits actually fell as well, so mortgage repricing is not being matched by better saving rates. The costs of mortgage repayments rose. The most significant fall in confidence was in the property investor segment, where loan repricing has been more pronounced, whilst rental incomes are hardly growing. They are also concerned about slowing capital appreciation. However, it is still true that property owners have their confidence buttressed relative to property inactive households who are more likely to be renting, and see no rise in their net worth.

The ripple of mortgage rates rises continued with Advantedge an important wholesale funder and distributor of white-label home loans, and part of the National Australia Bank Group, announcing it will increase the interest rate on all new and existing variable rate interest only home loans by 0.35% p.a., effective Tuesday 8 August.

Westpac said it ditching mortgage and equity-release products in a high-level review of its product range and underwriting standards. The latest products to be dumped include equity access low documentation loans, which is a revolving line of credit secured against property; and a range of fixed rate low documentation home loan. Review recommendations are expected to flow onto Bank of Melbourne, St George Bank and BankSA.

Data from the ABS showed that overall lending finance sagged in May. Owner Occupied housing grew, by 0.4%, with a rise in first time buyers, but all other lending flows were lower, whether you look at the trend or seasonally adjusted figures.

Personal credit continues to fall, the flows fell 3.2% of $193 million, with similar rates of decline across both fixed and revolving loans.

Total commercial lending fell 0.8% of $314 million. Within that lending for investment housing fell 1.5% or $194 million, whilst other fixed commercial lending fell 0.5% or $96 million. Revolving commercial credit fell 0.3% or $24 million. If business confidence is really so strong, why no growth in borrowing – something does not add up!

As a result, the total proportion of business lending to total lending stood at 29.9% down from a peak of 30.9% in December 2016. The proportion of investment property lending flows slipped to 18.1% of all lending, and 37.4% of all housing lending.

So whilst the regulatory tightening is crimping demand for investor finance, it is not being replaced with a rise in productive business lending, so commercial finance has fallen. This will put downward pressure on growth, at a time when mortgage interest rates are rising. We cannot see how the future growth expectations from the RBA are going to be met on these figures.

It is clear however, that secured lending for owner occupation rose, as first time buyers pick up the slack, and investor lending remains strongest in the two overheated markets of Sydney and Melbourne. Much of the fall in investment sector lending resides in the other states, who are already experience economic pressure. Data from AFG showed that more new loans are being written by non-major banks, who are helping fill the void left by some of the majors and consumers are benefiting from the fact that a mortgage broker can offer products from those lenders without a branch network.

All this explains why we have home prices moving up, whilst lending is slowing – you need to get granular to understand what’s happening, as discussed in an interesting IMF working paper.

Elsewhere, mortgage brokers commissions were in the spotlight following the ASIC review which found that consumers were not getting great outcomes and that the standard model of upfront and trail commissions creates conflicts of interest. The industry is being given a chance to self-regulate.

A combined industry forum, which involves the ABA, MFAA, FBAA and COBA, first met in June and is scheduled to meet later this month, with the broad objective of responding to ASIC’s review. Participants though hold a range of different views.

CHOICE, said it was “simply not good enough” that ASIC “has left it up to the industry to find a solution”. They suggested that the way mortgage brokers are currently paid “means it’s very unlikely that a customer is going to get a loan that’s best for them” and that the industry therefore needed a “major change”.

In a joint submission to the Treasury, consumer advocacy group CHOICE, along with the Financial Rights Legal Centre, Consumer Action Law Centre and Financial Counselling Australia, called for the removal of upfront and trail commissions, the implementation of fixed fees (via lump sum payments or hourly rates), the removal of bonus commissions, bonus payments and soft dollar payments; and a change in law so brokers have to act in the ‘best interest’ of clients; and a requirement that brokers disclose ownership relationships and the lender behind any white-label loan recommended to a consumer.

However, the peak broker bodies – the MFAA and FBAA have called this submission “ignorant” and “misinformed”, which perhaps is unsurprising, as these bodies are strongly aligned with the current mode of operation. They slammed the recommendations as “detrimental” to consumer interests and claimed mortgage rates would rise if such reforms were implemented.

The Australian Bankers Association announced it wants commissions to be decoupled from loan size but is prepared to negotiate with brokers to find a new model. Their Sedgwick review called for commissions to be completely decoupled from loan size by 2020.

So there will be some changes to mortgage broker commissions, but is not yet clear what the shape of those reforms will be. Whilst consumers say they get good service from brokers, the implicit conflicts in the current model cannot be overlooked.

Finally, this week two interesting Fintechs launched, highlighting that innovation is set to disrupt the mortgage market. Tic:Toc has emerged offering ‘instant home loans’ through a digital real-time loan processing system that connects customers directly to the lender, claiming a 22-minute home loan is available, which includes approval and document generation. This is significantly faster than most traditional lenders.

Separately, peer-to-peer lender Zagga, held a launch party in Sydney recently. The firm is looking to differentiate itself from competitor peer-to-peer players by pitching itself as the ‘secured alternative’. All Zagga’s loans are secured against a property and investors are matched with a specific loan, i.e. it is not a ‘pooled’ structure. While an algorithm is used to match investors with borrowers, depending on each investor’s risk tolerance, each lender undergoes a credit assessment by Zagga’s staff.

So signs of digital disruption now hitting the mortgage industry, in this time of uncertainty.

And that’s the Property Imperative week to 15^th July. If you found this useful, do subscribe to get the next edition, or sign up to the Digital Finance Analytics blog to receive all the latest news. Thanks for watching.

Auction Results

The preliminary auction clearance results from Domain show a national clearance rate of 72.6%, compared with last weeks final result of 66.7%. Melbourne is the hottest market, with a 77.3% clearance rate. Sales momentum remains strong, even if volumes are a little lower. No wonder home prices continue to defy gravity.

Brisbane cleared 41% on 94 scheduled auctions, Adelaide 84% on 41 listed and Canberra 63% of 36 scheduled.

Market-driven compaction is no way to build an ecocity

From The Conversation.

As Melbourne hosts the Ecocity World Summit this week, we might ponder the progress of Australia, a “nation of cities”, toward achieving sustainable urbanism.

Australian metropolitan planning has long subscribed to what urban geographer Clive Forster called the “compact city consensus”. This is a commitment to consolidated, well-designed, low-energy cities with high usage of public and active transport. But after decades of halting pursuit, we seem no closer to this ideal.

The 2016 State of the Environment report makes critical findings on metropolitan development. It casts these trends, at least in part, as market-driven compaction rather than planned consolidation. Leanne Hodyl’s much-reported 2014 study showed that:

High-rise apartment towers are being built in central Melbourne at four times the maximum densities allowed in Hong Kong, New York and Tokyo – some of the highest-density cities in the world.

She concludes that Australian regulation of high-rise development is uniquely weak.

Market prevails over planning

The compact city vision that has guided Australian metropolitan strategy for at least three decades was intended to realise sustainability in a form that departed from the extensive, car-dependent monocentrism of the post-war metropolis.

Yet planning has not been the principal directional force for urbanisation during this period. Instead, it has been dominated by a far more powerful political consensus, neoliberalism.

Whatever one thinks of the compact city ideal – and it is contested among urbanists – its realisation required a commitment to planned urbanisation. But that was never likely during an era of relentless hollowing-out of state capacities, including those needed to manage cities.

Instead, other forces have shaped the course of urban change. These include national policies (especially immigration, taxation and financing), technological innovation, cultural shifts, political economy (notably neoliberal governance) and increasingly unrestrained market power. This set of transformational “furies” can be grouped under the rubrics of intensification and pluralisation.

These forces have undeniably produced many welcome and stimulating changes in our cities. However, our current course, if left uncorrected, will potentially drive Australian cities further away from the ideal of sustainable urbanism.

The increases in “bad pluralities” – notably social polarisation and poverty – betray this ideal as much as physical failings do. Rising social ills, especially the ice plague and family violence, are markers of this betrayal.

‘Urban fracking’ undermines the city

Market-driven intensification has in many places permitted a fracturing and ransacking of urban value and amenity, and of human wellbeing, by development capital that has worn the thin robe of legitimacy provided by the compact city ideal.

We might summarise this as “urban fracking”: a new means of blasting through accumulated layers of material and symbolic value to extract profit.

Miles Lewis observed in 1999 that much redevelopment in Melbourne’s middle-ring neighbourhoods was parasitic. That is, it draws on (and thus depletes) existing amenity without adding to it.

More generally, this dispossession of urban value, from public (or communal) to private, takes myriad forms: amenity and infrastructure mining through overdevelopment, transfer of public housing stock to private investors in redevelopment, the continued non-taxation of unearned land value increments, privatisation of assets and services, and fast-tracked and favourable development approvals.

Ill-prepared for climate change

These various plunderings and injuries also potentially reduce the sustainability and resilience of our cities at a time of clear threat, especially the “climate emergency”.

Reducing green space and open space ratios in redevelopment areas raises particular risks for rapidly rising inner-city populations.

Consider that Melbourne City Council has prepared a Heatwave Response Plan, which will evacuate city residents to the Melbourne Cricket Ground, Etihad Stadium and the Convention and Exhibition Centre. The council recognises that 82% of residents now live in buildings “without passive ventilation”. That’s code for the air-conditioned towers that have done little for the cause of sustainability.

New modelling reveals that sea-level rise is likely to flood many inner-city high-rise redevelopment areas in Australian cities. This includes the zones identified for evacuation in Melbourne’s Heatwave Response Plan.

Governance must be restored

As the 2016 Census confirms, our rapidly growing core metro regions are evolving into ever more complex landscapes, which defy simple description. It could be tempting to conclude that the sources of their problems resist identification. But this is not true. At the core of our urban failing is governance in all of its necessary forms – economic, social and spatial.

Our cities appear increasingly unsustainable, chaotic and frankly ungovernable only because we allow this to happen. Long historical stretches of firm urban governance, notably in Brisbane and Melbourne, produced much more balanced and agreeable patterns of urbanisation than we are now experiencing.

The ever-mounting costs and failures of the “long night” of neoliberal governance are resonating ever more strongly within national politics. Economist John Quiggin believes this is feeding a new, if nascent, appetite for public intervention and ownership.

We must hope this desire for restoration of state capacities extends to the cities whose rapidly deteriorating development trajectories threaten national wellbeing.

The first necessity is to reinstate capacities for public economic governance. The need is especially great in the areas of infrastructure and urban services, which powerfully shape the general course of urbanisation.

After decades of relentless privatisation and deregulation, however, there is little to govern and little to govern with.

To improve metropolitan functioning, there will be no escaping the necessity of what the late ANU academic Peter Self described as “rolling back the market”. This will require nationalisation of key assets, especially infrastructure, and stronger regulation of urban amenities, especially energy, transport and hydraulic services.

This is the first, urgent step towards resetting our urban course for sustainability. State governments could do so without delay.

Unfortunately, most cannot yet conceive of a true break from neoliberal urbanism. The New South Wales government recently privatised its land registry. South Australia and Victoria plan to do the same.

If this mindset can be changed, the next imperative is to establish strong planning governance for our metropolitan regions so our freewheeling development furies can be steered towards more sustainable ends. Renewal of governance is the key to surviving let alone thriving in the urban age.

Author: Brendan Gleeson, Director, Melbourne Sustainable Society Institute, University of Melbourne

The cold weather has done nothing to cool Melbourne property prices

From The Real Estate Conversation.

The cold weather hasn’t cooled Melbourne’s property prices: in the three months to 30 June, the city’s median house price increased for the fifth consecutive quarter.

New REIV data shows the metropolitan Melbourne median house price rose 2.9 per cent in the three months to June 30, to $822,000.

The top growth suburbs were spread right across Melbourne, and at both the low and high ends of the market, from Broadmeadows and Roxburgh Park in the north, to Malvern East and Toorak in the south-east.

Croydon in the outer east experienced the city’s largest quarterly increase, up more than 20 per cent to a median of $810,000.

Source: REIV.

REIV acting president Richard Simpson said Melbourne’s property market continues to perform strongly, boosted by a buoyant auction market.

“It has been an exceptional year for the property sector, with numerous auction records falling in the first half of 2017,” he said.

“More than 10,300 homes have gone under the hammer in the June quarter – a record for this time of year.

Simpson attributed the strong price growth to strong population growth, record low interest rates, and strong buyer demand.

“It’s certainly a sellers’ market at present with strong competition for homes across the city, particularly in Melbourne’s more affordable areas,” said Simpson.

Half of the top-growth suburbs are priced below the Melbourne’s median, suggesting buyers continue to seek value further from the city, he said.

Source: REIV.

The data confirms Toorak’s position as Melbourne’s most expensive suburb.

Source: REIV.

Melbourne’s apartment sector performed similarly well in the June quarter, with the metropolitan Melbourne median apartment price increasing 4.3 per cent to $606,500.

“Contrary to popular opinion, Melbourne’s apartment market has been growing steadily for the past year with strong price growth in inner city areas,” said Simpson.

House prices in regional Victoria rose strongly for the second consecutive quarter, up two per cent in June to a record high $385,000.