Category: Property Market

Auction Markets Results – Second Busiest Week So Far This Year

CoreLogic says last weekend’s auction markets continue their strong run of high clearance rates after the second busiest week for auctions so far this year.

Auction volumes increased with 3,367 properties taken to auction this week.  This was the second highest number of reported auctions this year for the combined capital cities, up from 2,987 over the previous week. Despite the surge in auction numbers, market volume is still significantly lower than the corresponding week last year (3,729).  The preliminary auction clearance rate, despite the increase in volume, remains strong (76.0 per cent), up from last week’s final of 74.4 per cent and also higher than equivalent week last year (60.1 per cent). Every capital city except Perth and Canberra are showing auction numbers to be lower than a year ago, while every capital has recorded a higher clearance rate compared with last year.

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Foreigners can buy failed off-the-plan

From AAP.

The government is bringing in changes to foreign investment rules to protect developers who are left in the lurch when a settlement falls through.

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The changes will allow foreign buyers to purchase an off-the-plan dwelling when another foreign buyer has failed to reach settlement, meaning developers won’t be left out of pocket.

It comes amid reports of a growing number of Chinese buyers failing to settle in off-the-plan property sales.

Overseas investors are allowed to purchase new Australian dwellings in a bid to encourage developers to build more houses and apartments.

Auction Results Still On The Up

The latest provisional auction results from Domain for today show property is still being purchased at an amazing rate. Nationally, 76.4% cleared on a listing of 2,637, compared with 73.2% last week on 2,152, and 58.3% on 3,016 a year ago.  At these rates, home prices will continue to climb.

Much of the action was in Sydney, with 78.8% of 961 cleared, and Melbourne where 77.5% of 1,366 cleared. Both higher than last week.

domain-26-nov-2016-1Brisbane had 119 listed and 56% cleared, Adelaide had 104 listed and 58% cleared, whilst Canberra has 87 listed and 68% cleared.

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Broker channel sees significant rise in fraud

From Australian Broker.

The significant growth in fraud found in the broker channel is an ongoing concern, Veda’s 2016 Cybercrime and Fraud Report has revealed.

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The report showed broker channel fraud makes up 15% of all credit application fraud and has risen by 25% in the last half year period (H2 FY2016).

Speaking to Australian Broker, Veda general manager, fraud and identity solutions Imelda Newton said it is in brokers’ best interest to take measures to detect fraud.

“A lot of the activity we see through that broker channel is where people falsify their personal details to be able to secure the finance so things like altering payslips, bank statements, tax assessments,” said Newton.

The research found the falsifying of personal details has risen 27% per cent year-on-year and more than a quarter (27%) of Australians have been a victim of identity theft, which has risen 80% in the 12 months to June 2016. 56.94% of all credit application fraud  comes from an online channel.

“Even though they might not suffer the ultimate financial loss – the lender will – the thing for the broker is their reputation,” Newton told Australian Broker.

“Being associated with some fraud that’s happened is not a good thing for that sector and for those individuals whose reputation can be everything in terms of the credibility of their business.”

The data also found fraud occurrence has increased among bank branches, rising 13% on 2016, with branch channel fraud making up 12.78% of all credit application fraud.

“Everyone is getting better at detecting the fraud – there’s a lot more quick investigation and detection going on, so that’s how we’re finding out more about these cases that are happening in the branches.”

She said the rise in fraud in the branch channel may stem from banks and other lenders using manual methods of identity verification.

“One of the downsides to these manual processes is the subjectivity of manual identity verifications. By using electronic verification the subjectivity is removed and a common standard set of rules can be applied.”

Newton said from the latest insights, growth in fraud shows no signs of slowing down this year.

“This trend is likely to continue into the future, as individuals and businesses become more reliant on the internet for their banking, shopping and other financial interactions.”

Greater Sydney Commission releases draft district plans

From The Real Estate Conversation.

The Greater Sydney Commission, which is headed up by Lucy Turnbull, has released its draft district plans outlining targets and priorities across Sydney’s six districts for the next 20 years.

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The Greater Sydney Commission has released its draft district plan with a 20-year vision for each of Sydney’s six districts.

The plan sets out how the priorities outlined in the ‘A Plan for Growing Sydney’ report can be achieved in practical terms, and includes a 5-10 per cent affordable rental housing target for low and very low income households in all new residential developments across Sydney.

The plan also outlines a vision for a ‘green grid’, a network of parks, bushland, waterways, green street canopies, and walking and cycling paths across the city.

The Commission’s plan is to transform Sydney’s six districts into three cities: the Eastern City, the Central City and the Western City, with each city liveable and productive in its own right.

The Commission has also launched a Greater Sydney Digital Dashboard, an online tool that will allow better monitoring of the growth and changing face of Sydney with a view to making better planning decisions.

Visitors are able to enter their suburb name into the website, and view their relevant district plan and related documents.

With Sydney forecast to have a population of 6 million by 2036, better urban planning is essential.

“Greater Sydney is a mosaic of great places, and we’ve collaborated with the community, peak interest groups, businesses, and all levels of government to build concrete plans to make those places greater,” said Greater Sydney Commission’s Chief Commissioner, Lucy Turnbull.

Greater Sydney Commission CEO Sarah Hill said, “By early 2018, for the first time in many decades, our aim is that final land use, transport and infrastructure plans will be aligned to provide a strong platform for Greater Sydney.”

The plans will be on display until the end of March 2017. The Commission will be leading a public discussion about the plans until then, and encourages submissions.

To view the documents click here.

To visit the Greater Sydney website visit here.

To make a submission click here.

Auction Momentum Confirmed Again

CoreLogic says there were 2,950 auctions held across the combined capital cities, with week-on-week results showing an increase over the 2,897 reported capital city auctions last week. With the number of auctions tracking at the highest level since March, there has been no indication that clearance rates are starting to ease as we approach summer. However, when compared to last year, auction volumes continue to track lower with vendors still seemingly reluctant to place their properties on the market despite such strong selling conditions. There were 3,166 auctions reported over the corresponding week last year, with a clearance rate of 59.5 per cent, which is a substantially lower rate of clearance when compared to the higher rate that has remained consistent since July. This week’s preliminary clearance rate remains over 70.0 per cent (75.6 per cent), decreasing slightly over last week’s final clearance rate of 75.8 per cent.

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Auctions Remain Hot

The latest results from Domain shows that provisional auction clearance rates remain strong. Sydney achieved 79.5%, Melbourne 78.7% and Nationally 76.8%.  These are stronger than last week, though volumes are down a bit. This time last year, clearances nationally were 58.6%
domain-19-nov-2016-1Brisbane achieved 46% clearance on 152 listed, Adelaide 69% on 83 listed and Canberra 75% on 74 listed.

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If the ‘bond market rout’ continues it could impact home prices

From The Conversation.

For the past three decades the yields on long-term bonds have been on a downward trend. This has dramatically reversed since the election of Donald Trump, with more than a trillion dollars wiped off the global bond market in the past week and a half.

But it’s not just investors that are impacted by this spectacular reversal. The bond market is a backbone of the global financial system, meaning the sell off has implications far and wide, from economic growth through to real estate prices.

What’s happening in bond markets

Bonds are a type of long-term debt – companies and governments sell bonds to investors and these will in turn be bought and sold on the bond markets.

The thing to look at with bonds is the market price, which is reflected in the yield quoted or price paid when a bond is bought and sold. Investors in bonds receive their returns in regular interest payments and the return of principal when the bond matures.

As the price of the bond rises, the yield will drop. With the price of bonds steadily rising during the 30 year bull market, yields have fallen away significantly, bringing down the interest rates around the world.

US 10 Yr Treasury Yield.

Why we pay attention to the bond market

The price of bonds filters through into the rest of the economy. This is because government bonds are considered relatively risk free, and so act as a benchmark for pricing (relatively more risky) securities in all other markets.

A company’s shares, for example, are expected to yield the risk-free rate (what a government bond would yield) plus an additional amount to compensate investors for their riskiness – called the “equity risk premium”. Investment in corporate bonds can be expected to yield the risk-free rate plus a premium for taking on the added default risk.

The US bond market is especially important, as it is the largest and its prices act as a benchmark for interest rates globally. Rising bond yields in the US signal a number of things – higher expected inflation from the touted tax cuts and higher spending, and the need to borrow to fund this expansion. All of this puts further downward pressure on bond prices and upward pressure on interest rates, increasing yields.

Overall, bond prices serve as a “barometer” of what the market is “thinking”. Especially what it thinks will happen in the future, as the relation between long term interest rates and short term interest rates has a mechanical effect on future interest rates.

What this could mean

The sudden increase in bond yields, most notably the 10 Year US Government bond yields, has broad implications for the economy.

Mortgage rates are tied to the 10 year bond yield, for example, meaning borrowers will need to pay more for housing loans. This won’t happen overnight and we will have to wait to see the long-term effect on real estate prices.

But taking in past history, here are a range of possibilities from the end of the bull market.

First, when long-term interest rates are higher than short-term interest rates, the market expects interest rates in the future to be higher. This suggests that this market sell off isn’t an aberration, we can expect higher yields and lower bond prices in the future, and this trend will continue.

Second, long-term bond yields generally reflect an economy’s long-term real growth rate plus a premium for inflation. Inflation measures around the globe have been quite low and central banks have struggled to reach their inflation targets. Rising bond yields could mean the growth starts to tick up.

Third, there will be more uncertainty in global markets until the implications of a Trump presidency are known. Investors will expect a greater return to investment in US government bonds because of this heightened uncertainty. So yields on long-term US Treasuries are likely to stay up and even increase further in the foreseeable future. But even so interest rates are still low by historical standards.

Fourth, new borrowing for housing will be more costly. The risk of rising interest rates on existing mortgages has been mostly shifted elsewhere in the US economy. Let’s hope that the institutions or individuals holding that risk fare better than the institutions which collapsed during the savings and loans crisis in the US in the late 1980s.

Fifth, this is a permanent change in the nature of global interest rates. Rising bond yields could push up interest rates. Australia’s Reserve Bank Governor Phillip Lowe has signalled no further interest rate cuts unless inflation drops well below its current 1.5% level.

Author: Christine Brown, Professor and Head of the Department of Banking and Finance, Monash University

Trump hasn’t derailed Chinese homebuyers’ obsession

From South China Morning Post.

Donald Trump’s presidency won’t hurt the rising tide of Chinese investment into the United States – in fact, the level of cash may actually increase, according to Knight Frank.
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Trump’s shock election last week rattled markets around the world and analysts continue to disagree on what the Republican candidate’s victory means or how it will affect the US property market, the No 1 destination for Chinese capital. “The short answer is I am not worried about Trump’s impact on Chinese flows into America,” Knight Frank’s global capital markets head Peter MacColl told the Post during a visit to Hong Kong last week.

“Whilst he’s come out with a lot of rhetoric, what might be considered to be barmy ideas that might have an impact on the geopolitical scene globally, the American system of checks and balances through Congress, through all the advisory parties that any change has to go through, means any really radical things won’t happen overnight,” he said.

“I don’t think there will be a big downturn in the property market because of Trump, and if anything, there could be a bit of an upturn because of his policies towards business generation and self responsibility.”

In the short term, MacColl expects there to be a bit of “waiting in the wings and seeing what’s going to happen”.

“A bit of caution, a bit of a slowdown just in terms of making decisions – which is understandable – until maybe the new year when things start to pan out a bit.”

But MacColl said he didn’t see a lot of risk to mainland Chinese investors in the US from Trump’s presidency and expected the US to remain the favoured destination for Chinese capital.
There wasn’t just a pull factor, there was also a push factor, with Chinese investors keen to take their money out of the country as the yuan continued to be devalued, he said.

The total volume of Chinese outbound real estate investment between January and October is slightly down on the same period last year, according to Knight Frank research.

But not everyone was so positive. Jefferies equity analyst Mike Prew said the combination of a possible post-election Federal Reserve rate rise in December and rising bond yields compared with property yields could have an effect on the returns in the US’s $27 trillion residential market.

“Things could get messy for real estate,” he said.
He tipped Canadian residential markets of Toronto, Montreal and Vancouver to be the big property winners following the US election.

Simon Smith, head of research and consultancy for Savills, agreed that investors would stay cautious for the rest of this year and capital volumes might be more muted.

“The uncertainty continues to drive people to the United Kingdom,” he said, noting that Brexit had also worked out positively for the British property market thanks to the falling pound – something which hadn’t happened to the US dollar. “It looks like the UK remains a net beneficiary of what’s been happening.”

Trump’s indication that he would invest in infrastructure was judged as positive by investors, but question marks remain over the wider policy direction of his presidency.

“I don’t think the clouds have parted quite yet on Trump and what election promises he may or may not choose to enact. We’re still asking ourselves: is this soft Trump or hard Trump?”
New York real estate company CityRealty’s director of research Gabby Warshawer said it was difficult to predict the long-term implications of Trump’s presidency on New York property,
which was the top destination for Chinese capital investment in the first six months of this year.

“If the stock market were to be extremely unsettled for a long period of time, that would have a clear effect on real estate — for example, following the financial crisis in late 2008, it took more than three years for New York real estate prices and sales volume to bounce back,” she said in an emailed response to questions from the Post.

“That being said, analysts have not been predicting a protracted doomsday scenario for the markets following this election.”
She said it was unlikely there would be significant change in Chinese investment following the election as the buying spree had a lot to do with property market conditions in China.

“If there is significant turmoil and the United States is no longer considered as safe for real estate investments as it has been in recent years, then that would impact all international buyers,” Warshawer said.“The New York City real estate market is stable and exceptional enough that it is still generally seen as a safe long and medium-term investment by most buyers, regardless of campaign rhetoric.”