Channel Nine News Does House Prices and Mortgage Defaults

A segment today from Channel Nine featured the latest data on Sydney residential property, and featured data from the Digital Finance Analytics mortgage default heat mapping, as well as the latest from CoreLogic on Home Prices.

 

Home Prices Gallop Away

The latest data from CoreLogic to December 2016 shows Perth apart, home prices rose significantly.

December 2016 saw capital city dwelling values rise by 1.4%, taking the annual capital gain for 2016 to 10.9% – the highest  growth rate for a calendar year since 2009.  Factoring in gross rental yields and capital gains, housing as an asset class, earned a total annual return of 14.7% based on the combined capital cities index results.

Across Australia’s capital cities, the annual change in dwelling values for 2016 ranged from -4.3% in Perth to 15.5% in Sydney, with Melbourne and Hobart also showing annual capital gains higher than 10%.

Whilst there may be issues with the basis of the index, this rise is so strong that it underscores the need to tighten macro prudential controls. The regulators have simply been too lax.

Capital city clearance rate remain above 70 per cent

CoreLogic confirms the auction clearance stats for the last weekend of the year, with combined capital city clearance rate remaining above 70 per cent, while auction volumes continue their seasonal taper.

Auction activity continued to ease this week after a surge in auctions over the past four weeks. The combined capital city clearance rate fell slightly to 70.5 per cent, down from last week’s 71.6 per cent. The number of properties taken to auction this week also fell across the capital cities, with 2,722 reported auctions, down from 3,432 last week, when the second busiest auction week this year was recorded. However, compared to the corresponding week last year, auction activity is significantly higher, with 1,818 auctions and a lower rate of clearance (59.4 per cent) reported over the same period last year.  Auction numbers will remain relatively sedate over the festive period, with CoreLogic resuming auction reporting in late January.

Auction markets continue their strong run

The latest data from CoreLogic confirms that the auction markets continued their strong run last weekend, with the number of auctions recorded at the second highest level this year and clearance rates remaining above 70 per cent for the 20th successive week.

Auction activity does not appear to be slowing through the festive period, with auction numbers reaching the highest level since March earlier this year.  There were 3,411 auctions held over the past week, returning a preliminary clearance rate of 74.6 per cent, which is up from last week’s 72.3 per cent and substantially higher than the equivalent period last year (58.2 per cent). The combined capitals clearance rate has been tracking above 70 per cent consistently over the past 20 weeks, with the clearance rate higher than 75 per cent over eleven of the past twenty week’s.  The last time the combined capital city clearance rate was tracking over 70 per cent over the given period was in 2009.  Across Australia’s two largest markets in Sydney and Melbourne, clearance rates rose this week, with preliminary results showing 77.4 per cent and 80.2 per cent respectively.

Stock levels remain well below average across the hot housing markets

Nice piece from CoreLogic’s Tim Lawless. Stock levels remain well below average across the hot housing markets, but are close to record levels in Perth and Darwin.

With the spring ‘selling season’ done and dusted and Christmas rapidly approaching, it is worthwhile having a look at how stock levels have tracked over the season and year relative to previous years. One of the key facets of the housing market over the last year has been the shortage of advertised stock that has created urgency amongst buyers. This has likely been one of the primary reasons why clearance rates have been high and the average selling time has been short.

CoreLogic counts listing numbers over a rolling 28 day period, updating the results each week. The listing counts are the summation of collecting listing numbers from online sources as well as print sources. Advertised listings are matched against property records, duplicates are removed, and listings are counted. New listings (ie those listings that we have not seen advertised previously over the past six months) are counted separately, while total listings is the sum of relisted stock (ie those properties that have been advertised at least once previously over the past six months) and new listings.

The graphs below track new and total listings across the combined capital cities. They show the number of property advertisements is highly seasonal and has varied substantially from year to year. Throughout spring 2016, new listing numbers have been tracking well below the highs of 2014 and 2015, however with the summer slowdown now in full swing, the number of new listings being added to the market is tracking almost 5% higher than last year across the capital cities.

The total amount of advertised stock shows a more substantial divergence over the years. Total stock levels have actually been tracking higher than a year ago across the combined capitals region and are currently 1.4% higher than a year ago. This trend seems to fly in the face of the argument that stock levels are in short supply, driving growth in prices. However, when we drill down into individual capital city trends it becomes very clear that the very ‘hot’ markets are where the shortage of stock is most pronounced.

1-capsThe shortage of advertised stock is most pronounced in Sydney where fresh stock being added to the market has been consistently and substantially lower than the past two years. Total advertised stock levels are currently 10.2% lower than a year ago and there is approximately half the number of advertised properties in the market compared with the 2011 peak which was above 40,000.

The listings trend in Brisbane is very different. New listings being added to the market are on par with the highs of 2014 and substantially higher compared with last year and earlier periods in the cycle. Total advertised stock is higher than the past two years which is likely contributing to the softer pace of capital gains across the Brisbane housing market, as well as longer selling times and higher rates of vendor discounting compared with the larger capitals.

The weakness across the Perth housing market can be seen in a range of indicators. Dwelling values have been trending lower, rents are down almost 10% over the past year, properties are taking a long time to sell and vendors are showing large rates of discounting in order to sell their properties. The high number of total listings relative to previous years highlight that Perth is well and truly a buyer’s market. New listings are tracking higher than last year but remain well below the highs achieved when the market was much healthier in between 2012 and 2014. As buyer demand has slowed, total stock levels have trended significantly higher and are currently 14.2% higher than at the same time last year. Such a wide range of stock to choose from and little in the way of urgency amongst buyers is unlikely to create upwards pressure on prices until stock levels reduce substantially.

Capital city clearance rate remains strong

CoreLogic confirms the combined capital city preliminary clearance rate rose this week to 75.0 per cent, up from last week’s final clearance rate of 73.0 per cent. This week’s auction market results indicate that clearance rates are maintaining strength coming into summer, a trend that is very different compared with last year’s performance when auctions clearance rates were tracking in the high 50 per cent to low 60 per cent range.  The number of properties taken to auction this week fell across the capital cities, with 3,173 reported auctions, down from 3,398 last week, which was the second busiest week for auctions this year. In Melbourne and Sydney, the number of auctions held have decreased (1,410 and 1,158) while across the smaller capital cities, auction volumes have increased over the week.  Auction activity is expected to slow over the remaining weeks of December, however the strong trend in clearance rates is showing no signs of easing.

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Home Prices Up Again

The CoreLogic November Hedonic Home Value Index results out today show a rise in dwelling values across every capital city excluding Melbourne over the month. Capital city dwelling values rose by 0.2% in November as the housing growth cycle clicked over 4.5 years of growth.

Darwin was the best performing capital city: +3.7%, whilst the weakest was Perth, down -1.1%.

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The soft performance across the combined capital city reading was attributable to a 1.5% fall in the Melbourne index, while all other capital cities recorded a positive month-on-month result.

The combined regional areas of Australia showed a weaker result with house values falling by 0.2% over the month.

On an annual basis, every capital city except for Perth is now showing a positive annual trend in dwelling value growth. The highest annual growth rate is evident in Sydney and Melbourne where dwelling values are now 13.1% and 11.3% higher respectively, reflecting a steeper upwards trajectory in growth over the second half of the year. The Hobart and Canberra markets have also seen some acceleration in growth rate trends with dwelling values up 8.5%, and 8.4% respectively over the past twelve months.

Currently the national growth cycle has been in play for 4.5 years, with capital city dwelling values rising by 42.2% over the cycle to date.

Disaggregating this growth figure highlights the diversity in market conditions with Sydney and Melbourne at one end of the spectrum experiencing an increase in dwelling values over this period of 67.3% and 46.3% respectively, while at the other end of the spectrum, Perth and Darwin values have broadly declined since 2014. Perth values are 6.9% higher since the cycle commenced in June 2012, while Darwin values are 13.8% higher over this period.

It appears that higher unit supply is progressively weighing down the capital gains across Melbourne’s unit sector, with annual capital gains tracking at 3.9% for Melbourne units compared with a 12.2% annual gain in Melbourne house values. A similar trend can be seen in Brisbane, where the supply of units across key inner city regions is also high. Brisbane house values were up 4.3% over the past twelve months compared with a 0.9% fall in unit values.

Rental yields reached a new record low in November across the combined capitals index due to dwelling values continuing to rise at a faster pace than weekly rental rates.The average gross rental yield across combined capital city dwellings is now recorded at 3.2%,down from 3.5% a year ago and 4.1% five years ago.

Sydney and Melbourne share the lowest yield profile for detached housing, with an average of 2.8% in both cities, while the gross yield on Sydney units has fallen well below Melbourne’s at 3.8%.

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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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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