Australian Property Information (1 - 597 of about 597)

Lending eases in May, a sign of things to come?

The Australian Bureau of Statistics ABS released housing finance data for May 2015 last Friday. The data showed a broad-based fall in commitments over the month with both investment and owner occupier lending falling. In May 2015 there was $31.1 billion in housing finance commitments, down -4.4% from $32.6 billion in April. The $31.1 billion worth of commitments was comprised of $18.1 billion in lending to owner occupiers and $13.0 billion to investors. Over the month, the value of owner occupier housing finance commitments fell by -5.3% and investor commitments were -3.2% lower. Year-on-year the value of owner occupier commitments has increased by 8.1% compared to a 19.4% rise in investment mortgage lending. Based on this data the proportion of total lending to investors was at a record high 41.9%. If you exclude refinances and look at just new lending, investors accounted for a record high 52.5% of all lending over the month. The $18.1 billion in commitments to owner occupiers in May consisted of $1.7 billion for construction of dwellings, $1.0 billion for purchase of new dwellings, $6.3 billion in refinances and $9.1 billion for purchase of established dwellings. Over the month, lending for new construction fell -5.4%, lending for purchase of new was -0.6% lower, refinance commitments were -3.7% lower and commitments for purchase of established were -6.8% lower, its largest monthly fall since February 2012. Year-on-year commitments for new construction are -4.3% lower, for purchase of new dwellings they are 9.0% higher, refinances are 30.1% higher and purchase of established dwellings is -1.2% lower. The data highlights that the recent strength in owner occupier housing finance commitments is largely due to refinances. In fact if you remove refinances lending to owner occupiers is -0.9% lower over the year. Investors committed to $13.0 billion worth of housing finance in May 2015 which consisted of $0.9 billion for the construction of new housing and $12.2 billion to established housing. Over the month, investor commitments for new construction rose 1.6% compared to a -3.5% fall in commitments for established housing. Year-on-year, commitments for new construction have increased by 64.1% compared to a 17.1% rise in commitments for established stock. The data shows that domestic investors are largely targeting established housing stock as opposed to new stock. Looking specifically at new mortgage lending excluding refinances $3.6 billion of commitments in May 2015 were for new product as opposed to $21.2 billion for established housing stock. Over the month, lending for new fell by -2.4% compared to a larger -5.0% fall in lending for existing stock. Year-on-year lending for new stock is 10.8% higher compared to an 8.5% rise for existing stock. Although lending to new stock is rising quicker than lending for established, with a record high level of new construction the overall level of purchasing of new, at least domestically is quite low. It makes you wonder just who is buying all these new homes being built, there’s really only two options: Australians are purchasing in cash or people are buying with cash sourced from overseas which is not measured in the housing finance data. With the changes to mortgage lending policies from Australian banks starting to become public in May it will be very interesting to track the housing finance data over the coming months. Since May we’ve seen further changes to lending policies announced and it remains to be seen if it is enough to cool the Sydney and to a lesser degree Melbourne housing markets. Of course there remains the great unknown of just how many buyers are coming from offshore and how much that is impacting home values. If the slowdown in lending experienced in May continues regulators will be happy to see that the changes Australian banks have made to their lending policies is having an impact on demand for mortgages. The next test will be to see whether these changes are enough to slow the rate of home value growth, at the same time they will be hoping it does not deter developers from constructing all those new homes they have in their pipeline.

Auction markets continue to show a slight softening trend with a preliminary auction clearance rate of 76.2 per cent, the third week in a row in which the capital city clearance rate has fallen

The preliminary clearance rate across the combined capital cities was recorded at 76.2 per cent this week, compared to 76.8 per cent last week, marking the third week in a row where the auction clearance rate has trended lower. So far, 1,370 auctions have been reported this week, with a total of 1,669 auctions held across the capital cities. In comparison, last week there were 1,674 auctions, while at the same time last year 1,421 residential properties were taken to auction with a success rate of 67.2 per cent. The preliminary auction clearance rate for Melbourne was 78.2 per cent this week, with 651 auctions held across the city. Over the previous week, 78.6 per cent of the 640 Melbourne auctions sold, while at the same time last year, Melbourne’s clearance rate was significantly lower, at 66.4 per cent across 567 auctions. Across the individual sub-regions of Melbourne, the strongest performer this week was the Outer East, the only region where the preliminary clearance rate surpassed the 90 per cent mark, with 95.7 per cent of the 46 reported results selling. For Sydney, usually Australia’s second largest auction market, the number of homes taken to auction this week 765 was higher than in Melbourne. Sydney’s preliminary clearance rate was 81.0 per cent, down from 82.0 per cent the previous week, but higher than at the same time last year 75.6 per cent . Although Sydney currently remains the strongest capital city auction market, over recent weeks the clearance rate across the city hasn’t been as strong as it was in April and May. Across Sydney’s Outer West and Blue Mountains region, there were six auction results reported this week with all properties selling. Following on from this, Sydney’s strongest performing sub-region this week was the Inner West, with a preliminary clearance rate of 90.1 per cent. 53.6 per cent of Brisbane’s reported auctions were sold this week, compared to 63.5 per cent last week and 43.3 per cent at the same time last year. There were 121 auctions held across Brisbane this week, compared to 115 last week and 118 over the same week last year. Meanwhile, across the 29 reported Gold Coast results, the preliminary clearance rate was 58.6 per cent this week. Adelaide’s preliminary clearance rate was 66.0 per cent this week, across a total of 50 reported results. This week’s clearance rate was lower than last week 69.3 per cent , but higher than at the same time last year 60.9 per cent . Across Perth, 26 homes were taken to auction this week. So far, 13 results have been reported and the preliminary clearance rate for the city is 23.1 per cent, slightly higher than last week’s clearance rate of 22.2 per cent, but significantly lower when compared to last year 44.4 per cent . This week, 30 Canberra auctions were held with a preliminary clearance rate of 69.2 per cent. Across Tasmania, 4 results were reported to CoreLogic RP Data, with 3 of these properties sold.

Commercial Auction Results – Week ending 3 July 2015

Last week, 22 commercial auctions were reported with a preliminary clearance rate of 54.6 per cent, having fallen from a final auction clearance rate of 71.4 per cent the previous week across 126 reported results. One year ago, conditions across Australia’s commercial auction market were comparable, with 37 auctions and a clearance rate of 56.8 per cent. Over the most recent four week period, there have been 236 commercial results reported with 150 sales. The total transaction value of the 102 sales reported with a price comes to just over $209.4 million. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update â

The latest research from Cityscope has found that Wellington commercial property sales have increased in the last three months, primarily due to the sale of the building at 171 Featherstone Street, Wellington Central. Sales recorded in the three months to July 2015 totalled $240.4 million, a substantial increase from the $129.2 million recorded in the three months to April 2015, and $138.1 million recorded to January 2015. This data brings the twelve month total to $518.9 million from 61 sales, an increase from the previous twelve month total of $231.3 million from 59 sales. The table below shows sales recorded for the past eight updates of Wellington Cityscope. Recent standout sales in Wellington include: 171 Featherstone Street, Wellington Central, part of a 24-storey building developed in conjunction with the adjoining Intercontinental Hotel, formerly known as the HP Tower, with three levels of basement carparking and a net lettable area of 11,293 sqm was bought for $76 million. The AXA Centre, at 80 The Terrace, a 19-storey commercial building including four levels of parking, net lettable area of 10,554 sqm, bought for $36.1 million. Kathryn Jermyn Hall, at 175 The Terrace, Wellington Central, formerly the Night and Day House, a sixteen level building part of the Victoria University of Wellington bought for $33.3 million. Museum Hotel de Wheels, at 90 Cable Street, Te Aro, a five-storey hotel with a site area of 2,015 sqm. The 3,500 ton building is known for being the largest building at the time to be relocated. It was bought for $28.5 million. Properties for sale in Wellington in July 2015 include: The Victory Buildings, a two-storey retail building at 66-70 Courtenay Place, Te Aro and an adjacent two-storey retail building at 74-78 Courtenay Place, Te Aro are for sale by deadline private treaty closing 9 July 2015; agent Colliers International. 25-29 Taranaki Street, a two-storey building at with the Zibibbo Restaurant and Bar on the ground floor and a site area of 278 sqm is for sale through Paul Hastings & Co. Wellington leasing opportunities in July 2015 include: The Clemenger BBDO building, at 7-8 Kent Terrace a four-storey art deco building has office space of 625 sqm for lease through Colliers International and CBRE. 173-175 Victoria Street, a 12-storey retail and commercial building with 4,751 sqm has office space of 1,500 sqm for lease through CBRE. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update â

The latest research from Eastern Sydney Cityscope shows property sales have decreased in the past three months. Sales recorded in the quarter ending July 2015 totalled $86.3 million, a decrease from the $96.3 million recorded in the three months to April 2015, and a decrease from the $267.8 million recorded to January 2015. This data brings the 12 month total to $494.6 million a decrease from the $608.4 million recorded the same time last year. The table below shows sales recorded for the past eight updates of Eastern Sydney Cityscope. Recent standout sales in Eastern Sydney include: Kennedy House at 9-11 Knox Street Double Bay, a 2-storey, 778 sqm, building, was bought for $13.1 million in a sale handled by Burgess Rawson and Metro Commercial Double; 65-67 Foveaux Street Surry Hills; formerly known as the Schweppes Building, a 4-storey retail and commercial building with parking for 6 cars, was bought for $10.75 million in a sale handled by Knight Frank Sydney and Gunning Commercial Surry Hills; The Light Brigade Hotel at 2-2A Oxford Street, a 3-storey building, was bought for $10.37 million in a sale handled by Ray White Hotels. Properties for sale in Eastern Sydney in July 2015 include: 63-73 Ann Street Surry Hills, a 4-level, 2,800 sqm, commercial building; originally built as a warehouse and factory, is for sale through SKW Property. The building last traded at $12,000,000 in December 2014 in a related-party transaction; 292-302 Oxford Street, Bondi Junction, a single-storey and 2-storey building to Oxford Street, and a 4-storey building to Hegarty Lane, is for sale; for the first time in 128 years, through Gunning Commercial Surry Hills. The building stands on an 828 sqm site; 185 Oxford Street Darlinghurst, a 3-storey, 283 sqm Victorian Free Classical style building, is for sale through Khoury & Partners Parramatta. The building last traded at $3 million in September 2002. Significant leasing opportunities in Eastern Sydney in July 2015 include: 372-394 Elizabeth Street Surry Hills, a 7-storey, 4,500 sqm, commercial building with basement parking; has office space of 4,500 sqm through Karbon Property; 100 William Street Woolloomooloo, formerly known as Westfield Towers; a 24-storey, 29,850 sqm, office building with basement parking; has office space of 107 to 3,785 sqm through Colliers International; Terrace Tower, at 80 William Street Woolloomooloo, a 20-storey office building with parking for 108 cars; has office space of 205 to 1,209 sqm through Steven Krulis Real Estate. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Record yield reported for two Parramatta towers

Eureka Funds Management has settled on its $170.1 million December 2014 purchase of two Parramatta office towers. The towers at 4 George Street and 160 Marsden Street, in the Parramatta Justice Precinct, have been sold by the NSW Government in a sale arranged by James Parry and Wally Scales of Knight Frank and Scot Gray-Spencer and Josh Cullen of CBRE. The buildings were sold as part of a government initiative to off load properties not essential to service delivery and re-invest funds in the community, including infrastructure and the stimulation of job growth. The programme has netted the government over $700 million in the past two years. The purchaser, Eureka Funds Management, is a private company owned by its principals and is a vehicle for institutional investors. The company has in excess of $4.2 billion of assets under management, including hotels, office, retail, industrial, car park and residential development. The purchase consists of two commercial office buildings whose tenants include the Department of Public Prosecutions and various Department of Justice agencies. The tower at 160 Marsden Street alone houses 1,000 staff. The sale includes a 15 year leaseback to the government and was sold on a reported record yield of 6.27% for Parramatta commercial property. Meredith Baume Commercial Research

Low auction volumes for the second week in a row

CoreLogic RP Data National Auction Preview, week ending 12 July 2015 The number of auctions scheduled across Australia’s capital cities is relatively low this week, again driven by the school holidays. Across the combined capital cities, CoreLogic RP Data is currently tracking 1,705 auctions this week, slightly higher than the 1,674 last week, but far fewer than the preceding three weeks. Last week, the final auction clearance rate across the combined capitals was 76.8 per cent, remaining steady when compared to the previous week 76.9 per cent . So far this year, the auction clearance rate has been much higher than at the same time last year, with last week being no exception. Currently, CoreLogic RP Data is tracking 660 Melbourne auctions, only slightly higher than last week, when there were 640 auctions across the city and higher than at the same time last year 567 . Last week, 78.6 per cent of the reported auctions across Melbourne were successful; this was the fourth consecutive week in a row where Melbourne’s clearance rate was below the 80 per cent mark. There are 796 Sydney auctions planned this week, up from 734 last week and much higher than the 580 at the same time last year. For the second week in a row, Sydney’s auction clearance rate was recorded at 82.0 per cent last week. Across Brisbane, 120 auctions are scheduled this week, after there were 115 Brisbane auctions last week and 118 at the same time last year. Last week, Brisbane’s clearance rate was 63.5 per cent, the strongest result for the city since February, and the second highest clearance rate for 2015. Much like Sydney and Melbourne, Adelaide’s clearance rate was steady last week, at 69.3 per cent, down only slightly from 69.9 per cent the previous week. There are 66 Adelaide auctions scheduled for the coming week, lower than last week and last year both 85 . Canberra has 31 auctions set to take place this week, down from 58 last week and 41 last year. Across Perth 22 homes will be taken to auction over the week, compared to 35 last week and 24 last year. This week, the highest number of auctions across any one individual suburb will be in the Victorian suburb of Reservoir 15 , followed closely by New South Wales’ Blacktown 14 and Queensland’s Surfers Paradise 14 .

Australian property, expensive for us, not so for foreigners

With plenty of talk about a housing bubble and home values climbing much higher in Sydney and Melbourne, housing is looking expensive to many Australians. Low interest rates and the strong gains in certain areas are making residential housing investment quite attractive for some which is one of the drivers resulting in increasing home values. While housing may be looking expensive to locals, the declining Australian dollar means that it may be looking more attractive to foreign buyers. Since combined capital city home values reached their most recent low point in May 2012 they have risen by 26.8%. At the same time the Australian dollar has fallen by -13.3% over that period in trade-weighted index terms. While the depreciation in the dollar has no impact on local buyers, for off-shore buyers the fall in the Australian dollar is likely to make Australian housing even more attractive. Furthermore, the Reserve Bank continues to state that there is a need for an even lower dollar which would exacerbate the relative affordability even further. Foreign buyers are meant to be purchasing brand new homes in most instances. There have been numerous recent reports of foreign buyers not adhering to these rules. Furthermore a recent parliamentary inquiry found that the Foreign Investment Review Board was significantly underfunded and as a result has not been able to effectively monitor and enforce foreign investment rules. Combined capital city home values have increased by 26.8% between May 2012 and June 2015. Keep in mind that these figures are heavily influenced by the Sydney and Melbourne housing markets with these the only two capital cities recording value growth in excess of this figure over the period. When you look at that 26.8% increase across other currencies you can see the impact of the falling exchange rate. Of those currencies highlighted only the Japanese Yen and Indonesian Rupiah have seen values rise by a greater amount. Across most other currencies the relative value rises have been significantly lower than they have been in Australian dollar terms. Once you look at capital cities that have seen relatively lower recent capital growth, there has been a significant improvement in Australian housing affordability for foreign buyers. Not to mention the fact that in many of these foreign countries mortgage holders are borrowing at significantly lower interest rates than those available to Australians. With the RBA stating that the Australian dollar remains overvalued, any further falls in the Aussie dollar are likely to result in even more attractive buying conditions for foreign buyers. Given this it is imperative that foreign investment rules are tightened and FIRB improve their surveillance work. A central register of foreign buyers would also be seemingly important. The Victorian Government has recently announced that it will increase fees and charges to foreign buyers of property in that state. Despite howls of protest it would seem that this is likely to have little material impact on foreign demand for housing. Furthermore, a national approach similar to this would be a good step towards appropriately funding FIRB to undertake their review and surveillance of foreign housing investment. Particularly given that should the dollar fall further demand from off-shore buyers is likely to increase. Earlier this week Federal Treasury released the Exposure Drafts and Regulatory Impact Statement of legislation designed to tighten foreign investment rules, including those relating to residential real estate. The document can be read here and submissions can be made up until Friday 17 July.

Auction markets slow down on the volume front, while the combined capital city clearance rate of 78.1 per cent is the strongest result since the first week in June.

This week, the preliminary clearance rate across the combined capital cities was recorded at 78.1 per cent, the strongest result in 4 weeks. There were 1,273 reported auctions this week, with total auction volumes at 1,626. Due to the school holidays, this week the number of homes taken to auction was substantially lower than last week 2,249 , but remained higher than at the same time last year 1,442 when the clearance rate was recorded at 68.9 per cent. 76.7 per cent of Melbourne’s reported auctions sold this week, compared to a clearance rate of 78.5 per cent last week and 71.4 per cent last year. This week, 617 Melbourne auctions were held, down from 1,007 last week, but higher than the 549 held at the same time last year. Across Melbourne’s individual sub-regions the performance was varied this week. The stand out performer was the Outer East region, where 93.7 per cent of homes were sold, followed by the Inner East, where the clearance rate was 85.7 per cent this week. The preliminary auction clearance rate for Sydney was 84.5 per cent this week with 711 auctions held. Last week, 896 residential properties were taken to auction across Sydney with a success rate of 82 per cent. Auction conditions across Sydney continue to outperform when compared to the same time last year. One year ago, 72.4 per cent of the 597 auctions across the city cleared. Sydney’s strongest performing sub-region this week was the Sutherland region, where 92.8 per cent of reported auctions were successful, followed by the Inner South West 92.1 per cent , and the Baulkham Hills and Hawkesbury region 91.6 per cent . For Brisbane the number of homes taken to auction this week was 113, down from 140 last week and also lower than one year ago 126 . Based on the preliminary results, 68.9 per cent of Brisbane homes taken to auction sold this week, compared to 46.2 per cent the previous week and 59.5 per cent last year. There have been 30 Gold Coast auction results reported this week, with a preliminary clearance rate of 50.0 per cent. Across Adelaide 86 homes were taken to auction this week with a clearance rate of 75.4 per cent. Last week, 69.9 per cent of the 84 Adelaide auctions were sold, while one year ago the clearance rate was 64.6 per cent. Perth’s preliminary clearance rate this week is 30.0 per cent, across 20 reported results. In comparison, over the previous week, Perth’s clearance rate was 68.0 per cent, the strongest result for the city so far this year, while at the same time last year, 50.0 per cent of Perth auctions were successfully sold. There were 57 Canberra auctions this week, with a preliminary clearance rate of 75.0 per cent. Across Tasmania, only 1 result has been reported so far this week with an unsuccessful result.

School holidays drive auction volumes lower this week

CoreLogic RP Data National Auction Preview, week ending 5 July 2015 Given that winter is in full swing and the mid-year school holidays have begun, auction volumes are lower this week, with CoreLogic RP Data expecting 1,689 capital city auctions, down substantially from 2,249 last week, when the final auction clearance rate was recorded at 76.9 per cent. The drop in auction volumes this year is not a new phenomenon and doesn’t appear to be as pronounced as previous years. Over the same period last year, the number of residential auctions fell by -28 per cent over the week, while in 2013, auction volumes were down -35 per cent week-on-week. Australia’s auction market has maintained record-high strength over the past few months and given this, it will be interesting to see if the limited supply drives the clearance rate up further this week. It is expected that 668 Melbourne auctions will take place this week, compared to 1,007 last week and just 549 at the same time last year. Melbourne’s final auction clearance rate last week was 78.5 per cent, the third week in a row where Melbourne’s clearance rate has been below the 80 per cent mark. The fall in Sydney auction volumes is less noticeable, with 724 auctions this week, compared to 896 last week. Auction volumes across Sydney are still much higher this year than they were last year 597 . Sydney’s auction clearance rate fell last week, to 82.0 per cent, from 82.4 per cent the previous week and much lower than the recent high of 88.7 per cent at the start of June. There are 105 Brisbane homes being taken to auction this week, down from 140 last week and also lower than at the same time last year 126 . Brisbane’s auction clearance rate was recorded at 46.2 per cent last week, a relatively low reading for the city. Across Adelaide, 91 auctions are expected this week, interestingly increasing compared to last week 84 and last year 83 . Adelaide’s clearance rate was recorded at 69.9 per cent last week. In Canberra, 56 auctions are currently being monitored by CoreLogic RP Data this week, compared to 72 last week and just 43 at the same time last year. Last week Canberra recorded its strongest clearance rate 72.9 per cent in eight weeks. Last week, Perth recorded its strongest clearance rate on record for 2015 at 68.0 per cent across 25 reported results. Over the coming week 38 Perth auctions are scheduled, similar to the 34 at the same time last year. This week, the highest number of auctions across any one individual suburb will be 12 in the New South Wales suburb of Epping and 12 in St Kilda Vic .

Commercial Market Update – Melbourne Cityscope

The latest research from Melbourne Cityscope shows that commercial property sales have increased in the past three months. Sales recorded in the quarter ending June 2015 totalled $844.1 million, an increase from the $547.3 million in sales recorded in the three months to March 2015 and the $372.1 million recorded in the three months to December 2014. This data brings the 12 month total to $2.918 billion from 347 sales, an increase compared with the previous twelve month total of $2.649 billion from 278 sales. The table below shows sales recorded for the past eight updates of Melbourne Cityscope. The most notable sales recorded for the June 2015 update of Melbourne Cityscope include: 357 Collins Street, Melbourne, a 23-storey office building with a net lettable area of 31,920 sqm was bought for $222.5 million. The Mid City Arcade at 194-200 Bourke Street, Melbourne, a 3-storey retail building housing the Chinatown Cinema Complex, 24 retail shops and a 171-space basement car park was bought for $60 million. 520 Collins Street, Melbourne, an 18-storey office building with a net lettable area of 12,077 sqm and parking for 14 cars was bought for $52 million. Properties for sale in the area covered by Melbourne Cityscope in June 2015 include: 52 La Trobe Street, a 3-storey commercial building with a building area of 900 sqm, 48-50 La Trobe Street, a 2-storey office building with a building area of 600 sqm, Unit 1 at 42-46 La Trobe Street, 302 sqm on the ground level, Unit 2 at 42-46 La Trobe Street, 302 sqm on level 1, Unit 3 at 42-46 La Trobe Street, 454 sqm on level 2, Unit 4 at 42-46 La Trobe Street, 450 sqm on level 3, Unit 5 at 42-46 La Trobe Street, 300 sqm to the south side of level 4, Unit 6 at 42-46 La Trobe Street, 300 sqm to the north side of level 4 are for sale in one line through Colliers International. 573-585 Bourke Street, Melbourne, an 18-level office building including three ground-floor showrooms and a two-level, 82-space underground car park, with a net lettable office area of 16,200 on a site of 1,833 sqm, is for sale through Colliers International and CBRE. Leasing opportunities in the area covered by Melbourne Cityscope in June 2015 include: 570 Bourke Street, Melbourne, a 33-storey office building with ground-floor retail space, a total building ara of 35,144 sqm and basement parking for 522 cars has office space from 500 to 28,000 sqm through Knight Frank Melbourne. 15W at 15-33 William Street, Melbourne, a 20-level, A-Grade office building with 40,700 sqm and parking for 300 cars has 12,000 sqm for lease through CBRE Melbourne and JLL Melbourne. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Auction Results â

Over the week ending 26 June 2015 there were 34 commercial auction results reported with a preliminary clearance rate of 70.6 per cent, the strongest clearance rate recorded over the past six weeks. In comparison, over the previous week, there were 57 commercial auctions with a clearance rate of 59.7 per cent. At the same time last year, the number of commercial properties taken to auction were much higher 100 and the clearance rate was 60.0 per cent. There have been 166 commercial auctions reported over the most recent four week period, with 97 of these properties transacting. Of these 97 sales, 66 have been reported with a price, totalling $127 million. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Parramatta Cityscope

The latest research from Parramatta Cityscope shows property sales have decreased in the past three months. Sales recorded in the quarter ending June 2015 totalled $85.1 million, a decrease from the $170.2 million recorded in the three months to March 2015, and a decrease from the $191.5 million recorded to December 2014. This data brings the 12 month total to $549.8 million, a decrease from the $704.8 million recorded the same time last year. The table below shows sales recorded for the past eight updates of Parramatta Cityscope. Recent standout sales in Parramatta include: 80 George Street, Parramatta, two office buildings of 6 and 11 storeys with basement parking for 103 cars, was bought for $38.7 million. 44 Anderson Street, Parramatta, a single-storey building on a block with a site area of 2,016 sqm, was bought for $11.5 million. 96 Phillip Street, Parramatta, a four-storey building with basement parking for 23 cars was bought for $9.3 million. Properties for sale in Parramatta in June 2015 include: 267 Church Street, Parramatta, a two-storey brick building with ground floor retail is for sale through Khoury & Partners – Parramatta. The property last traded at $2.2 million in July 2006. 57 Church Street, a 1,992 sqm car yard with 2-storey building; 63 Church Street, a car yard with 3 storey office and showroom; 83 Church Street, a 6,854 sqm car yard with a single-storey sales office and 44 Early Street, a block of residential units not in Parramatta Cityscope , are for sale together as a development site through Colliers International Sydney West, and Matrix Property Group. The buildings are on a 14,287 sqm site. Significant leasing opportunities in Parramatta in June 2015 include: 130 George Street, Parramatta, a 14-storey office building including ground floor retail/showroom space and basement and on-grade parking for 332 cars, has office space of 1,480 to 4,440 sqm for lease through Colliers International Sydney West and Dexus Property Group. 88 Phillip Street, Parramatta, a six-storey office building with three levels of basement car parking for 113 cars has office space of 199 – 2,152 sqm for lease through Colliers International Sydney West. 240 Church Street, Parramatta, a two-storey retail building has retail space of 600 – 750 sqm for lease through Belroy Property Parramatta. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Australia’s largest and most expensive office tower

Recent transactions involving Barangaroo’s Tower 1 have valued the building at approximately $2 billion, making it Australia’s most expensive building. Lend Lease, as the Government’s choice of most preferred developer for Barangaroo, has placed the still to be built tower in a new commercial wholesale fund, the Lend Lease One International Towers Sydney Trust. Its $2 billion price tag is arrived at from the $1.4 billion of equity commitments and $600 million of debt financing. Lend Lease Trust will retain 37.5%, with the Qatar Investment Authority purchasing another 37.5% for about $525 million and the Australian Prime Property Fund Commercial APPF-C taking the remaining 25%. The QIA is Qatar’s sovereign wealth fund, specialising in domestic and foreign investment on behalf of its citizens. The APPF–C units are owned by Australian and overseas institutions and the fund is managed by Lend Lease Real Estate Investment Limited. Tower 1 is 48% leased with pre-commitments received from HSBC, Servcorp, Marsh & McLennan and PWC. The tower’s smaller neighbours, Towers 2 and 3, are 76 – 79% leased and their future tenants include Westpac, Gilbert & Tobin, KPMG and Lend Lease. The two towers have been placed in a fund, the Lend Lease International Towers Sydney Trust, of which 50% has been on-sold to the Canadian Pension Plan Investment Board at $1 billion, thereby valuing the smaller buildings at $2 billion together. Towers 2 and 3 are set to introduce an additional net lettable area into the Sydney commercial market of 89,000 and 78,000 sqm respectively. Tower 1, with a net lettable area of 100,000 sqm over 49 levels, is set to be not only Australia’s most expensive office building but also replace Melbourne’s Rialto Towers as the largest. Meredith Baume Commercial Research

Building approvals rebound and the pipeline of new construction keeps growing

The Australian Bureau of Statistics ABS released building approvals data for May 2015 yesterday. The data showed that dwelling approvals rose over the month following a fall over the previous month. Dwelling approvals remain at extremely high levels with May 2015 being the third highest month ever for approvals. In May 2015 there were 19,414 total dwelling approvals nationally. The number of approvals rose by 2.4% over the month and year-on-year approvals have increased by 17.6%. With 19,414 approvals over the month the number of approvals was just -2.9% lower than the record-high monthly number of approvals. The surge in approvals over the past year has resulted in a record-high number of approvals with 218,442 approvals over the past year, up 13.4% from the same time last year. Looking at house approvals versus unit approvals shows different trends. Over the month there were 9,375 houses and 10,039 units approved for construction. It was only the fourth time on record where more units were approved than houses over a month, three of which have occurred during 2015. Over the month, house approvals fell -8.5% however, this was offset by a 15.2% rise in unit approvals. Year-on-year house approvals have fallen by -2.8% however, unit approvals are 46.2% higher over the period. On an annual basis, a record high 47.0% of approvals were for units with 115,686 house approvals and 102,756 unit approvals. Given that a record-high 47.0% of all dwelling approvals were for units over the past year it is interesting to look at what type of units are being constructed. The above chart indicates that most of it is high-rise stock i.e. greater than 4 storeys . In fact, of the 47.0% of approvals that were for units, 63.1% were 4 storeys or higher. To put the rise in prevalence of high-rise unit development into context, five years ago just 32.3% of unit approvals were for high-rise stock. Similarly, there has been an ongoing decline in approvals for semi-detached product. Much of the building boom currently taking place is occurring across the capital city markets. In fact, 77.9% of all dwelling approvals nationally over the past year have been within a capital city market. There was a sharp rise in combined capital city dwelling approvals in May 2015, in fact it was the highest monthly number of approvals on record. Over the month there were 16,051 dwelling approvals across the combined capital cities. The number of approvals increased by 24.0% over the month to be 26.7% year-on-year. Over the past 12 months there has been a record-high 167,946 dwelling approvals which is a 17.1% annual rise. The annual number of dwelling approvals has now hit a record high in each of Sydney, Melbourne and Brisbane. These three capital cities accounted for 74.2% of all capital city dwelling approvals over the past year. Annual approvals have increased across most cities over the past year, the exceptions have been Darwin -11.5% and Canberra -16.9% . In all other capital cities the number of dwelling approvals have risen over the past year with rises recorded at 9.4% in Sydney, 28.8% in Melbourne, 28.1% in Brisbane, 5.2% in Adelaide, 11.4% in Perth and 43.7% in Hobart. Looking at the differential between houses and units, approvals for units are much more prevalent across the capital cities than they are at a national level. Over the month there were 6,491 capital city houses and 9,560 units approved for construction. The number of house approvals increased by 2.3% over the month but they were -5.5% lower year-on-year. Unit approvals were 44.8% higher over the month and 64.8% higher year-on-year. Over the past 12 months a record high 54.4% of all capital city dwelling approvals were for units. Over the year there were 76,558 houses approved +10.5% yoy and 91,388 units approved +23.2% yoy . Looking at the differential between houses and units, approvals for units are much more prevalent across the capital cities than they are at a national level. Over the month there were 6,491 capital city houses and 9,560 units approved for construction. The number of house approvals increased by 2.3% over the month but they were -5.5% lower year-on-year. Unit approvals were 44.8% higher over the month and 64.8% higher year-on-year. Over the past 12 months a record high 54.4% of all capital city dwelling approvals were for units. Over the year there were 76,558 houses approved +10.5% yoy and 91,388 units approved +23.2% yoy . Annual unit approvals have reached new record highs in Sydney 28,259 , Melbourne 32,980 and Brisbane 15,301 . The three largest capital cities have accounted for 83.8% of all capital city unit approvals. The annual number of unit approvals is higher over the year in most capital cities with Darwin -21.2% and Canberra -14.8% the exceptions. Across the remaining cities the annual increases in unit approvals were: 4.6% in Sydney, 42.8% in Melbourne, 32.4% in Brisbane, 30.4% in Adelaide, 37.6% in Perth and 74.8% in Hobart. Each of Sydney, Melbourne, Brisbane, Darwin and Canberra has approved more units than houses over the past year with the proportion of unit approvals at a record high in Melbourne and Brisbane. The data indicates that the heightened level of housing construction is persisting which is good news as the economy transitions away from mining investment. Housing construction has a significant multiplier effect throughout the economy. Although the heightened level of construction is positive for the economy, there are some concerns about heightened levels of housing investment and there is some cause for concern with the record high level of unit approvals. Of course lifestyle preferences are changing and more people want to live in inner city units. The challenge is that inner city units also tend to be targets for investors, while values are still rising demand will likely remain for most of these new projects. The challenge will be once value growth slows or values start to fall where will the buyers for this stock come from? Furthermore will recent investment purchasers look to exit the market and move to a more liquid investment class? This is of course crystal ball gazing but the record high level of unit construction should at least raise some alarm bells. Particularly when you consider that rental rates are growing at their slowest pace in more than 2 decades and the supply of new rental stock unit approvals is at record highs. Of course these potential risks have been mentioned a number of times over the past year by the Reserve Bank. Foreign demand for new inner city units is certainly playing a part in fulfilling some of the demand for new stock and we expect this to continue, in fact if the Australian dollar falls we will probably see greater demand from offshore. Our latest home values index results also highlight the impact of the heightened supply of unit stock. Across the combined capital cities house value growth is much stronger than unit value growth, recorded at 10.4% and 5.6% over the year respectively. Further highlighting the potential risk in unit markets was our recently released March 2015 quarter Pain & gain Report. The report showed that across Greater Melbourne, the Melbourne Council Area which is dominated by units had the highest proportion of loss-making resales across the city at 24.0% of all resales.

New listings are higher than one year ago and transactions have been trending upwards since 2012. As a result, stock is being absorbed faster and total listings are lower than at the same time last year across most cities

Over the four weeks ending 28 June 2015, there were 24,981 new residential listings added for sale across Australian capital cities. At the same time last year, over the corresponding four week period, 23,676 residential properties were newly listed for sale. That is a difference of 1,305 properties this year compared to last year. On the other hand, total stock levels across the combined capital cities show that currently there are 94,891 properties currently listed for sale. Looking back one year ago, there were 6,615 more properties actively listed for sale, with 101,506 residential homes on the market. The downward trend in overall stock levels, coupled with the upward trend in new listings can also be seen across the nation as a whole. Across the individual capital cities, new listings are higher over the year in Sydney 10.0 per cent , Melbourne 9.2 per cent , Brisbane 7.0 per cent , Hobart 5.8 per cent and Canberra 5.1 per cent , while Perth and Darwin are both showing new listings to be -5.3 per cent lower than at the same time last year and Adelaide, to a lesser extent, is also showing a year-on-year fall in new listings, down -1.7 per cent. On the other hand, Perth and Darwin continue to be the only two cities where total listings are higher than at the same time last year, showing that there is some underlying weakness across the two markets, with stock not being absorbed as quickly as across the other Australian cities. In terms of total listings the amount of stock available for sales is substantially lower than a year ago in Sydney -19.1 per cent , Melbourne -14.6 per cent and Canberra -13.7 per cent . As mentioned, total listings are substantially higher than a year ago in Perth and Darwin. In terms of the number of listings, there are fewer homes available for sale currently in each of Melbourne, Brisbane and Perth than there are in Sydney. This further highlights the supply-side pressures in Sydney which are leading to strong levels of growth in home values. Currently, there are 233,336 residential properties on the market across Australia, with overall listing volumes -3.9 per cent lower than they were last year. In New South Wales, Victoria and the Australian Capital Territory, listings volumes are more than 9 per cent lower than one year ago, while across Queensland, South Australia and Tasmania, volumes are relatively stable when compared to one year ago. Again, as seen across the capital cities, Western Australia and the Northern Territory are both currently seeing more residential properties available for sale than there were at the same time last year.

Outlook for 2015-16 financial year

So where have we been? Over the first 11 months of the 2014-15 financial year, combined capital city home values have risen by 7.5% according to the CoreLogic RP Data Home Value Index. The Index is weighted based on the number of dwellings in each city and looking more closely at the results only Sydney and Melbourne have recorded value rises of more than 4.5% while values are lower in Perth and Hobart. Sydney has been the powerhouse of growth over the current phase, trailed by Melbourne. Meanwhile, the remaining capital cities have recorded very little capital growth despite the very accommodative monetary policy settings. Unsurprisingly, Sydney and Melbourne are also seeing relatively stronger economic conditions and are benefitting from both interstate and overseas migration, as well as the highest levels of interest from offshore investment. Over the past year we have seen the housing market become a much more prevalent topic of discussion. Although there is still no Federal Housing Minister we have seen a number of parliamentary inquiries into housing. We have also seen a number of pointed warnings about the heat in the Sydney and Melbourne housing markets from both the Reserve Bank and the Australian Prudential Regulation Authority APRA . In December 2014 APRA wrote to Australian financial institutions re-iterating what sound lending practices look like and highlighted potential changes for these institutions in the event that these prudent measures weren’t being adhered to. Since then we’ve seen a number of changes to lending practices by lenders. Where are we headed? Looking at what the next 12 months is likely to hold the expectation is that mortgage rates will remain low however; with lenders changing their lending policies, accessing a mortgage may become more difficult. After three years of strong value growth in Sydney and Melbourne we expect growth to continue however, it should start to slow over the year especially as housing supply continues to trend beyond the current record highs. We are already seeing signs of growth in other markets around the country particularly areas like Newcastle and Wollongong adjacent to Sydney as well as certain pockets in Brisbane and the Gold and Sunshine Coasts. We would expect the dramatic differential in affordability in these areas relative to Sydney and Melbourne will drive more buyers to these areas. On the other hand we are seeing significant signs of weakness in both the Perth and Darwin housing markets along with many of the regional markets linked to the resources sector. These markets are characterised by: slowing value growth or falling home values, falling rental rates, declining sales, increasing discounting levels and time on market and an increase in properties available for sale. Overall, it looks as though housing market conditions will remain mixed across the country over the next 12 months. Sydney and Melbourne are likely to continue to be the stand-outs for capital growth however; we expect that over the year the rate of growth will reduce back to more sustainable levels. We may also see a further pick-up in growth in markets such as Brisbane, Newcastle, Wollongong and the Gold and Sunshine Coast. Growth in markets such as Adelaide, Hobart and Canberra is likely to remain contained while weakness in mining areas and Perth and Darwin is likely to persist. Happy EOFY.

Week-on-week results show auction volumes remain steady, while the auction clearance rate rises

A preliminary auction clearance rate of 78.0 per cent was recorded across the combined capital cities this week having increased from 77.3 per cent last week. There were 1,777 auction results reported this week with a total of 2,205 scheduled auctions showing that auction volumes have remained virtually unchanged when compared to the previous week 2,268 . In comparison, over the same week last year 66.6 per cent of the 1,991 homes taken to auction sold. The preliminary auction clearance rate across Melbourne was 78.5 per cent this week, down from the previous weeks final result of 79.3 per cent and stronger than at the same time last year 68.3 per cent . So far this year, Melbourne’s weekly auction clearance rate has been, on average, 10.6 per cent higher than over the comparable week one year ago. Across Melbourne’s individual sub-regions, the strongest preliminary clearance rate this week was across the North East region at 85.8 per cent, followed closely by the Inner East region where the preliminary clearance rate was 85 per cent. There were 887 Sydney homes taken to auction this week and a preliminary clearance rate of 83.5 per cent across 747 results. Over the previous week, the final auction clearance rate was 82.4 per cent with 862 auctions held across the city. At the same time last year, 71.1 per cent of the 861 homes taken to auction recorded a successful result. This week, the strongest sub-region performance across Sydney’s sub-regions was the Ryde region, with 90.6 per cent of the reported results clearing at auction. Brisbane’s preliminary clearance rate was 51.1 per cent this week, compared to 52.2 per cent last week and 42.2 per cent at the same time last year. Across Brisbane, a total of 140 auctions were held this week which is higher than last week 128 , but lower than at the same time last year 153 . Adelaide hosted 81 auctions this week and across the 48 reported results, CoreLogic RP Data’s preliminary auction clearance rate is 70.8 per cent. Last week, Adelaide’s clearance rate was 63.5 per cent across 83 auctions in the city, while at the same time last year 62.7 per cent of the 79 homes taken to auction were sold. For Perth, the number of homes taken to auction this week was 29, less than last week 47 and last year 39 . Meanwhile, Perth’s clearance rate of 57.1 per cent this week was higher than last week 38.9 per cent and last year 50.0 per cent . Across Canberra 72 homes were taken to auction this week and the preliminary clearance rate across 32 auctions was 81.3 per cent. There were 22 auctions across Tasmania this week, with 10 successful results out of the 20 reported.

Australia’s rate of population growth continues to slow

The Australian Bureau of Statistics ABS released demographic data for the December 2014 quarter yesterday. The data highlighted a continuing slowdown in the rate of national population growth, with the quarterly increase now lower than slump in population growth recorded during the GFC. In particular the mining states and territories are recording the biggest slowdown in population growth fueled by a slowdown in both interstate and overseas migration. The data showed that throughout 2014 Australia added another 330,202 persons. Although this is still a relatively high rate of population growth, it is the lowest annual increase in population since the population increased by 327,637 persons over the 12 months to September 2011. Over the final quarter of the year the national population increased by 64,010 persons which was its lowest quarterly increase since June 2006 52,834 . At a national level population growth is comprised of overseas migration arrivals minus departures and natural increase births minus deaths , any interstate migration is neutral at a national level. Over the past year, the country experienced a natural increase of 146,067 persons and net overseas migration of 184,135 persons. The rate of annual natural increase is at its lowest level since December 2006 139,793 and annual net overseas migration is at its lowest level since June 2011 180,372 . On a quarterly basis, natural increase was recorded at 36,517 persons its lowest level since December 2006 and net overseas migration was recorded at 46,034 persons its lowest level since June 2011 . With the national population increasing by 330,202 persons over the past year, the majority of population growth has taken place in the largest states. NSW 31.2% and Vic 30.7% accounted for a combined 61.9% of national population growth. If you add Qld 19.4% and WA 12.1% the four largest states accounted for 93.5% of national population growth over the year. As far as the rate of population growth goes, for the first time since September 2006 WA is no longer the state with the most rapid rate of population growth with Vic taking over the mantle. Vic’s population increased by 1.8% over the year followed by: WA 1.6% , NSW and Qld both 1.4% , ACT 1.1% , SA 0.9% , NT 0.4% and Tas 0.3% . Qld, WA and NT in particular are seeing the impact of the mining downturn with fewer workers required in these states as the pipeline of major infrastructure projects winds down translating into slower population growth. Two years ago these states were recording annual population growth of 2.0% in Qld, 3.7% in WA and 2.8% in NT. Net overseas migration has been slowing at a national level and as the above chart shows, all states are experiencing a fall in net overseas migration. The full brunt of the slowdown in net overseas migration is once again being felt by the resource states. Annual net overseas migration is -30.9% lower in Qld, -47.6% lower in WA and -56.0% lower in NT. All other states except for NSW +1.9% and ACT +4.1% have recorded a fall in net overseas migration over the year, but nowhere near the extent of the mining states and territories. The declines in these states were recorded at -4.2% in Vic, -9.0% in SA and -2.9% in Tas. The data also highlights that overseas migrants have a clear preference to settle in the larger states. Over the past year, 37.9% of net migration occurred in NSW with a further 30.4% in Vic, 13.2% in Qld and 10.3% in WA. At a national level net interstate migration has no impact however, it does have a significant impact across individual states. Over the 12 months to December 2014, there were 335,256 interstate movements across the Australian states. Historically Qld has attracted as high number of interstate migrants however; net interstate migration to the state has slowed sharply over recent years. Across the states, Vic now attracts the most net interstate migrants 9,336 followed by Qld 5,598 and these are the only two states that have recorded a net gain in interstate migration over the year. Vic’s net gain from interstate migration is a record high while migration to Qld is at its lowest level on record. The net outflow of residents from the remaining states was recorded at: -5,572 persons in NSW, -2,744 in SA, -400 in WA, -1,278 in Tas, -3,392 in NT and -1,548 in ACT. Despite the net outflow, the net number of residents leaving NSW is at a record low. On the other hand the loss of residents from WA is the largest since September 2003 and the outflow from NT is the largest on record. In terms of natural increase the states with the largest overall populations also have the greatest natural increase. There has been a sharp decline in natural increase in NSW over the past few years while natural increase is trending higher in WA. The state-by-state shares of natural increase are: 26.5% in NSW, 24.8% in Vic, 23.5% in Qld, 4.9% in SA, 14.8% in WA, 1.0% in Tas, 2.0% in NT and 2.6% in ACT. The demographic data highlights challenges for the Australian economy and individual states. Gross domestic product has been slowing and is much lower on a per capita basis. With population growth slowing and set to slow further in coming quarters as foreshadowed in the monthly overseas arrivals and departures data this poses a challenge for the national economy. The resource states in particular are being impacted as they are attracting fewer migrants from both interstate and overseas. Conversely, NSW and Vic which are a proxy for Sydney and Melbourne are the places that both domestic and international migrants want to head to. This in turn fuels demand for housing, creates the need for more jobs and requires more spending on infrastructure. To-date it doesn’t look as if the sharp rises in home values in Sydney and to a lesser degree Melbourne over recent years is stopping migrants heading to these areas. You would have to think that at some point this will change but no one has a crystal ball to know exactly when that inflection point will occur. Particularly given how low the cost of debt currently is with interest rates so low, furthermore rental pressures are easing given already high new housing construction and a record high pipeline of approvals to potentially follow.

Auction volumes higher in 2015 compared to 2014, with last weekâ

CoreLogic RP Data National Auction Preview, week ending 28 June 2015 CoreLogic RP Data is currently expecting 2,255 capital city auctions this week, which is higher than at the same time last year 1,991 and similar to the number of homes taken to auction across Australia’s capital cities last week 2,268 . Last week saw the final auction clearance rate rise from 75.9 per cent the previous week to 77.3 per cent, which is much higher than one year ago 65.4 per cent . Across Melbourne, Australia’s largest auction market, CoreLogic RP Data is currently expecting 1,009 auctions, compared to 1,084 last week and 811 one year ago. Last week, 79.3 per cent of Melbourne homes taken to auction recorded a successful result, compared to 68.3 per cent last year. Sydney is still maintaining a clearance rate above the 80 per cent mark; however auction results have been slightly softer over the most recent couple of weeks, indicating a slight easing in demand compared to the record strong results seen since mid-April. Despite this, Sydney’s clearance rate is consistently higher than all other major capital city auction markets. Last week’s clearance rate of 82.4 per cent was down from 83.4 per cent the previous week, but remains much higher than over the same week last year 71.1 per cent . This week, there are 909 Sydney homes scheduled for auction, up from 862 last week and 861 at the same time last year. This week there are 141 Brisbane auctions, compared to 128 last week and 153 over the same week last year. Last week, Brisbane recorded the strongest clearance rate so far for June 2015, at 52.2 per cent, which is also higher than one year ago 42.2 per cent . In Adelaide, 75 auction properties are being monitored this week, slightly down on the 83 last week and 79 at the same time last year. Adelaide’s auction clearance rate last week was 63.5 per cent, similar to one year earlier, when the cities clearance rate was 62.7 per cent. Across Canberra there are 71 scheduled auctions this week, a high number for the city and much higher than both last week 52 and one year ago 35 . Over the past two weeks, Canberra’s clearance rate has been recorded above the 68 per cent mark, while one year ago the cities clearance rate was 58.1 per cent. Perth has 30 homes scheduled for auction this week, down from 47 last week and 39 at the same time last year. Across the individual suburbs of Australia, Balwyn North 21 , Glen Waverley 18 , Kew and Mount Waverley both with 17 all in Victoria have the highest number of auctions scheduled this week.

Biggest Commercial Sale for 2015

The Dexus Property Group has added to its Brisbane office portfolio through the purchase of Waterfront Place at 1 Eagle Street, Brisbane and the Eagle Street Pier at 45 Eagle Street, Brisbane. The sale, at $635 million, was arranged by CBRE Brisbane and JLL Brisbane. Vendors of Waterfront Place, each with a half share, were Future Fund and Stockland Trust. Future Fund was established by the Australian Federal Government in 2006 to assist future Australian Governments to meet the cost of superannuation liabilities. Stockland Trust is a diversified property group with units stapled to shares in Stockland Corporation Ltd and traded on the stock exchange. Dexus, who will now have 14.2% of its office portfolio in the Brisbane CBD, is one of Australia’s largest listed owner and manager of Australian office properties. Dexus is purchasing the properties in partnership with the Dexus Wholesale Property Fund, a $5.5 billion unlisted property fund which owns interests in a diversified portfolio of office, industrial and retail properties throughout Australia. According to Brisbane Cityscope, Waterfront Place is a 36-level, 162-metre office tower completed in mid-1990. The building comprises 36 office floors and two basement levels of tenant and visitor car parking, with 494 car spaces. It has a net lettable area of almost 60,000 sqm and a 5-star NABERS rating. The building is well leased and its major tenants include BankWest, BHP Billiton, BlackRock, Commonwealth Parliamentary Offices and the Honorable Bill Hayden A.C. Eagle Street Pier is a 2-storey retail centre with numerous hospitality/tourism tenants including Matt Moran’s Aria Restaurant, Bavarian Bier Café, The Coffee Club and Kookaburra River Queens river boat tours. The properties last traded as a whole at a total of $307 million in 2004. The current sale, at $635 million, represents an initial yield of 6.3% and values the properties at $9,664 a square metre. Meredith Baume Commercial Research Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Auction Results – Week ending 19 June 2015

Auction volumes increased last week, with 31 commercial auction results reported and a preliminary clearance rate of 54.8 per cent. In comparison, the final auction clearance rate over the previous week was just 27.3 per cent across 22 auctions. At the same time last year, there were 49 commercial auctions reported over the week with a success rate of 67.4 per cent. Over the most recent four week period, a total of 170 commercial auctions have been reported with 94 sales. Of these 94 sales, 59 have been reported with a sale price, totalling slightly over $108.9 million. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – South Sydney Cityscope

The latest research from South Sydney Cityscope shows property sales have decreased in both volume and value for the quarter ending June 2015. There were 81 sales recorded for the most recent quarter at a total value of $269.8 million, compared to 161 sales at a total value of $464.8 million for the quarter ending March 2015. The most recent quarter’s sales compare favourably with the quarter ending December 2014, however, when there were 60 sales recorded at a total value of $241.7 million. The 12-month totals for the year ending June 2015 have increased, with 348 sales at a total value of $1,418.7 billion, compared to 239 sales at a total value of $1,018 billion for the previous year. The table below shows sales recorded for the past eight updates of South Sydney Cityscope. Notable sales in the areas covered by South Sydney Cityscope in the June 2015 update include: A 17,900-sqm area in the proposed Green Square Town Centre development at 105 – 115 Portman Street, Zetland, which sold for $82 million; A 93,810-sqm area of vacant land at Coal Pier Road, Banksmeadow, which sold for $33.1 million; and A large high-clearance warehouse with parking for 75 vehicles at 2 Baker Street, Banksmeadow, which sold for $20.34 million. Properties for sale in South Sydney Cityscope in June 2015 include: A 1.35-hectare area in the proposed Green Square Town Centre development, known as Southern Precinct/Stage 4, at 377 – 397 Botany Road, Zetland, available through JLL Sydney; Two warehouses on a 11,470-sqm site with parking for 30 vehicles at 1 – 3 Ricketty Street, Mascot, available through Knight Frank; and A high-clearance warehouse with office space at 683 Gardeners Road, Mascot, and another high-clearance warehouse with office space at 671 – 675 Gardeners Road, Mascot, are available together as a development site through Colliers International. Leasing opportunities in South Sydney Cityscope in June 2015 include: PortAir Industrial Estate, a complex of ten high-clearance warehouses at 1A Hale Street, Botany, which has industrial space of 2,000 to 20,000 sqm available through Goodman International and Colliers International South Sydney; Gateway 241, a 12-storey office building at 241 O’Riordan Street, Mascot, which has 261 to 13,727 sqm available through Colliers International South Sydney; and Botany Grove Business Park, a complex of five high-clearance warehouses at 14A Baker Street, Banksmeadow, which has 2,033 to 7,524 sqm available through Colliers International South Sydney and Goodman International. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Gold Coast Cityscope

The latest research from Gold Coast Cityscope shows property sale figures have significantly decreased in the past three months, but sale numbers have remained generally consistent. Sales recorded in the three months to June 2015 recorded 43 sales for a total of $86.3 million. Of this, $55 million was for commercial, $7.9 million was for commercial strata, $8.6 million was for retail, $5.6 million was for retail strata and $9.1 million was for other. In comparison, the three months to March 2015 recorded 46 sales for a total of $235.8 million. Of this, $12.3 million was for commercial, $4.9 million was for commercial strata, $127 million was for retail, $18.6 million was for retail strata and $73 million was for other. The latest data raises the 12 month total to over $471.6 million; more than double the previous 12 month period. The table below shows sales recorded for the past eight updates of Gold Coast Cityscope: The most significant sales recorded this quarter together totalled over $58 million. Foxtel Building formerly Austar Building , a six-level commercial building with a total of 268 car parking spaces on the ground 111 car parks and basement levels 157 car parks ; built 2001. Bought for $46 million by Centuria Metropolitan REIT. Christian Sandstrom and Seb Turnbull from JLL sold the property in conjunction with Mark Witheriff, Justin Bond and Ben McGrath of Knight Frank. The sale represented an initial yield of 8% on a passing net income of $3.68 million and a cap rate of 7.8%. Trust House, 3074 Surfers Paradise Boulevard, Surfers Paradise. A four-storey office/retail building. Sold at auction on June 18, 2015 for $4.35 million. Michael Willems and Steven King of Ray White Commercial Gold Coast negotiated the sale, which was a court ordered trustee sale. 16 Griffith Street to 22 Griffith Street, Coolangatta. A single-storey shop and a two-storey building with three ground floor shops and upper level residential space. Both buildings sold separately to Jack & Miriam Freeman and Freda & Hiro Pamamull for $3.95 million each . Properties currently listed for sale include: Karingal Place, 40 Griffith Street, Coolangatta – a two-storey, 368 sqm, retail/office building. For sale by expressions of interest, closing July 8, 2015; agent, Alpha Property Network Neil Johnson . The property was advertised with an annual income of around $130,000. Unit 30205, Southport Central Red Tower, 27 Garden Street, Southport – a 159 sqm unit on level 2. Scheduled for auction on July 9, 2015; agents, Ray White Commercial Southport Wayne Devenport and Ray White Commercial Gold Coast Brad Merkur . Granton House, 36 Nerang Street, Southport – a two-storey retail/office building. Scheduled for auction on July 9, 2015; agent, Ray White Commercial Southport Martin Trautmann and Wayne Devenport . Properties currently under contract conditionally or unconditionally include: 10 Energy Circuit, Robina – a warehouse and associated car parking, tenanted by Bounce Inc. Under contract following an expressions of interest campaign which closed October 30, 2014; agent, Wright Property Josh Wright and Corey Bolt . The property was advertised with a return of $534,200 per annum net. 3 Trickett Street, Surfers Paradise – the former Iluka site, now a 3,494 sqm vacant site. Under contract unconditionally for around $65 million to interests associated with Forise Holdings Group; agent, Canford Property Group Roland Evans . Commerce House, 113 Scarborough Street, Southport – a 2-storey, strata titled commercial/retail building. Under contract unconditionally with settlement expected June 29, 2015; agent, Hoad Commercial Elizabeth Hoad . CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Christchurch Cityscope

The latest research from Christchurch Cityscope shows that commercial sales activity in Christchurch has increased in the past three months. Sales recorded in the three months to June 2015 totalled $38 million, an increase from the quarter ending March 2015 when sales totalled $29.8 million but a decrease from the quarter ending December 2014 when sales totalled $74.7 million. The latest data brings the twelve-month sale total to $182.4 million, a decrease from the previous 12 months when sales totalled $315.3 million. The table below shows sales recorded for the past eight updates of Christchurch Cityscope: Recent notable sales include: The Pacific Tower Apartments at 164-166 Gloucester Street, a 23-level apartment building, 15 storeys of which are occupied by the four-and-a-half-star Rendez Vous Hotel, was bought for $20 million. Vacant land with a site area of 1,643 sqm at 158 Hereford Street was bought for $6,107,500. Vacant land being used as a car park, at 199-201 Madras Street, with a site area of 2,036 sqm was bought for $2.5 million. Properties for sale in Christchurch in June 2015 include: Pentax House, at 124-126 Peterborough Street, a three-storey plus mezzanine besser-brick building with a net lettable area of 668 sqm and a site area of 424 sqm is for sale through Cowdy and Ray White Commercial. Vacant cleared land at 174 High Street with a site area of 172 sqm is for sale through MB Cook. Worcester Chambers, at 69 Worcester Street, a 2-storey historic brick office building with a net lettable area of 740 sqm is for sale through CBRE. Significant leasing opportunities in Christchurch in June 2015 include: Office space of 685 sqm in a new development at 47 Hereford Street in a new development is available for pre-lease through Whalan and Partners Ltd, NAI Harcourts Christchurch and Bayleys Canterbury-Commercial. Office space from 140 – 1,248 sqm in a proposed development at 167 Victoria Street available for pre-lease through Cowdy & Co Ltd and Bayleys Canterbury-Commercial and JLL Christchurch. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

1 in 10 capital city home sales over the past year were over $1 million

Sales data over the 12 months to March 2015 shows that there have been fewer homes sold across the combined capital cities for less than $200,000 than there have been homes sold for more than $1 million. As you would expect there is a growing proportion of sales in excess of $1 million in Sydney and Melbourne while homes selling for less than $200,000 are almost exclusively found in Hobart and Adelaide. Over the 12 months to March 2015, a record low 6.1% of capital city home sales were below $200,000 and 31.8%sold for between $200,000 and $400,000, the lowest proportion since the 12 months to October 2001. While we are seeing a decline in sales at the lower price points, predictably more expensive sales are increasing. Over the 12 months to March 2015, 10.0% of all homes sold across the combined capital cities sold for more than $1 million, a record high. As we will discover the proportion of homes selling in excess of $1 million is substantially higher within cities such as Sydney and Melbourne. Sydney Over the 12 months to March 2015, a record low 8.9% of Sydney houses sold for less than $400,000 compared to a record high 34.0% of houses selling above $1 million. The remaining 59.2% occurred between $400,000 and $1 million. For the unit market, a record low 18.6% of sales were below $400,000 whilst there was a record high 71.1% between $400,000 and 1 million and a record 10.3% above $1 million. The impact of a surge in home values over the past year is being felt at the lower end of the market with a sharp drop in sales below $400,000 for both houses and units over the past year. Melbourne 24.5% of Melbourne houses and 36.9% of Melbourne units sold for less than $400,000 over the 12 months to March 2015. In comparison, 16.5% of houses and 5.1% of units sold for more than $1 million. For houses, the proportion of sales below $400,000 was at a record low while it was just shy of a record low for units. Conversely, both houses and units logged a record high proportion of sales over $1 million. Like Sydney, the impact of the value rises over recent years is being felt most at the lower-end of the housing market with a sharp decline in sales below $400,000. This is highlighted both by the table above which shows a sharp drop in sales below $400,000 over the past 20 years. Unlike Sydney, finding more affordable housing options is relatively easier in Melbourne with almost 1 in 4 houses and more than a third of units selling for less than $400,000. Brisbane Across all sales, 30.6% of houses and 52.5% of units transacted in Brisbane over the year to March 2015 sold for less than $400,000. The proportion of houses sold for less than $400,000 was at a record low while the proportion for units was lower in the middle of last year. House sales in excess of $1 million were at a record high 5.9% over the past year while the 2.3% of unit sales over $1 million is still a way off the record high 3.1% in early 2011. Brisbane has seen fairly moderate value growth over recent years however, we are still seeing an erosion in sales at the lower end of the market, albeit the deterioration is moderate compared to Sydney and Melbourne. 10 years ago, almost three quarters of houses and more than 4 out of every 5 unit sales was below $400,000, as the above table shows there has been a marked shift over the past decade to fewer lower priced sales. Relative to Sydney and Melbourne properties selling for less than $400,000 are much more common across Brisbane. Adelaide Over the 12 months to March 2015 45.3% of Adelaide houses and 65.9% of units sold for less than $400,000. The proportion of houses and units sold for less than $400,000 was at a record low over the past 12 months however, lower priced housing stock is much more readily available than across all other mainland capital cities. While sales at a lower price point are falling, a record high 4.7% of houses sold for more than $1 million over the past year. For units, 2.6% of all sales were over $1 million which was lower than the 3.5% recorded in mid-2008. Value growth across Adelaide has been limited since the financial crisis, nevertheless the proportion of homes selling for less than $400,000 has continued to decline. Adelaide offers much more affordable housing options than all other mainland capital cities. Perth 15.1% of Perth houses and 37.7% of Perth units sold for less than $400,000 over the 12 months to March 2015. In comparison, 10.8% of Perth houses and 4.2% of units sold for more than $1 million over the past year. The proportion of houses and units selling for below $400,000 is above the record-low of 14.7% and 36.9% respectively both of which occurred over the past year. The climb in more affordable sales over recent months is likely to be reflective of the fact that value growth has hit a stand-still in Perth over the past 12 months. Furthermore, new supply of homes is at close to record highs across the city currently. Perth has recorded one of the strongest capital growth rates over the past decade and as a result there has been a substantial decline in the proportion of homes selling for less than $400,000. This is highlighted by the fact that 10 years ago 81.7% of Perth houses and 88.0% of units sold for less than $400,000. In fact, Perth currently has fewer house sales below $400,000 than all capital cities except for Sydney and Canberra. Hobart Hobart is the nation’s most affordable capital city and also sees an overwhelmingly larger proportion of lower priced house and unit sales. Over the 12 months to March 2015, 61.4% of Hobart houses and 82.0% of units sold for less than $400,000. Hobart is the only capital city in which a majority of houses have sold for less than $400,000 over the past year. Subsequently, relatively few homes sell for over $1 million with just 1.5% of all house sales and 1.7% of unit sales over that price point. Hobart’s housing market has seen very little growth in home values over the past 10 years yet there has still been a fairly substantial decline in house sales below $400,000 while unit sales below $400,000 have seen little change. 10 years ago, 86.9% of all house sales were less than $400,000 and 88.5% of unit sales sat within that price point. Darwin Darwin has recorded the strongest value growth of all capital cities over the past decade; as a result it has shifted from being one of the most affordable capital cities to now being one of the most expensive. Over the 12 months to March 2015, 20.8% of houses and 28.8% of units sold for less than $400,000. Alternatively, 6.3% of houses and 4.8% of units in the city sold for more than $1 million. The proportion of houses selling for less than $400,000 has started to trend higher over recent months as values have fallen while unit sales below $400,000 are at a record low. The proportion of sales above $1 million is below its record high for houses and units with the record high coming for houses over the past year and in late 2010 for units. With value growth in Darwin the strongest of all capital cities over the past decade, the decline in the availability of more affordable housing is clear. Around 1 in 5 house sales nowadays are below $400,000 compared to 9 out of 10 a decade ago. For units, just over 1 in 4 sales nowadays are below $400,000 compared to more than 9 in 10 a decade ago. Canberra Over the 12 months to March 2015, 7.8% of Canberra houses and 42.3% of Canberra units sold for less than $400,000. On the other hand, 5.9% of house sales and 2.4% of unit sales were for more than $1 million over the year. The proportion of houses selling for less than $400,000 is currently at a record low while unit sales below $400,000 reached their low point throughout the past year at 39.7%. The number of houses selling over $1 million is below its peak of 6.2% a couple of months earlier, as are unit sales at this price point. Although home value growth in Canberra has been moderate over the past 5 years, there’s been a fairly substantial fall in sales below $400,000 over that time. 5 years ago, 23.2% of Canberra houses and 56.7% of units were sold for less than $400,000. The data shows that whether you look at interest rates, household incomes or any other factor that can influence affordability; we have seen a sharp decline in homes selling at a lower price point in over the past decade. Of course, even a home priced at $400,000 won’t be cheap enough for some potential home buyers. It is to be expected that the cost of housing rises over time however, there are social issues surrounding the sharp decline in lower priced homes. The result is that more people have to choose to rent or alternatively they have to move away from our capital cities or to smaller capital cities. Of course, finding employment in smaller capital cities and regional markets can be more difficult. Anecdotally we are also hearing that in markets such as Sydney and Melbourne first time buyers are purchasing investment properties rather than owner occupied properties for their first home. We also hear that a number are purchasing investment properties outside of these two cities where you can seemingly get better value for money. Of course, in most markets outside of Sydney and Melbourne the economies are currently weaker and capital growth has been much more moderate. Housing affordability is a very individualistic issue however; the data contained here shows that housing at a lower price is becoming much harder to come by, particularly in our larger capital cities.

Preliminary auction results show 77.7 per cent of homes sold at auction

This week, 2,207 auctions were held across Australia’s capital cities with a combined capital city weighted clearance rate of 77.7 per cent across 1,803 reported results. In comparison, a softer result was recorded last week when the final clearance rate of 75.9 per cent was reported. Last week’s clearance rate was the lowest clearance rate across the combined capitals since mid-March this year. Current clearance rates continue to track at levels much higher than last year, when over the same week one year ago 65.4 per cent of homes taken to auction were sold. Melbourne’s preliminary auction clearance rate was recorded at 79.2 per cent this week, with 1,047 properties taken to auction and 909 results recorded so far. In comparison, over the previous week, Melbourne’s clearance rate was 77.7 per cent across 947 auctions, while one year ago 69.1 per cent of Melbourne auctions were successful. This week, the strongest clearance rate across Melbourne was recorded in the North East sub region, where 88.7 per cent of the 89 auctions reported were successful. The preliminary auction clearance rate for Sydney was recorded at 83.9 per cent this week, compared to 83.4 per cent last week and 70.1 per cent over the previous week. There were 847 Sydney homes taken to auction this week, up from 816 the previous week and 785 at the same time last year. Across the individual sub-regions of Sydney, the strongest performance this week was recorded across the Ryde region, with 45 results reported and a clearance rate of 88.8 per cent. Following on from this, the Eastern Suburbs, City and Inner South, Baulkham Hills and Hawkesbury and Inner West regions all recorded a clearance rate of above 87.0 per cent. For Brisbane, the number of homes taken to auction this week was 122, down from 135 last week and 141 at the same time last year. In comparison this week’s clearance rate rose from 45.5 per cent last week to 55.4 per cent this week, both of which were stronger than the 32.2 per cent recorded over the same week last year. Across the Gold Coast, 47.2 per cent of the reported auctions have sold. Adelaide’s preliminary auction clearance rate was 62.3 per cent this week, in comparison to last week’s final result of 58.7 per cent and 59.7 per cent one year ago. There were 81 Adelaide auctions this week, 87 last week and 74 held over the comparable week last year. Across Perth, the preliminary clearance rate was 26.3 per cent this week, down from 31.0 per cent last week, and 29.0 per cent at the same time last year. 45 Perth homes were taken to auction over the week, compared to only 32 last week. In Canberra, 53 auctions were held this week with a 67.5 per cent success rate. There were 12 Tasmanian auctions this week; so far 6 results have been reported with 5 transactions.

Old Schweppes building sold for $10.75 million

The former Schweppes building at 65-67 Foveaux Street, Surry Hills, has sold for $10.75 million to a private investor. The sale reflects a net yield of 6.4% at a passing income of $688,000. The Australian based investor purchased the property following an expression of interest campaign conducted by Andy Hu and Dominic Ong of Knight Frank and Tom Speakman and Romain Saussey of Gunning Commercial. The property attracted interest from Hong Kong, South Korean and Indian investors and also from local property syndicates, funds and investors. According to East Sydney Cityscope, the property is a 4-storey brick retail and commercial building and has extensive 1903 alterations and additions by architect T. W Hodgson. In 2006, extensive internal alterations were completed by Trico Constructions. The ground floor is occupied Foveaux Restaurant & Bar with a lease until February 2017. Office tenants on the upper levels include Wella Studio, Benchmarque Recruitment Services and The Holla Agency. Brendon Wood Data Integration Manager – Commercial Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Over 2,000 capital city auctions expected this week

CoreLogic RP Data National Auction Preview, week ending 21 June 2015 There are 2,050 capital city auctions expected across the capital cities this week, similar to the number held last week 2,076 when the final auction clearance rate was recorded at 75.9 per cent, the softest result across the combined capital cities since March this year. At the same time last year, 2,040 residential auctions were held and the clearance rate over the week was recorded at 65.4 per cent. Melbourne is expecting 959 auctions this week, an increase from 947 last week and higher than the 946 at the same time last year. Last week, Melbourne’s final auction clearance rate was recorded at 77.7 per cent, which is much higher than one year ago 69.1 per cent , however it is the lowest clearance rate for the city in 9 weeks. This week, there are 799 Sydney homes scheduled for auction, compared to 816 last week and 785 over the previous week. Sydney’s clearance rate was down last week, from 88.7 per cent the previous week to 83.4 per cent, while in comparison, the clearance rate for the city last year was 70.1 per cent. Sydney’s year to date clearance rate is 84.9 per cent, while over the same period last year, the clearance rate for the city was tracking at 75.0 per cent. On the other hand, auction volumes this year are slightly lower than they were last year. Across Brisbane, CoreLogic RP Data is currently expecting 114 auctions this week, compared with 135 last week and 141 last year. Brisbane’s clearance rate last week was 45.5 per cent, while one year ago, 32.2 per cent of homes taken to auction were sold. There are currently 76 Adelaide homes scheduled for auction this week, slightly lower than the 87 last week and tracking at a similar level as the same time last year when 74 auctions were held across the city. Adelaide’s clearance rate last week was 58.7 per cent, having fallen from 71.2 per cent the previous week. Canberra has 51 scheduled auctions this week, compared to 53 last week and 35 at the same time last year. Across Perth, 40 homes are set for auction over the current week, increasing from 32 last week and slightly lower than one year ago 45 . Across Australia’s individual suburbs, the highest volume of auctions this week will be held in Balwyn North, Glen Waverley and Richmond Vic .

Commercial Market Update – Canberra Cityscope

The latest research from Canberra Cityscope shows property sales have increased in the past three months. Sales recorded in the quarter ending June 2015 totalled $149.8 million, an increase from the $6 million recorded in the three months to March 2015, and an increase from the $97.6 million recorded to December 2014. This data brings the 12 month total to $334.6 million a decrease from the $404.2 million recorded the same time last year. The table below shows sales recorded for the past eight updates of Canberra Cityscope. Recent standout sales in Canberra include: The Novotel Canberra and the Jolimont Centre at 65 Northbourne Avenue, City, a six-storey building; comprising a 286-room hotel in the upper levels, a bus terminal on ground level , and basement parking, was bought for $77.3 million. St George Building at 60 Marcus Clarke Street, City, two 13-storey office buildings with net lettable office area of 12,205 sqm and parking for 133 cars, was bought for $49.1 million in a sale handled by Colliers International and CBRE. 54 Marcus Clarke Street, City an 8-storey, 5,157 sqm, office building with parking for 53 cars, was bought for $14.2 million in a sale handled by Colliers International and CBRE. Properties for sale in Canberra in June 2015 include: Scarborough House at 8 Atlantic Street, Woden, a 14-storey, 16,782 sqm, office building with parking for 47 cars, is for sale through JLL Canberra. 40 Cameron Avenue, Belconnen, a 5-storey, 15,338 sqm, office building with parking for 45 cars, is for sale through Colliers International Canberra. The property was valued at $42.7 million in June 2014 at a capitalization rate of 10.5 per cent. 20 Allara Street, City, an 11-storey, 13,948 sqm, office, is for sale through Knight Frank and Colliers International. The property last traded at $23.2 million in February 2004. Significant leasing opportunities in Canberra in June 2015 include: 2 Constitution Avenue, City, a 7-storey, 19,835 sqm, office building with parking for 203 cars; has office space of 650 to 10,131 sqm through Knight Frank and JLL Canberra. 40 Cameron Avenue, Belconnen, a 5-storey office building with parking for 221 cars; has office space of 500 to 9,470 sqm through Knight Frank and JLL Canberra. 33 Allara Street, City, an 8-storey, 9,900 sqm, office building with parking for 131 cars; has office space of 650 to 9,215 sqm through Knight Frank and Colliers International. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Auction Results – Week ending 12 June 2015

The preliminary results show that 18 commercial auction results were reported over the week ending 12 June 2015, with just 4 sales. In comparison, the final auction clearance rate over the previous week was 62.5 per cent across 48 reported auctions. One year ago, 42 properties were taken to auction with a clearance rate of 45.2 per cent. Over the most recent four week period, a total of 208 commercial auction results have been reported with 120 sales. Of the 120 sales, 79 have been reported with a sale price, totalling just over $174.3 million. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Chatswood Cityscope

The latest research from Chatswood Cityscope shows property sales have decreased in value for the quarter to June 2015. There were 23 sales recorded in the most recent quarter with a total value of $39.4 million, as compared with 30 sales recorded to March 2015 with a total value of $57 million. The 12 months leading up to the mid June 2015 recorded 123 sales for a total of $327 million, a significant decrease from the $600.9 million recorded the same time last year. The table below shows sales recorded for the past eight updates of Chatswood Cityscope. Recent standout sales in Chatswood include: 134-150 Mowbray Road, Willoughby, a three-storey concrete commercial building over two basements levels with a net lettable area of 2,480 sqm and 680 Willoughby Road, Willoughby, a three-storey concrete and glass commercial building with a net lettable area of 1,959 sqm were bought for $16 million; 10 Carlotta Street, Artarmon, a three-storey freestanding office/warehouse building with a total lettable area of 1,051 sqm plus 612 sqm of basement parking was bought for $3.85 million; 398 Pacific Highway, Lane Cove, a three-storey office building to the rear with a single-storey showroom to Pacific Highway on a 816 sqm site was bought for $2.65 million. Properties for sale in Chatswood in June 2015 include: Zenith Centre Tower A and Tower B, at 821 Pacific Highway, Chatswood, a twin A-grade complex with 43,400 sqm of office space and 900 sqm of retail space, it also includes a 250-seat community theatre for sale by international expressions of interest through Savills and CBRE; 425 Victoria Avenue, Chatswood, a two-storey brick commercial building situated on a 550 sqm site for sale through auction on 16th July 2015 through Knight Frank Sydney; 73 Dickson Avenue, Artarmon, a two-storey warehouse building with parking for three cars on a 551 sqm site for sale through Sutton Anderson. Significant leasing opportunities in Chatswood in June 2015 include: Solitaire at 12 Help Street, Chatswood has office space ranging from 250 sqm to 4,000 sqm for lease through JLL North Sydney and Cadigal Office Leasing North Sydney; Citadel Towers Complex Tower A and Tower B at 783-803 Pacific Highway, Chatswood, both has fitted suites to whole floor with areas ranging from 214 sqm to 3,137 sqm for lease through JLL North Sydney and CBRE North Sydney and 10 Herbert Street, St Leonards has retail/office space ranging from 5,000 sqm to 14,000 sqm for lease through Sutton Anderson and Savills. CoreLogic RP Data Commercial. Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Removal of negative gearing alone is no silver bullet to housing affordability

As someone who works analysing housing markets every day it is good to see that housing policy is back on the agenda especially considering that we currently don’t have a Federal Housing Minister. The lack of a Housing Minister at the Federal level is intriguing when you look at some of the statistics relative to the housing market. According to CoreLogic RP Data the total value of residential property at the end of May 2015 was $5.9 trillion. To put this in perspective, gross domestic product GDP for Australian was recorded at $1.587 trillion over the 12 months to March 2015. The Australian Bureau of Statistics’ housing finance data showed that as at April 2015 there was $1.392 trillion in outstanding mortgage debt to Australian banks, building societies and credit unions. Meanwhile, the share market garners plenty of attention, as at April 2015 the market capitalisation of listed domestic equities was $1.693 trillion. Based on this data it would be fair to say that housing is Australia’s largest and arguably most important asset class. Even the value of Superannuation clocks in at a much lower $2 trillion, nearly three times smaller than the overall value of housing. Given the importance of shelter and the runaway growth currently being experienced in Sydney and, to a lesser degree, Melbourne home values, it is no wonder that housing is becoming a politically very sensitive topic. In particular negative gearing has become a topic of plenty of debate over the past few weeks. While the current Government have ruled out changes to negative gearing, both the Labor and Green parties are highlighting potential changes to their policies. Negative gearing allows owners of investment properties to offset their expenses losses against their taxable income and as a result it can reduce their taxable income. While this most certainly makes investment attractive the suggestion that negative gearing alone drives up the cost of housing is somewhat debatable. The above chart shows the total value of net rent claimed by individual taxpayers by financial year up to 2012-13. Net rent is gross rent minus applicable deductions such as rental interest, depreciation and costs such as capital works. What you will immediately note is that prior to 1999-00 the net profit or loss made from rent was fairly negligible. The Federal Government made changes to capital gains tax in September 1999 and this has seemingly helped to make negative gearing much more attractive than it was previously. In September 1999 the Federal Government made changes which offered investors a 50% discount on capital gains tax when they sold their property if they held their investment for at least 12 months. As the first chart shows, since the 1999-00 financial year net rental losses have spiked. This would seem to suggest that the 50% discount to capital gains tax has conspired to make negative gearing of residential property a much more attractive investment option. If we take a look at the most recent financial year’s taxation data available there are some interesting statistics about negative gearing and who is claiming the benefit. In terms of the number of individuals claiming net rent, 68.9% of claimants had a taxable income of less than $80,000. While more taxpayers with a taxable income of less than $80,000 claim net rent losses, only 13.1% of all individuals with a taxable income below $80,000. On the other hand, more than a quarter 25.8% of all taxpayers with an income of more than $80,000 claimed net rent. In terms of the value of these losses, individuals earning less than $80,000 claimed rental losses of $2.781 billion or an average of $2,050 per claimant. Individuals earning more than $80,000 claimed $2.613 billion in rental losses at an average of $4,276 per claimant. More people on incomes below $80,000 claim rental income but that is largely due to the fact that 81% of taxpayers had a taxable income of less than $80,000. Conversely, a greater proportion of total higher income earners own rental properties and the typical losses claimed from these properties are much larger than those with taxable incomes below $80,000. In my opinion negative gearing is essentially a way in which the Government outsources social housing to the private sector or at least this should be how it works. If we take a look at dwelling approvals data you can see that very few new approvals have been granted to the public sector over the past three decades. Typically more than 90% of all dwelling approvals over any month are granted to the privates sector with very few being approved and ultimately constructed by the public sector. Ultimately the private sector takes on the role of construction of homes and it appears private citizens are incentivised to provide rental accommodation via the provision of negative gearing. If negative gearing were removed no doubt housing would still be an attractive investment for some who are seeking to be positively geared however, you may find that fewer people are attracted to housing as an investment option because of the absence of the tax deductions which negative gearing provides. The data shows that a greater number of people on lower taxable incomes claim rental losses than those on higher incomes however, as a proportion of total taxpayers a greater proportion of high income earners claim rental losses and the value of these losses is greater for higher income earners. The longer term net rental losses chart indicates that negative gearing alone didn’t really result in a high level on net rental losses however, when the capital gains tax discount was halved that seemingly made negative gearing much more attractive and the losses began to add up. While scrapping negative gearing would likely provide a saving to the Budget bottom line, I believe it is unlikely to result in the substantial improvement in housing affordability that many are hoping for. Arguably removing the capital gains discount which was introduced after negative gearing is a good first step to addressing the problems and then Government can revisit negative gearing. The housing market has many moving parts that result in relatively expensive housing prices here in Australia. While the removal of negative gearing may help improve the Budget bottom line it is unlikely to be the silver bullet which improves housing affordability. Zoning restrictions on developable land which drive up the cost of housing, the tax-free nature of the family home, stamp duty, the mass-centralisation of our population and shortage of jobs away from the major capital cities all conspire to make housing less affordable. Any discussion about improving housing affordability shouldn’t solely focus on just one of the issues such as negative gearing rather it needs to look at all of the factors which contribute to high housing costs.

Combined capital city clearance rate of 77.8 per cent with the number of auctions almost doubling from last week

There were 1,582 capital city auction results reported this week with a preliminary clearance rate of 77.8 per cent. Compared to last week, the number of auctions is much higher, up from 1,201 last week, when the final auction clearance rate was recorded at 78.5 per cent. In comparison, over the same week last year, there were 2,108 auctions held and the clearance rate was 65.5 per cent. Since the third week of February, the combined capital city auction clearance rate has consistently been recorded at a higher level than at the same time last year, with the gap becoming increasingly significant. The preliminary clearance rate for Melbourne was recorded at 78.0 per cent this week, having decreased from 80.3 per cent over the previous week. Melbourne hosted 918 auctions this week, compared to 315 last week, when the auction market had a small rest with Monday’s public holiday. One year ago, 1,016 residential auctions were held across the city with a success rate of 69.2 per cent. The strongest clearance rate for any individual Melbourne sub-region this week was 92.6 per cent across the Outer East region where 50 auctions were scheduled and 41 results have been reported. Across Sydney there were 796 auctions this week and the preliminary clearance rate, across 621 results, was 86.5 per cent. In comparison, last week there were 603 auctions with a stronger clearance rate of 88.7 per cent, while last year, just under 70 per cent of all homes taken to auction recorded a successful result. Sydney’s auction clearance rate has been above the 85 per cent mark since the third week in April this year. Given Sydney’s strong result this week, it is not surprising that across the individual sub-regions, 6 regions saw the preliminary clearance rate come in above the 90 per cent mark. Brisbane’s preliminary clearance rate was 51.2 per cent this week, compared to last week’s final result of 48.5 per cent and 43.5 per cent last year. There were 132 Brisbane homes taken to auction over the most recent week, similar to last week 130 and the same as this time last year. The clearance rate across the Gold Coast this week was recorded at 44.4 per cent across 27 results, with some revision likely as more results across the region are reported. Across Adelaide this week, 85 homes were taken to auction with a preliminary clearance rate of 60.4 per cent. In comparison, last week, Adelaide’s clearance rate was 71.2 per cent, and at the same time last year it was 52.3 per cent. For Perth, the number of homes taken to auction this week fell from 48 last week to 29. The preliminary auction clearance rate was recorded at 30.8 per cent across 13 results. Canberra’s preliminary clearance rate was 70.0 per cent across 30 auction results. In Tasmania, 6 homes were taken to auction this week, with 1 sale recorded so far.

Commercial Market Update – Perth Cityscope

The latest research from Perth Cityscope shows property sales have decreased in the past three months. Sales recorded in the quarter ending June 2015 totalled $10.3 million, a decrease from the $87.8 million recorded in the three months to March 2015, and a decrease from the $89.5 million recorded to December 2014. This data brings the 12 month total to $391.6 million, a decrease from the $1.05 billion recorded the same time last year. The table below shows sales recorded for the past eight updates of Perth Cityscope. Recent standout sales in Perth include: 195 Hay Street, a 3-level building with retail space on the ground floor, residential back packer accommodation on the first floor and basement parking for 8 cars, was bought for $2.7 million. 139 Barrack Street, a single-storey retail building with room for one car to the rear, was bought for $1.5 million through Realmark Commercial. 716 Murray Street, a single-storey former house built circa 1900 and refurbished in 1997 with parking for 5 cars, was bought for $1.4 million through Burgess Rawson. Properties for sale in Perth in June 2015 include: 53 Ord Street, an A-grade office building of 5 storeys with a 2-level car park and a building area of 6,864 sqm is for sale through CBRE. Four Points by Sheraton Perth at 707-713 Wellington Street, an 8-storey, 278-room hotel is for sale through CBRE. Unit 19 at 160-162 Colin Street, part of the Blue Note Executive Offices, of 620 sqm on level one plus 13 car spaces on the basement level is for sale at $4.59 million through Burgess Rawson. Significant leasing opportunities in Perth in June 2015 include: 45 St Georges Terrace, a building of 9 floors of office space, 2 basement levels and 2 levels of plant and equipment, has 329 to 2,504 sqm available for lease through CBRE and Sheffield Property Group. Central Park at 777 Hay Street, a 48-storey office tower plus 4 levels of basement parking has 500 to 8,779 sqm for lease through Savills and JLL. 32 St Georges Terrace, a 16-storey commercial building expanded in 2014 to 14,895 sqm, with basement car parking for 46 vehicles, has 200 to 7,242 sqm in the redeveloped building available for lease through JLL and Knight Frank. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Auction Results – Week ending 5 June 2015

There were 38 commercial auctions reported over the week ending 5 June 2015 with a preliminary clearance rate of 57.9 per cent, only slightly lower than the 58.0 per cent recorded over the previous week across 69 results. At the same time last year, 72 commercial auction results were reported with 43 sales 59.7 per cent . Over the most recent four week period there were 258 properties taken to auction with 163 successful results. Of these 163 sales, 103 have been reported with a sale price, totalling just under $217.77 million. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Newcastle Cityscope

The latest research from Newcastle Cityscope shows that commercial property sales have decreased in the three months to June 2015. The most recent quarter had 25 sales at a total value of $22.2 million, as compared to 26 sales totalling $38 million in the three months to March 2015, though it is an increase from the 13 sales totalling $21.8 million for the quarter to December 2014. This latest data brings the total sales value in Newcastle Cityscope to $142 million for the year, a decrease from the $151.3 million recorded the same time last year. The table below shows sales recorded for the last eight updates of Newcastle Cityscope. Notable sales in the June 2015 update of Newcastle Cityscope include: 464-470 King Street , Newcastle West, a two-storey office building and an adjoining single-storey brick commercial building with a net lettable area 3,626 sqm mas bought for $3.85 million. 48-50 Hunter Street, Newcastle, a five-storey rendered brick building commercial with classical facade detail, built circa 1926 was bought for $3.745 million. The most notable property for sale in Newcastle Cityscope in the June 2015 update is: 11 Argyle Street, Newcastle, a six-storey building with 342 cars with two levels of office space and a total net lettable area 5,002 sqm is for sale by expression of interest closing 18 June 2015 through Knight Frank and CBRE. Leasing opportunities listed in the June 2015 update of Newcastle Cityscope include: 150-162 Wharf Road, Newcastle, a three-storey ferry building and two-storey wharf building, has 3,000 sqm of retail space for lease in June 2015 through Colliers International Newcastle. A future development at 16-18a Honeysuckle Drive, Newcastle West has 7,000 sqm for lease in a future development on the site through Colliers International Newcastle. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Canberra’s commercial activity reaches $97.34 million worth in sales

With the Canberra property market behind the other Eastern seaboard markets, two interesting results have emerged. The first sale is that of the Novotel in the CBD at 65 Northbourne Avenue. The hotel was sold by GW Hotels Pty Ltd, a subsidiary of Tourism Asset Holdings Ltd and in turn an asset of the Abu Dhabi Investment Authority. This investment vehicle, a sovereign wealth fund owned by Emirate of Abu Dhabi was founded in 1976 for the purpose of investing funds on behalf of its Government. The hotel was sold for $77.34 million. According to Canberra Cityscope, the Novotel Canberra, which includes the Jolimont retail centre, was built in 1983 and is a six-storey building with basement parking. The 286-room hotel was refurbished and extended in 2009. Besides the hotel the property includes various small retail outlets such as Greyhound Australia,an Ezymart and several cafes and restaurants. The property last traded at $10 million in 1998. Another noteworthy Canberra sale is the purchase of the commercial tower at 20 Allara Street in the CBD, which was bought for about $20 million. Interestingly, the purchaser is the Morris Property Group, a residential apartment developer owned by Barry Morris of Queensland. This perhaps foreshadows a residential conversion for the site, a trend already strong in the eastern states and yet to have a big impact in Canberra. The property currently comprises an 11-storey office building in Allara Street and a 3-storey office and retail section along City Walk on a site area of over 3,000 sqm. The property last traded at $23.25 million in 2003. Meredith Baume Commercial Research Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Auction volumes rise after another strong clearance rate was confirmed for last week

CoreLogic RP Data National Auction Preview, week ending 14 June 2015 Auction volumes are set to rise this week, given the number of homes taken to auction last week were down significantly due to the Monday public holiday across most states and territories. Volumes are set to rise by almost 60 per cent, from 1,201 last week to 1,905 this week. The combined capital city weighted clearance rate was recorded at 78.5 per cent across the 1,054 auction results reported last week. So far this year, it has been apparent that even in weeks where auction volumes are low, demand across the auction markets, especially Sydney, has remained strong. This week, there are 864 Melbourne auctions scheduled, more than doubling from 315 last week. Last week, Melbourne’s clearance rate was recorded at 80.3 per cent, having remained steady when compared to the previous week 80.2 per cent , showing that limited stock across the region did nothing to slow down demand. One year ago, 1,016 Melbourne homes were taken to auction, with a 69.2 per cent success rate. Across Sydney, auction volumes didn’t fall as much as they did in Melbourne last week, with 603 Sydney homes taken to auction with a final clearance rate of 88.7 per cent. This week, 753 Sydney homes will be taken to auction and given Sydney’s clearance rate has remained above the 85 per cent mark for the last 8 weeks, it is likely another strong result will be recorded this week. At the same time last year, Sydney’s auction clearance rate was recorded at 69.3 per cent when 798 properties went to auction. Brisbane is expecting a similar number of auctions this week when compared to last week, with 120 homes set to go under the hammer. Last week a clearance rate of 48.5 per cent was recorded when 130 homes went to auction In Adelaide, CoreLogic RP Data is currently expecting 80 auctions this week, following a 71.2 per cent clearance rate across 62 auctions last week. Although Adelaide’s auction volumes remain relatively low, especially compared to Australia’s larger auction markets of Sydney and Melbourne, the clearance rate across the city is becoming increasingly strong, with last week’s clearance rate the strongest since the first week in April, albeit across a relatively low volume of auctions. There are 53 Canberra auctions scheduled this week, compared to 38 last week and 41 at the same time last year. Across Perth, only 28 auctions are currently being tracked this week, down from 48 last week and also slightly lower than at the same time last year 32 . Once again, the individual suburb with the highest number of residential auctions scheduled this week is located in Melbourne. CoreLogic RP Data is expecting 21 South Yarra auctions to be held.

Investors keep powering the housing market

The Australian Bureau of Statistics ABS released housing finance data for April 2015 earlier today. The seasonally-adjusted data showed that over the month there were a total of $32.7 billion in housing finance commitments with the value of commitments increasing 2.9% over the month and by 18.7% year-on-year. The raw data provides further insight into the make-up of mortgage lending although the figures are slightly different to the seasonally-adjusted data. As the first chart shows, for the 26th straight month, investors account for the greatest proportion of overall lending while investors and refinances are the only segment of lending recording any significant increase. In fact, over the past year the value of investment commitments has on average been more than 4.5 times greater than the value of commitments to first home buyers. The seasonally-adjusted data shows that in April there was $19.2 billion in commitments to owner occupiers and $13.5 billion in commitments to investors. Keep in mind that the owner occupier figure includes both commitments to owner occupiers which include first home buyers and refinances by owner occupiers. Over the month, the value of housing finance commitments to owner occupiers rose 3.1% to be 15.6% higher year-on-year. The investment segment of the market has been growing at a much more rapid pace than owner occupier lending, over the month the value of investment housing finance commitments rose 2.6% to be 23.6% higher year-on-year. Focussing solely on the owner occupier segment of lending there was $19.2 billion in lending to owner occupiers in April 2015. The data was made up of $1.8 billion 9.6% in commitments for construction of dwellings, $1.0 billion 5.3% for purchase of new dwellings, $6.6 billion 34.2% for refinances of established dwellings and $9.8 billion 50.9% for the purchase of established dwellings. Overall, there was $6.6 billion worth of refinancing and $12.7 billion in new lending. Over the month, the change in the value of owner occupier housing finance commitments was: +4.6% for construction, +3.5% for purchase of new, +4.5% for refinances and +1.8% for purchase of existing. Year-on-year, the change was recorded at: +5.4% for construction, +14.0% for purchase of new, +38.8% for refinances and +5.8% for purchase of existing. The 38.8% year-on-year increase in refinance commitments is the largest since January 2004. It highlights that many mortgage holders are shopping around for a better deal on their mortgage. It may also reflect that people are re-drawing their equity to re-invest or fund their lifestyle. Looking at the investment segment, the $13.5 billion worth of commitments in April was made-up of $0.9 billion 6.4% for construction of new homes and $12.6 billion 93.6% for purchase of existing homes. Over the month, the value of housing finance commitments to investors for construction of new homes fell -9.1% while commitments for purchase of existing homes rose 3.5%. Year-on-year, commitments for construction of new dwellings rose 25.6% compared to a 23.4% rise in commitments for purchase of existing homes. The data for both owner occupiers and investors shows that very little is actually going towards new housing. Just $3.7 billion of the $32.7 billion in commitments was to new housing representing just 11.4% of all housing finance commitments. Over the past two years, the value of housing finance commitments for new housing stock has increased by 31.2% compared to a 43.9% rise in commitments for existing stock. We have recently seen building approvals hit new record high levels and it does pose the question just who is buying all this new stock. Remember that the housing finance data is only collected across Australian Authorised Deposit-taking Institutions ADIs so overseas buyers are not captured in this data. Of course it is perfectly legal for overseas buyers to buy off-the-plan or newly built housing stock. This data suggests there is a lot of purchasing taking place by non-residents given the ramp-up in new construction appears misaligned to the commitments data for new homes. The housing finance data shows that investors and owner occupiers refinancing their existing mortgages remain the clear divers of the current housing market. Over the past month we have seen a number of ADIs changing their lending criteria and this may start to result in a cooling of the investment segment of the market. It is encouraging to see some strength returning to the owner occupier segment of the market with new loans to this segment up 3.1% so far this year after only increasing by 5.6% throughout all of 2014. If the investment segment does begin to slow over the coming months it will be important to see a pick-up in the owner occupier segment of lending.

Despite low volumes, capital city clearance rates remain strong at 79.2 per cent

The preliminary auction clearance rate was recorded at 79.2 per cent this week across 872 auction results. Given the public holiday on Monday, the number of homes taken to auction this week 1,155 has fallen in comparison to the previous week, when 2,792 homes were taken to auction. Last week, the final auction clearance rate was recorded at 78.5 per cent, bringing the combined capital city clearance rate for May to 78.4 per cent, only slightly lower than April’s result 78.8 per cent . Across Melbourne this week, auction volumes were significantly lower than the previous week, falling from 1,248 to 302. The preliminary auction clearance rate for Melbourne was recorded at 78.4 per cent across 255 results, which is a decrease from the final auction clearance rate last week 80.2 per cent . At the same time last year, 335 Melbourne homes were taken to auction and the clearance rate was 62.4 per cent. The Melbourne sub-region with the highest number of auctions this week was the South East, where 49 auctions were held. In terms of clearance rate, the strongest performing region was the Outer East region, with a preliminary clearance rate of 95.5 per cent across 22 results. This week, Sydney’s preliminary auction clearance rate was recorded at 90.1 per cent, up from the final result over the previous week at 85.0 per cent. There were 573 Sydney auctions held this week, with 464 results reported to CoreLogic RP Data so far. The first five months of 2015 have proved to be the strongest on record for Sydney with an estimated 85 per cent of all homes taken to auction recording a successful result. This week, Sydney’s strongest performing sub-regions were the City and Inner South 97.9 per cent , North Sydney and Hornsby 96.3 per cent , Ryde 96.3 per cent and Sutherland 96.1 per cent regions. The preliminary clearance rate for Brisbane was recorded at 52.2 per cent this week, compared to 48.0 per cent last week and 37.3 per cent at the same time last year. There were 129 homes taken to auction in Brisbane this week, lower than the 213 held last week. Across the Gold Coast, 52.9 per cent of the reported auctions have sold. Adelaide saw 61 homes taken to auction this week, with a preliminary clearance rate of 69.0 per cent. Last week, there were 95 Adelaide auctions and the final auction result was recorded at 67.4 per cent. Unlike each of the other capital cities, the number of auctions held in Perth this week increased, up from 21 last week to 47 this week. The preliminary clearance rate for Perth was recorded at 38.1 per cent across 21 auction results. Canberra’s preliminary clearance rate this week was 84.2 per cent across 19 auction results. There were 38 homes taken to auction in the city this week. In Tasmania, 5 auctions were held and so far 4 results have been reported. Of the reported results, 2 properties have sold.

Capital city auction volumes slow due to public holiday

CoreLogic RP Data National Auction Preview, week ending 7 June 2015 Given that all states and territories, except for Western Australia, have a public holiday on Monday the 8th of June auction market activity will be much quieter this week with many vendors choosing to hold off on taking their property to auction. Perth is the only capital city auction market where volumes are set to rise on a week-by-week basis. There are just 1,016 capital city auctions scheduled this week, down significantly from 2,792 last week. The slow-down in auction volumes comes after a strong month of auction activity, with the final auction clearance rate for the last week in May recorded at 78.5 per cent, significantly higher than at the same time last year, when the clearance rate was recorded at 66.4 per cent. The latest result brings May’s clearance rate across the combined capitals to 78.4 per cent. Given most of Melbourne’s auctions are held on a Saturday, auction volumes are prone to falling over the weeks that lead up to a long weekend. There are only 253 Melbourne auctions scheduled this week, down 80 per cent from last week 1,248 . Melbourne’s final auction clearance rate was recorded at 80.2 per cent last week, bringing May’s clearance rate for the city to 80.3 per cent. Sydney auction volumes are more ‘immune’ to public holidays, partially due to the fact that the city is often host to a number of mid-week auctions. This week, there are 508 Sydney homes being taken to auction, compared to 1,149 last week. Sydney’s clearance rate for May was recorded at 86.2 per cent, strengthening from the previous month 85.9 per cent . This week, the number of Brisbane auctions scheduled is 114, down from 213 last week, a particularly busy week for the city. One year ago there were 95 Brisbane homes taken to auction. Adelaide is expecting 58 auctions this week, compared to 95 last week and 78 last year. Across Canberra only 35 auctions will be held this week, down from 52 last week and 44 one year ago. In Perth, the only city that doesn’t have a public holiday on Monday, auction volumes are set to increase this week, up from 21 last week to 44 this week. At the same time last year there were 38 Perth auctions held. Usually, the individual suburb with the highest number of auctions for the week is located in Melbourne; however this week, due to the drop in auction volumes, Mosman in Sydney has the highest number of auctions, with 13 scheduled for this week.

Commercial Auction Results – Week ending 29 May 2015

Over the week ending 29 May 2015, the preliminary clearance rate was recorded at 55.3 per cent across 38 auctions, down from 61.8 per cent the previous week, when 68 commercial auction results were reported. One year ago, the auction clearance rate was tracking at a similar level, recorded at 59.1 per cent when there were 88 auctions held over the week. Over the four weeks ending 29 May 2015, there were 224 commercial properties taken to auction, with 142 reported sales, resulting in a 63.4 per cent success rate over the period. Of the 142 sales, 98 have been reported with a sale price, totalling $220.41 million. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Brisbane South Cityscope

The latest research from Brisbane South Cityscope shows property sale numbers have increased in the past three months. The last three months to the end of May 2015 recorded 23 sales for a total of over $185.5 million; with $23.2 million for commercial, $1.6 million for retail strata and $36.4 million for other. In comparison, the three months to the end of February 2015 recorded 17 sales for a total of $137.8 million, with $115.4 million for commercial, $2.8 million for commercial strata and $19.6 million for other. The 12 months leading up to the end of May 2015 recorded 68 sales for a total of over $524.7 million, over $70 million higher than the recorded figure for the same time period the year before. The table below shows sales recorded for the past eight updates of Brisbane South Cityscope: The top three most significant sales recorded this quarter together totalled over $68 million: 1 Cordelia Street, South Brisbane – A three-level former educational building. Sold for $46 million td 22.03.2015 to R&F Mega Property Pty Ltd. 22 Merivale Street, 26 Merivale Street, 28 Merivale Street, South Brisbane – a two-storey, office/showroom building and two, high-clearance warehouses were bought for $22.15 million td 04.05.2015 by Merivale JV Pty Limited, as trustee for the Merivale JV Unit Trust. Carl Charalambous from Elders Commercial Brisbane negotiated the sale. 41 Buchanan Street, West End, a four-storey office/educational building. Bought for $20 million cd 31.10.2014, td 17.02.2015 by Green Future Aust Pty Ltd, as trustee for the Buchanan St Trust. Nick Spiro and Andrew Gard from Wright Property negotiated the sale, which represented an initial yield of 7.69% on a passing income of $1.537 million net . Properties listed for sale include: 99 Melbourne Street, South Brisbane – a five-storey office building with ground floor retail space. For sale by expressions of interest, closing June 18, 2015; agent, CBRE Brisbane Bruce Baker and Flint Davidson . 137 Melbourne Street, South Brisbane – a single-storey, raised, brick-built former house, used commercially. For sale with a reduced asking price of $1.9 million; agent, Chesterton International Warren Jopson . 23-27 Merivale Street, South Brisbane – Centrelink Building, a two-storey office building, used as a call centre. For sale with offers over $30,000,000 considered; agents, CBRE Sydney Rick Butler , CBRE North Sydney Matthew Ramsey and Deloitte Capland Real Estate Advisory James Walsh . CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Macquarie Park Cityscope

The latest research from Macquarie Park Cityscope shows property sales have increased in the past three months. Sales recorded in the quarter ending May 2015 totalled $132 million, an increase from the $63.6 million recorded in the three months to February 2015, but a decrease from the $252.2 million recorded to November 2014. This data brings the 12 month total to $590.9 million a decrease from the $738.7 million recorded the same time last year. The table below shows sales recorded for the past eight updates of Macquarie Park Cityscope. Recent standout sales in in the area covered by Macquarie Park Cityscope include: 6 and 7 Eden Park Drive Macquarie Park, two buildings with a total net lettable area of about 18,131 sqm; 6 Eden Park Drive, the CA building is a 6-storey commercial building; 7 Eden Park Drive, Dupont House, is a six-storey office building with ground floor retail. They have a total of 324 car parking spaces. The buildings were bought for $81,800,000 in a sale handled by Chesterton International North Sydney and Savills. A half-share of 68 Waterloo Road Macquarie Park, a 5-storey office and research building, was bought for $20,629,504. 1-7 Waterloo Road Macquarie Park, a 3-storey, 3,201 sqm, building; partly office and partly high-clearance warehouse with parking for 101 cars, was bought for $7,500,000 in a sale handled by JLL North Sydney. Properties for sale in the area covered by Macquarie Park Cityscope in May 2015 include: 4 Sirius Road Lane Cove West, a 3-storey office and high-clearance warehouse building, and a two-storey office and warehouse building is for sale through CBRE. The building last traded at $9,750,000 in April 2009. 125 Bowden Street Meadowbank, a 489 sqm high-clearance warehouse with office space is for sale through Knight Frank North Sydney. 21 Sirius Road Lane Cove West, a 2-storey, 1,193 sqm, office building with a single-storey workshop is for sale through Griffin Property. Significant leasing opportunities in the area covered by Macquarie Park Cityscope in May 2015 include: Citrix House at 1 Julius Avenue North Ryde, a 5-storey, 14,479 sqm, commercial building with parking for 395 vehicles; has office space of 566 to 7,544 sqm through Colliers International. The former Fujitsu House at 2 Julius Avenue North Ryde, a 5-storey, 7,227 sqm, office building with parking for 263 vehicles; has office space of 7,227 sqm through Colliers International North Sydney. 54 Waterloo Road Macquarie Park, two 2-storey commercial, research and industrial buildings with total net lettable area of 5,394 sqm, have office space of 1,166 to 5,394 sqm through Knight Frank North Sydney. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Hong Kong investors buy North Sydney office tower for $58 million

A North Sydney office tower has changed hands at $58 million. The property, at 140 Arthur Street, North Sydney was sold by Bevan Kenny and Chris Veitch of Chesterton International North Sydney and Dominic Ong and James Parry of Knight Frank Sydney. Vendor was fund manager CorVal, on behalf of the Victorian Funds Management Corporation a Victorian fund which provides investment and funds management services to Victorian public authorities , Funds SA a SA fund which manages and invests public sector assets and the Future Fund a Federal fund to help meet future superannuation liabilities . The buyer, HK Realway, is owned by Ling L Wong and Yun C Choi of Hong Kong and is a private company that engages in overseas property investment and management. The sale follows its previous purchases of a 13-storey office building at 309 George Street, Sydney and a 10-level car parking station at 521 – 527 Kent Street, Sydney. According to North Sydney Cityscope, the property is a 17-storey office building with basement parking which was completed in 1973 and refurbished in 1996. With a building area of 8,384 sqm, the property has a NABERS rating of 3.5 starts. It is fully leased and its major tenants include NSW Business Chamber, Active International and University of South Australia. The property last traded at $39 million in December 2012 which represented an initial yield of 9.53% on passing income of $3,727,100. This sale, at $58 million, equates to a yield of about 7.5% and is evidence that the commercial market is also performing strongly in this rising Sydney market. Meredith Baume Commercial Research

Dwelling approvals remain high but ease in April

Earlier this week the Australian Bureau of Statistics ABS released building approvals data for April 2015. The data showed that after a record high number of approvals in March, approvals fell to their lowest levels since November of last year. Despite the fall, when compared to historic levels, dwelling approvals remain very high as the dwelling construction boom continues. In April there were 18,715 dwelling approvals nationally which was -4.4% lower over the month from a record high in March. Although the number of approvals fell over the month, they were still 16.3% higher year-on-year. Over each of the past six months there have been more than 18,000 dwelling approvals each month. To provide some context as to the surge in approvals, over the past decade there has been an average of 13,922 approvals each month while over the past two years, the average has increased to 17,861 approvals a month. Of the 18,715 dwelling approvals in April, there were 10,264 houses and 8,451 units approved for construction. Over the month, house approvals rose by 4.7% and house approvals recorded their highest monthly volume since February 2010. On the other hand, the more volatile unit sector saw approvals fall by -13.6% over the month which is their lowest monthly level since October 2014. Year-on-year, house approvals have increased by 8.8% while unit approvals have increased by 26.8%. Over the past 12 months, a record high 45.9% of all dwelling approvals were for units. Looking more closely at the type units being approved, the data shows that there is a surge in high density unit approvals; note that this data is not seasonally adjusted. Over the 12 months to April 2015 there were 26,594 townhouses approved for construction compared to 69,814 apartments. Of the townhouses approved 33.6% were one storey and 66.4% were two or more storeys. Looking at the apartments, 7.7% were in a one or two storey block, 8.4% were in a three storey block and 83.9% were in a four or more storey block. High-rise apartments ie four storey’s or higher accounted for a record high 27.6% of all dwelling approvals over the past year. It is clear that developers are building more higher density stock which is, in most instances, located within or close to the city centre of our major capital cities. Focussing on capital city data, which is also not seasonally adjusted, it shows that in April there were 12,843 dwelling approvals. The 12,843 approvals was a -16.7% decline in approvals over the month however, year-on-year approvals were 13.0% higher. Over the month dwelling approvals fell across most capital cities except for Melbourne, Darwin and Canberra. Year-on-year monthly dwelling approvals are higher across each capital city except for Adelaide. Of the 12,843 capital city dwelling approvals in April, 6,300 were for houses and 6,543 were for units. It was the seventh consecutive month in which unit approvals were greater than house approvals. Over the month, house approvals fell by -6.0% compared to a much greater -25.0% fall in unit approvals. Year-on-year house approvals have increased by 11.3% compared to a 14.6% rise in unit approvals. Over the 12 months to April 2015 there has been a record high 163,576 dwelling approvals across the combined capital cities. To put the surge in approvals into perspective, two years ago there had been just 117,549 approvals over the year. Over the year, dwelling approvals increased across each capital city except Canberra and were at record highs in Sydney, Melbourne and Brisbane. The greatest increases in approvals over the year were recorded in Hobart 53.0% , Brisbane 28.0% , Melbourne 22.7% and Darwin 22.0% . Approvals fell in Canberra -24.8% over the year and increases were relatively moderate in Sydney 8.6% , Adelaide 6.7% and Perth 12.5% . There were 76,872 capital city house approvals over the past year, which is a 12.6% year-on-year increase and the highest number of approvals since the 12 months to May 1989. The number of house approvals was higher over the year across all capital cities except Adelaide -2.1% and Canberra -14.2% . The greatest increases were recorded in Hobart 52.3% , Brisbane 27.0% and Sydney 18.4% while increases were more moderate in Melbourne 14.3% , Perth 6.1% and Darwin 8.3% . In Sydney 34.0% , Melbourne 43.3% , Brisbane 42.8% , Darwin 42.8% and Canberra 37.7% less than 50% of all dwelling approvals were for houses. In Adelaide 62.9% of all approvals were for houses compared to 72.2% in Perth and 84.3% in Hobart. There were a record high 86,704 capital city unit approvals over the 12 months to April 2015, an 18.0% year-on-year rise. Annual unit approvals were at a record high in Melbourne and Brisbane. The annual number of unit approvals was higher over the year across each capital city except for Canberra -30.0% . The greatest annual increases in approvals were recorded in Hobart 56.8% , Darwin 34.8% , Perth 33.2% and Melbourne 29.9% . The annual increases were only slightly lower in Brisbane 28.7% and Adelaide 25.9% but much lower in Sydney 4.1% . After recent record high approvals, we may have passed or are currently close to peak approvals. As the Reserve Bank has previously stated, the challenge is extending this period of heightened construction for as long as possible. With many banks now tightening lending criteria for investors that may prove difficult. New stock, particularly units, tends to appeal to investors because of the depreciation benefits as well as the higher yield profile and strategic location of many of these new developments. With investor lending a focus by the banks, some projects may start finding it harder to achieve the necessary presales to enter construction. As shown in the ABS’ data released last week relating to construction work done, engineering construction is slumping due to the end of the resource investment boom. Residential building is increasing and assisting in offsetting this decline however, the improved performance of the residential construction sector is nowhere near large enough to offset the downturn in mining related investment entirely. The ABS building approvals data will be very important to watch over the coming months as we start to see what, if any effects, there are from the banks tightening their lending criteria. If it results in a fall in the residential construction pipeline dwelling approvals , it will make the Reserve Bank’s job of rebalancing the economy even more difficult, particularly as mining investment continues to slide.

Both auction volumes and the preliminary auction clearance rate remain strong leading up to the Queen’s Birthday long weekend

There were 2,727 homes taken to auction this week, up from 2,599 over the previous week. The preliminary clearance rate was recorded at 78.9 per cent, down slightly from 79.1 per cent last week, making it the tenth week in a row where the combined capital city clearance rate has been above the 77 per cent mark. Although auction volumes were higher at the same time last year 3,072 , the auction clearance rate was lower, at 66.4 per cent. In Melbourne, Australia’s largest auction market, there were 1,221 auctions held across the city. Of the 1,053 results reported so far, the preliminary clearance rate is 78.3 per cent. In comparison, last week, Melbourne recorded a final clearance rate of 82.1 per cent across 1,162 auctions. One year ago, Melbourne’s clearance rate was recorded at 65.4 per cent across 1,356 auctions. Across Melbourne’s sub-regions, the Inner region had the highest number of auctions this week 296 , with a preliminary clearance rate of 73.8 per cent, while the Outer East region of Melbourne had the strongest result, with 88.8 per cent of reported auctions selling. Across Sydney, 1,120 homes were taken to auction this week with a preliminary clearance rate of 86.5 per cent across 882 reported results. Last week, 1,018 Sydney properties were taken to auction with a clearance rate of 86.2 per cent. At the same time last year, Sydney’s auction clearance rate was 73.0 per cent across 1,316 auctions. This week, across Sydney’s individual sub-regions, Baulkham Hills and Hawkesbury 94.7 per cent , City and Inner South 92.5 per cent , Inner West 92.3 per cent and Sutherland 91.2 per cent regions all recorded strong preliminary clearance rates. This week, Brisbane’s preliminary clearance rate was recorded at 52.1 per cent, up from 46.2 per cent last week and 42.5 per cent at the same time last year. There were 209 Brisbane auctions this week, compared to 159 last week and 219 last year. The Gold Coast’s preliminary clearance rate was 40.3 per cent across 62 results this week. In Adelaide 92 auctions took place this week with a clearance rate of 72.1 per cent. In comparison, at the same time last year, 87 Adelaide homes were taken to auction and 55.3 per cent were reported as sold. A total of 20 Perth homes were taken to auction over the week, with 10 results reported so far. Perth’s preliminary clearance rate of 50 per cent across these 10 results is similar to this time last year, when the clearance rate was 52.2 per cent. In Canberra, 52 auctions were held over the week. 70.4 per cent of the reported auctions were successful. Tasmania saw 13 auctions take place this week. Of the 11 results that have been reported so far, 4 have sold.

More residential listings are being added to the market when compared to last month, but new listings remain lower than last year

The number of new listings that have been added to the market over the most recent four week period is significantly higher than it was at the same time last month. On a capital city basis, new listings numbers have increased by 7.6 per cent for houses, 10.5 per cent for units, while for vacant land, new listings are -2.7 per cent lower than they were last month. Despite this increase, when compared to the same time last year, the number of new listings being added to the market is still lower across each individual capital city and similarly, across each state and territory with the exclusion of the Northern Territory, where new listing number are 5.8 per cent higher than they were one year ago. According to CoreLogic RP Data, there are 99,783 residential properties across Australia’s capital cities currently available for sale. One year ago, the number of properties available for sale was 5.4 per cent higher 105,183 . Perth and Darwin are the only two cities where the number of properties currently available for sale is higher than the number of properties that were available for sale at the same time last year. To put that into perspective, compared to last year, there are an additional 2,560 Perth properties available for sale, and an additional 379 Darwin homes available for sale. Given some general weakness across these two markets, with capital growth across Perth and Darwin over the past year lacklustre when compared to Australia’s other capital cities, and the average time it takes to sell a home across these two cities increasing over the year, this result is not a surprise. Similarly, across the states and territories, the Northern Territory and Western Australia both have more homes available for sale currently than they did one year ago, however the same can also be said for South Australia +1.2 per cent and Queensland +0.3 per cent , where the total listings volumes are also higher than they were one year ago. Across each of the remaining states and territories, the number of homes available for sale currently is lower than they were over the corresponding four week period last year. New South Wales -14.7 per cent and the Australian Capital Territory -13.2 per cent are showing the most significant fall in total listings, while across Victoria -2.6 per cent and Tasmania -2.9 per cent the difference in the number of listings when compared to one year ago is less prominent.

CBD hotel sold for $445.3 million

A third luxury Sydney CBD hotel has been sold in four weeks. Following the sales of the Sofitel Wentworth at $224 million and the Sydney Hilton at $442 million is the sale of the Sydney Westin Hotel at $445.3 million. The vendor, GIC Pte Ltd, is a sovereign wealth fund established by the Government of Singapore in 1981 to manage Singapore’s foreign reserves for the well-being of current and future generations of Singaporeans. The sale was arranged by Peter Harper and Craig Collins of JLL and Stephen Burt and Gus Moore of Colliers International. Purchaser was a partnership of the Singaporean Far East Organisation and Hong Kong based Sino Group. The Far East Organisation was established in 1960. Effectively owned by brothers Robert and Phillip Ng, it is the largest private property developer in Singapore. The Sino Group, one of the leading property developers in Hong Kong, is a public company also associated with the Ng family. According to Sydney Cityscope, the Westin is a 32 level, 416 room, 5-star hotel. The hotel features a 32 metre high mural by Australian artist Frank Hodgkinson in the foyer area, one of the largest in Australia. Set partly in the heritage-listed 1844 GPO building, it also includes the Grand Ballroom, a pillar-free function room catering for 1,000 people, a 1,000 sqm courtyard, 49 heritage rooms and several luxury designers’ retail outlets. The property last traded at $160 million in 2002. This sale, at $445.3 million, apparently reflects a yield of approximately 4.5%. The sale price equates to a record price of $1.2 million per room, which reflects the strong demand for Sydney’s hotel market. Meredith Baume Commercial Research

The lead up to the Queen’s birthday weekend pushes auction volumes higher

CoreLogic RP Data National Auction Preview, week ending 31 May 2015 Auction volumes are set to reach their highest level since the last week in March, however the current scheduled number of auctions 2,591 remains below the levels seen one year ago 3,072 . So far this year, while the clearance rate has been much higher than last year, auction volumes have been just 1.3 per cent higher. Last week, the final auction clearance rate increased to 79.1 per cent, from 77.5 per cent over the previous week. With volumes rising this week, it will be interesting to see if the strength across the auction market can be maintained. In Melbourne, it is expected that 1,149 residential properties will be taken to auction this week, compared to 1,162 last week, when the final auction clearance rate of 82.1 per cent was recorded. Last week’s clearance rate was one of the strongest clearance rates for the city so far this year. One year ago, 1,356 Melbourne homes were taken to auction, with a clearance rate of 65.4 per cent. This week, the number of auctions scheduled across Sydney is only slightly lower than Melbourne, at 1,087. This will be the 5th week so far this year where Sydney’s auction volumes for the week have surpassed the 1,000 mark, which is lower than last year 7 weeks , despite the strengthening clearance rate. In Brisbane, 137 auctions are scheduled this week, compared to 159 last week and 219 last year. This week there are 88 auctions expected in Adelaide, the same as last week and almost unchanged when compared to last year 87 . There are 54 Canberra homes listed for auction this week, a decrease from 96 last week, which was the highest number of weekly auctions for the city so far this year. At the same time last year 40 auctions were held across Canberra. In Perth, CoreLogic RP Data is currently expecting 19 auctions over the current week, down significantly from 53 last week and also lower than the 30 held one year ago. The three suburbs which will host the highest number of auctions this week are all located in Victoria Camberwell, Reservoir and South Yarra .

Commercial Auction Results – Week ending 22 May 2015

The preliminary auction clearance rate over the week ending 22 May 2015 fell to 50.0 per cent, from 69.3 per cent over the previous week. Auction volumes were also down, from 75 the previous week to 30 last week, however, it is expected the number of auctions will revise upwards when the final results are reported next week. One year ago, there were 51 commercial auctions with a clearance rate of 56.9 per cent. Over the most recent four week period, there has been 131 sales recorded from a total of 208 commercial auctions. Of the successful results, 91 have been reported with a sale price, totalling just short of $158 million. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Sydney Cityscope

The latest research from Sydney Cityscope shows that Sydney CBD commercial property sales for the three months ending May 2015 have increased from the preceding quarter. There were 97 sales recorded for the most recent quarter with a total value of $1.795 billion, as compared to 86 sales for a total of $1.059 billion for the quarter ending February 2015 and 85 sales for a total of $1.538 billion for the quarter ending November 2014. For the year ending May 2015, there were 369 sales recorded for a total of $5.973 billion, compared to 363 sales for a total of $4.659 billion for the year ending May 2014. The table below shows sales recorded for the last eight updates of Sydney Cityscope: Recent notable sales in Sydney include: Hilton Sydney, a 577-room, five-star hotel of 44 levels, redeveloped over a period of three years, completed and reopened in July 2005, which was bought for $442 million by Bright Ruby Resources Pte Ltd, a Singapore-based Chinese Investment group, in a sale handled by JLL Hotels & Hospitality Group. The vendor, Hilton International Co, will continue to operate the hotel under a 50-year management contract; The 75-year leasehold of Sofitel Wentworth Sydney, a 436-room, five-star hotel of 19 storeys, built in 1966 and last refurbished in 2007, which was bought for $224 million by Frasers Hospitality Real Estate Investment Trust FH-REIT ; 60 Carrington Street, an 18-storey office building completed in 1971 and last refurbished in 1996 with 13,862 sqm commercial space and 686 sqm ground level retail space, which was bought for $118 million; and 309 George, a 13-storey building with 2 basement levels , completed in 1965 and refurbished in 1994 and again in 2005, which was bought for $112.3 million in a sale handled by JLL Sydney and Knight Frank Sydney. The sale represented an initial yield of 6.26% on passing income of $7,028,901. Properties for sale in Sydney Cityscope in May 2015 include: Bligh House at 4 Bligh Street, a 17-storey office building completed in 1964 and featuring 21 basement parking spaces and ground floor retail space, available through Colliers International and CBRE; Lutheran Church Centre at 17-19 Valentine Street, a three-storey building on a 172-sqm parcel of land, by expressions of interest through Colliers International; A 671-sqm parcel of land at the northern end of the site at 15-31 Parker Street, available through Colliers International; and Unit 1 at 209 Clarence Street, a 192-sqm retail unit with frontage to 350 Kent Street, which is to be auctioned by Metro Commercial. Properties with space for lease in Sydney Cityscope in May 2015 include: 83 Clarence Street, a 19-storey building with two levels of car parking and two floors of retail space, which has office floor space ranging from 180 to 3,000 sqm for lease through Dexus Property Group and Colliers International; Treehouse, at 227 Elizabeth Street, a 24-level commercial building with two levels of basement parking and retail on the ground and lower ground floors, which has office space of 93 to 9,450 sqm available for lease through Colliers International; No 1 Martin Place at 374-376 George Street, a 24-level office tower with 7 levels of basement parking for 382 cars, which has office space of 485 to 6,500 sqm for lease through DTZ Australia and CBRE; and 1 York, a 25-storey office building with typical floor area of 859 sqm and four levels of basement car parking, which has office space of 80 to 4,860 sqm for lease through CBRE and Colliers International. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Southbank Cityscope

The latest research from Southbank Cityscope shows property sales have increased in the past three months. Sales recorded in the quarter ending May 2015 totalled $517.3 million, an increase from the $367 million recorded in the three months to February 2015, and a decrease from the $542.9 million recorded to November 2014. This data brings the 12 month total to $1.8 billion, a large increase from the $683 million recorded the same time last year. The table below shows sales recorded for the past eight updates of Southbank Cityscope. Recent standout sales in Southbank include: 97A Kavanagh Street, Southbank, 6-10 Power Street, Southbank and Citylink, Southbank, three parcels of vacant land, partly used for parking and with a combined site area of 20,259 sqm was bought for $145 million. 274 City Road Southbank, 272 City Road Southbank and 270 City Road Southbank, a single storey showroom, a 2-storey brick building and a 2-storey former Victorian warehouse was bought for more than $20 million in a sale handled by Conquest Estate Agency. 42-48 Moray Street, Southbank, a two-storey brick building with ground-floor showroom and workshops and first-floor offices, was bought for $13.5 million in a sale handled by CBRE Melbourne. Properties for sale in Southbank in May 2015 include: 153-159 Sturt Street, South Melbourne, a two-storey retail building constructed in 1952 total building area 1,825 sqm with parking for 30 vehicles, is for sale through CBRE and Gross Waddell. The property last traded at $5 million in October 2007. Russell & Russell Building, 11-13 Hancock Street, Southbank, a single-storey brick workshop constructed in 1940 site area 168 sqm , is for sale through agent Savills. The property last traded at $1.233 million in March 2012. 33 Park Street, South Melbourne, a three-storey brick and concrete office building, constructed in 1971 on a site of 405 sqm, is for sale by auction scheduled for May 21, 2015 through CBRE Melbourne. The property last traded at $705,000 in June 1992. Significant leasing opportunities in Southbank in May 2015 include: 380 City Road, a 2-storey, 2,287 sqm, industrial building, has 1,400 to 4,043 sqm for lease through Lemon Baxter. The Primrose Potter Australian Ballet Centre, 2-6 Kavanagh Street, Southbank, a six-storey concrete building with three floors of offices above a three-level 436-space car park has 480-1,950 sqm for lease through Gross Waddell. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

APRA data shows investment lending continues to outpace growth on owner occupier loans

The Australian Prudential Regulation Authority APRA released their quarterly Authorised Deposit-taking Institution ADI Property Exposures data for March 2015 earlier today. The data always provides a valuable insight into current and historic mortgage lending by domestic ADIs and this quarter’s release was no different. Given the heightened vigilance from APRA around investment lending and overall lending standards as well as recent changes to mortgage policies from many banks, the latest release from APRA may also signal a cyclical peak in investment lending as well as interest-only mortgage lending. Based on the value of all outstanding mortgages by households to Australian ADIs, there was $852.5 billion outstanding to owner occupiers 65.4% of all housing loans at the end of March 2015 and $450.2 billion to investors 34.6% . Over the 12 months to March 2015, the total value of outstanding mortgages to owner occupiers has increased by 7.2% compared to a 12.4% rise in outstanding credit to investors. This represents a reduction in the annual rate of increase in owner occupier lending over the quarter and the greatest rise in investor lending since September 2010. Much like other data received more regularly, the chart indicates that there remains significantly more momentum in the investor lending space than that for owner occupiers where growth is more moderate. With changes to investment lending criteria now being adjusted we are likely to see a slowing of that rate of change over the coming quarters. At the end of March 2015, a record high 38.6% of loans outstanding had an offset facility, up from 35.4% a year earlier. Also a record high was the 37.4% of all outstanding mortgages which were interest-only, up from 35.4% a year earlier. Just 0.2% of all outstanding mortgages were reverse mortgages and 2.3% were low documentation which was down from 3.1% a year earlier and at a record low proportion. Other non-standard loans accounted for just 0.1% of all outstanding mortgages. It seems that more and more mortgagees are accessing offset accounts in order to reduce the interest payable on their mortgages and maximise repayments of the principal while interest rates are so low. The data also indicates that a high proportion of lenders are accessing interest-only mortgages which seem somewhat counterintuitive at a time when interest rates are so low. Following APRA’s letter to ADIs in late in 2014 they specifically called out interest only lending as a risk and we would expect that over the coming months these types of mortgages will become harder to obtain. The average balance on all outstanding mortgages at the end of March 2015 was $243,500. The average balance has increased by 3.6% over the past year, its fastest annual rate of growth since the year to June 2012. Loans with an offset facility $290,600 and interest-only mortgages $315,100 have much higher average outstanding loan balances. The annual growth in average outstanding loan balances has been slightly more moderate for mortgages with an offset and interest-only mortgages at 3.3% and 3.4% respectively. The annual rate of growth for mortgages with an offset is the fastest since September 2012 and the rate of growth for interest-only mortgages is at its fastest pace since September 2010. Encouragingly, the data indicates that outstanding balances are reducing for low documentation and other non-standard loans as they become less common. Over the past year the average balance has fallen by -2.9% for low-documentation loans and by -6.7% for other non-standard loans. With mortgage rates low and fewer of these loan types being written it seems those that have these types of loans are continuing to pay down these mortgages at a fairly rapid pace. Turning the focus to new loans written over the March 2015 quarter, 63.0% of the total value of new lending was to owner occupiers and 37.0% was to investors. The proportion of new lending to investors has fallen from a record high of 37.9% in the June 2014 quarter. Based on this data it suggests that growth in demand for both owner occupier and investment lending may have peaked. The annual change in new owner occupier and investment lending was recorded at 9.3% and 15.4% respectively. The annual change in owner-occupied mortgages is growing at its fastest pace since March 2014 while the annual change in investment lending has been trending lower over the past two quarters. Over the March 2015 quarter, 0.7% of new loans approved were low-documentation, 42.3% were interest-only, 0.1% was other non-standard loans, 42.2% were third party originated loans and 2.8% were loans approved outside of serviceability. The 42.3% of new loans which were interest-only was down over the quarter with the proportion at its lowest level since March 2014. The data also seems to reflect the slowing of growth in investment demand, remember that interest only loans tend to be but not always reflective of lending for investment purposes. The ADIs seem to be increasing the usage of their broker channels with 42.2% of loans originated by third parties. With 2.8% of new mortgages approved outside of serviceability over the March 2015 quarter, this was down from 2.9% over the previous quarter. In terms of the annual change in new lending, the value of new low documentation loans approved rose 31.1% year-on-year, interest-only loans rose 19.7%, other non-standard loans fell -24.3%, third party originated loans increased by 14.9% and loans approved outside of serviceability increased 25.2%. Although low documentation and loans outside of serviceability make up a small overall proportion of lending, the significant increase in lending for these loan types over the year is a potential cause for concern. Looking at the loan to value ratios LVR of loans written over the March 2015 quarter, 25.7% of new loans had an LVR of less than 60%, 41.4% of loans had an LVR of between 60% and 80%, 21.7% had an LVR of between 80% and 90% and 11.1% had an LVR of 90% or more. The 11.1% of new loans with an LVR of more than 90% is the lowest proportion since December 2010. The 25.2% of mortgages with an LVR lower than 60% was the highest proportion since June 2013. This falling proportion of loans above 90% LVR suggests there are proportionally less high-risk mortgages being written. It should be noted that around a third of all new mortgages written 32.8% had an LVR of more than 80%. Looking at the year-on-year change in mortgage lending by LVR bands, mortgages with an LVR above 90% were the only segment to record a fall down -7.8%. Mortgages with an LVR below 60% were up 18.6% year-on-year, LVRs of 60% to 80% were up 12.4% and LVRs of 80% to 90% rose 13.9%. The 18.6% rise in mortgages with an LVR of less than 60% was the largest since December 2013, the 12.4% rise in mortgages with an LVR of 60% to 80% was the lowest since March 2013, the 13.9% rise in mortgages with an LVR of 80% to 90% was the lowest since March 2013 and the -7.38% fall in mortgages with an LVR greater than 90% was the largest fall since March 2011. Given that we have recently seen many banks starting to implement changes in their lending policies, mostly focussed on investors we would anticipate that investor and interest-only lending will likely moderate over the coming quarters. The decline in higher LVR lending is an encouraging development given a focus on mortgage serviceability at this time of low mortgage rates. The increase in lending outside of serviceability and low documentation loans over the past year is likely to be an area of scrutiny for APRA over the coming months.

Regional market analysis shows that there is strength outside of capital city markets

Based on the Australian Bureau of Statistics latest Regional Population Growth figures, 67 per cent of Australia’s population resides in the capital cities. To put that further into perspective, Sydney and Melbourne are home to around 40 per cent of the population. Given this, much of what is reported on in the market place revolves around these cities; however, this week CoreLogic RP Data released the Quarterly Regional Market Report, which focuses on some of the larger cities outside of the Australian capitals. In the latest edition, eleven key areas are focused on; Newcastle & Lake Macquarie, Illawarra, Richmond-Tweed NSW Gold Coast, Sunshine Coast, Townsville, Wide Bay, Cairns Qld Geelong, Latrobe-Gippsland Vic Bunbury WA Of the above regions, home values increased by the greatest amount across the Illawarra region which is around an hour and a half south of Sydney, up 9.3 per cent for houses and 9.6 per cent for units. Similarly, the Newcastle and Lake Macquarie region also saw solid results over the year, indicating that Sydney’s current strong growth phase is not just limited to the capital city. Across Queensland’s lifestyle markets, the Gold Coast and Sunshine Coast, the performance of the housing market, in terms of value growth has been relatively strong over the year to March. Gold Coast home values were up 4.8 per cent and 3.9 per cent for houses and units respectively, while Sunshine Coast values increased by 6.3 per cent for houses and 4.7 per cent for units. These results are especially significant considering the lacklustre performance of these markets since the financial crisis, when both capital growth and sales volumes across these regions were declining. Similarly, after a downturn following the financial crisis, Cairns has shown some recent improvement across the residential housing market. On the other hand, off the back of the slowing resources sector, some weakness was observed across Townsville’s residential property market, with house values falling by -2.4 per cent and unit values down -1.4 per cent. The number of homes sold across the region also fell over the most recent 12 month period. Across Victoria, both the Geelong and Latrobe-Gippsland regions have shown positive growth across the housing markets over the year to March 2015. Latrobe-Gippsland home values have been rising since 2013 and the detached housing market is continuing to show steady growth. Bunbury, in Western Australia has seen both house and unit values rise over the year, up 1.2 per cent for houses and rising slightly for units 0.4 per cent . Despite what may look like a subdued result, given Perth’s current soft market, the increases indicate a moderate level of housing demand in the region. If you are interested in further information and to view key statistics for each area, please refer to the complete report.

Both the number of auctions and the auction clearance rate up week-on-week

Across the combined capital cities, the preliminary auction clearance rate was recorded at 78.4 per cent across 1,981 results this week. This week, auction volumes were higher than last week, with 2,470 capital city homes taken to auction, compared to 2,232 over the previous week when the clearance rate was recorded at 77.5 per cent. The number of homes taken to auction this week was lower than last year, when 2,786 auctions were held, however the clearance rate last year was lower, at 67.1 per cent. In Australia’s largest auction market, Melbourne, the preliminary clearance rate of 80.0 per cent was an improvement on the previous week’s final auction clearance rate of 78.3 per cent. Prior to this week, Melbourne’s clearance rate for the year to date was tracking at 77.6 per cent, so this week’s result has shown further improvement across an already strong market. There were 1,110 Melbourne auctions this week, with 961 results reported so far. Over the previous week, 1,012 Melbourne auctions were held, and a higher 1,211 were held last year, with a clearance rate of 66.6 per cent. This week, the individual sub-region of Melbourne with the strongest result was the Outer East region, where 87.3 per cent of reported auctions were successful. The clearance rate increased in Sydney this week to 86.9 per cent, based on preliminary results, signifying that Sydney’s clearance rate of 85.0 per cent last week was a brief dip, after the four previous weeks where Sydney’s clearance rate was recorded above the 87 per cent mark. There have been 770 Sydney auction results reported so far this week, with 950 homes taken to auction. Volumes are higher than last week, when 885 residential auctions were held, and lower than last year, when there were 1,115 auctions. One year ago, Sydney’s auction clearance rate was 73.1 per cent, more than 10 percentage points lower than the current level. Across Sydney’s individual sub-regions, the Inner West region recorded the strongest result with a preliminary clearance rate of 94.7 per cent across 76 results. Brisbane’s preliminary clearance rate across 86 results this week was 51.2 per cent, increasing from 50.0 per cent across 136 auctions last week. At the same time last year, Brisbane was host to 185 auctions with 49.4 per cent of properties recording a sale. Across the Gold Coast, 40 auction results have been reported and based on this, the preliminary clearance rate is 35 per cent. Across Adelaide, there were 87 auctions this week, with 65 results collected so far. The preliminary clearance rate of 72.3 per cent is higher than both last week 63.8 per cent and last year 64.2 per cent . There have been 20 Perth auction results reported so far this week with a preliminary clearance rate of 25 per cent. Perth’s clearance rate last week was 41.9 per cent and 45.0 per cent last year. In Canberra this week, 100 auctions were held and so far, 69 results have been reported with a clearance rate of 65.2 per cent. There were 15 Tasmanian auctions held over the week. Of the 10 results reported, 2 properties have sold.

Pyrmont waterfront to be transformed into luxury apartments

Several prime sites on the waterfront at Pyrmont on Darling Island Road have been sold for approximately $180 million. The vendor was a partnership between Seven West Media and Greg Shand’s property arm, the Barana Group. The Barana Group, with a portfolio size of $450 million invests, develops and manages commercial, retail and residential property. The buyer, Aqualand Australia, a privately owned Chinese backed company based in Shanghai, specialises in all areas of property development including acquisitions, planning, designing, marketing and construction of projects. The sale was arranged by Justin Brown, Peter Krieg and Matt Ramsay of CBRE. According to the Pyrmont/Ultimo Cityscope, the sites include the Revy Buildings at 42 Pirrama Rd, two buildings of 5 and 6-storeys on a site area of 4,480 sqm, a two level gatehouse, a car park and a development site of 2,264 sqm at 8 Darling Island Road, with its vacant 8-storey heritage building having approval for conversion to 46 high end apartments. The Seven Network occupies the Revy Buildings, using the other sites as a car park. Their lease runs to 2029 though the car park site does have development approval for 32 units. The properties last traded at $29 million in May 2003. The current price of $180 million reflects the sites’ water views, the proximity to the CBD and the current confidence in and growth of the luxury apartment market. Meredith Baume Commercial Research

Commercial Market Update – Richmond Cityscope

The latest research from Richmond Cityscope shows property sales have increased in the past three months. Sales recorded in the quarter ending May 2015 totalled $63.9 million, an increase from the $29.8 million recorded in the three months to February 2015 and an increase from the $24.2 million recorded to November 2014. This data brings the 12-month total to $146.8 million, a decrease from the $236.7 million recorded for the same time last year. The data for this update of Richmond includes sales from the past two years in the additional 17 maps that have been added to the coverage area. The table below shows sales recorded for the past eight updates of Richmond Cityscope. Recent standout sales in Richmond include: 584 Swan Street, Richmond, part of the Botanicca Corporate Park, Building 8, a five-storey commercial building with ground floor retail and two levels of basement parking, was bought for $46.5 million. 9-11 David Street, Richmond, a single-storey industrial building with a bas-relief carving in the facade and 13-15 David Street, Richmond, a single-storey industrial building with a brick and corrugated iron façade, were bought together for $5.85 million. 418 Burnley Street, Richmond, a single-storey high-clearance warehouse with a paved area used for parking and storage, was bought for $3.005 million. Properties for sale in Richmond in May 2015 include: 17 David Street, Richmond, a single-storey brick industrial building, is to be auctioned on 5 June 2015 through CBRE. 38 Bridge Road, Richmond, a two-level retail terrace building with a shop at street level with the site area of 193 sqm is to be auctioned on 28 May 2015 through Axis Property. Significant leasing opportunities in Richmond in May 2015: 572-576 Swan Street, Burnley, three levels including basement parking, which has office space of 500 – 2,300 sqm for lease through Colliers International 582 Swan Street, Burnley, a three-storey building, part of the Botanicca Corporate Park, comprising ground floor retail space, office space on the upper levels and one level of basement parking, which has 94 – 310 sqm of office space for lease through Colliers International. 650 Bridge Road, Richmond, retail and commercial building with a glass façade, three levels to Bridge Road, which has 560 sqm of office space on level 1 for lease through Knight Frank. 600 Victoria Street, Richmond, a five-storey office building, part of the Victoria Gardens complex, which has 443 – 2,200 sqm of office space for lease through JLL Glen Weverley and Colliers International. CoreLogic RP Data Commercial. Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Burke Road Cityscope

The latest research from Burke Road Cityscope shows property sales have decreased for the last three months. Sales recorded in the quarter ending May 2015 totalled $13.2 million, a decrease from the $72.7 million recorded in the three months to February 2015 and a decrease from the $17 million recorded to November 2014. The total value of sales for the year ending May 2015 is $106.6 million from 31 sales, a slight decrease from the previous year, when the total value came to $111 million from 18 sales. The table below shows sales recorded for the past eight updates of Burke Road Cityscope. Notable sales for the May 2015 update of Burke Road Cityscope include: 626 Burke Road, Camberwell, a single-storey brick showroom building on a site of 261 sqm, which was sold for $5.529 million through CBRE Melbourne and Fitzroys; and Unit 1R, known as Shops G.01 and G.02 at 347 Camberwell Road, Camberwell, a retail unit on the ground floor and 6 car spaces in the lower basement, which was bought after auction for $3.601 million through Colliers International. Properties for sale in May 2015 update of Burke Road Cityscope include: 744 Burke Road, Camberwell, a single-storey brick retail building with a site area of 201 sqm, scheduled for auction on June 4, 2015, through Gorman Commercial; and Suite 402, 685 Burke Road, East Hawthorn, an office suite of 60 sqm in the seven-storey Camberwell Corporate Centre, available through Prowse Burns Commercial. Leasing opportunities listed in the May 2015 update of Burke Road Cityscope include: Shell Headquarters, at 4-14 Redfern Road, East Hawthorn, a four-storey office building built in 2002, which has 1,336 – 8,118 sqm for lease through CBRE Melbourne and Gorman Commercial; 467 Riverdale Road, East Hawthorn, a two-storey brick building with a net lettable area of 119 sqm, for lease through GormanKelly; and 277 Camberwell Road, Camberwell, a four-storey concrete office building, which has office space for lease through JLL Glen Waverley. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Auction Results – Week ending 15 May 2015

Over the week ending 15 May 2015, the preliminary auction result was strong, with 71.4 per cent of the 42 properties taken to auction selling. The number of commercial properties taken to auction was slightly higher over the week, compared to the 38 over the previous week, when the clearance rate was lower at 57.9 per cent. One year ago, the number of commercial properties taken to auction was higher, at 76 and exactly half of the results were reported as successful. The most recent four weeks shows 185 results, with 123 sales. Of these 123 sales, 91 have been reported with a price, totalling just over $139.6 million. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Chapel Street Cityscope

The latest research from Chapel Street Cityscope shows that commercial property sales have increased in the past three months. Sales recorded in the quarter ending May 2015 totalled $112.1 million from 13 sales, compared with $20.3 million from 4 sales in the three months to February 2015 and the recorded $20.5 million from 9 sales in the three months to November 2014. This data brings the 12 month total to $194.8 million from 40 sales, an increase compared with the previous twelve month total of $131.6 million from 22 sales. The table below shows sales recorded for the past eight updates of Chapel Street Cityscope: Notable sales recorded in the May 2015 update of Chapel Street Cityscope include: 661 Chapel Street, South Yarra, a vacant site of 1,435 sqm, sold for $40 million; 627 chapel Street, South Yarra, an office building of 6 levels plus basement parking for 86 cars, providing a net lettable area of 5,714 sqm; sold for approximately $40 million; and 663-667 Chapel Street, South Yarra, a vacant site of 1,171 sqm, sold for $16.3 million. Properties listed as for sale in the May 2015 update of Chapel Street Cityscope include: A two-storey retail building with 371 sqm building area at 182-184 Commercial Road, Prahran, is scheduled for auction on 15 May 2015 through Prowse Burns Commercial Real Estate; and Retail shops in the Luxton Prahran development at 18-30 Chatham Street, Prahran, with areas from 59 to 288 sqm are for sale through Gross Waddell. Leasing opportunities listed in the May 2015 update of Chapel Street Cityscope include: 236 Chapel Street, Prahran, a three-storey retail building with 352 sqm net lettable area, is for lease through TeskaCarson; 177 Toorak Road, South Yarra, a five-level retail and office complex with shops at street level, providing a net lettable area of 1,691 sqm, has office space of 329 sqm for lease through Newtons; 208 Chapel Street, Prahran, a two-storey retail building with 408 sqm area, is for lease from July 2015 through Hocking Stuart Commercial. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Auction volumes to rise this week, but they aren’t as high as one year ago

CoreLogic RP Data National Auction Preview, week ending 24 May 2015 Currently, CoreLogic RP Data is tracking 2,322 capital city auctions this week, signifying a slight increase from last week, when 2,232 auctions were held and the auction clearance rate fell to 77.5 per cent. The scheduled auction volumes for this week are currently tracking below the volumes seen last year, when 2,786 capital city auctions took place, which was a 27 per cent increase on the previous week. Last year, however, the clearance rate was 67.1 per cent, which is noticeably lower than the level that clearance rates have currently been tracking. Canberra and Tasmania are the only two auction markets, where the scheduled auction numbers for this week are higher than at the same time last year. As Australia’s most prominent auction market, Melbourne is set to host 1,053 auctions this week, up on last week when there were 1012 auctions and lower than the 1,211 auctions held over the same week last year. Melbourne is continuing to maintain a healthy clearance rate, with last week’s results showing 78.3 per cent of properties taken to auction sold. Meanwhile, one year ago, the clearance rate was 66.6 per cent, showing that Melbourne’s auction market has strengthened since then. In Sydney, it is expected that 884 auctions will be held this week, on par with last week, when 885 auctions were held, but lower than last year, when over the week 1,115 Sydney homes were taken to auction. Last week, Sydney’s final auction clearance rate fell 2.6 percentage points, from the previous week, to 85.0 per cent across the city, a strong result, despite the fall. Brisbane is host to 137 auctions this week, similar to the 136 last week, and lower than the 185 one year ago. Across Adelaide, 84 auctions are set to take place this week, which is lower than both last week 106 and last year 121 . For Canberra, the number of homes being taken to auction this week is 96. This is the highest number of weekly auctions scheduled in the city so far this year. More than doubling from last week, when 43 auctions were held and also higher than last year 76 . The number of auctions scheduled across Perth this week is 51, higher than last week 36 , but lower than the 70 Perth auctions held last year. The Melbourne suburb of Richmond is set to host 20 auctions this week, the highest number of auctions for any individual suburb this week.

Property related tax revenue moves beyond the $40 billion mark for the first time on record

Last week the Australian Bureau of Statistics ABS released data which revealed that 48.7% of state and local government taxation revenue over the 2013-14 financial year came from property related taxes. The data showed that over the year, state and local governments collected a record $40.485 billion in taxes from property related sources. In comparison, they collected $21.341 billion in taxes from employers, $11.208 billion in taxes from the provision of goods and services and $10.024 billion in taxes on the use of goods and performance of activities. As this shows, at a state and local government level property taxes are the largest source of revenue. Although property accounted for 48.7% of total tax revenue over the year, it has previously accounted for as much as 50.6% of all revenue in 2003-04. The total value of property related taxes increased by 12.6% over the most recent financial year. This represents the greatest year-on-year increase in property related tax revenue since it rose 14.3% over the 2009-10 financial year. In comparison, taxes on employer’s payroll and labour force rose by 2.8%, taxes on the provision of goods and services rose 1.2% and taxes on the use of goods and performance of activities rose 3.5%. Overall, state and local government tax revenue increased by 7.2% over the year. With home values nationally beginning to rise in June 2012, it is clear that state and local governments are a major benefactor of the strong housing market conditions. With higher home values, taxes such as land tax, municipal rates and stamp duty on conveyances all increase. Conversely when housing market conditions shift and value growth slows or values falls the largest source of tax revenue property is adversely affected. Of the $40.485 billion in property related tax revenue collected in 2013-14, 40% came from municipal rates and 36% came from stamp duties on conveyances. Land tax was the only other sizeable contributor to property related tax accounting for 17% of revenue. Over the year the most significant increase in property related taxes came from stamp duty, up by 24.4%. The amount of tax revenue collected from municipal rates increased by 5.3%, and land taxes increased by 2.8%. Property related tax revenue is only collected by those who own properties. Ultimately every property is owned by someone, some as an owner occupier and some as an investor. The taxes levied against property are typically only payable by the owner of the property. Given this, those who choose to rent rather than own property pay no tax on property. Not to mention the fact that the cost of renting is typically much lower than the cost of owning. State and local governments have clearly experienced a significant revenue boost via the improvement in the residential housing market over the year. Stamp duty in particular has seen a significant rise. With sales volumes and property values rising there have been more sales to receive stamp duty from and at a higher price which also increases the stamp duty collected. Of course, the issue with stamp duty is that it is a tax only collected across those properties which sell. From a residential perspective this is just 5% to 7% of the total housing stock over a given year. Stamp duty also acts as a disincentive for home owners to transact property on a more regular basis because it is a tax paid on a new purchase. Looking more closely at stamp duty over time you can see just how inefficient the tax is, being heavily reliant on the performance of the housing market. The 2013-14 financial year was a bumper one for stamp duty revenue thanks to strong growth in home values and an increase in sales activity. As we’ve seen in the past, these good times won’t last forever and eventually state and local governments will feel the impact of a downturn in tax revenue as the housing market cools. I have previously argued that the removal of stamp duties would encourage greater mobility of residents and provide less of a barrier to those home owners looking to upgrade or downsize. Of course state and local governments would lose 36% of their property related tax revenue and 17% of their total taxation revenue. Replacing stamp duty with a blanket land tax, another tax, would likely be unpopular and you’d have to consider how equitable that would be particularly for those who have recently paid stamp duty if a blanket land tax regime were to be introduced it would likely be accomanpied by compensation or discounts to those who recently purchased under the stamp duty regime . To put a blanket land tax into perspective to cover the $15.976 billion in stamp duty revenue over the 2013-14 financial year, each residential dwelling would have to pay $1,705.60 based on the ABS estimate of 9,366,800 residential dwellings as at June 2014. Keep in mind that stamp duty isn’t just payable on residential property transactions and more revenue is available from commercial and industrial properties or the cost per home could be reduced. Over the year, stamp duty revenue was higher in each state and territory except for the Australian Capital Territory -1.7% . Across the other states the rise in stamp duty revenues were recorded at: 32.3% in New South Wales, 27.9% in Victoria, 27.3% in Queensland, 2.1% in South Australia, 9.5% in Western Australia, 10.8% in Tasmania and 12.7% in the Northern Territory. According to the CoreLogic RP Data Home Value Index, home values rose across each capital city except for Darwin over the year with the largest rises in Sydney, Melbourne and Brisbane. Clearly home value rises across the capital city markets have had a positive effect on stamp duty revenues. The data highlighted shows that property related taxes are the most important source of revenue for state and local governments, accounting for 48.7% of their total taxation revenue. The issue of course is that these levels of government are looking to constantly grow their revenues. The two main sources of property related revenue are rates and stamp duty. Rates can be grown by encouraging a greater number of ratepayers into a region create more housing and stamp duty can only be lifted by changing the rates or encouraging higher prices and/or more sales. In certain regions increasing the supply of ratepayers is not possible so it is clear that stamp duty is an extremely important source of revenue. With capital city home values continuing to rise throughout the 2014-15 financial year, we anticipate that stamp duty will be higher once again. The question is whether governments can continue to rely on property being a one-way bet? The ACT has already announced a phase out of stamp duty over the next two decades, and there is also discussion around a move away from stamp duty in South Australia. The major benefit to State governments under a broad land tax arrangement as opposed to stamp duty would be the consistency of revenue flows rather than the lumpy market driven revenue which is evident under the stamp duty system.

Preliminary results show 76.4 per cent of homes sold at auction

CoreLogic RP Data National Auction Comment, week ending 17 May 2015 The preliminary clearance rate across 1,748 results was recorded at 76.4 per cent this week, a decrease from the final auction clearance rate over the preceding week, recorded at 78.2 per cent. There were a total of 2,127 auctions held this week, while in comparison, last week there were 2,426 and 2,194 over the corresponding week last year. The latest clearance rate shows that broadly, demand across the capital city auction markets remains strong. There were 973 Melbourne auctions this week and of the 849 results 74.3 per cent were reported as sold. Last week, when there were 1,072 Melbourne auctions, the clearance rate was 79.0 per cent; while one year ago, Melbourne’s clearance rate was lower at 68.8 per cent across a similar number of auctions 1,068 . Across Melbourne’s individual sub-regions, the strongest performer in terms of clearance rate this week was the Inner East region, where 81.9 per cent of reported auctions were successful. Meanwhile, the Inner region was host to the highest number of auctions 200 . This week another strong clearance rate was recorded in Sydney, which is currently Australia’s strongest auction market in terms of clearance rates. The preliminary results show a clearance rate of 85.5 per cent across 690 results, with a total of 830 auctions held across the city this week. Last week, the clearance rate was slightly stronger at 87.6 per cent across 955 auctions. One year ago, fewer Sydney homes were taken to auction 796 and the clearance rate was much lower, at 69.6 per cent. The North Sydney and Hornsby region of Sydney, where 102 auction results have been reported with a clearance of 94.1 per cent, is the strongest performing sub-region this week. Similarly, Ryde 91.7 per cent , Parramatta 90.9 per cent and Inner South West 90.1 per cent all had clearance rates over the 90 per cent mark. Across Brisbane, 129 homes were taken to auction this week with a preliminary clearance rate of 53.7 per cent across 82 results. Last week, Brisbane’s clearance rate was 54.5 per cent across 176 auctions, while one year ago, 133 Brisbane homes were taken to auction with a clearance rate of 46.5 per cent. This week, 31 Gold Coast auction results have been reported and the preliminary clearance rate based on these results is 51.6 per cent. There were 103 Adelaide homes taken to auction this week. So far, 67 results have been reported with a preliminary clearance rate of 67.2 per cent. This week’s clearance rate is higher than both last week 59.5 per cent , and last year 63.8 per cent . In Perth there were 36 auctions this week and of the 23 reported results 43.5 per cent have sold. Perth’s clearance rate last week was just 21.4 per cent, while one year ago it was 46.9 per cent. Across Canberra, the preliminary clearance rate was 76.0 per cent across 42 results. Last week, Canberra’s clearance rate was 65.7 per cent, while one year ago, 45.8 per cent of auctions were successful. There were 14 Tasmanian auctions this week. Of the 12 results reported, 5 have sold.

The number of homes scheduled for auction this week is lower than last week, despite steady, strong clearance rates

CoreLogic RP Data National Auction Preview, week ending 17 May 2015 There are 1,934 auctions scheduled across the capital cities this week, less than the 2,426 held last week, when for the fourth week in a row, the combined capital city clearance rate was recorded above 78 per cent, at 78.2 per cent. One year ago, over the comparable week, there were 2,194 homes taken to auction, which is higher than the current scheduled number, however it is likely that this will revise upwards as additional auction results are reported over the weekend. Currently, in Melbourne, 903 auctions are expected this week, lower than the 1,072 last week, when 79 per cent of reported auctions sold but higher than the 1,068 one year ago. So far this year, Melbourne’s clearance rate has been trending higher, with the rise likely to be attributed to growing consumer confidence borne through recent interest rate cuts. Sydney’s auction market is currently performing at record levels. So far this year, it is estimated that of the 12,074 homes taken to auction there have been 10,227 sales, which equates to more than 8 in every 10 properties taken to auction recording a successful result. The result shows the current strength across Sydney’s auction market. This week, it is expected that 720 residential properties across Sydney will be taken to auction, less than the 955 last week and also lower than the 796 at the same time last year. There are 119 Brisbane homes set for auction this week, lower than both last week 176 and last year 133 . Brisbane’s final auction clearance rate was recorded at 54.5 per cent last week, strengthening from 47.3 per cent the previous week. There is expected to be 101 residential auctions across Adelaide this week, up from 92 last week, when the final auction clearance rate was recorded at 59.5 per cent. One year ago, 121 auctions were held. Across Canberra, 43 auctions are scheduled for this week, after 78 last week and 29 one year ago. Last week, Canberra’s final auction clearance rate was 65.7 per cent. Perth is expecting 35 auctions this week, similar to one year ago, when there were 39 auctions. Last week, there were 42 Perth auction results and the clearance rate was low, 21.4 per cent, the second week in a row where Perth’s clearance rate was recorded below the 30 per cent mark There will be 15 auctions held in Reservoir Vic and Preston Vic this week, both of which have the highest volume of auctions for any individual Australian suburb.

Heritage listed hotel sold for $224 million

Hot on the heels of last week’s $442 million sale of the Sydney Hilton Hotel, comes news of the sale of the Sofitel Sydney Wentworth Hotel for $224 million to the Frasers Centrepoint managed Hospitality Real Estate Investment Trust. The trust purchased a 75 year leasehold interest in the hotel, and as part of the deal the trust will lease the furniture, furnishings and equipment in the hotel to another Fraser’s subsidiary, Ananke Holdings, for 20 years with an option to renew. The hotel was bought from Frasers Sydney Wentworth Trust, another trust managed by Frasers Centrepoint. Frasers Centrepoint is a diversified property trust controlled by Thai tycoon Charoen Sirivadhanabhakdi and is listed on the Singapore Exchange. In recent weeks Frasers has announced a strategy of optimizing the profitability of its assets. Moving existing assets to its real estate investment trust REIT platforms is part of this strategy. The sale of the Sofitel from the Frasers Sydney Wentworth Trust to the Hospitality Real Estate Investment Trust is part of this strategy and follows last month’s sale of 357 Collins Street, Melbourne, into the Frasers Commercial Trust for $222.5 million. According to Sydney Cityscope, the Sofitel Sydney Wentworth Hotel, 61-101 Phillip Street, Sydney is a heritage listed, 5 star, 19 storey hotel with 436 hotel rooms and 46 suites, a café and two levels of car parking. The hotel was originally built in 1966. The building includes the three level Wentworth Connection retail arcade, which is on a separate stratum title to the hotel and is owned by Wentworth Connection Retail Pty Ltd. The hotel was bought by Frasers Sydney Wentworth Trust in $202.7 million from a trust managed by LaSalle Investment Management in May 2014. LaSalle purchased the property for $130 million in May 2010. The hotel will continue to be operated as part of the Sofitel chain by French company Accor. Brendon Wood Data Integration Manager Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Investor lending surges again in March

Housing finance data released yesterday by the Australian Bureau of Statistics ABS for March 2015 showed that despite the recently released guidelines for sound lending practices released by APRA and repeated warnings from the RBA, lending for investment purposes continues to surge. While values are still rising, the prospect of very low yields remain no deterrent to prospective investors. Based on the value of mortgage lending over the month there was $31.6 billion worth of mortgage lending by Australian authorised deposit-taking institutions ADIs over the month which represented an increase of 3.5% over the month and 15.4% year-on–year. Looking at the segments, $18.7 billion was borrowed by owner occupiers with $12.3 billion for new loans and $6.4 billion for refinances. New owner occupier loan commitments are now 1.3% higher over the month and 3.3% higher year-on-year. Owner occupier refinances have experienced much stronger growth over the year, up 33.0% and rising by a further 2.2% over the month. Over the month, investors committed to $12.9 billion in mortgages with the value of these rising 6.4% and by 20.9% year-on-year. As can be observed, new lending to investors is outweighing lending to owner occupiers once refinances are excluded. Since home values started rising in the current growth phase, the values of investment housing finance commitments has increased by 86.6% compared to a 59.5% increase in refinances by owner occupiers and a 29.8% rise in new mortgages ex-refinances to owner occupiers. It is clear that investors have played a significant role in the increase in home values across the current growth phase. Looking at the owner occupier segment of housing finance; $1.7 billion was borrowed for construction, $1.0 billion for purchases of new homes, $6.4 billion for refinances and $9.5 billion for purchase of established stock. Over the month, the change in borrowings was recorded at; -2.7% for construction, +2.2% for purchase of new, +2.2% for refinances and +1.9% for purchase of established stock. Year-on-year, the changes have been recorded at; -4.0% for construction, +10.7% for purchase of new homes, +33.0% for refinances and +4.1% for purchase of established stock. Growth is clearly strongest across the refinance segment whilst there is a clear weakness in the data for commitments for construction of new homes. The growth in refinance is reflective of consumers shopping around for a better home loan deal. It may also indicate that some home owners are drawing down on their equity. Switching the focus to the investment segment, in March there was $0.9 billion committed to for construction of new dwellings and $12.0 billion committed to established investment housing. Over the month, the change in investment was recorded at +35.6% for construction of new dwellings and +4.6% for established homes. Year-on-year the increases were recorded at +68.5% for construction of new and +18.3% for established housing. Along with refinances by owner occupiers, investment borrowing is clearly a key driver of the current market. In terms of magnitude, investors are overwhelmingly more inclined to target established stock rather than new stock. In terms of the total value of housing commitments which was recorded at $31.6 billion, only $3.7 billion or 11.7% of total commitments were for construction or new dwellings across owner occupiers and investors. Over the month the total value of commitments for new housing stock has increased by 6.4% and it is 12.4% higher year-on-year. Although this is quite solid growth, it does pose the question of just who is buying all this new stock with a record high level of new construction activity currently taking place. The proportion of total commitments which are for new homes at 11.7% has trended lower over recent months. We know that legally, foreign investors can in most cases only purchase newly built stock so the data seems to suggest that a growing proportion of the new housing stock is being purchased by foreigners. Most of the foreign borrowings are not collected in the housing finance data due to the fact that its coverage is only for Australian authorised deposit-taking institutions ADIs . If funds are borrowed from overseas, the housing finance data provides no visibility of them. From now, it will be interesting to see in which direction housing finance data heads. We know that APRA and RBA have repeatedly expressed concerns about the level of investment lending and have reiterated minimum lending standards that they would like ADIs to target. The surge in investment lending over the month coupled with another interest rate cut in May could potentially create even more challenges for the two institutions. There are also tentative signs that new mortgage commitments by owner occupiers those excluding refinances may also be starting to pick-up. The next couple of months of housing finance data will be very interesting to watch to see if investor housing finance commitments begin to cool and whether the owner occupier segment is buoyant enough to continue its recent uptick.

Commercial Market Update – Melbourne Units Cityscope

Sales recorded over the three months to May 2015 totalled $411.6 million, an increase from the $238.2 million recorded to February 2015 and the $392.7 million recorded to November 2014. The latest data brings the twelve-month sale total to $1.426 billion, an increase from the previous twelve months, when sales totalled $1.101 billion. The table below shows sales recorded for the past eight updates of Melbourne Units Cityscope: Recent standout sales in Melbourne Units include: Unit 2401 at 218-236 A’Beckett Street, Melbourne, a two-level residential unit with balconies on both levels plus four car spaces and two storage units was bought for $2.93 million. Unit 1004A at 201 Collins Street, Melbourne, a residential unit with two bedrooms, a balcony and car space was bought for $2.5 million. Unit 904 at 199-205 Collins Street, Melbourne, a residential unit with a balcony and one car space was bought for $2.415 million. Unit 1114 at 108 Flinders Street, Melbourne, a residential unit with three bedrooms, a balcony and two car spaces was bought for $2.03 million. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update â

The latest research from Brisbane Cityscope shows property sale numbers have increased in the past three months. The last three months to the beginning of May 2015 recorded 20 sales for a total of $313.1 million, with $85 million for commercial, $3.1 million for commercial strata, $42.5 million for retail, $300,000 for retail strata and $182 million for other. In comparison, the three months to the beginning of February 2015 recorded 8 sales for a total of $331.8 million, with $327.5 million for commercial, $1.1 million for commercial strata and $3.3 million for retail. The 12 months leading up to the beginning of May 2015 recorded 56 sales for a total of over $1.024 billion, significantly less than the recorded figure for the same time period the year before. The table below shows sales recorded for the past eight updates of Brisbane Cityscope: The three most significant sales recorded this quarter were: 76 Queen Street – NEXT Hotel Brisbane, converted in 2014 from a mix-use hotel/office building to a 300-room hotel. Bought for $133 million cd 18.02.2015, td 25.03.2015 by Challenger Life Nominees Pty Ltd. Simon Rooney from JLL Brisbane and Dean Dransfield of Dransfield Hotels & Resorts negotiated the sale. 111 Mary Street – an eight-level underground car park with development approval in place. Bought for $49 million cd 12.09.2014, td 23.12.2014 by Mary 111 Pty Ltd. 363 Adelaide Street – Boeing House, a 16-storey office building with basement car parking. Sold for $47.5 million td 10.04.2015 to El Camino Priority I Pty Ltd, on behalf of Valparaiso Capital Partners. The sale was negotiated by Jason Lynch and Tom Phipps from Colliers International Brisbane and James Barber and James Quigley from Colliers International Sydney. Properties currently listed for sale include: 215 Adelaide Street – a 30-storey office tower and adjoining heritage listed Rothwells and Rowes Buildings. For sale by expressions of interest, closing June 4, 2015; agents, Knight Frank Brisbane Ben McGrath and Justin Bond and JLL Brisbane Seb Turnbull and Geoff McIntyre . 63 Adelaide Street – a 3-storey retail building. For sale by expressions of interest; agent, L J Hooker Commercial Richard Bomhoff . The property was advertised with a fully leased net income of $955,165. Unit 11, 301-307 Ann Street – a 35 sqm unit on the lower ground level of ULTIQA Rothbury Hotel. For sale with an asking price of $255,000; agent, Chesterton International Warren Jopson . Properties under contract include: Unit 15, 345 Ann Street – a 203 sqm unit on the fourth floor. Under conditional contract in late April 2015; agent, CBRE Brisbane Callum Short . 420 George Street – a 14-storey office building. Under conditional contract to Forza Capital, details undisclosed; agents, CBRE Brisbane Peter Court and Mike Walsh and Ray White Transact Rick Bird and Joe Tynan . 38 Wharf Street – Wharf Central, a two-level retail building. Under contract, details undisclosed; agent, CBRE Brisbane Mike Walsh and Peter Court CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Auction Results – Week ending 8 May 2015

Preliminary results show that there were 15 commercial properties taken to auction over the week ending 8 May, with 53.3 per cent selling at auction. In comparison, over the previous week both volumes 53 auctions and the clearance rate 60.4 per cent were higher. One year ago, 57 commercial properties were taken to auction and 69.7 per cent recorded a successful result. There has been 188 commercial auctions over the most recent four week period and 117 sales reported. Of these 117 sales, 92 have been reported with a sale price, totalling exactly $180 million. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update – Auckland Cityscope

The latest research from Auckland Cityscope shows that property sales have substantially decreased over the past three months. This is primarily due the previous quarter including several large sales over $50 million, including the sale of the SAP Tower at 151 Queen Street, Auckland Central, which sold for $97 million. In the three months to May 2015, there were 38 sales for a total of $139.2 million, as compared with $566.9 million recorded for the three months to February 2015 and the $338.3 million recorded for the three months to November 2014. This latest data brings the total sales for the 12 months to May 2015 to $1,356.4 million, an increase from the $567.2 million in sales recorded to the same time last year. The table below shows sales recorded for the past eight updates of Auckland Cityscope: Recent standout sales in Auckland Cityscope include: Canterbury Arcade, at 170 Queen Street, Auckland Central, a group of four buildings between four to nine-storeys, integrated at the ground floor retail levels, with a net lettable area of 5,689 sqm , was sold for $38.75 million. Auckland Central Backpackers, at 229 Queen Street, Auckland Central, an eleven-storey building with car spaces in the basement, with a gross floor area of 5,780 sqm was sold for $23.2 million. Properties for sale in the May 2015 update of Auckland Cityscope include: 42 Airedale Street, Auckland Central, a three-storey building comprising of two floors of office space and a workshop and parking space on the lower ground floor, with a net lettable area of 851 sqm is for sale by auction on 20th May 2015 through Bayleys Auckland Central. 15-23 O’Connell Street, Auckland Central, a four and three-storey art deco building with a net lettable area of 860 sqm is for sale by tender closing 19 May, 2015 through Bayleys Auckland Central. 36 Fort Street, Auckland Central, a three-storey building, built circa 1890 with a gross floor area of 800 sqm is for sale; agent Colliers International Auckland. Notable leasing opportunities in the May 2015 update of Auckland Cityscope include: The Tower Centre at 22 Fanshawe Street, Auckland Central, a 12-storey office building with parking space for 75 cars has office space of 6,000 sqm for lease through Robert Walters. ACG House at 396 Queen Street, Auckland Central, a 19-storey office building with a tavern to Queen Street, has office space of 3,402 sqm for lease through Colliers International NZ. IDATA House at 7 City Road, Auckland Central, a 12-storey office building with 4 levels of basement parking has office space of 625 sqm for lease through Colliers International NZ and CBRE. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Combined capital city weighted clearance rate remains steady, showing buyer confidence continues

The number of homes taken to auction this week fell slightly to 2,385, compared with 2,540 over the previous week. However, the preliminary clearance rate of 78.2 per cent has remained steady, down only slightly from 78.6 per cent last week. The overall strength across the combined capital city market is showing no sign of slowing down, with 13 of the 15 weeks in which auction results have been reported on so far this year seeing the clearance rate at, or above, 74 per cent. Over the corresponding week last year, the clearance rate was 65 per cent and 1,535 auctions were held. In Melbourne, 77.5 per cent of the 938 reported auctions sold this week. There were 1,064 auctions held across the city this week, down from 1,139 last week when the final auction clearance rate was 81.7 per cent and higher than the 710 auctions held one year ago, with a notably lower clearance rate 61.9 per cent . The Inner region of Melbourne had the highest number of auctions this week 231 , with a clearance rate of 71.1 per cent. Meanwhile, the strongest clearance rate was recorded across the South East and Outer East region, where preliminary results show 9 in every 10 homes taken to auction sold. Across Sydney, 924 homes were taken to auction this week with a preliminary clearance rate of 88.7 per cent across 726 reported results. The latest results show that Sydney’s record strong conditions are continuing. Last week, the final clearance rate for the city was 87.3 per cent, which prior to being overtaken this week, had been the cities second strongest result on record across 914 auctions. One year ago, 618 Sydney homes were taken to auction with a clearance rate of 73.3 per cent. This week, the performance across Sydney’s individual sub regions was varied. Across the Central Coast, where 21 results have been reported so far, the clearance rate was 51.1 per cent, while across Blacktown 96.0 per cent , Ryde 93.6 per cent and North Sydney and Hornsby 92.9 per cent the success rate of auctions was much higher. There were 176 Brisbane auctions this week with a preliminary clearance rate of 55.5 per cent, having increased from 47.3 per cent last week across 192 auctions and higher than one year ago when there were 89 auctions with a success rate of 46.7 per cent. The Gold Coast’s preliminary clearance rate was 41.8 per cent across 55 results this week. A total of 92 Adelaide homes were auctioned this week and the preliminary auction clearance rate of 63.9 per cent is just higher than the 62.8 per cent from the previous week across 167 auctions. One year ago, although Adelaide’s clearance rate was comparable at 62.3 per cent, there were far fewer auctions 57 . In Perth, 42 auctions took place this week, with 19 results reported so far. Perth’s preliminary clearance rate of 26.3 per cent across these 19 results is similar to both last week’s result 29.4 per cent and the clearance rate from one year ago 25.0 per cent . Canberra’s preliminary auction clearance rate of 63.0 per cent this week is lower than last week, when the final auction clearance rate was 83.0 per cent and higher than the 57.1 per cent recorded last year. So far this year, Canberra’s auction clearance rate has been substantially stronger when compared to previous years. Tasmania saw 11 auctions take place this week, 7 results have been reported so far, with 3 sales.

Sydney Hilton sold for $442 million

The Sydney Hilton Hotel has been sold for $442 million to Singapore-based investment firm Bright Ruby. The hotel was sold by Hilton Worldwide subsidiaries Admiral I Pty Ltd, Admiral II Pty Ltd and Admiral III Pty Ltd. Hilton Worldwide is listed on the New York Stock Exchange and a 66 per cent stake in the company is held by Blackstone Group, an American multinational private equity, investment banking and financial services corporation based in New York City. Bright Ruby is a Singapore based Chinese investment group which was originally incorporated in 2009. Bright Ruby purchased two Sydney office towers in 2013 when they paid $62.5 million for 10 Barrack and $201 million for 231 Elizabeth Street. Bright Ruby is also believed to be interested in purchasing the Westin Sydney hotel. According to Sydney Cityscope, the Sydney Hilton, at 255 Pitt Street, Sydney is a 5-star 44-level hotel with a 3,000 seat conference and convention centre, 11 event rooms, 9 meeting rooms, a 1,200 guest ballroom and a total of 577 hotel rooms. An extensive redevelopment of the hotel was completed at a cost of $200 million in July 2005. The hotel includes the Marble Bar, which was originally built in 1893 and restored as part of the redevelopment of the Hilton. Brendon Wood Data Integration Manager. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update â

The latest research from Adelaide Cityscope shows that commercial property sales in Adelaide have increased for the quarter to April 2015. The latest quarter shows total sales figures of $420m, an increase from the quarter to January 2015, which had total sales figures of $110.2m, and an increase on the quarter to October 2014, which had $269.9m. The year to April 2015 shows total sales of $908m, an increase on the previous year, which had $361m. Notable sales in the April 2015 update of Adelaide Cityscope include: Myer Centre Adelaide at 14-38 Rundle Mall, Adelaide, a department store and office building with total building area of 64,718 sqm and 474 car parking spaces; sold for $288m with settlement expected by end of June 2015. Hender Consulting House at 81-99 Flinders Street, Adelaide, an office building of 12 levels plus basement for 42 car parking spaces, sold for $41.3m. Properties for sale in the April 2015 update of Adelaide Cityscope include: The State Administration Centre Precinct comprising the State Administration Centre and Torrens Building at 190-220 Victoria Square, Adelaide, State Education Centre at 15-41 Flinders Street, Adelaide, Wakefield House at 24-40 Wakefield Street, Adelaide and 16-24 Flinders Street, Adelaide are for sale by expressions of interest closing 7 May 2015 through agent JLL Adelaide and the Government of South Australia; 15-19 Frome Street, Adelaide, an 8-level car park, 11 Frome Street, Adelaide, a one to two-storey retail building, 13 Frome Street, Adelaide a 2-storey retail building and 21-27 Frome Street, Adelaide, a 3-storey retail building are for sale by expressions of interest closing 12 May 2015 through Colliers International Adelaide; and 228-230 North Terrace, Adelaide, a 5-storey office building with a net lettable area of 2,689 sqm and 231 North Terrace, Adelaide, a 7-storey medical and retail building with two rooftop apartments are for sale by expressions of interest closing 30 April 2015 through JLL Adelaide. Leasing opportunities in the update of Adelaide Cityscope include: Origin Energy House at 1 King William Street, Adelaide, a 19-level office building with a lettable area of 20,776sqm on a 1,396sqm site, which has 400 to 12,500sqm available through Knight Frank; Grenfell Centre at 23-31 Frenfell Street, Adelaide, a 26-level office building with a retail plaza level, ground and basement level, providing a net lettable area of 25,244sqm, which as 240 to 7,000sqm through JLL Adelaide and CBRE Adelaide; and 58-78 Franklin Street, Adelaide, a two-tower property comprising a 16-level serviced apartments and a 19-level office building, which has office space from 532 to 5,534sqm available through Colliers International. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update â

The latest research from East Melbourne Cityscope shows property sales have decreased in the past three months. Sales recorded in the quarter ending April 2015 totalled $166.2m, a decrease from the $179.5m recorded in the three months to January 2015, but an increase from the $118.8 m recorded to October 2014. This data brings the 12 month total to $538.5m an increase on the $301.3m recorded the same time last year. The table below shows sales recorded for the past eight updates of East Melbourne Cityscope. Recent standout sales in East Melbourne include: Greenwood Office Park, at 301 Burwood Highway Burwood, three commercial buildings of 2 and 3 storeys, with a total net lettable area of 19,967sqm, and parking for 976 cars was bought for $70m in a sale handled by Melbourne Acquisitions. Kingsway@Monash, at 295-297 Springvale Road Glen Waverley; a 6-storey, 5,200sqm, commercial building with parking for 160 cars was bought for $22m in a sale handled by JLL Melbourne. 700 Springvale Road Mulgrave, a 6 storey, 6,930sqm, office building with parking for 361 cars was bought for $14.35m. Properties for sale in East Melbourne in April 2015 include: 2-6 Glenferrie Road Malvern, a three storey, 2,394sqm office building with parking for 69 cars is for sale through Rosin Smyth. The building last traded at $4.5m in March 2007. Unit 1 in the Monash Corporate Centre at 10 Duerdin Street Clayton, a 2-storey office and warehouse unit, part of Monash Corporate Centre; with parking for 20 cars, is for sale through Eastpoint Property Consultants. The unit/building last traded at $2.727m in May 2007. 303 Burwood Highway Burwood East, part of Eastern Views Office Park, a 2-storey office building with parking for 29 cars, is for sale through MP Burke Commercial. The building last traded at $1.150m in October 1993. Significant leasing opportunities in East Melbourne in April 2015 include: Australian Taxation Office at 990 Whitehorse Road Box Hill, a 9-level, 21,760sqm office and retail building, with parking for 403 cars, has office space of 1,500 to 20,000sqm through Colliers International. Ferntree Business Park at 310-324 Ferntree Gully Road Notting Hill, a complex of five self-contained office/warehouse/laboratory buildings, and 2 separate 4 and 5 storey buildings, has an office space of 2,000 to 10,000sqm through Colliers International and Goodman. The Adidas Building at 759-767 Springvale Road Mulgrave; a large high clearance warehouse at the rear with 2 storeys of offices at the front, has warehouse space of 10,611sqm through Colliers International Melbourne East and CBRE Mulgrave. CoreLogic RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Auction Results – Week ending 1 May 2015

There were 45 commercial auctions reported over the week ending 1 May 2015, with a preliminary clearance rate of 64.4 per cent. In comparison, over the previous week, the final auction clearance rate was ten percentage points higher, at 74.4 per cent across a comparable number of auctions 43 . The current auction market conditions are reflective of what was happening at the same time last year, when 60 commercial properties were taken to auction with a clearance rate of 63.3 per cent. Over the four weeks ending 1 May, 176 commercial properties have gone to auction with 112 properties sold. Of the 112 properties reported as sold, 86 have been advised with a sale price, totalling $152.6m. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update â

The latest research from Brisbane Fringe Cityscope shows property sale numbers have increased in the past three months. The last three months to the beginning of May 2015 recorded 33 sales for a total of $89.4 million, with $54.1 million for commercial, $6.9 million for commercial strata, $500,000 for retail, $6 million for retail strata and $22 million for other. In comparison, the last three months to the beginning of February 2015, recorded 21 sales for a total of $93.7 million, with $57.5 million for commercial, $7.3 million for commercial strata, $16.8 million for retail, $4.6 million for retail strata and $7.5 million for other. The 12 months leading up to early May 2015 recorded 118 sales for a total of more than $512 million, over $118.5 million less than the same time last year. The table below shows sales recorded for the past eight updates of Brisbane Fringe Cityscope: Together the top three sales recorded this quarter total over $50.5 million. The top three sales recorded this quarter include: 16 Marie Street, Milton – a six-storey office building with basement car parking. Bought for $20.425 million cd 13.03.2015, td 18.03.2015 by The Marie Street Trust. Peter Court and Darren Collins of CBRE Brisbane negotiated the sale which represented an initial yield of 10.37% on a passing income of $2,117,497 net . 223 Barry Parade, 161 Alfred Street, 237 Barry Parade and 265 Barry Parade, Fortitude Valley – 2,950 sqm of vacant land with an approved development proposal in place. The properties were bought together for $15.15 million td 31.03.2015 by 237 Barry Parade Pty Ltd. Mark Evans, Tony Pagano and Neville Jenson of Ray White Metro negotiated the sale. 324 Wickham Street, Spring Hill – a two-storey retail and office building and associated car parking. Bought for $15 million cd 07.08.2014, td 08.09.2014 by N G P Investments No 2 Pty Ltd. Seb Turnbull and Christian Sandstrom of JLL Brisbane negotiated the sale which represented an initial yield of 5.74% on a passing income of $861,000 net . Properties for sale include: 419 Upper Edward Street, Spring Hill – a two-storey plus lower ground floor office/retail building. Scheduled for auction on May 14, 2015; agent, Colliers International Hunter Higgins . The property was advertised with a current net income of $236,283. 44-48 Leichhardt Street, Spring Hill – a three-level former Methodist church, used commercially. Scheduled for auction on June 17, 2015; agent, Chase Commercial Michael Feltoe and Rod Brown . 454 St Pauls Terrace, Fortitude Valley – a three-storey office building. For sale by expressions of interest, closing June 4, 2015; agent, JLL Brisbane Christian Sandstrom and Seb Turnbull . Properties under contract include: 185 Wharf Street, Spring Hill – a four-storey office building. An expressions of interest campaign closed April 16, 2015. The property is now under conditional contract, details undisclosed; agent, JLL Brisbane Sam Bryne and Christian Sandstrom . 31 Duncan Street and 315 Brunswick Street – China Town Car Park and TCB on Brunswick. An expressions of interest campaign closed November 12, 2014. Due diligence was being conducted in January 2015 and was continuing in April 2015, details undisclosed; agent, Colliers International Tom Phipps and Jason Lynch . 211 Leichhardt Street, Spring Hill – St Paul’s on Leichhardt tavern. Under contract unconditionally for $3.05 million, with settlement expected in June 2015; agent, Ray White Transact Joe Tynan and Rick Bird . RP Data Commercial Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Increased sales at auction a likely result of the latest interest rate cut

CoreLogic RP Data National Auction Preview, week ending 10 May 2015 Currently, CoreLogic RP Data is tracking 2,651 auctions across Australia for this week, with 2,177 scheduled across the capital cities. Last week there were 2,540 capital city auctions and over the same week one year ago, there were 1,535 capital city auctions. Last year, 65.0 per cent of the homes taken to auction sold, which is a softer result when compared to current activity. Last week, the final weighted average clearance rate was 78.6 per cent, yet another strong result in what has been a record strong year for auctions so far, mostly driven by the solid results across Sydney. There are 961 Melbourne homes set to go to auction this week, 1,139 Melbourne homes were taken to auction last week, with a final auction clearance of 81.7 per cent. Last year there were 710 Melbourne auctions over the corresponding week. Currently, in Sydney, 854 auctions are expected this week, compared to 914 last week and a lower 618 at the same time last year. Last week, Sydney’s final auction clearance rate was 87.3 per cent, the second highest result on record for the city. Given the latest rate cut by the RBA, we anticipate another strong result again this week, with the clearance rate potentially shifting even higher. In Brisbane, last week’s auction clearance rate was 47.3 per cent across 192 auctions, while this week, the number of homes taken to auction is set to fall to 151. Adelaide is expecting 90 auctions this week, a much lower number when compared to last week, when there were 167 auctions, but comparable to the same time last year, when 89 Adelaide homes were taken to auction. There are currently 75 auctions scheduled across Canberra this week, compared to 59 last week and 33 last year. Across Perth, 38 auctions are expected this week, compared to 47 last week and just 15 at the same time last year. Across Australia the highest volume of auctions in one suburb are the 21 in Reservoir, Victoria.

Dwelling approvals hit new record highs in March 2015

The Australian Bureau of Statistics ABS released building approvals data for March 2015 earlier today. The data showed that over the month there were 19,419 new dwelling approvals which was a record high and 2.8% higher than levels in February. The data highlights that approvals and subsequently new housing construction is continuing to surge across the country. In March there were more units 9,767 approved for construction than there were houses 9,651 . Although this may not sound like a big deal, this has only occurred on two previous occasions. House approvals were 0.5% higher over the month and are 1.3% higher year-on-year. In comparison, unit approvals rose 5.3% over the month and are 57.9% higher year-on-year. Keep in mind that the number of unit approvals tend to be more volatile than houses however, the surge coupled by the fact that there were more approvals for units than houses shows a growing tendency toward new unit construction. Over the past 12 months, there have been a record high 210,484 dwellings approved for construction which is 11.2% higher than at the same time last year. Over the period, there have been 114,874 houses approved and 95,608 units. Although house approvals outnumber unit approvals on an annual basis, unit approvals accounted for a record high 45.4% of all dwelling approvals over the past year. While there is a growing prominence of units approvals, so too is there a growing prominence of these approvals being for high density stock. Over the 12 months to March 2015, a record high 60.5% of all unit approvals were for units in a block of four or more storeys. To put this surge into perspective, ten years ago just 39.7% of unit approvals were for units in these higher density buildings. You only have to drive through inner city areas of Sydney, Melbourne or Brisbane to see that there is a current shift towards much higher density living and today’s data shows there is plenty more in the pipeline. The capital city data isn’t seasonally-adjusted so it doesn’t line-up with the national data however, over the month there were 15,349 dwellings approved for construction across the combined capital cities. Like the national figures, this was also a record high number of approvals following a 9.7% monthly increase and a 33.5% year-on-year increase. Looking at the split between capital city house and unit approvals there were 6,709 houses and 8,640 units approved for construction over the month. House approvals were 7.5% higher over the month and 9.0% higher year-on-year. Unit approvals increased by 11.5% over the month and by 61.8% over the year. Although total approvals were at a record high neither houses or units recorded their highest month for approvals. Across the capital cities, dwelling approvals increased over the month in all capital except for Melbourne and Darwin. Year-on-year approvals are higher in each capital city except for Canberra. Looking at annual approvals across the capital cities, annual approvals are at a record high in Sydney, Melbourne and Brisbane as well as being just shy of a record high in Perth. Hobart 40.4% , Melbourne 25.5% , Brisbane 25.1% and Darwin 12.1% have recorded the greatest increases in approvals over the year. Dwelling approvals have fallen -36.8% in Canberra over the year, while increases in Sydney 4.9% , Adelaide 10.3% and Perth 11.4% have been relatively moderate. Annual house approvals were higher in March 2015 than a year earlier in all cities except for Adelaide -1.3% and Canberra -9.0% . Across the remaining cities the annual increases in house approvals were recorded at: 16.5% in Sydney, 14.6% in Melbourne, 29.6% in Brisbane 6.1% in Perth, 54.0% in Hobart and 6.9% in Darwin. What is noticeable from the above chart is that Melbourne the 2nd largest city has approved substantially more houses 22,878 than Sydney the largest city 13,776 . Similarly, Perth the 4th largest city has approved far more houses 19,783 than both Sydney and Brisbane the 3rd largest city 10,826 . While annual capital city unit approvals have risen by 15.2% over the year, across the capital cities unit approvals were lower over the year in Sydney -0.2% , Hobart -6.9% and Canberra -49.9% . Elsewhere the annual increases in unit approvals have been recorded at: 35.2% in Melbourne, 21.7% in Brisbane, 36.5% in Adelaide, 28.4% in Perth and 16.6% in Darwin. When we look at the annual approvals picture, more than half of all approvals over the year were for units in Sydney 66.2% , Melbourne 56.9% , Brisbane 58.6% , Darwin 56.2% and Canberra 53.9% . Over the past 12 months, a record high 52.7% of all capital city dwelling approvals were for units. Unit approvals have accounted for more than half of all approvals in Sydney, Darwin and Canberra for many years however, it is a relatively new phenomena in Melbourne and Brisbane. In our opinion this raises some concerns given the rapid ramp-up in unit approvals in these two cities. Although lifestyle preferences are changing we have some concerns about an oversupply of units in these markets. Especially when you consider that unit stock is generally favoured by investors and rents are already growing at their slowest pace in a decade. Furthermore, capital growth for units is lower than that for houses across four of the five cities in which there have been more unit approvals than house approvals over the past year, the exception is Darwin. Value growth for units over the year has been particularly sluggish in comparison to house value growth in Melbourne and Brisbane. The data is encouraging; there remains a large volume of new house and unit developments being approved for construction. Much of the new unit stock is high density which by nature means most of it is taking place in inner city areas. Although there is a strong pipeline of construction we continue to have concerns of a new unit oversupply in certain areas, particularly in inner city Melbourne and Brisbane. Although there are some concerns a record-high level of approvals, should they ultimately end up constructed, should alleviate some of the housing shortages and contribute to a slowing of the escalation in home values. What is somewhat worrying is that the Sydney market, where home values are escalating rapidly on the back of low overall housing supply, is not experiencing as significant a ramp-up of approvals as we are experiencing across most other capital cities.

A combined capital city clearance rate of 79 per cent, the third strongest on record, shows auction strength continues into May

This week there were 2,419 capital city auctions held and the preliminary clearance rate was 79.0 per cent, a good start to May, following on from last week’s record result 82.3 per cent across the capital city auction markets, when just 604 auctions were held. This week’s preliminary clearance rate is the third strongest combined capital city clearance rate on record, topped only by last week’s clearance rate and the 79.7 per cent recorded in mid-September 2009. At the same time last year, 2,053 homes were taken to auction and the clearance rate was 63.2 per cent. Melbourne’s preliminary clearance rate this week was 81.3 per cent. There were 1,110 auctions held across the city and so far 963 results have been reported. Last week, only 183 Melbourne homes were taken to auction, however demand was still strong, with 86.6 per cent of homes selling. One year ago, Melbourne’s clearance rate was almost 20 percentage points lower, at 61.9 per cent, while auction volumes were also lower, with 891 auctions held. This week, 6 out of the 9 individual Melbourne sub-regions saw auction clearance rates above the 80 per cent mark. The strongest performer this week was the Outer East region, where, across the 72 results reported, 65 were sold 90.3 per cent . There were 839 Sydney auctions this week with a preliminary clearance rate of 87.3 per cent, down from 89.7 per cent last week and much higher than the 71.4 per cent from one year ago. This week marks the 13th week in a row where Sydney’s clearance rate has been above 80 per cent, and based on preliminary results, this is the third week in a row where Sydney’s clearance rate has been recorded at 87 per cent or more. These strong results are no surprise given that one third of Sydney’s individual sub-regions recorded a preliminary clearance rate in excess of 90 per cent. This week, Brisbane’s preliminary clearance rate fell to 49.5 per cent from 61.5 per cent last week and 42.4 per cent at the same time last year. There were 186 Brisbane auctions this week, compared to 41 last week and 142 last year. Across the Gold Coast there were 90 auctions held this week and so far 53 results have been reported with just 17 sales. In Adelaide 158 auctions took place this week with a clearance rate of 72.5 per cent. In comparison, at the same time last year, 97 Adelaide homes were taken to auction and 62.7 per cent were reported as sold. A total of 45 Perth homes were taken to auction over the week, up from 12 last week. Based on the preliminary results, Perth’s auction market was relatively soft this week, with just 27.8 per cent of the 18 reported auctions sold so far, compared to 42.9 per cent last week. In Canberra, the auction clearance rate increased to 81.5 per cent this week, from 71.4 per cent last week. This week, 15 Tasmanian auctions were reported to CoreLogic RP Data, with 6 sales.

Commercial Auction Results â

Over the week ending 24 April 2015, the preliminary auction clearance rate was recorded at 84.9 per cent across 33 reported auctions. In comparison, the final auction clearance rate for the previous week was 57.9 per cent across 76 results. Last year, given both Anzac Day and Easter, auction activity was much lower with just 8 commercial auctions held. Of the 8 auctions held, 7 were reported as sold, a strong result given the small number of properties available. Over the most recent four week period, there has been a total of 150 commercial properties taken to auction, with 95 reported as sold. Of these 95 sales, 67 have been reported with a sale price, totalling just over $127.1 million. The table below indicates National Auction Clearance Rate figures. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Melbourneâ

The former Stock Exchange House at 357 Collins Street, Melbourne has been sold in a related party sale for $222.5m. The sale is the largest commercial transaction in Melbourne this year. Vendor was Frasers Centrepoint, an international real estate company based in Singapore with a portfolio that spans residential, commercial, hospitality and industrial asset classes. Controlled by Thaibaire, Charoen Sirivadhanabhakdi, Frasers was listed in 1988 and is the vendor through its control of the Australand Property Holdings Collins St No.1 . Frasers gained control of the trust after its 2014 $2.6b takeover of Australand. The buyer is Frasers Commercial Trust, a trust that invests primarily in quality income-producing commercial office properties and has assets of almost $2b under management. According to Melbourne Cityscope, 357 Collins Street is a 23 level office tower, built in 1968 and now merged with an 11-level building to Collins Street, which was completed in 2005 and refurbished in 2009. A further refurbishment of the building to Flinders Lane and the redevelopment with extensions of the existing tower to the Collins Street frontage was completed in mid-2013 and achieved a 5 Star NABERS rating. The building has parking for 40 cars, a total of 31,800sqm of office space and 1,800sqm of retail space. It is now 95% leased with major tenants including the Commonwealth Bank, Omega Global Investors, AXIS and numerous small retail tenants. The building last traded pre-refurbishment and being tenanted at $45m in March 2010. Meredith Baume Commercial Research Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update â

The latest research from Norwest Cityscope shows a substantial decrease in the total value of sales over the last quarter. For the three months to April 2015, there were 35 sales at a total value of $64.6 million, compared to 38 sales at a total value of $148.1 million for the three months to January 2015. However, the most recent quarter shows an appreciable increase to the quarter ending October 2014, when there were 35 sales at a total value of $15.2 million. The figures for the year ending April 2015, of 146 sales at a total value of $247.6 million, represent a considerable increase on those for the year ending April 2014, when there was a total of 142 sales at a total value of $128.3 million. The table below shows sales recorded for the last eight updates of Norwest Cityscope. Notable sales recorded in the April 2015 update of Norwest Cityscope include: Norwest Quay, a four-storey office building with a net lettable area of 10,836 sqm and basement parking for 427 vehicles at 21 Solent Circuit, Baulkham Hills, which sold for $38,915,306; A 16,000-sqm site of vacant land at 26 – 28 Norbrik Drive, Bella Vista, which sold for $5,202,344; and The 8,170-sqm site of the Quest Serviced Apartments development at 24 Norbrik Drive, Bella Vista, which sold for $3,550,000. Significant properties for sale in the April 2015 update of Norwest Cityscope include: Part of Hills Corporate Centre, 15 Brookhollow Avenue, Baulkham Hills, a two-storey office building with warehouse space, available through Coutts Industrial Real Estate; and An office/warehouse unit of 1,384 sqm with parking for 32 vehicles at 18 Lexington Drive, Bella Vista, at an asking price of $3.65 million through Norwest Commercial and Industrial. Significant leasing opportunities in Norwest Cityscope include: Century Estate, a group of commercial and industrial buildings on a 54,390-sqm site with parking for over 500 vehicles at 2 Solent Circuit, Baulkham Hills, which has up to 3,120 sqm of office space available through Norwest Commercial and Industrial; The aforementioned Norwest Quay, which has up to 2,640 sqm of office space available through Colliers International Sydney West and Norwest Commercial and Industrial; and Norwest C3, a group of three four-storey office buildings with a net lettable area of 15,099 sqm and parking for 682 cars at 3 Columbia Court, Baulkham Hills, which has office space of 450 to 2,200 sqm available through Norwest Commercial and Industrial and CastleCorp Real Estate Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Commercial Market Update â

The ninth quarterly update of Pyrmont-Ultimo Cityscope shows a decrease in both sales activity and total sales value. The most recent quarter had a total of 41 sales at a sales value of $122 million, as compared to 45 sales at a total value of $423.8 million for the quarter ending January 2015. The 12-month total sales figure now stands at $677 million dollars for the year ending April 2015, with 159 sales recorded over that period. The table below shows sales recorded for the nine editions of Pyrmont-Ultimo Cityscope: Notable sales in the areas covered by Pyrmont-Ultimo Cityscope for the April 2015 update include: 13-19 Harris Street, Pyrmont, an A-grade office building with seven levels of office space and 2 levels of basement parking, sold for $75.3 million; 37-49 O’Connor Street, Chippendale, a one-and-two-storey industrial building with high-clearance roller door access, sold for $10 million; 385 Wattle Street, Ultimo, two adjoined single-storey brick warehouse buildings, each with a loading dock to Blackwattle Lane, sold for $5 million; 2-12 Kensington Street, Chippendale, a three-storey brick warehouse to the corner of Dwyer and Kensington Streets and a two-storey brick warehouse at 12 Kensington Street, sold for $4.75 million; and Suite 121 at 26-32 Pirrama Road, Pyrmont, a 601 sqm strata office suite, sold for $3.68 million. Properties for sale in the latest update of Pyrmont-Ultimo Cityscope include: 167 Glebe Point Road, Glebe, a two-storey building with ground floor retail at is to be auctioned on 28 April 2015 through Raine & Horne Commercial. 92 Glebe Point Road, Glebe, a two-storey building with ground floor retail at is to be auctioned on 12 May 2015 through Taylor Nicholas. 609-615 Harris Street, Ultimo, a two-storey warehouse, at with the site area of 806 sqm is for sale through DB Property and Joandarc Realty. Suite 109, 55 Miller Street, Pyrmont, a 116 sqm strata office suite is for sale through auction on 24 April 2015 through Laing and Simmons and Suite 133, at 89-97 Jones Street, Ultimo a 147 sqm strata office suite is for sale through Century 21 Mirabella Property. Leasing opportunities listed in the April 2015 update of Pyrmont-Ultimo Cityscope include: 13-19 Harris Street, Pyrmont, has office space from 250 to 3,500 sqm at an A-grade office building with seven levels of office space and 2 levels of basement parking, is for lease through Savills; City West Centre, at 55 Pyrmont Bridge Road, Pyrmont has office space of 1,200 and 1,500 sqm for lease through Cushman & Wakefield; 63-71 Balfour Street, Chippendale has office space from 200 to 1,100 sqm for lease through Fringe Commercial; and 63-79 Miller Street, Pyrmont, a five-storey refurbished commercial building has office space of 1,000 to 1,250 sqm for lease through Regus and Colliers International. Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Residential auction markets set to become busy again, with a strong result recorded for April

CoreLogic RP Data National Auction Preview, week ending 3 May 2015 CoreLogic RP Data is currently tracking 2,871 auctions across Australia this week and 2,295 of these are in the capital cities. At the same time last year, auction volumes were lower at 2,053. Last weekend marked the final weekend for auctions in April and while the number of auctions was low, the combined capital city clearance rate remained strong, showing that the demand for the homes that did make it to auction did not waver. The final auction clearance rate for last week was 82.3 per cent across 604 auctions. While last week’s clearance rate is the strongest result on record, given ANZAC day, auction volumes were around 70 per cent lower than the average number of auctions that has been held each week so far this year. Last week’s result brings the April clearance rate for the combined capitals to 78.8 per cent, well above the same time last year when the clearance rate over the month was 66.4 per cent and higher than the 76.6 per cent recorded in March. Currently, there are 1,033 auctions scheduled in Melbourne for this week, compared to 891 at the same time last year. Last week, the clearance rate across the 183 auctions held was 86.6 per cent, a strong result, despite the low volume. Last week’s result brings the clearance rate for April to 79.7 per cent. In Sydney, the auction clearance rate for last week was 89.7 per cent across 285 auctions. The result was the strongest on record for the city; however, given the low number of auctions, it could be argued that it was not as significant as the 87.0 per cent recorded across 988 auctions the previous week. This week, Sydney is expecting 815 residential auctions. Over the past four weeks, April proved to be a strong month for Sydney, with the auction clearance rate above 83 per cent each week. There are 172 auctions expected across Brisbane this week, compared to 41 last week and 142 at the same time last year. The final auction clearance rate was recorded at 61.5 per cent for Brisbane last week, a strong result for the city. This week, Adelaide is expecting 156 auctions, up from 59 last week and 97 at the same time last year. Last week Adelaide’s clearance rate was 59.2 per cent. Canberra’s auction clearance rate from last week was 71.4 per cent with just 23 homes taken to auction. This week, CoreLogic RP Data is expecting 55 auctions which are relatively similar to the 47 homes taken to auction one year ago. There will be 43 Perth homes taken to auction this week, up from 12 last week and 41 at the same time last year. The highest volume of auctions for any one individual suburb this week is outside of the main capital city auction markets in Armidale, New South Wales. Currently, CoreLogic RP Data is tracking 21 Armidale homes that are set for auction this week. The number of auctions scheduled in the Victorian suburbs of South Yarra 18 and Reservoir 17 is also high.

The number of new listings being added to the residential property market is lower than at the same time last year, with regional markets showing the greatest slow down

Over the most recent four week period, the number of new listings added to the market has remained somewhat subdued with the traditional slow-down in listings experienced each year around Easter still included in the four week reporting period. The number of new residential property listings are broadly still lower than they were one year ago. Across the combined capitals, 24,535 new listings were added to the market over the four weeks ending 26 April 2015, -4.8 per cent lower than the 25,785 added at the same time last year. Nationally, new listings are -8.9 per cent lower than last year, with 40,688 new homes advertised for sale over the most recent four weeks 3,952 fewer than last year . As a result of the new stock that has been added to the market, the total number of residential properties currently available for sale across the combined capitals is 99,270 and 241,647 properties nationally. While the total stock levels for the capital cities are lower than at the same time in 2014 -3.9 per cent , the number of properties available Australia-wide is trending closer to the 2014 levels, with -2.2 per cent fewer residential properties available for sale, however, this number is largely being driven by re-lists, rather than new listings. Melbourne, Brisbane and Adelaide are each seeing more new listings come onto the market than at the same time last year however, unlike Brisbane and Adelaide, Melbourne’s total stock available for sale is currently lower than it was at the same time last year. In each other capital city, the number of residential properties entering the market is lower than over the comparable four week period at the same time last year. Despite Sydney’s current strong performance in terms of capital growth, stock levels across the city are much lower than what has been observed historically. Across the states and territories, total available stock levels are higher than at the same time last year in Queensland 66,158 compared to 63,773 last year , South Australia 17,227 compared to 16,954 last year Western Australia 34,993 compared to 34,328 last year , Northern Territory 1,942 compared to 1,500 last year and the Australian Capital Territory 2,194 compared to 2,067 last year , while in New South Wales, Victoria and to a lesser extent, Tasmania, the number of residential properties currently listed for sale is lower than over the comparable period 12 months ago.

Some ideas about measuring the relativity of housing costs

Measuring the cost of housing and housing affordability is such an abstract idea because it is not a one size fits all measure and there are so many factors which contribute to affordability or unaffordability. Most of the common measures have one or a number of glowing weaknesses which I will cover. Interest rates What interest rate do you use when a typical mortgage is 25 to 30 years? Most measures utilise the current mortgage rate and while that may tell you what affordability is like now affordability is important to analyse throughout the life of the mortgage not just as you purchase. With generational low mortgage rates right now, affordability in many areas looks good but if rates were to normalise affordability would look very different. Household income What figure do you use for household income? Much like interest rates household incomes will fluctuate over the 25 to 30 year cycle of a mortgage. Given this, are household income measures appropriate or is it better to assume a single or dual income household? Furthermore, outside of the Census, which is conducted every five years, this data is only published semi-regularly and at a state level. Housing markets and income levels are very different across different regions of the country. International comparisons Is a home in Australia the same as a home anywhere else in the world? In the sense that it provides shelter it is, however, tax regimes, the cost and scarcity of developable land, the provision of infrastructure and the availability of jobs are all other factors that contribute to the cost of housing. Furthermore, most comparisons are not apples with apples. Australian housing markets are dominated by detached houses whereas markets like Tokyo, Singapore, Hong Kong and Manhattan are largely apartment markets while London for example is predominately attached housing types what we would call terraces or townhouses . The fact that Australian homes are, at least for the large part, detached and the largest in the world will also contribute to a higher cost. Ryan Fox and Richard Finlay from the RBA wrote an excellent paper back in 2012 which provides an overview of some of the challenges around blending household income data with housing prices which is available here CoreLogic RP Data don’t regularly publish a measurement of housing affordability, however, a different perspective on housing affordability is to look at the cost of renting relative to the price of a home. Using our data on advertised median rental rates and median selling prices of homes we can determine how many years difference there is between the cost of renting and the cost of a home. This analysis focusses on the relative affordability between the two primary means of shelter; renting or owning a home. This analysis doesn’t factor in interest rates or household incomes and doesn’t compare internationally. What it does do is look at the difference between the two forms of housing residents have, to rent or to purchase. With rental growth at its lowest level in more than a decade, we would expect that the number of years of rent required to purchase a home will rise over the coming year. As a result we may see more residents choosing not to purchase their own home despite the low mortgage rates available. Across the combined capital cities, the annual rent for a house is $25,552, for a unit it is $24,013 and for combined houses and units dwellings it is $25,311. In comparison, the median house price is $559,000, the median unit price is $470,000 and the median dwelling price is $530,000. Based on this data, to buy a house would take 21.9 years of rental payments, to buy a unit requires 19.6 years of rent and a dwelling would take 20.9 years of rental payments. As the chart shows, the differential has been greater at the end of 2007 and there has been little change over recent years. In saying this, in March 1997, the differential was much lower at 10.8 years for houses and 11.7 years for units. In Sydney, the cost of a house is equivalent to 24.6 years of rents and the cost of a unit is 21.7 years of rent. Across Melbourne the median house price is equivalent to 23.8 years of rent while the cost of a unit equates to 21.3 years of rent. A typical Brisbane house costs 20.9 years’ worth of rent while the typical Brisbane unit costs 17.7 years of rent. Note that the 17.7 years is the lowest since July 2004. The median house price in Adelaide is equivalent to 22.0 years of rent and the unit price amounts to 20.6 years of rent. The median Perth house costs 21.0 years’ worth of rent while the median unit costs 19.1 years’ worth of rent. A typical house in Hobart costs the equivalent of 18.9 years of rent while a unit costs 17.0 years of rent. A house in Darwin costs 18.4 years’ worth of rent while a unit costs 18.9 years’ worth of rent. The median house price in Canberra is equivalent to 22.6 years of rent while the median unit price is 19.7 years of rent. It is also interesting to look at the relativity between cities. The way to read this chart is if you use Sydney as an example, rents are on the left and purchase prices are at the top. Given this, if you rent in Sydney and want to purchase in Sydney it costs 22.4 years of rent, whereas if you live in Sydney but want to purchase in Melbourne it is equivalent to just 16.8 years of your Sydney rent. The table shows that those renting in the more expensive cities would have a much easier time entering into home ownership outside of these cities. On the other hand, if you are thinking about buying in Sydney but are currently renting in another city you could be in for a nasty shock when you go to purchase. By no means do I think this analysis is a perfect picture of housing affordability however, I do think it is a different way to measure it. It still has the weakness of using medians and of course, very few people purchase the median home and in particular first time buyers should be looking to purchase below the median price. Nevertheless it does show the difference in the cost of renting and housing and potentially provides some food for thought for those looking to enter into home ownership. Considering this analysis is quite different from other studies around the cost of housing, I’d value any feedback that readers may have on this analysis.

Commercial Market Update â

The latest research from Docklands Cityscope shows property sales have decreased in the past three months. Sales recorded in the quarter ending April 2015 totaled $220.5 million, a decrease from the $262.9 million recorded in the three months to January 2015, and from the $566.1 million recorded to October 2014. This data brings the 12 month total to $1.49 billion, an increase from the $484.6 million recorded the same time last year. The table below shows sales recorded for the past eight updates of Docklands Cityscope. Recent standout sales in Docklands include: 105 Pearl River Road, Docklands, 440 Docklands Drive, Docklands and 52-90 Waterfront Way, Docklands, The National Ice Sports Centre known as The Icehouse , a 2-level sporting and entertainment complex, the Harbour Town Melbourne Shopping Centre, a complex of 170 retail outlets over 38,000 sqm and Harbour Town East Car Park, a 7-storey, 1,300-space car parking station, was bought for $142.3 million. 733 Bourke Street, Docklands, The Goods Shed North, an extensively refurbished 1889 heritage building with 11,235 sqm of retail and commercial space, was bought for $76.5 million in a sale arranged by Colliers International and JLL – Melbourne. Properties for sale in Docklands in April 2015 include: Unit 11R, 223 Harbour Esplanade, Docklands, a retail unit with an area of 180 sqm is for sale at $1.3 million through Lucas Real Estate. Unit G4, 439 Docklands Drive, Docklands and Unit 6G, 439 Docklands Drive, Docklands, a 188 sqm retail premise and a 279 sqm retail strata unit for sale together at $2.5 million through Lucas Real Estate. Significant leasing opportunities in Docklands in April 2015 include: Ericsson Commercial Tower, 818 Bourke Street, Docklands, a six-level office building above a car park of three split level has a whole floor of 3,815 sqm available for lease through Knight Frank and Colliers International. 720 Bourke Street, a 22-storey, 47,000 sqm office building with 70 car parking spaces has 251 to 11,659 sqm available for lease through Colliers International and Knight Frank. Cityscope covers 28 predominantly capital city CBD markets across Australia and New Zealand, providing a rich level of property level data including building attributes, tenancy detail, sales and ownership.For more information on Cityscope or any other CoreLogic RP Data products call 1300 734 318 or visit the website at www.corelogic.com.au/products/cityscope. Subscribe to the free Commercial Pulse eNewsletter Get the latest commercial news and sales data each week from our CoreLogic RP Data Commercial Pulse! Click here to subscribe.

Auction volumes drop due to Anzac Day commemorations

CoreLogic RP Data National Auction Comment, week ending 26 April 2015 As a result of the Anzac Day commemorations on Saturday, which is traditionally the busiest day for auctions, it was a quiet week for auction activity. There were 550 auctions held across the combined capital cities this week, with a preliminary auction clearance rate of 84.3 per cent. While this is the highest auction clearance rate on record, it is likely that the clearance rate will revise down as the remaining auctions are reported. Last week, a clearance rate of 78.9 per cent was recorded across 2,603 capital city auctions. At the same time last year, auction volumes were higher than this week, but still low off the back of Easter, with 881 properties taken to auction and a clearance rate of 64.6 per cent. In Melbourne, Australia’s largest auction market, a preliminary auction clearance rate of 87.4 per cent was recorded across 169 auctions this week. Last week, Melbourne’s final clearance rate was recorded at 79.5 per cent across 1,266 auctions, while this time last year, 373 properties were taken to auction across Melbourne and a clearance rate of 63.0 per cent was recorded. The busiest Melbourne sub-regions this week were Melbourne’s Inner region and the Inner South region, where 27 and 26 auctions were held respectively. Sydney’s preliminary clearance rate this week was 91.9 per cent across 192 auction results. There were a total of 249 auctions held across the city. Excluding this week, last week’s clearance rate of 87.0 per cent across 988 auctions was the highest clearance rate on record for the city. It will be interesting to track this week’s final auction clearance rate once the remaining results have been reported. Looking back at this weekend last year, 361 auctions were held across Sydney and a clearance rate of 71.3 per cent was recorded. Sydney’s Eastern Suburbs hosted the most auctions of any Sydney sub-region this week, with 62 properties taken to auction. The preliminary clearance rate for the region is 95.7 per cent across 47 results. There were 39 Brisbane auctions this week and so far 11 results have been reported, with 10 sales. Last week, auction volumes across the city were much higher with 140 auctions held across the city and a 46.4 per cent clearance rate recorded. Much like Brisbane, the number of homes taken to auction this week fell across the Gold Coast with 32 properties up for sale this week. Of the 21 results reported, just over half 52.4 per cent were successful. A total of 59 Adelaide homes were taken to auction this week, with a preliminary clearance rate of 55.0 per cent across 20 results, down from 69.7 per cent last week when 97 auctions were held across the city. In Perth, just 10 auctions were held this week. So far, only 2 successful sales have been reported to CoreLogic RP Data. Last week, the final auction clearance rate for Perth was 28.6 per cent across 36 auctions. Canberra’s clearance rate was 78.6 per cent this week, up from 65.6 per cent last week. There was only 1 Tasmanian auction held this week. The property was reported as sold.

Anzac Day shifts focus away from auctions this weekend

CoreLogic RP Data National Auction Preview, week ending 26 April 2015 Given that Anzac Day falls on Saturday this year, traditionally the busiest day for auctions, the number of auctions being held this week is much lower than usual. Currently CoreLogic RP Data is expecting 433 capital city auctions to take place during the week ending 26 April, with just 591 held nationally. At the same time last year, there were 881 capital city auctions held. In Melbourne, 143 homes will be taken to auction this week. Last week, Melbourne’s final auction clearance rate was recorded at 79.5 per cent, with 1,266 auctions held across the city. Melbourne’s clearance rate last week was the second highest on record this year, with the highest recorded over the Easter weekend, when volumes were considerably lower. Last week, Sydney’s final auction clearance rate came in at 87.0 per cent across 988 total auctions. This is the highest clearance rate on record for the city, with nine of the top ten clearance rates on record for the city having occurred this year. There will only be 174 auctions held across Sydney this week, with the majority of the auctions held prior to the weekend, given the Anzac Day commemorations. There are 31 Brisbane auctions currently being tracked by CoreLogic RP Data, down significantly from 140 last week, when the final auction clearance rate was 46.4 per cent. Adelaide’s final auction clearance rate for last week was 69.7 per cent, with 97 auctions held over the week and 76 results reported. There will be 54 auctions held across the city this week, with the majority of the auctions held on weekdays and on Sunday. There are 22 Canberra auctions scheduled this week, down from 65 last week. 65.6 per cent of Canberra’s auctions that were reported last week were successful at auction, with Canberra’s auction success rate becoming increasingly strong. In Perth, 36 auctions were held last week and the clearance rate fell to 28.6 per cent. This week, there are only 6 auctions scheduled across Perth. The busiest suburbs for auctions this week are Bondi Beach in Sydney and Surfers Paradise in Queensland’s Gold Coast. Both suburbs have 6 auctions being held this week.

Sydney and Melbourne are the only capital cities where dwelling values have risen at a faster pace than inflation over the past five years

The Australian Bureau of Statistics ABS released Consumer Price Index CPI data for the March 2015 quarter yesterday. The data showed that over the quarter, headline inflation was recorded at 0.2% taking annual inflation to 1.3%. The Reserve Bank’s RBA preferred measures of underlying inflation, the trimmed mean and weighted median, were recorded at an annual rate of 2.3% and 2.4% respectively. Headline inflation is well below the RBA’s target range of 2% to 3% however, underlying inflation is towards the bottom of the RBA target range. From a housing market perspective, it is useful to understand the real change in home values. We all know that the Sydney market is recording strong rates of value growth at the moment while most other capital cities are seeing more moderate growth. When you take the impact of inflation into consideration, growth is generally much more tepid. Over the 12 months to March 2015, nominal home values across the combined capital cities increased by 7.4% however, including inflation, real home value increases have been recorded at 6.0%. Across the individual capital cities, real home value growth over the past year has been below 1.5% in all cities except for Sydney 12.5% and Melbourne 4.2% . When you compare the annual change in real capital city home values to the 10 year real annual change it shows that only Sydney, Melbourne and Brisbane are outperforming the decade average. Elsewhere real home values have increased at a rate which is below the decade average. Over the past five years, real combined capital city home values have increased by 1.2% per annum compared to 2.2% pa over the past decade and 4.3%pa over the past 15 years. Over the past five years, real home values have increased at a rate of 4.0% pa in Sydney and by 1.3% pa in Melbourne. Every other capital city has recorded real value falls over the period with values down -2.3% pa in Brisbane, -1.3% pa in Adelaide, -1.0% pa in Perth, -3.9% pa in Hobart, -1.6% pa in Darwin and -1.2% pa in Canberra. Even over the past 10 years home values have fallen in real terms in Hobart whilst they have recorded gains elsewhere. Over the longest timeframe shown, 15 years, Perth has recorded the strongest annual value increases at 5.5% pa, followed by: Melbourne 5.0% pa , Brisbane 4.8% pa , Hobart 4.7% pa , Canberra 4.6% pa , Adelaide 4.5% pa , Darwin 4.2% pa and Sydney 3.5% pa . One of the features of the capital city housing market has been the strength of growth in home values across Sydney and Melbourne since the end of 2008 following value falls during the financial crisis in 2008. From December 2008 to March 2015 nominal home values have increased by 40.2% however, in real terms value growth is much more moderate at 18.2% over the period. Over this period real home values have recorded falls in Brisbane, Adelaide and Hobart while Perth, Darwin and Canberra have each recorded real home value growth of less than 10%. Only Sydney 42.0% and Melbourne 26.9% have recorded any significant real increases in home values over the period. Earlier this week RBA Governor Glenn Stevens noted that there is generally too much attention on the Sydney housing market which ignores the 80% of Australians that don’t live in that city. Looking at the real change in home values really highlights this point; value growth has been comparatively very strong over recent years in Sydney while most cities have actually recorded real declines in values. What’s also interesting is that although Sydney is seeing a strong rise in both nominal and real home values currently, over the past 15 years it has been the overall weakest performing capital city housing market.

Australia has a glut of bedrooms but a dearth of policies in place to make these rooms and homes available to those who need them most

The last Census showed that across Australia we have ample bedrooms to cater to our population yet the lack of new housing supply over recent years along with increasing demand for homes has resulted in increases in home values. Particularly in Sydney and Melbourne the escalation in home values over recent years has been strong while most other capital cities have largely remained on the sidelines. The 2011 Census showed that at that time there were 21,507,717 residents of the country. The data also showed that there were 7,760,320 private dwellings which were occupied at the time with a further 10.7% unoccupied. Given this, and if we assume that everyone has a dwelling to live in, each occupied dwellings would have an average of 2.77 residents. According to the Census data, on average occupied dwellings in Australia have 3.1 bedrooms which is theoretically more than ample bedrooms to house the population. The above table which is lifted from the Census shows that there are far more bedrooms than required across the country. In fact, if we exclude those labelled as ‘none’, assume the 4 bedrooms or more category is just 4 bedrooms and exclude those where the number of bedrooms aren’t stated there were 22,866,601 bedrooms at the time of the 2011 Census. When you consider that many married couples sleep in the same room there is actually a substantial oversupply of bedrooms nationally. The problem is we have a housing market and taxation system which largely discourages home owners from moving to more appropriate accommodation as their lifestyle evolves. Furthermore, the high cost of housing makes it difficult for some younger home owners to move into more appropriate accommodation as their family grows. First of all, home owners are taxed via stamp duty when they buy a new home, if they also sell they incur agent commissions. Both of these factors act as a disincentive for home owners to move on a more regular basis. The disincentive for home owners to move on a more regular basis is highlighted when we look at the turnover of house and unit stock. On a monthly basis, the record-high number of sales occurred in July 2003 when there were 59,414 sales over the month. In comparison over the past 12 months there has been an average of 40,561 dwelling sales a month which is -32% lower than the peak. While sales volumes peaked in July 2003, the national population was recorded at 19.7 million persons at the end of June 2003. The latest data to September 2014 shows that the national population was 23.6 million persons which is 3.9 million more persons than there were in June 2003. Despite the fact that the population is substantially larger than it was in 2003 there are now fewer homes selling. Housing is one of the most heavily taxed asset classes; the most recent data for the Australian Bureau of Statistics ABS showed that over the 2012-13 financial year, $35.931 billion in property related taxes were collected by state and local governments. Looking at the breakdown of this data, property related taxes were collected from the following sources: 17% was land taxes, 40% was municipal rates, 36% was stamp duty on conveyances, 3% was government guarantee borrowing levies and 4% was from other sources. Stamp duty in particular is the most contentious of these taxes because it is only collected from homes which are transacted rather than being broadly taxed on all homes. Over a typical year only around 5% to 7% of properties nationally are sold, given this more than a third of all property related revenue is collected based on how many homes are sold in a given year. As I have mentioned previously, in my opinion shifting away from a turnover dependent tax such as stamp duty to a more stable and broad tax such as land tax would seemingly make sense as well as potentially improve labour mobility and encourage residents to shift into more appropriate accommodation. While investment properties incur capital gains tax, the sale of a home that is owner occupied doesn’t incur any capital gains tax. If the owner occupied home is sold, agent commissions are payable and if a new home is purchased stamp duty would be payable. This is probably one of the major reasons for the excess number of bedrooms across the country, after the children move out of home there is simply no real incentive to downsize. Furthermore, many homes have seen significant value appreciation over the past 25 years so there is substantial equity in these homes which can be withdrawn by the owners. As owners of owner occupied property enter into retirement, their tax-free home is also currently not included in the pension asset test. Essentially this means that if an owner has held their home for say 25 years they have likely seen a significant rise in the home’s value and can then retire and still receive the pension. Again, if they were to sell and re-purchase they would incur stamp duty so there is little incentive to do so. Most people enter retirement with little or no mortgage so excluding the family home from the pension asset test seems counter-intuitive as it creates an additional cost to the government for people who can afford to sell or take out a reverse mortgage in order to fund their own retirement. On the other hand, there is the argument that some pensioners have very little other than their home to fund their retirement so there would likely need to be some balancing with regard to this policy. You also don’t necessarily want to put pensioners in a position where they have to sell their home to fund their retirement and as a result have to move further away from their support network. Australia needs to investigate ways to encourage greater household mobility along with encouraging people to shift over time into more appropriate housing. The removal of stamp duty would seem like an easy place to start along with including the family home in the pension asset test for retirees. Stamp duty removal would make it easier for home owners to move into more appropriate and suitable accommodation as their family life cycle changes. Including the family home in the pension asset test may act as a disincentive for retirees to stay in their large tax-free homes and would also reduce the impost on the Government to pay a pension to these retirees, many of whom have the equity in their home to fund their own retirement or could release the equity to fund their retirement by moving to a smaller home. The data clearly shows that there isn’t an undersupply of bedrooms it is simply that many of these homes are locked away from the market because there is no incentive to move homes. Incentivising home owners to shift to more appropriate accommodation could go a long way to improving supply-side issues in the housing market.

Capital city clearance rate reaches 79.2 per cent, the second strongest result on record

CoreLogic RP Data National Auction Comment, week ending 19 April 2015 It has been another strong week for auction activity, with a preliminary auction clearance rate of 79.2 per cent this week, the strongest result since September 2009. There were 2,541 auctions held across the combined capital cities. Last week, the final auction clearance rate was recorded at 77.2 per cent with 1,674 residential properties taken to auction. At the same time last year, due to the Easter long weekend, auction volumes were low across most cities, with just 642 capital city auctions held. So far this year, with 12 weeks of auction results having been reported, the combined capitals have seen clearance rates above the 75 per cent mark in eight of these weeks. There were 1,252 Melbourne auctions held this week, with a preliminary auction clearance rate of 78.7 per cent. Over the year to date, Melbourne’s clearance rate has been outperforming when compared to the same periods over the past four years, however the number of homes taken to auction so far this year is slightly below last year. The best performing Melbourne sub-region this week was Melbourne’s Outer East, where 73 auction results were recorded, with a clearance rate of 93.2 per cent. Auction activity was also solid across the Inner South region 86.8 per cent . In what was yet another strong result for Sydney, this week’s preliminary auction clearance was 88.3 per cent, the strongest clearance rate for the city on record. There were 950 auctions held across Sydney this week, up from 671 over the previous week. Since the last week in January this year just shy of 9,890 Sydney homes have been up for auction and the number of transactions is around 8,300. The high success rate shows that vendors and buyers within this market are well aligned, which is also reflected in the short time it is taking to sell a Sydney home by private sale. Much like last week, Sydney’s Eastern Suburbs performed well this week, with 62 auctions held and so far, 95.9 per cent of reported auctions sold. A similar result was obtained across North Sydney and Hornsby 95.0 per cent and Blacktown 94.7 per cent . Brisbane’s preliminary clearance rate this week was 48.3 per cent, down from 54.4 per cent last week, which was the second highest clearance rate for the city this year. There were 139 Brisbane auctions this week, compared to 117 last week. The Gold Coast was host to 103 auctions this week. Based on the results reported to CoreLogic RP Data so far, 65.8 per cent have been sold. In Adelaide, the preliminary clearance rate was 70.5 per cent, compared to 68.6 per cent last week. As the year progresses, Adelaide’s clearance rate is becoming increasingly strong. There were 37 Perth auctions this week and so far 19 results have been reported, with just 21.1 per cent selling. Last week there was a 57.1 per cent clearance rate for Perth. Canberra’s clearance rate was 73.7 per cent this week, compared to 72.7 per cent last week. In Tasmania, 6 auctions were reported to CoreLogic RP Data with 2 sales. Last week, 8 auctions were reported with 4 sales.

The relationship between dwelling approvals, commencements and completions

Earlier this week the Australian Bureau of Statistics ABS released building activity data for the December 2014 quarter. The data includes quarterly figures for dwelling commencements and dwelling completions. With a record number of dwelling approvals coming through the system it is important to track this data as it provides insight into how many of these approvals are ultimately being constructed. Over the past 30 years, approvals and commencements have been highly correlated with the vast majority being approved and commenced in the same quarter. If we look at the relationship between approvals and completions, most houses are completed two quarters after approval while most units are constructed three quarters after being approved. Based on this data over the past 30 years, 96.5% of house approvals have moved to the commencement phase and 96.2% of unit approvals have been commenced. Looking at the completion rate for houses based on a two quarter lag, 95.1% of houses which have been approved are ultimately completed. For units the completion rate has been somewhat lower. Using a 3 quarter lag between approval and completion, 86.9% of units approved for construction have been completed. On this logic, detached housing approvals are much more likely to result in a completed product, with a fallout rate of just 5%, while apartment approvals are less likely to ultimately be constructed, with a dropout rate close to 15%. The results are much different over the past five years with the correlations not as strong as they have been over the longer term, particularly for apartments. The commencement rate for properties approved for construction over the past five years has been stronger than it has been over the past 30 years. Over the past 30 years, 96.5% of houses approved had been commenced in the same quarter compared to 98.1% over the past five years. For units, the commencement of approvals has typically been a quarter later over the past five years however, the likelihood of commencement has increased from 96.2% over the past 30 years compared to 97.8% over the past five years. Looking at the completion rate of approvals over the past five years, with a lag of two quarters 96.7% of houses approved for construction have been completed over the past five years. For units, based on a three quarter lag 85.1% of units approved have been completed. Note that the completion rate of houses over the past five years has been stronger than over the past 30, while the unit approval to completion rate has been slightly lower. One of the possible reasons for the reduced completion rate of units is likely to be the increasing level of high density unit construction. While the data indicates a lag of three quarters from approval to completion the reality is higher density unit construction takes significantly longer to complete often a number of years. The data highlights, whether you look at it over the longer or shorter timeframe, that houses which are approved for construction are ultimately more likely to be completed than units. With a record-high number of unit approvals currently there is no guarantee that they will all end up constructed. The long term and short term averages indicate we should expect around 15% of apartment approvals won’t transition to a completed product. The more timely dwelling approvals data showed an all-time high number of approvals in January and the second strongest month on record in February. The data clearly shows that the pipeline of housing construction is continuing to grow and that commencements will likely remain high for most of 2015 while the heightened level of completions is likely to extend out over the next few years at least.

Auction volumes to rise in Sydney, Melbourne and Perth

CoreLogic RP Data National Auction Preview, week ending 19 April 2015 This week, CoreLogic RP Data is currently tracking 2,936 auctions across Australia, with 2,296 scheduled in the capital cities. The coming week of auction activity will bring auction volumes back into line with where they were sitting prior to the seasonal Easter slow-down. At the same time last year, only 642 capital city auctions were held, given the seasonal effect from Easter. The final auction clearance rate for last week confirms that Sydney’s auction market is not showing any signs of slowing down; with last week signifying the 9th week in a row in which the Sydney auction clearance rate remained above the 80 per cent mark. The consistently high rate of clearance highlights that there is increasingly more incentive for Sydney vendors to consider selling their home by auction. The last time an auction market was recording results this strong was towards the end of 2009 and the start of 2010, when Melbourne’s clearance rate was trending above the 80 per cent mark. At this time, however, the number of auctions being held across the city was lower than what is currently being experienced across Sydney. Melbourne is set to host 1,145 auctions this week, an increase from 716 last week. Melbourne’s final auction clearance rate was recorded at 77.6 per cent last week, strengthening when compared to the 76.2 per cent clearance rate recorded over the first quarter of 2015. Last week, 671 Sydney auctions were held with a final auction clearance rate of 83.4 per cent. This week, 845 Sydney auctions are expected. The number of auctions have not returned to the volumes seen in the lead up to Easter, however, the clearance rate is maintaining strength with no signs of slowing down. Brisbane is expecting 119 auctions this week, almost unchanged when compared to the 117 auctions held last week. Brisbane’s final auction clearance rate was recorded at 54.4 per cent last week, a strong result for the city. Over the March 2015 quarter, Brisbane’s auction clearance rate was recorded at 46.5 per cent, having improved from 44.3 per cent over the final three months of last year. This week, Adelaide has 85 auctions scheduled, up only slightly from 83 last week. While Adelaide recorded a strong preliminary auction clearance rate this week, as additional results were reported the clearance rate revised down to 68.6 per cent, which is trending in line with what was observed over the few weeks leading up to the Easter slow down. Canberra has 56 auctions scheduled this week, compared to 53 last week, when a final clearance rate of 72.7 per cent was recorded. There are 32 Perth auctions scheduled for this week, up from 24 last week. Over the same week last year, Easter brought the volume of Perth auctions down to virtually nothing, with just 3 homes taken to auction over the seven day period. Nationally, the two suburbs with the most auctions scheduled this week are both located in Melbourne. The neighboring suburbs of Glen Waverley and Mount Waverley each have 17 auctions scheduled to take place on Saturday.

Strong national auction clearance rate maintained last week as volumes rise from a low base

CoreLogic RP Data National Auction Comment, week ending 12 April 2015 Auction volumes increased this week, albeit from a low base due to the Easter long weekend, with 1,568 auctions scheduled across the combined capital cities this week. A total of 1,014 results were recorded with the preliminary clearance rate remaining stable at 79.0 per cent, up only slightly from 78.9 per cent last week. At the same time last year, 67.2 per cent of all capital city properties taken to auction recorded a successful sale, while volumes were much higher at 3,534; however volumes were elevated in what was last year’s lead up to the Easter long weekend. As Australia’s largest auction market, Melbourne’s preliminary auction clearance rate was recorded at 77.7 per cent this week, more than 10 per cent higher than at the same time last year, when over the week the auction clearance rate was recorded at 64.4 per cent. The number of Melbourne homes taken to auction this week was 674, compared to just 63 last week and 1,530 over the same week in 2014. Across Melbourne’s sub-regions, the strongest performers this week were the Outer East region 91.7 per cent , followed by Melbourne’s Inner East, where the clearance rate was recorded at 84.9 per cent. Sydney vendors continued to experience strong conditions across the auction market this week, with the preliminary auction clearance rate recorded at 84.8 per cent with 619 auctions held across the city. In comparison, over the previous week, 427 Sydney auctions were held with a highly comparable clearance rate of 84.7 per cent, while one year ago, Sydney’s auction clearance rate was recorded at 74.8 per cent across 1,496 auctions. This is the ninth week in a row where Sydney’s auction clearance rate has been recorded above the 80 per cent mark. An exceptional result was recorded across Sydney’s Eastern Suburbs this week, with 35 auctions reported to CoreLogic RP Data and 34 of these recording a sale. Brisbane saw 111 auctions take place this week, with just over half of all results collected recording a sale 50.9 per cent . This week’s preliminary clearance rate is stronger than both last week, when 40.0 per cent of Brisbane auctions sold and at the same time last year, when the final auction clearance rate was recorded at 45.3 per cent. Across the Gold Coast, 57 auctions were held this week, with the preliminary clearance rate recorded at 56.5 per cent. A total of 80 Adelaide homes were taken to auction this week, with a strong preliminary clearance rate of 88.5 per cent, up from 69.4 per cent at the same time last year, and higher than the 83.3 per cent recorded last week. Perth’s preliminary clearance rate this week was recorded at 77.8 per cent, up from 60.0 per cent the previous week and also higher than the 43.5 per cent recorded at the same time last year. 76.0 per cent of Canberra auctions were successful this week, which leaves the clearance rate relatively stable when compared to last week 71.8 per cent and much higher than at the same time last year 55.8 per cent . There were 10 Tasmanian auctions this week. 7 results were reported to CoreLogic RP Data, with 4 sales recorded.

Is lending to investors finally starting to slow?

The Australian Bureau of Statistics ABS released housing finance data for February 2015 earlier today. The results suggested to me that perhaps; after many warnings, the exuberance from the investor segment of the market is starting to slow. Keep in mind that investor borrowing remains at near record highs however, there have been signs that the growth has slowed recently. In February, there was $30.4 billion worth of housing finance commitments which was -1.0% lower over the month. $18.3 billion was committed to by owner occupiers compared to $12.1 billion to investors. Over the month, the value of owner occupier housing finance commitments increased by 0.5% while the value of investment commitments was -3.4% lower, the largest monthly fall since January 2012. Year-on-year, the value of owner occupier housing finance commitments has increased by 8.7% compared to a 9.9% increase in investment lending. Taking a closer look at the owner occupier commitments shows that virtually all of the growth is coming from the refinance segment. As previously mentioned, owner occupier housing finance commitments increased by 0.5% in February with construction of new -0.2%, purchase of new +5.7%, refinances +4.5% and purchases of established stock -2.3%. Year-on-year, construction of new is +1.1%, purchase of new is +7.5%, refinances are +28.4% and purchase of established stock is +0.1%. This data indicates that refinances are the driving force behind the increase in housing finance commitments by owner occupiers. It suggests that many home owners are shopping around for a better mortgage deal, which should come as no surprise considering the low mortgage rates that are available and the heightened level of competition across Australia’s lenders. It may also be indicative of many home owners refinancing their mortgage with the intention of purchasing an investment property or using their equity to invest in some other asset class. Turning to the investment segment of the market, which recorded its largest monthly fall in commitments since January 2012 in February 2015 with a fall of -3.4%. Although I try not to read too much into one month’s data, the value of investment housing finance commitments has now fallen in three out of the past four months. Breaking the results down further shows that investor commitments for construction of new stock was -15.8% lower over the month while established home commitments fell -2.5%. Year-on-year investor commitments for construction were -37.9% lower while commitments for established stock rose by +15.2%. The chart below shows that the investors overwhelmingly favour borrowing for established stock as opposed to new stock. Keep in mind that there is significantly more established stock to choose from than new stock. The owner occupier and investor data paired shows some interesting trends. Over the month, owner occupiers committed to $2.8 billion in new housing stock while investors committed to $0.7 billion in new housing stock. This indicates that new stock made up just $3.5 billion in new commitments or 11.4% of total commitments or 14.3% of total new commitments excluding refinances . Whether it is the investment or the owner occupier segment, a relatively small proportion of borrowing is directed towards new construction. Year-on-year the value of owner occupier commitments for new housing is +3.3% higher while the lumpy investment series is -8.7% lower. On the other hand the owner occupier segment of lending for established stock was +0.1% higher year-on-year while investor commitments for established stock were +15.2% higher. This data seems to indicate that much of the new unit stock being built across the major capital cities is not being purchased by local investors. Local investors generally have a preference for existing stock rather than newly constructed stock. A proportion of this new construction is being purchased by owner occupiers but the data suggests implies a lot of the newly developed unit stock is being purchased by offshore investors. This month’s data makes for interesting reading and while it is still early days it seems like growth in the local investor segment of the market may be cooling we have though this to be the case previously and the market surged once again! . Additionally, the heightened level of refinances may lead to more investor activity over the coming months. We know that APRA are monitoring lending standards closely and they, along with the RBA, are carefully watching the investment segment of the market. No doubt the regulators will be happy to see that growth in the investor lending segment is slowing and will be hopeful that overall credit growth to investors falls back within the APRA guidelines of ten percent per annum based on February data, investor credit growth was at 10.1% growth over the past year . Housing credit data also indicates that the rate of growth in investor demand has slowed over recent months which may indicate that the warnings from the RBA and new benchmarks from APRA are starting to be heeded.

Auction volumes slow to pick up following the long weekend.

CoreLogic RP Data National Auction Preview, week ending 12 April 2015 In response to the Easter long weekend, capital city auction markets took a break last week, with only 653 capital city auctions held, down significantly from 3,668 over the previous week. The auction clearance rate, however, maintained its strength, with 78.9 per cent of auctions recording a successful sale, compared to 77.6 per cent the previous week and a much lower 66.2 per cent over the same week last year. Given that school holidays continue, auction markets remain relatively quiet, with only 1,478 capital city auctions set to take place this week and 1,958 nationally. In comparison, at the same time last year, 3,534 capital city homes went to auction in what was last year’s lead up to the Easter long weekend. To put this into perspective, if we exclude last week, so far this year there has been an average of over 2,100 across the combined capital cities each week. Across Melbourne this week, 626 auctions are set to take place, up from 63 last week and lower than the 1,530 at the same time last year. For the past seven weeks, Melbourne’s clearance rate has consistently remained above 75 per cent. The clearance rate across Melbourne has not been this strong since early 2010. Last week there were 427 residential properties taken to auction in Sydney, with 586 expected this week. In comparison, at the same time last year 1,496 auctions were held. So far this year, Sydney is currently experiencing the strongest auction clearance rate conditions that CoreLogic RP Data has on record. There are 102 auctions expected in Brisbane this week and 289 across the state. In comparison, there was 61 Brisbane auctions last week and 240 over the same week last year. Adelaide is set to see 82 properties taken to auction this week, up from 34 last week and 144 at the same time last year. Adelaide’s clearance rate has been fluctuating between 52 per cent and 84 per cent so far this year, with the average number of homes taken to auction each week around the 100 mark. In Canberra, CoreLogic RP Data is expecting 52 auctions this week, similar to the volume seen last week 49 and at the same time last year 51 . Although Canberra’s auction market is much smaller than some of the other capital city auctions markets, volumes have increased this year, with the year to date number of auctions held this year 26 per cent higher than at the same time last year. Currently there are 20 auctions scheduled across Perth for this week, up from just 6 auctions last week and 56 at the same time last year.

Booming building approvals and slowing population growth are reducing housing undersupply

Regional population growth data was recently released by the Australian Bureau of Statistics ABS for the year to June 2014. By combining this data over time with dwelling approvals over time we can derive localised information to approximate the extent of oversupply and undersupply in the capital city housing markets. The combined capital cities recorded an increase in population over the 12 months to June 2014 of 288,994 persons, down from an increase of 308,206 persons the previous year. While the population increased by 288,994 persons, there were a record-high 145,268 dwelling approvals over the year. The population increase was -6.2% lower over the year while the number of dwelling approvals was 25.6% higher. Based purely on a ratio of population growth to dwelling approvals there was one dwelling approved for construction for every 1.99 residents added to the capital cities. This represents a significant improvement on the ratio of one dwelling approval for every 2.66 new residents over the previous year. The 2011 Census reported that across the nation, households had an average of 2.6 persons. Based on this figure, we have approved significantly more homes than required based on population growth over the past year. Unfortunately, measuring housing demand is not quite so simple. We must also consider how much of the new demand is from overseas migration compared to natural increase as well as factors such as demolitions and holiday home demand. I haven’t found any literature on housing demand from overseas migration compared to natural increase however; I think it is a reasonable assumption that overseas migration creates a more immediate addition to housing demand than natural increase. There has been a noticeable slump in net overseas migration to Australia over the past year. Although it is a little bit old now, the former Deputy Governor of the Reserve Bank RBA gave a speech entitled ‘Housing and the Economy’ to the National Housing Conference in November 2009. Two of the most interesting and relevant points to housing demand from the speech were: 1. A higher proportion of the new dwellings built are simply replacing existing homes that have been demolished. The RBA estimated that between 2001 and 2006, around 15% of new dwellings built replaced those that had been demolished; 10 to 15 years earlier that figure was less than 10%. 2. A significant proportion of dwelling investment appears to have gone into holiday homes or second homes. Census data 2006 Census shows that the number of dwellings built has exceeded the increase in the number of households by a large margin. As a result, the ratio of the number of dwellings to the number of households has been rising over time; as at 2006, there were 8% more dwellings in Australia than there were households. Presumably, most of this surplus reflects holiday homes and second homes. Based on these two points from the former deputy governor’s speech, in order to cater to dwelling replacements and secondary homes we should construct 23% more dwelling than the previous simplistic analysis of measuring the rate of population growth compared to approvals. There are a few points and assumptions to keep in mind here: 1. This analysis is based on approvals not completions and approvals won’t necessarily become a completion; based on our calculations completion rates are historically 98% for houses and 85% for units. 2. The heightened level of inner-city unit development in most instances would see fewer homes demolished to make way for this new construction. 3. Holiday and second homes ae generally more likely to be located outside of the capital city than within. 4. Anecdotally activity from foreign buyers is increasing, a proportion of these homes sit unoccupied and don’t even enter into the rental market. So while the supply of housing has increased if the property sits vacant it is more reflective of secondary homes. Given these qualifications, the point about holiday and second homes is likely to be less relevant here, but in the absence of more up-to-date data we will still allow for the 15% of homes which have been demolished when looking at the approvals data. The 2011 Census reported that on average, Sydney, Brisbane and Darwin had 2.7 persons per household, Melbourne, Perth and the ACT had 2.6 persons per household and Adelaide and Hobart had 2.4 persons per household. Returning to the original findings, over the year to June 2014 the capital city population increased by 288,994 persons and 145,268 dwellings were approved for construction. If we adjust these figures based on the average household sizes as at the 2011 Census, based on population growth the capital cities required 109,825 new homes. If we further adjust for the assumption that the country needs to approve 15% more homes to replace demolitions, the capital cities required 126,298 new homes last year. Given this, 18,970 more homes were approved for construction than were required over the year compared to a deficiency of 19,076 homes the previous year. The above chart shows that new dwelling approvals were typically sufficient for the rate of population growth throughout the 1990’s however, since the beginning of the 2000’s population growth has boomed while new approvals have largely been unresponsive. Dwelling approvals are now climbing on the back of rising home values and increasing demand for homes. Keep in mind, the heightened level of dwelling construction will have to persist for a number of years to make up for the cumulative effect of the insufficient supply response over the past decade or so. Over the past year, each capital city had more homes approved for construction than was required based on population growth. While dwelling construction is a positive outcome for the economy, it is important to note that an approval doesn’t necessarily translate into a completion. Furthermore, there is a time lag between approval and completion; these homes are required right now, not in a year or twos time or longer in some unit developments . The following charts track the annual population growth and annual number of swelling approvals across each of the capital cities. The above charts show that the disconnect between new dwelling approvals and population growth since the beginning of the 2000’s has been largest across the four most populous capital cities. These four cities are also home to a majority of the national population and have also been recording the greatest increase in residents over that period. A further important consideration for housing supply and demand is the type of new product that is being built. While the city-wide analysis can be useful it should be remembered that new housing is typically either new detached houses on the outskirts of the city or medium to high density product within the inner city areas. We are seeing over time a shift from greenfield and brownfield detached housing development to inner city infill and higher density development across most capital cities. In fact, over the past year more than half of all capital city dwelling approvals have been for units as opposed to houses. The analysis shows that within the four largest capital cities there has been a deficiency of dwellings approved for construction over recent years compared to the rate of population growth. Over the past 24 months or so there has been a surge in dwelling approvals, at the same time the rate of population growth has slowed. The RBA has spoken many times about looking to extend this period of heightened construction activity for a number of years. Not only would this have a multiplier effect throughout the economy but it would also help to improve the undersupply of housing which currently exists. In 1991, 29.9% of all dwelling approvals across the combined capital cities were for units showing an overwhelming majority of approvals were for houses. Over the most recent year, 51.6% of capital city dwelling approvals were units. In 2013 50.1% and 2014 51.6% it was the first time that there were a greater number of capital city unit approvals than house approvals. The above chart shows that since 2010 when 38.1% of all approvals were for units, there has been a strong trend towards a smaller proportion of house approvals. Over the past 12 months, each of Sydney, Melbourne, Brisbane, Darwin and Canberra have approved more units than houses. Sydney, Darwin and Canberra have approved a majority of units for more than a decade however, in Melbourne and Brisbane the rising prominence of unit approvals is a relatively new phenomena. Adelaide, Perth and Hobart have each recorded a significantly lower proportion of unit approvals, in fact as a proportion, Perth and Hobart had fewer unit approvals last year than they had 20 years ago. Data from the 2011 Census showed that across the separate house category, the most prevalent number of bedrooms is 3 bedrooms 49.6% and 4 bedrooms 32.4% . When you combine the Census data for semi-detached and units, the most prominent number of bedrooms in 2 bedrooms 50.1% and 3 bedrooms 28.6% . To look at it another way, 88.8% of detached houses have three bedrooms or more compared to 66.9% of units having 2 bedrooms or fewer. The point being that more units are being approved and constructed however, they typically have fewer bedrooms and are likely to have a smaller average household size than a detached house would. Given this, it is likely that as more units are constructed, we will actually need more housing than we would have if houses had been exclusively built because of the potential smaller household size. The challenge of course is that while the pipeline of approvals is very strong, there are more unit approvals than houses and ultimately these units are less likely to be built than houses. The other feature we are seeing in the market is the rise and rise and rise of the investor segment. In fact the value of loans to investors has been greater than new loans to owner occupiers over each of the past 6 months and that has never happened before. A lot of the new unit construction taking place is to cater to demand from the investment segment of the market. The important thing to note is that while investment style detached houses are fairly similar to houses for owner occupiers, the same is not necessarily the case for units. The type of unit that someone is willing to live in while they are renting is often quite different to what they would be willing to live in as an owner occupier. This is largely in relation to internal floor area, kitchen size and design and balcony size. With investment purchases surging, a large proportion of the new unit development is targeted at that market while units for owner occupation are not as prevalent. Of course developers build what product is going to sell. The potential cause for concern is that many of these investors exit the housing market when the returns aren’t as strong as they currently are. What could then happen is a lot of investment stock hits the market at a time of falling demand coupled with a product offering which is not what the market wants. Despite this potential cause for concern, it is very encouraging to see an improving relationship between housing demand and housing supply. With population growth looking likely to slow further it would be encouraging, particularly from a housing affordability perspective if the heightened level of approvals persisted. More importantly of course will be that we see these approvals ultimately constructed, particularly in our largest capital cities where housing deficiency has been greatest.

Dwelling approvals fall to the second highest month on record in February

Earlier today the Australian Bureau of Statistics ABS released building approvals data for February 2015. After a record high monthly number of dwelling approvals in January 2015 approval numbers could not quite be matched in February although they remain at near-record highs. Over the month there were 18,768 dwelling approvals, down from 19,397 in January. Although approvals fell by -3.2% over the month, the number of approvals in February was still the second highest monthly figure on record. The number of approvals has increased by 14.3% over the past twelve months highlighting that there is a clear boom in approvals which sit at highs never before seen. Given that housing supply has been insufficient for the past decade this is a welcome development, especially considering the strong multiplier effect of higher rates of construction on the Australian economy. Over the past 12 months there have been a record high 205,929 dwellings approved for construction. Looking at a breakdown between houses and units, the data shows that over the month there were 9,613 houses and 9,155 units approved for construction. House approvals were 0.2% higher over the month while the more lumpy unit approvals recorded a -6.6% monthly fall. Year-on-year, house approvals are unchanged while unit approvals have increased by 34.5%. With such a higher rate of growth in new apartment approvals, is clear that the new unit segment of the market is booming at the moment. Over the 12 months to February 2015 there were 114,747 house approvals and 91,183 unit approvals. While house approvals were a long way from their record high annual approvals of 140,832, unit approvals currently sit at an all-time high. Looking at the capital city data it becomes further evident that new unit construction is booming, particularly across the east coast capital cities, despite a sharp rise in house approvals in February. Over the month, capital city house approvals increased by 26.6% and capital city unit approvals rose by 11.5%. The year-on-year figures show the trend towards unit approvals with house approvals increasing by 3.5% compared to a 43.0% jump in unit approvals. Over the 12 months to February 2015 there were a record-high 153,303 capital city dwelling approvals. Dwelling approvals have increased by 13.0% over the year. Over the past year there were a record high number of dwelling approvals in Sydney 39,802 , Melbourne 51,037 and Brisbane 23,303 . Approvals were below their record highs but still hefty in Adelaide 8,990 , Perth 26,942 , Hobart 981 , Darwin 1,820 and Canberra 3,428 . Note that despite Sydney being our most populous city and arguably having the greatest under-supply of housing and increases in home values, the number of approvals was much lower compared with Melbourne. Focussing on the detached housing market there were 75,597 capital city house approvals over the year to February 2015 which is 14.6% higher than the previous year. Across the individual cities, there were 13,503 approvals in Sydney, 22,530 approvals in Melbourne, 10,671 in Brisbane, 5,755 in Adelaide, 19,891 in Perth, 887 in Hobart, 795 in Darwin and 1,565 in Canberra. Note that Melbourne house approvals were almost double that in Sydney and Perth was also significantly higher. Over the year, the change in house approvals has been recorded at: 17.5% in Sydney, 15.5% in Melbourne, 31.4% in Brisbane, 4.0% in Adelaide, 8.8% in Perth, 50.1% in Hobart, 5.4% in Darwin and -5.1% in Canberra. Across the unit market there were 80,706 capital city approvals over the past year accounting for 51.6% of all capital city dwelling approvals and a record-high annual number. Unit approvals in Melbourne 28,507 and Brisbane 12,632 were at historic high levels over the year while Sydney and Perth were also close to a record high with 26,299 and 7,051 unit approvals respectively. Elsewhere there were 3,235 unit approvals in Adelaide, 94 in Hobart, 1,025 in Darwin and 1,863 in Canberra. Unit approvals were higher over the year in Sydney 1.7% , Melbourne 27.4% , Brisbane 12.3% , Adelaide 25.8% , Perth 21.7% and Darwin 4.9% but fell in Hobart -47.8% and Canberra -45.2% . Unit approvals accounted for more than half of all approvals in Sydney 66.1% , Melbourne 55.9% , Brisbane 54.2% , Darwin 56.3% and Canberra 54.3% . Sydney, Darwin and Canberra have approved more units than houses for many years however, in Melbourne and Brisbane this is a relatively new phenomena. With unit approvals at all-time highs in both Melbourne and Brisbane we have some concerns around exactly who is going to buy all this stock. Of course demand for inner city units is growing however supply can quickly turn to a glut if there is too much development. Rental growth is already slow in both cities and given units tend to be favoured by investors there are some concerns about a potential glut of this stock in Melbourne and Brisbane. It should be noted that just because a dwelling is approved doesn’t necessarily mean it will be constructed and there are generally many more hurdles in order to deliver high-rise units. Record high unit approvals with record low interest rates are likely to create some risks, most notably a risk of oversupply of inner city units in Melbourne and Brisbane where the level of new construction is unprecedented. Further down the track as interest rates rise and capital growth slows there are some concerns that the heightened level of investor activity in the Sydney and Melbourne unit markets may result in value falls if and when these investors exit to asset classes enjoying a superior performance. Particularly considering that rental returns for Sydney and Melbourne units are at near record lows and rental growth is moderate.

The number of new residential property listings slows down in the lead up to the Easter long weekend

Each year, in the weeks leading up to the Easter long weekend, the number of new listings coming onto the market often slows down. This year has been no exception, with the number of residential properties being added to the market beginning to fall on a week-by-week basis. Across the combined capital cities, the number of new listings coming onto the market over the four weeks ending 22 March was -1.6 per cent lower when compared to the previous rolling four week period and over the week ending 29 March, new listings were a further -4.0 per cent lower. There were 27,238 new capital city properties advertised for sale over the four weeks ending 29 March 2015, -13.3 per cent lower than at the same time last year, however overall stock levels 103,022 across the combined capital cities are just -3.9 per cent lower than they were at the same time last year. Perth 20,409 compared to 17,406 , Darwin 1,452 compared to 1,091 and Canberra 2,344 compared to 1,911 are all recording higher total stock levels than they were at the same time last year, however the number of new listings for each market is lagging behind when compared to the same four week period one year ago which, as mentioned previously, is likely to be attributed to the seasonal slow-down leading up to the Easter long weekend. Across Sydney, the total number of listings over the most recent four week period was recorded at 19,047, down -16.2 per cent when compared to the 22,723 properties available for sale at the same time last year and new listings being added to the Sydney market are currently -20.9 per cent lower than at the same time last year. In Melbourne, total listings are -10.4 per cent lower, -6.0 per cent lower in Hobart, -4.2 per cent lower in Adelaide, while total listings are just -1.5 per cent lower than over the same four week period last year in Brisbane. One interesting thing to take note of is that currently the number of total listings across Perth is higher than the number of listings that CoreLogic RP Data is tracking across the Sydney market. This has generally been the trend since the beginning of the year and it is the first time in the history of tracking listings since 2007 that Perth has had a higher number of properties listed for sale than Sydney. This indicates that stock turnover across Sydney is outpacing the number of new homes coming to the market and can likely be attributed to the strong performance across the residential housing market over the past year. Similarly, Perth’s residential market has shown a slow-down in transactions and value growth since the end of 2013 resulting in less of the listings stock being absorbed. On a national level, over the 28 days ending 22 March 2015, there were 45,039 new residential properties advertised for sale, bringing the total number of houses, units and vacant land properties available for sale across Australia up to 246,708.

Strong clearance rate and record highs for volume in three capital cities

CoreLogic RP Data National Auction Comment, week ending 29 March 2015 A desire by vendors to sell before Easter and the strong market this year has resulted in record volumes for the year in Sydney, Adelaide and Perth. The results show that the high volumes did not overwhelm demand. The auction market is clearly responding positively to the interest rate cut two months ago. A preliminary weighted average clearance rate of 77.5 per cent was recorded this week across capital cities compared to 75.9 per cent last week and 67.7 per cent this time last year. In Sydney a preliminary clearance rate of 84.6 per cent was recorded compared to 84.8 per cent last week and 75.9 per cent last year. Buyers responded very well to the high volumes this week and kept the market in boom territory. In Melbourne a preliminary clearance rate was 78.5 per cent was recorded, compared to 77.1 per cent last week and 66.9 per cent this time last year. Volumes are similar to this time a year ago however more homes have been sold due to strong demand from buyers. In Brisbane a preliminary clearance rate of 45.6 per cent was recorded compared to 41.5 per cent last week and 47.1 per cent last year. In Adelaide a preliminary clearance rate of 69.1 per cent was recorded compared to 64.6 per cent last week. In Canberra a clearance rate of 58.1 per cent was recorded compared to 62.1 per cent last week. In Perth a clearance rate of 57.7 per cent was recorded compared to 23.1 per cent last week and 41.7 per cent last year. Robert Larocca CoreLogic RP Data Housing Market Specialist

The rate of population growth remains strong but continues to slow

The Australian Bureau of Statistics ABS released its demographic data for the September 2014 quarter yesterday. The data showed that over the quarter, Australia’s population was recorded at 23.581 million persons having increased by 1.5% or 354,605 persons over the past year. The increase in population over the past year was actually the lowest increase in national population over a year since the 12 months to December 2011. Looking at the components of the national population increase, natural increase births minus deaths accounted for a 150,721 person increase in population and net overseas migration contributed to a 203,884 person increase. The 150,721 person natural increase was the lowest annual increase since the 12 months to March 2007 while the additional 203,884 persons due to net overseas migration was the lowest since September 2011. As the first chart shows the sharp slowdown in net overseas migration in particular is having a big impact on the overall national rate of population growth. Looking at population growth across the states, the annual increase in population was greatest in New South Wales NSW 106,365 , Victoria Vic 102,021 , Queensland Qld 69,423 and Western Australia WA 53,691 . Annual population growth was much lower over the year in South Australia SA 14,303 , Australian Capital Territory ACT 4,403 , Northern Territory NT 2,765 and Tasmania Tas 1,602 . Over the past year, 58.8% of total population growth occurred in NSW and Vic. If you add Qld and WA those four states account for 93.5% of total national population growth. In terms of the rate of annual population growth, it is currently strongest in WA 2.1% , Vic 1.8% , Qld 1.5% and NSW 1.4% . Elsewhere, the rate of annual population increase was recorded at 0.9% in SA, 0.3% in Tas, 1.1% in NT and 1.2% in ACT. Although the population of each state is continuing to grow, the rate of growth has slowed across the board. In NSW the annual increase in population was the lowest since June 2013, in Vic it was the lowest since March 2013, in Qld it was its lowest since September 2001 and in WA it was at its lowest level since September 2010. Across the remaining states and territories the rate of population growth in SA was its lowest since September 2011, in Tas it was its lowest since March 2014, in NT it was higher than the previous quarter but lower over the year and in ACT it was at its lowest level since September 2006. If we look at the components of population growth at the state level we get even further insight into the trends taking place. Natural increase is basically a function of the overall population size and as a result natural increase is much greater within the largest states. Over the 12 months to September 2014, the natural increase was recorded at 43,069 persons in NSW, 36,794 in Vic, 34,603 in Qld, 6,932 persons in SA, 21,210 persons in WA, 1,503 persons in Tas, 2,882 persons in NT and 3,706 persons in ACT. Turning to net overseas migration, overseas migrants are finding NSW and Vic the most attractive states in which to settle. Over the 12 months to September 2014, 62.0% of the net gain from overseas migration was recorded in NSW and Vic. Across the individual states the net overseas migration was greatest in NSW 69,601 , Vic 56,772 , WA 32,190 and Qld 28,878 . Across the remaining states and territories net overseas migration was recorded at: 10,304 in SA, 1,065 in Tas, 3,266 in NT and 1,798 in ACT. NSW and Vic have always attracted the greatest number of overseas migrants however, as the chart shows the gap has widened significantly over recent quarters. The profile of interstate migration has also changed significantly over recent years. Qld has historically been the powerhouse in terms of interstate migration however, Vic has now taken that mantle. Over the 12 months to September 2014 only Vic 8,455 , Qld 5,942 and WA 291 recorded positive net interstate migration. On the flipside, each of NSW -6,305 , SA -2,933 , Tas -966 , NT -3,383 and ACT -1,101 recorded a net loss of residents to the other three states. This data set is published from 1981 onwards and over that time NSW has always recorded a net loss of residents to other states and territories however, the outflow is currently at a record low. In Vic, the inflow eased slightly from a record high over the previous quarter. Across the other states and territories, Qld net interstate migration is hovering around the lowest level on record, WA interstate migration is at its lowest level since September 2003 and the outflow of residents to other states and territories in NT is at a record high. The data highlights an overall slowing of the rate of population growth which will undoubtedly have an impact on the wider economy. Economic growth is slower than it has typically been over the past 2 decades and is extremely weak on a per capita basis, lower population growth may exacerbate the slowing of economic growth. Dwelling approvals and construction are at record high levels, as we know over the past decade there hasn’t been an ample supply of new housing. The heightened level of construction will go some way to alleviating housing shortages however, it would take a number of years of heightened construction to totally rectify the shortage. Looking at the data, the rate of population growth has slowed and the fall has been most noticeable across net overseas migration. Those migrants who are coming to Australia are favouring settling in NSW Sydney and Vic Melbourne . This is creating further demand for housing in these cities, so too is the fact that Vic now has the highest net interstate migration of any state and the outflow of residents from NSW is at a record low level. Given this it is easy to see the impact demographics are having on the housing markets and why Sydney and Melbourne are seeing much greater housing demand and housing value growth. Fewer people are leaving those cities, more people are coming from interstate and most coming from overseas are choosing to settle in our two largest cities. On the other hand population growth has slowed significantly in other capital cities, fewer residents are leaving NSW and Vic to settle in these states and territories and they are attracting fewer overseas migrants. With population growth now showing a consistent slowdown since the end of 2012 and new housing supply showing a consistent increase since late 2011, the gap between housing supply and demand has significantly narrowed. It is reasonable to assume that higher supply levels and lower housing demand will eventually dampen the exuberant housing market conditions that are so evident in Sydney and to a lesser extent in Melbourne. It is important to note that to-date the supply-side response has been nowhere near as strong in Sydney as it has been across most other capital cities.

Records for auctions in 2015 in three capital cities

CoreLogic RP Data National Auction Preview, week ending 29 March 2015 This is a big week nationally for auctions with record volumes for 2015 expected in Sydney, Adelaide and Perth. The rate cut from nearly two months ago will now be having an impact on listings as vendors will have had sufficient time to both decide sell and undertake a marketing campaign. The fact that this is the last week before Easter will also have had an impact on volumes. There are 3,961 auctions expected this week across Australia with 3,323 expected in capital cities. This is compared 2,896 last week and 3,039 for the same week last year. In Sydney 1,343 auctions are expected this week compared to 1,123 last week and 1,163 this week last year. This is the biggest weekend for auctions in Sydney this year but is short of the all time record of 1,631 at the end of November last year. In Melbourne 1,459 auctions are expected compared to 1,333 last week and 1,414 this week last year. Over one thousand auctions in a week have become the norm for the late summer, autumn and spring markets as volumes have risen with buyer demand and sellers have increasingly opted for auctions as a selling method. There are 195 auctions expected in Brisbane compared to 185 last week and 238 this week last year. This week there are 166 auctions expected in Adelaide compared to 112 last week and 107 over the same week last year. This is the biggest weekend for auctions this year in Adelaide. In Canberra there are 84 auctions expected, compared to 74 last week and 51 this week last year. In Perth 56 auctions expected over the coming week, compared to 46 recorded last week and the 55 on this week last year. This is the biggest week of the year for auctions in Perth. Across Australia the highest volume of auctions in one suburb are 29 in Reservoir VIC . Robert Larocca CoreLogic RP Data Auction Market Specialist

Melbourne Auction Market preview for week ending 29 March

There are 1,459 auctions scheduled this week in Melbourne compared to 1,414 for the same time last year. The highest volume of auctions in a single suburb will be found in Reservoir where 29 are expected. There are 26 scheduled in St Kilda and 24 in Brighton. The compressed autumn auction market, the three weeks between Labour Day and Easter, are delivering excellent results to vendors with clearance rates tracking nearly 10 points above the same time last year while simultaneously showing high volumes. At the end of last year the market appeared to have a slowing trend but the interest rate cut has clearly reversed that. Citywide across the private sale market over the past week the time on market results for houses sold at private sale fell to 31 days, down from 32 days in the previous week. Overall vendor discounting contracted to -5.2 per cent from -5.4 per cent. Key data Clearance rate week ending 22 March: 77.1 per cent Melbourne auctions expected week ending 29 March: 1,459 Melbourne private sales time on market week ending 22 March: 31 days houses Melbourne vendor discounting market week ending 22 March: -5.2 per cent houses Listings being prepared for market are 11.2 per cent higher in the month ending 22 March seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

One billion dollars a week on Melbourne property in 2014

Key points Over one billion dollars a week was spent of residential real estate last year Brighton recorded the highest spend, $842m Glen Waverley recorded a $233m rise In 2014 a total of $53.7b, over one billion dollars a week, was spent on Melbourne residential real estate. In 2014 a total of $53.7b, over one billion dollars a day, was spent on Melbourne residential real estate. This is an increase from the $52.9b in 2013 and $43.8b in 2012, reflecting the overall growth in the market over the last few years. It is worth noting that last year was still slightly below the all time record of $54b in 2010. The citywide changes are also reflected at a suburban level. Whilst the top 10 Melbourne suburbs ranked by the total spent on residential real estate did not show a lot of change between 2013 and 2014, the amount spent did. Top of the list was Brighton. Last year an average of $2.3m was spent every day in Brighton property purchases and $378,213 more every day than the previous year. This pushed the entire value of sales from $700m to $841m. Brighton may have a higher value of sales than any other suburb, however the increase was dwarfed by the rises recorded in Melbourne, Glen Waverley, Kew and Toorak. In 2013 for instance, $1.49m was spent on units in the suburb of Melbourne and this rose by half a million dollars a day to $2.05m. This rise is partly due to the increased prices being paid and partly the increased construction. Glen Waverley recorded the most significant difference.. Over the course of the year $233m more was spent on houses which in turn pushed the median house price up from $807,000 to $970,000. Neighbouring Mount Waverley also saw a significant rise of $311,747 on a daily basis. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

The RBAâ

The Reserve Bank RBA released its bi-annual Financial Stability Review FSR earlier today. The document provides a guide as to the RBA’s thoughts on the overall economy and potential risks. As you’d expect, the residential housing market features heavily in their assessment of financial stability and I will delve into some of the key take-outs for the housing market from the document. Housing loan performance The report details that the share of non-performing banks housing loans ie those housing loans which are at least 90 days in arrears on their repayments was extremely low, recorded at around 0.6% in December 2014 which is down from a peak of 0.9% in 2011. The lack of repayment distress across Australian bank mortgage portfolios is being supported by low interest rates which make servicing the mortgage debt easier. The document also states that rising housing prices also make it easier for those home owners in arrears to sell rather than remain in arrears should they run into financial difficulty. It is important to note that while as a general the statement about rising house prices making it easier to sell is true, the housing market performance varies greatly region-to-region. Although selling a home in Sydney and Melbourne is relatively easy currently thanks to strong value growth and high levels of demand, housing market conditions in Perth, Hobart or Canberra are more challenging and it would probably be more difficult to sell a home in these markets. Competition in the mortgage market According to the Report competition has remained rigorous over the past six months. There is plenty of competition amongst lenders and as a result they are offering attractive fixed rates and significant discounts of up to 100 basis points off their advertised variable rates. The RBA has also noted targeted special rates as an example of short-term rate specials for those refinancing with lower LVRs. Banks have also increased commissions being paid to their brokers. As a result, refinancing activity has increased and around 40% to 50% of new housing loans are sourced from brokers. The RBA does raise some concerns that the rising prevalence of the broker channel potentially creates risks, specifically that misaligned broker incentives could create higher levels of lending outside of their risk tolerance. While APRA wrote to Authorised Deposit-taking Institutions ADIs highlighting its guidelines for sound residential mortgage lending late last year, the high level of competition across the banking sector may create issues, particularly in the investor space. Given APRA has indicated that growth in investor housing credit should not be materially above 10% per annum, the significant competition in the market means that those who can’t source an investor loan from one ADI may still have plenty of other ADIs to choose from. Lending criteria The RBA is reporting that serviceability and deposit criteria have been relatively unchanged over the past six months. They acknowledge that some banks have recently applied stricter criteria for some inner-city unit markets and regional towns linked to the resources sector. Despite the lending criteria being largely unchanged, the RBA acknowledge that low mortgage rates and the strength in demand from the investment segment have increased the macroeconomic risks from the housing market. Once again they have acknowledged that investors may amplify housing price cycles and increase the potential for falls in the future. They also note that the rising share of interest-only loans may also increase risks because there is a period over which the principal is not repaid leaving the household with more debt than they would have if they repaid both the principal and interest on the mortgage. It should be noted that while interest rates are low everywhere and investor activity has increased in most states, the sharp rise in investor participation is most prevalent in Sydney and Melbourne. These two cities have seen the strongest growth in home values over recent years, along with the most significant compression of rental yields which has resulted in these cities exhibiting the lowest rental yields across the capital city housing markets. The risks of investors amplifying the market are greatest within these two cities, particularly given the strong value growth coupled with very low rental yields and high investor concentrations. Investor lending The FSR notes that investor housing credit has increased at an annualised rate of 10.5% over the past six months however, it is too early to expect a slowdown in investment lending just yet in response to APRA’s guidelines. The reason being that the pipeline of pre-approvals was already in place before APRA wrote to ADIs in December highlighting a guideline of a cap of 10% annual growth in lending to investors. The RBA notes that investors have contributed to fuelling the rapid growth in home values in Sydney however, the growth has been more moderate outside of Sydney. The FSR states that periods of value growth also increase expectations for further price rises, creating even more demand. A future fall in housing prices would reduce wealth and dampen spending for the broader household sector, particularly for those households with significant housing debt, not just for the investors who contributed to the upswing. The RBA has also raised potential concerns that the surge in lending from the investment segment could lead to excessive new housing construction and a potential future glut in certain areas. While the RBA points out there is little risk of this currently at a national levels, there are some areas of local vulnerability, namely inner-city units in Melbourne and Brisbane. While the RBA has covered off on the risks surrounding heightened levels of investment lending quite well there are a few additional points that need to be made. While investor activity is strongest in Sydney and Melbourne, these two cities already have the lowest gross rental yields. This feeds in to the comment about amplifying the market but is important to understand; investors are chasing capital growth and having little regard for the returns. Secondly, while there are concerns about too much new housing supply in inner-city Melbourne and Brisbane rental growth is already at its lowest level in more than a decade. Although inner-city Melbourne and Brisbane are areas for concern, there is no mention of the fact that rental rates are already falling in Perth, Darwin and Canberra. Furthermore, while both rents and the rate of population growth are falling in Perth there is simultaneously a record high number of dwelling approvals currently. Mortgage characteristics Although low interest rates and the high level of competition in the mortgage market could create risks, the RBA sees little evidence that lending standards have deteriorated. The share of loan approvals above 90% LVR continued to reduce over 2014. The RBA reports that this shift was led by those lenders that previously reported a higher than average share of these types of loans. The profile of new lending indicates that households remain well placed to service their loans. The area that the RBA points out as a concern is the increase in interest-only lending. The rising level of interest-only lending to investors is consistent with tax deductibility of investors’ mortgage interest payments which act as a disincentive to pay down the principal. The banks have suggested that the rise in owner occupier interest-only mortgages has been driven by the borrowers seeking greater flexibility in managing their repayments rather than affordability pressures. Reportedly some of this demand is from owner occupiers who plan to switch their property into a rental property in the future. The RBA also notes that many of these owner occupiers are building sizeable buffers in their offset and redraw facilities. It should also be noted that in principle, interest-only loans should not increase borrowing capacity because consumer protection regulations imply that lenders should assess a borrower’s ability to service principal and interest payments following the expiry of the interest-only period. ASIC is currently assessing compliance with this obligation through its review of interest-only lending. Despite these considerations, interest-only loans – especially for owner-occupiers – pose greater risk to the financial system because they enable borrowers to pay down the principal more slowly than a conventional mortgage. Conclusion The RBA have spelled out a number of key areas of risk surrounding the residential mortgage market. It is clear that the RBA along with APRA and ASIC are closely monitoring the overall market conditions and are on the lookout for risks and an easing of lending standards. While each organisation has stated publicly their concerns and what they are going to do to allay those concerns, it seems unlikely that any significant changes to policies due to these risks for individual ADIs would be communicated publicly.

National clearance rate reaches 77.4% from weekend auctions

CoreLogic RP Data National Auction Comment, week ending 22 March 2015 After 6 weeks with a clearance rate in the mid to high 70’s sellers in Melbourne, Sydney, Canberra and Adelaide can be quite confident of attaining a good outcome when selling at auction. A preliminary weighted average clearance rate of 77.4 per cent was recorded this week across capital cities compared to 77.2 per cent last week and 69.4 per cent this time last year. In Sydney demand continues to outpace supply at auction with a preliminary clearance rate of 84.7 per cent was recorded compared to 83.9 per cent last week and 76.1 per cent last year. In Melbourne auction market conditions are very strong and favoring sellers. If this continues post Easter it will begin to impact overall price movements. This week the preliminary clearance rate was 78.1 per cent, compared to 78 per cent last week and 69.4 per cent this time last year. In Brisbane a preliminary clearance rate of 52.1 per cent was recorded compared to 47 per cent last week and 37.8 per cent last year. In Adelaide a preliminary clearance rate of 73.8 per cent compared to 66.7 per cent last week. In Canberra a clearance rate of 71.1 per cent was recorded compared to 68.8 per cent last week. In Perth a clearance rate of 17.4 per cent was recorded compared to 41.4 per cent last week and 50 per cent last year. Robert Larocca CoreLogic RP Data Housing Market Specialist

Auctions as a sales method have increased in all capital cities

CoreLogic RP Data National Auction Preview, week ending 22 March 2015 There are 3,003 auctions expected this week across Australia with 2,539 expected in capital cities. This is compared to 2,556 last week and 2,466 for the same week last year. With full data now available for 2014 it is clear that the proportion of sales by auction increased in each capital city when compared to both 2013 and 2012. The use of auctions traditionally grows with prices and competition as vendors and agents seek to take advantage of the rising market. The data shows that compared to other recent upswings this cycle is different as all auction records have been broken in Sydney and Melbourne at the same time as there were more than 100,000 auctions in capital cities. In Sydney 947 auctions are expected this week compared to 926 last week and 982 this week last year. Last year 30.2 per cent of sales were by auction, up from 21.8 per cent in 2013 and over double the 14.1 per cent in 2012. In Melbourne 1,202 auctions are expected compared to 1,269 last week and 1,160 this week last year. Last year a remarkable 33.6 per cent of sales were by auction, up from 29.4 per cent in 2013 and 20.3 per cent in 2012. There are 170 auctions expected in Brisbane compared to 132 last week and 130 this week last year. Last year 6.6 per cent of sales were by auction, an increase from 5.7 per cent the year before. This week there are 97 auctions expected in Adelaide compared to 100 last week and 80 over the same week last year. Adelaide saw just over 10 per cent of sales by auction last year up from 8.3 per cent the year before and nearly double the 5.8 per cent recorded in 2012. In Canberra there are 69 auctions expected, compared to 71 last week and 57 this week last year. Last year just over one in five sales were by auction, up from 13.1 per cent in 2013 and only 7.8 per cent in 2012. In Perth auction volumes are set to remain steady, with 45 auctions expected over the coming week, the same as the 45 recorded last week, but up from the 31 over this week last year. Last year a mere 1.8 per cent of sales across the city were by auction. Across Australia the highest volume of auctions in one suburb are 21 in both Reservoir VIC and Thornbury VIC . Robert Larocca CoreLogic RP Data Auction Market Specialist

Melbourne Auction Market preview; Week ending 22 March, 2015

There are 1,202 auctions scheduled this week in Melbourne compared to 1,160 for the same time last year. The highest volume of auctions in one suburb is 21 in both Reservoir VIC and Thornbury Auction volumes are higher than last year and on track to exceed last years volumes when there were more auctions and a higher proportion of homes sold at auction. Our latest data shows that a record 33.6 per cent of sales were by auction in Melbourne last year, up from 29.4 per cent in 2013 and a mere 20.3 per cent in 2012. Remarkably the 30,079 sales at auction last year was near twice the 15,640 recorded in 2012. The increase in use of auctions is a market feature, especially when prices rise as they can deliver better outcomes in competitive markets. In respect of the private sale market in the past week, on a citywide basis, the time on market results for houses sold at private sale fell to 32 days, down from 33 days in the previous week. Overall vendor discounting was stable at -5.4 per cent. Key data Clearance rate week ending 15 March: 78% Melbourne auctions expected week ending 22 March: 1,202 Melbourne private sales time on market week ending 15 March: 32 days houses Melbourne vendor discounting market week ending 15 March: -5.4% houses Listings being prepared for market are 7.6 per cent higher in the month ending 15 March seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Only 1 out of 100 apartments has 4 bedrooms in Melbourne’s CBD

Key points Across 2013 and 2014 only 1 per cent of apartments advertised for sale in Melbourne had 4 bedrooms Two bedroom apartments are more likely to be found in Southbank and Docklands than Melbourne In Brighton only 9 per cent of apartments had one bedroom It will come as no surprise that there are very few three or four bedroom apartments in the CBD, Docklands or Southbank. Developers frequently cite market demand as the reason why they don’t build larger high-density dwellings. A review of data from the apartments advertised for sale in the past two years shows that the size of dwellings does vary between the three inner city suburbs of Melbourne, Docklands and Southbank. Across those three suburbs, 43 of the 3,966 homes had four or more bedrooms. Three bedroom apartments where rare but slightly more plentiful with 434 advertised for sale. They were mostly found in Southbank and Docklands. Almost one in two apartments in the suburb of Melbourne were one bedroom but they are far less plentiful in Docklands and Southbank, accounting for around 25 per cent of the housing. It is interesting to see the differences in the type of apartments between Melbourne and Docklands/Southbank. From the perspective of the number of bedrooms Docklands and Southbank are the home to larger apartments than Melbourne. One-bedroom apartments accounted for 23 per cent of apartments in Docklands and 28 per cent in Southbank. In the suburb of Melbourne the comparable number is 47 per cent. Clearly, developers are providing different dwellings in different suburbs. This is also obvious when a comparison is made to a very different apartment market such as bayside Brighton where 9 per cent had one bedroom, three bedroom apartments comprised 34 per cent of the market, and two bedroom apartments were the majority at 53 per cent. What is also clear is that if you are looking for a four bedroom unit then it will take a very long time.

What does a 10% cap on growth in investment mortgage lending look like?

Late last year the Australian Prudential Regulation Authority APRA wrote to Australian Authorised Deposit-taking Institutions ADIs reinforcing sound residential mortgage lending guidelines. One of the guidelines related to the growth in investor lending. The letter stated, ‘annual investor credit growth materially above a benchmark of 10 per cent will be an important risk indicator that supervisors will take into account when reviewing ADIs’ residential mortgage risk profile and considering supervisory actions.’ APRA has explained that the approach involves benchmarks, not hard limits. The letter is forward-looking and is about how ADIs should lend in 2015, not about how they have lent in the past. It’s worthwhile to consider the practicality of implementing a cap such as this and what impact it could have on the overall market. APRA publish statistics each month on lending by the Australian banks, note that this data does not cover building societies and credit unions which are also considered ADIs which shows the level of growth for investment housing loans is substantially outpacing growth in loans for owner occupation. At the end of January 2015, there was $1.322 trillion in mortgages outstanding to Australian banks. This figure is made up of $859.645 billion in owner occupier mortgages and $462.358 billion in investor mortgages, indicating that owner occupier mortgages account for 65% of the value of outstanding mortgages and investors account for 35%. The overall value in residential mortgages has increased by 7.9% over the year to January 2015, comprised of owner occupier lending growing by 6.4% and investor lending growing by 10.8%. If we assume that a hard cap was to be introduced whereby the investment segment of the market would be limited to 10% growth per annum, the market as a whole would already be growing above that benchmark. Based on the published data from APRA, the following banks have grown their investment mortgage book at a level above 10% over the past year: Arab Bank Australia, ANZ, Defence Bank, Macquarie Bank, NAB, Police & Nurses Ltd, Police Financial Services Ltd, Suncorp-Metway Ltd, Taiwan Business Bank, Teachers Mutual Bank, Victoria Teachers Ltd and Westpac. There are a few problems surrounding the implementation of a cap on the growth in investment lending which I will now explore. Firstly, investor lending is currently the chief driver of growth in the current market. As mentioned earlier, across all banks, owner occupier mortgages have grown 6.4% over the year compared to 10.8% for investors. There are very few banks recording double-digit growth in owner occupier mortgages. Quite simply, there is currently modest demand from this segment of the market. Even with a firm cap on investment loan growth in place it is unlikely that it would result in a pick-up in owner occupier lending of a significant enough magnitude to offset the expected slowdown in investment lending associated with APRA’s communication. Secondly, a blanket percentage cap overly advantages those that already have a much larger mortgage book and disadvantages those that currently have a smaller investment loan book in relative terms. To put this into perspective, the two banks with the largest portfolio of investor loans; Westpac and CBA, have investor loan books of $146.7 billion and $123.5 billion respectively. Limiting growth to 10% annually would mean they could grow their investment loan books by $14.7 billion and $12.3 billion respectively. If we look at the number 3 and 4 banks nationally for investment loans NAB and ANZ , they have investment loan books of $63.0 billion and $58.5 billion respectively, meaning on an annual basis they could only grow their investment loan books by $6.3 billion and $5.9 billion in order to remain under the 10% cap. What this means is that Westpac and CBA the main competitors to NAB and ANZ could lend more than double the amount to investors than NAB and ANZ could. Further, a bank such as Macquarie, which has only recently re-entered the mortgage industry, is currently growing both their owner occupied and investment loan books well above the 10% pa benchmark as their portfolio is growing from a low base. APRA and the RBA appear intent on limiting the growth in investment lending, however a hard limit such as a 10% cap on the annual growth in lending to investors has its challenges. It is overly advantageous to those that already have a large amount of mortgage lending to investors. The second table shows that investment loans account for 35.0% of all mortgages. Perhaps a better indicator of potential risk is looking at which banks are overweight to investors based on this proportion, as you will note a number of the larger banks are underweight while others show higher investment concentrations. Housing finance data for January 2014 revealed that year-on-year, investment housing finance commitments have increased by 22.1% compared to a 28.5% increase in owner occupier refinance commitments and a -1.1% fall in owner occupier new loan commitments. Clearly the investor segment is a key driving factor in the current housing market, in fact for six consecutive months the value of housing finance commitments to investors has been greater than owner occupier new loans; a trend that has not previously been recorded over the length of the ABS housing finance series. The data on a state-by-state basis and excluding refinances shows that a majority of new lending in New South Wales and the Northern Territory is to investors. The data also reveals 40% or more of all lending was for investment purposes across each state and territory except for Western Australia and Tasmania in January 2015. It shows that there is a significant slant to investor lending currently which helps explain the current focus placed on investment lending by APRA and the RBA. With mortgage rates at record low levels resulting in little returns from risk-free assets, it is no wonder that investors are turning to residential property, particularly in Sydney and Melbourne. The concern should be around future serviceability of these mortgages and the fact that many of these investment properties are recording extremely low yields while the growth in values is currently quite strong, which implies most investors are speculating on further capital gain with little concern for negative cash flow. While there may be room for a cap on the growth in investment mortgage books as we have indicated, it may need to be a more horses-for-courses approach rather than blanket limits in order to truly be effective. The challenge for APRA and the RBA is that something should be done to slow mortgage lending to the investment segment of the market but it is a complex question as to how to implement changes and ensure that lending to this segment slows. Other factors that APRA also may need to consider include serviceability and the level of leverage along with the make-up of the lenders total mortgage book. APRA is attempting to constrain growth across the different geographies and lenders, all of whom have different histories and investment loan profiles, and different risk appetites at present. The key point of any new policy is to keep new lending balanced so as not to permit too much speculation which by implication some of the current investment lending appears to be when you look at the fundamentals.

Highest national clearance rate in 6 years

CoreLogic RP Data National Auction Comment, week ending 15 March 2015 A preliminary weighted average clearance rate of 78.3 per cent was recorded this week across capital cities compared to 74.5 per cent last week and 70.8 per cent this time last year. This is the highest national clearance rate in 6 years, since 79.7 per cent was recorded in September 2009 and provides a further indication of the improvement in demand since last year. There can be no doubt now that the interest rate cut has had a positive impact on the real estate market. In Sydney a preliminary clearance rate of 85.1 per cent was recorded compared to 84.2 per cent last week and 79.8 per cent last year. Sydney continues to have the strongest auction market nationally and is providing vendors with unprecedented results. In Melbourne the preliminary clearance rate was 77.8 per cent, compared to 75 per cent last week and 67 per cent this time last year. This is the highest clearance rate in a year and half and the market is now well ahead of this time a year ago. In Brisbane a preliminary clearance rate of 57.1 per cent was recorded compared to 37.2 per cent last week and 54.5 per cent last year. In Adelaide a preliminary clearance rate of 72.9 per cent compared to 60.7 per cent last week. In Canberra a clearance rate of 73.3 per cent was recorded compared to 70.8 per cent last week. In Perth a clearance rate of 41.7 per cent was recorded compared to 33.3 per cent last week and 41.9 per cent last year. Robert Larocca CoreLogic RP Data Housing Market Specialist 0409 198 350

Capital city auction market improving on 2014

CoreLogic RP Data National Auction Preview, week ending 15 March 2015 It is already clear that this year is on track to record both a higher number and higher proportion of sales by auction across capital cities. Last year saw 21.5 per cent of all residential sales in capital cities by auction and this was the first time the 20 per cent barrier had been exceeded. It is not a coincidence that it was also the first time there had been more than 100,000 auctions as both Sydney and Melbourne returned strong results. There are 2,679 auctions expected this week across Australia with 2,258 expected in capital cities. This is compared 1,705 last week and 2,293 for the same week last year. In Sydney 777 auctions are expected compared to 944 last week and 868 this week last year. It is unlikely that the clearance rate will drop below 80 per cent this week as stock levels have dropped when demand is still remarkably strong. In Melbourne 1,149 auctions are expected compared to 387 last week and 1,085 this week last year. Melbourne buyers and sellers face a busy three weeks until Easter. With around three in every four homes selling under the hammer the market is favouring vendors. There are 118 auctions expected in Brisbane compared to 164 last week and 138 this week last year. This week there are 97 auctions expected in Adelaide compared to 73 last week and 95 on the same week last year. In Canberra there are 67 auctions expected compared to 83 last week and 57 this week last year. Last week saw the national capital record the fourth consecutive week above 70 per cent for the first time since late 2009. It should be noted that volumes are around twice as high now. In Perth 43 auctions are expected compared to 40 last week and 44 this week last year. Across Australia the highest volume of auctions in one suburb are 22 in Reservoir VIC . Robert Larocca CoreLogic RP Data Auction Market Specialist

Housing finance eases in January but the proportion of lending to investors hits an all-time high

The Australian Bureau of Statistics ABS released housing finance data for January 2015 yesterday. This data represents the first full month of lending-based results after APRA’s recommendation to Australian Authorised Deposit-taking Institutes ADI’s reinforcing sound residential mortgage lending benchmarks. Over the month the total value of housing finance commitments fell by -0.6% across both the owner occupier and investor segments of the market. The value of housing finance commitments has increased by 12.8% year-on-year. Taking a look at the breakdown between the owner occupier and investor segment of the market, it is clear that most of the strength is coming from investors. The value of owner occupier housing finance commitments fell by -1.0% over the month and investor lending recorded a fall of -0.1%. Despite the monthly fall in lending, the value of housing finance commitments was 7.1% higher year-on-year to owner occupiers and 22.1% higher to investors. The proportion of total lending to investors reached an all-time high in January 2015. Over the month, 41.4% of the value of all housing finance commitments was to investors. In comparison, a record low 39.1% of the value of housing lending was to owner occupiers for new loan purposes and 19.5% was to owner occupiers for refinances. If we look solely at the value of new lending excluding refinances investor lending hit a record high 51.4% of all new lending in January 2015. Focussing on the owner occupier segment of lending, $17.7 billion was lent in January down from $17.9 billion in December. Across the segment: $1.8 billion was lent for construction of new homes, $0.9 billion for the purchase of new homes, a record high $5.9 billion for refinances and $9.1 billion for purchase of established homes. Month-on-month, housing finance commitments for owner occupiers fell by -2.6% for construction of new homes, -5.4% for the purchase of new homes, +1.8% for refinances and -2.0% for purchases of established dwellings. Year-on-year, the strength in the owner occupier segment has largely been from refinances which have increased by 28.5%. Across the other segments, construction of new homes were up +1.5%, purchase of new homes are -7.2% and purchase of established homes are -0.9%. The data indicates that much of the activity across the owner occupier segment of the market is coming from refinances as home owners shop around for a better deal or prepare to withdraw some of their equity which would feed into the strength of the investment segment. Turning to the investment lending segment, $12.5 billion was lent in January which was slightly lower than investment lending in December. Over the month there was $0.8 billion in commitments for construction of new dwelling and $11.7 billion for commitments to existing homes showing that investor lending is largely going to existing homes with lending to that segment almost 14 times greater than lending for new construction. Over the month, investor commitments for new construction fell -18.8% compared to a 1.6% increase in lending for purchases of existing homes. Year-on-year, the value of commitments for construction of new dwellings is 85.1% higher while investor lending for established homes has increased by 19.1%. The data shows that despite lending to investors is surging, a relatively small amount of this lending is contributing to new housing stock being constructed. Turning to the first home buyer segment of the market, the number of owner occupier first home buyer commitments fell sharply in January. It should be noted that this data series is not seasonally adjusted. Over the month there were 5,961 commitments which was -26.4% lower over the month and -14.4% lower year-on-year. As a proportion of all owner occupier housing finance commitments, investors accounted for 14.2% of commitments in January. Based on this data, the level of first home buyer participation in the market remains extremely low, however a weakness of the ABS data set is that it doesn’t identify first home buyers that are purchasing as investors. Anecdotally, it appears that many first time buyers are choosing to purchase an investment property rather than a principal place of residence. The CoreLogic RP Data Mortgage Index measures activity across CoreLogic RP Data’s mortgage platforms each week. The activity is highly correlated with housing finance data and as the above chart shows, activity has surged over recent weeks. Based on this data, it suggests that despite the Christmas / New Year slowdown there has been no sustained slowdown in mortgage demand. Given this we would expect a rebound in housing finance commitment over the coming months. Following the letter from APRA to Australian ADI’s in December we have seen a slight easing in housing finance commitments however, it is too early to suggest the two are related. Investor activity remains very strong and for the first time on record we have seen six consecutive months in which lending to investors is greater than lending to owner occupiers for new loans. Investors are largely purchasing existing homes which does little to contribute to new housing, although the value of commitments to investors for new construction has risen sharply over the past year. The owner occupier segment is largely being driven by refinance activity as borrowers shop around for better deals on their mortgage and prepare to re-invest some of their equity. Over the coming months it will be important to monitor if the new guidelines from APRA and the ramping up of their surveillance of mortgage lending has much of an effect on demand. We would suspect that the high level of competition in the mortgage market is likely to result in minimal change across the board. While some individual lenders may have to tinker with their lending policies, borrowers have many other banks to choose from if one borrower cannot provide the type of product they are looking for.

Melbourne Auction Market preview; Week ending 15 March, 2015

There are 1149 auctions scheduled this week in Melbourne compared to 1085 for the same time last year. Last week’s lower volume produced an outcome in line with trend with the overall auction market continuing to be better than last year. The highest volume of auctions will be held in Reservoir with 22 scheduled. The timing of Easter this year will ensure a very busy three weeks for sellers, buyers and real estate agents. The gap between Labour Day and Easter last year was 5 weeks and there were an average of 1280 auctions a week. This is a similar level of activity to Spring. In respect of the private sale market in the past week, on a citywide basis, the time on market results for houses sold at private sale fell to 33 days, down from 43 days in the previous week. Overall vendor discounting was up stable at -5.4 per cent. Key data Preliminary clearance rate week ending 8 March: 75% Melbourne auctions expected week ending 15 March: 1149 Melbourne private sales time on market week ending 8 March: 33 days houses Melbourne vendor discounting market week ending 8 March: -5.4% houses Listings being prepared for market are 3.3% higher in the month ending 8 March seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Buying into a tightly held suburb of Melbourne

There are many different ways of looking at the market and making judgements about its performance. You can look at sale prices, days on market or even turn up at auctions and count the number of active bidders. These metrics will invariably tell you how the market is performing, whether is trending up, down, flat and by how much. They don’t and can’t tell you about the future performance. They also don’t tell you about the ease of buying. The fact is that some suburbs are easier to buy into than others because owners are less inclined to sell. That can be for many reasons, sometimes it is cyclical, for instance in the first few years after property is purchased the owners are less likely to sell. We measure the ease of purchasing by comparing the number of homes advertised for sale in a given period with the number of properties in the suburbs. These suburbs are often described as ‘tightly held’. In the year ending 30 November across Melbourne 5.3 per cent of all houses had been advertised for sale. Those houses sold over the same time had been owned for an average of 11.8 years. Drilling down to a suburb level the hardest place to buy a house was in Brunswick East. In Brunswick East a mere 2.1 per cent of houses had been advertised for sale in the past year. Those houses that did sell had been owned for well over the metropolitan average at 14.2 years and in a sign of the lengths buyers were willing to go, the median sale price rose 26.6 per cent in a year. With some exceptions there is a correlation between the period of ownership, the recent capital growth and likelihood to list for sale. At a simple level that is demand and supply in action and it won’t surprise anyone active in the market. It also helps explain why real estate agents often letterbox suburbs or streets looking for an owner to sell! An analysis of the top 10 most difficult places to buy a house shows a high representation of suburbs in the inner north. Carlton is second on the list and it is followed by Fairfield, Carlton North and Fitzroy North. In each case the proportion of houses on the market is below 3 per cent. With the exception of Carlton the increase in median sale price is above the metropolitan wide number for the same time. The inner north of Melbourne has been in strong demand from buyers but the owners have not been as willing to sell. The inner northern suburbs are not the only place this occurs in Melbourne. The top 10 is rounded out by Clayton South, Mulgrave, Watsonia, Hughesdale and Carnegie. With the exception of Watsonia these are also all in a similar part of Melbourne. But what happens if you want to buy into a suburb where the owners don’t want to sell? These are called ‘off market’ transactions and they won’t be covered in this data because the homes are not listed for sale. A small number of those will be the homes sold direct by the owners but the majority are those transacted with the assistance of a buyers agent. Astute buyers agents are able to build their own networks of sellers. This happens because sometimes an owner wants to sell without advertising or they find that because the buyers agent has a good network of buyers there is simply no need to buy the advertising to support the sale. So if you want to buy into a tightly held suburb it pays to approach local real estate agents and let them know you are interested and consider hiring a buyers agent. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Strong demand in Sydney the main feature of weekend

CoreLogic RP Data National Auction Comment, week ending 8 March 2015 A preliminary weighted average clearance rate of 73 per cent was recorded this week across capital cities compared to 76.4 per cent last week and 70.2 per cent this time last year. The main auction activity this week was in Sydney and that ensured that the national clearance rate remained above 70 per cent for the fourth week in a row. We expect a very busy period between now and Easter with only three weekends available and demand from buyers very strong in Sydney, Canberra and Melbourne. In Sydney a preliminary clearance rate of 83.3 per cent was recorded compared to 81.4 per cent last week and 78.8 per cent last year. This is now the fourth consecutive week with a clearance rate in excess of 80 per cent. This indicates an auction market is strongly tilted in the favour of sellers. In Melbourne the preliminary clearance rate was 73.7 per cent, compared to 77.1 per cent last week and 67.3 per cent this time last year. There was a low volume of auctions in Melbourne due to Labour Day which may account for the small drop in the clearance rate. In Brisbane a preliminary clearance rate of 35.5 per cent was recorded compared to 47.9 per cent last week and 45 per cent last year. In Adelaide a preliminary clearance rate of 57.1 per cent compared to 76.6 per cent last week. In Canberra a clearance rate of 68.3 per cent was recorded compared to 74.6 per cent last week. In Perth a clearance rate of 30 per cent was recorded compared to 36.8 per cent last week and 44 per cent last year. Robert Larocca CoreLogic RP Data Housing Market Specialist

Short drop in auction market volumes after strong fortnight

CoreLogic RP Data National Auction Preview, week ending 8 March 2015 Strong auction demand continued in Sydney, Melbourne and Canberra last week with all three markets recording clearance rates in excess of their 2014 trend and they were joined by Adelaide where a clearance rate in excess of 70 per cent was recorded for the first time in a year. National volumes also fell this week due to the impact of the Labour Day long weekend, particularly in Melbourne, There are 1,818 auctions expected this week across Australia with 1,448 expected in capital cities. This is compared to 3,238 last week and 1,520 for the same week last year. In Sydney 801 auctions are expected compared to 1,223 last week and 859 this week last year. As volumes reached a record high last year, it is remarkable that they are higher again this year and that demand remains very strong. In Melbourne 312 auctions are expected compared to 1,565 last week and 329 this week last year. Last week saw a record set for the number of homes sold at auction in February. There are 144 auctions expected in Brisbane compared to 216 last week and 138 this week last year. This week there are 62 auctions expected in Adelaide compared to 109 last week and 80 on the same week last year. In Canberra there are 75 auctions expected compared to 84 last week and 64 this week last year. In Perth 42 auctions are expected compared to 27 last week and 33 this week last year. Across Australia the highest volume of auctions in one suburb are 16 in Mosman NSW . Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

Melbourne Auction Market preview; Week ending 8 March, 2015

There are 312 auctions scheduled this week in Melbourne compared to 329 for the same time last year. Volumes are low due to the Labour Day long weekend. The highest volume of auctions in one suburb is the very popular Glen Waverley where 7 are scheduled. The February Home Value Index results showed the dwelling prices rose at a greater rate over the last three months than any other capital city and rose slightly in the last month. When viewed in conjunction with the strengthening auction market this data confirms the solid position intending sellers now find themselves. This will also encourage a rise in listings over the next few months and provide buyers with good choice in April and May. The clearance rate also rose compared to last year. In February a clearance rate of 74.2 per cent was recorded from 3,452 auctions compared to 71.5 per cent from 2,623 auctions a year ago. In respect of the private sale market in the past week, on a citywide basis, the time on market results for houses sold at private sale fell to 43 days, down from 60 days in the previous week. Overall vendor discounting was up slightly to -5.5 per cent from -5.4 per cent. Key data Clearance rate week ending 1 March: 77.1% Melbourne auctions expected week ending 8 March: 312 Melbourne private sales time on market week ending 1 March: 43 days houses Melbourne vendor discounting market week ending 1 March: -5.5% houses Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Dwelling approvals reach new record highs in January 2015

Earlier this week, the Australian Bureau of Statistics released building approvals data for January 2015. The data showed that over the month, dwelling approvals surged to an all-time high while the annual number of approvals is also at a record high. Across the nation, the seasonally adjusted data showed that in January 2015, there were 19,282 dwelling approvals. This was a record high number of monthly approvals, 4.9% higher than the previous peak of 18,389 approvals two months earlier. The number of dwelling approvals increased by 7.9% over the month and approvals are 9.1% higher year-on-year. On an annualised basis, we are also seeing a record high with 203,182 approvals, up 0.8% over the month and 10.8% year-on-year. This represents a strong pipeline of new dwellings to be constructed. Looking more closely at the national figures, it shows that the surge in approvals over the month was entirely due to unit approvals as opposed to house approvals. We also saw a rare occurrence whereby there were more units approved for construction than houses. The above chart highlights monthly approvals with the thicker lines showing the 6 month average number of approvals. Over the month there were 9,588 house approvals and 9,694 unit approvals. The monthly number of house approvals has been fairly flat for the past 11 months while unit approvals tend to be much more volatile but trending higher. In January 2015, house approvals fell -0.4% while unit approvals increased by 17.5%. Year-on-year to January 2015, house approvals have fallen by -2.9% while unit approvals were 24.3% higher. Turning the focus to the capital cities it is firstly important to note that unlike the national data the figures are not seasonally adjusted. In January 2014 there were 11,926 capital city dwelling approvals which was -14.1% lower over the month but 8.6% higher year-on-year. Over the past 12 months, there has been a record high 153,323 dwelling approvals across the combined capital cities. Once again looking at houses as opposed to units, the data shows that the unit market is the key driver of new housing approvals. In January 2015 there were 4,986 capital city house approvals and 6,940 unit approvals. Approvals for both houses -11.2% and units -16.0% were lower over the month which can largely be attributed to seasonal effect of a weaker January. The unit series tends to be more volatile however, house approvals were at their lowest level since December 2013 over the month. The chart also shows that unit approvals have generally been outnumbering house approvals since the middle of 2012 despite some volatility month-to-month . Year-on-year, capital city house approvals are -5.9% lower while unit approvals are 22.1% higher. Looking at the individual capital cities and utilising annual data to smooth out some of the volatility, it is clear that there has been a surge in approvals over the past few years across the major regions of Australia. First looking at house approvals, over the 12 months to January there were 13,337 approvals in Sydney, 22,198 in Melbourne, 10,574 in Brisbane, 5,879 in Adelaide, 20,001 in Perth, 886 in Hobart, 789 in Darwin and 1,621 in Canberra. Year-on-year, the number of house approvals have changed by 18.1% in Sydney, 16.2% in Melbourne, 34.2% in Brisbane, 8.2% in Adelaide, 12.1% in Perth, 59.1% in Hobart, 7.5% in Darwin and -1.0% in Canberra. Probably the most interesting point to note from the data is that both Melbourne and Perth approved more houses than Sydney, despite Sydney’s larger overall population. Turning the focus to the unit market, over the past year the number approvals across the cities have been recorded at: 25,440 in Sydney, 26,712 in Melbourne, 12,012 in Brisbane, 3,241 in Adelaide, 7,432 in Perth, 95 in Hobart, 1,016 in Darwin and 2,090 in Canberra. Only Adelaide, Perth and Hobart have approved more houses than units over the year. The annual change in unit approvals across the cities are recorded at: 0.7% in Sydney, 22.8% in Melbourne, 7.6% in Brisbane, 17.8% in Adelaide, 38.0% in Perth, -48.4% in Hobart, -15.4% in Darwin and -38.9% in Canberra. The supply-side response has generally been quite positive over recent years however, in Sydney, where the dwelling deficiency is greatest, has experienced a much smaller increase in new supply than across other cities. The Perth, Darwin and Canberra housing markets have weakened noticeably over the past year with value growth slowing and rental rates falling. New dwelling approvals have eased in Darwin and Canberra however, Perth continues to approve a increasingly larger number of dwellings for construction despite the softening housing market conditions in this city. Approvals have surged by a greater amount for units as opposed to houses over the past several years. If we look at how this is now playing out we find some interesting trends: • Investors tend to target unit stock rather than detached houses in particular units in the inner city and this is where a large amount of unit stock already exists and a high proportion of the new stock is being delivered. • In Melbourne and Brisbane, where the rise in prominence of unit approvals has been greatest over recent years, unit values have recorded an annual increase of 2.8% and 0.5% compared to 8.0% and 6.5% for houses. • Turning to the rental markets, capital city house rents have increased by 1.6% over the past year which is lower than the 2.3% increase in unit rents however, in Melbourne and Brisbane annual growth in rents has been lower for units than houses. • The annual rental growth figures for units are 2.2% in Melbourne and 0.5% in Brisbane compared to 2.5% and 2.0% respectively for houses. Keeping in mind that many of these recent unit approvals will take time to be built, it could be the case that value and rental growth for Melbourne and Brisbane units will be minimal due to the higher supply levels coming on line. This may also have an impact for the wider market as the overall composition of unit stock increases it may result in lower overall value growth. Other cities should be cautious of higher housing stock levels, particularly within the inner city apartment markets. With population growth slowing, particularly from overseas, and a surge in new construction, without careful management an under-supply of dwellings can quite quickly turn to a glut in particular areas if too many new homes are approved. Brisbane at least appears to have slowed its rate of approvals growth recently however, it is potentially concerning that Melbourne has seen no such easing of the throttle. More dwellings are required nationally however, developers and those approving these new homes need to carefully monitor just how many new homes are required at one point in time. The RBA has pointed out that they want to extend this period of increased construction for as long as possible. Extending this heightened period of construction will help support jobs, particularly as high rise construction takes much longer than house construction, and will help reduce the housing deficiency. But we must be cautious to ensure that we aren’t just creating oversupplies in inner city areas while maintaining deficiencies in other areas of our cities where cheap and affordable housing options are required.

Melbourne residential market provides highest growth over quarter

The February CoreLogic RP Data Home Value Index results read results here showed the dwelling prices rose at a greater rate over the last three months than any other capital city. When viewed in conjunction with the strengthening auction market this data confirms the solid position intending sellers now find themselves in. This will also encourage a rise in listings over the next few months and provide buyers with good choice in April and May. In the last three months house values have risen 4.8 per cent and over the last month the rise was a more moderate 0.2 per cent. Based on settled sales in the last quarter the median sale price was $549,000. In the last three months unit values have risen 1.8 per cent and over the last month the rise 0.5 per cent. Based on settled sales in the last quarter the median sale price was $450,000. Unit values continue to be subdued due to high supply. The clearance rate also rose compared to last year. In February a clearance rate of 74.1 per cent was recorded from 3,452 auctions compared to 71.5 per cent from 2,623 auctions a year ago. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Capital city auction market showing best results in 5 years

CoreLogic RP Data National Auction Comment, week ending 1 March 2015 A preliminary weighted average clearance rate of 77.1 per cent was recorded this week across capital cities compared to 77.3 per cent last week and 74.2 per cent this time last year. Following last weeks strong result this week’s result indicates the auction market is delivering healthy outcomes to sellers in increasing numbers. In Sydney a preliminary clearance rate of 82.8 per cent was recorded compared to 86.2 per cent last week and 77.6 per cent last year. This is the fourth consecutive week in excess of 80 per cent making it the strongest capital city auction market in recent times. The Sydney auction market is in uncharted territory now. In Melbourne the preliminary clearance rate was 76.5 per cent, compared to 75.8 per cent last week and 76.6 per cent this time last year. The Melbourne auction market is beginning to record numbers similar to autumn 2010, when high clearance rates and volumes translated into strong capital gains. In Brisbane a preliminary clearance rate of 54.6 per cent was recorded compared to 63.6 per cent last week and 46.2 per cent last year. In Adelaide a preliminary clearance rate of 78.6 per cent compared to 53.3 per cent last week. In Canberra the market is beginning to show levels of demand currently present in Sydney and Melbourne. A clearance rate of 81.6 per cent was recorded compared to 72.4 per cent last week. In Perth a clearance rate of 40 per cent was recorded compared to 46.4 per cent last week and 55 per cent last year. Robert Larocca CoreLogic RP Data Housing Market Specialist

Residential property listings – February update

CoreLogic RP Data’s latest listings counts show that while overall listing stock is picking up on a monthly basis, listing volumes remain low when compared to the same time last year, although conditions are different across the individual states and capital cities. Over the four weeks ending 22 February 2015 there were 45,681 new listings added to the market nationally, bringing the total listings stock up to 241,994. Meanwhile, across the capital city markets, 28,447 new listings were added to the market over the four week period giving buyers access to a total of 98,811 residential properties that were listed for sale across the combined capital cities over the four week period. Nationally, total listing numbers are -2.5 per cent lower than at the same time last year and -4.1 per cent lower across the capital city markets, however this is not reflected across all individual markets. At a capital city level, total listings are 10.4% higher than at the same time last year in Perth, while across the smaller markets of Darwin +31.6% and Canberra 11.4% , total stock levels are currently higher than they were at the same time last year. Interestingly, while new listing being added to the market are also higher than at the same time last year in Perth and Darwin, the same cannot be said for Canberra, indicating the high level of stock is more likely attributed to a lower turnover. On a state-by-state basis, listings activity is relatively similar, with WA, NT and the ACT all recording a higher level of stock currently when compared to the same time last year, while the opposite can be said for all of the other states and territories. The latest figures from the CoreLogic RP Data Listing Index shows a 3.6% monthly increase in the number of properties being prepared for sale across the CoreLogic RP Data platforms when adjusted for seasonality. Tasmania is the only state to record a decrease across the Listing Index -0.2% over the month while all other states have seen listing activity increase over the month. In absolute terms, it is unsurprising that the preparation of homes for sale nationally has increased over the month +36.4% , given the seasonal slow-down experienced each year over the December/January period. We would anticipate that this will translate into a further surge in new listing activity over the next couple of weeks.

Good conditions for sellers after highest clearance rate since 2009

CoreLogic RP Data National Auction Preview, week ending 1 March 2015 The national auction market demonstrated exceedingly strong demand last week with the highest clearance rate recorded since September 2009. This is evident in all capital cities along the eastern seaboard along with Canberra. There are 3,347 auctions expected this week across Australia with 2,831 expected in capital cities. This is compared 2,372 last week and 2,712 for the same week last year. In Sydney 1,028 auctions are expected compared to 921 last week and 1,035 this week last year. If last week’s result, a clearance higher than any in the past 5 years, is repeated over the next few weeks it will have a direct impact on prices across the market. Clearance rates persistently in the 80’s indicate a market strongly favouring sellers and this generally results in unsustainable price rises. In Melbourne 1,401 auctions are expected compared to 1,074 last week and 1,334 this week last year. Demand continues to rise in line with supply and buyers will see good choice with high volumes in many of the leafy green inner eastern and popular seaside suburbs. There are 187 auctions expected in Brisbane compared to 119 last week and 149 this week last year. The substantial increase in the clearance rate last week mirrors market conditions at the same time last year. This week there are 103 auctions expected in Adelaide compared to 125 last week and 97 on the same week last year. In Canberra there are 73 auctions expected compared to 86 last week and 68 this week last year. In Perth 23 auctions are expected compared to 32 last week and 22 this week last year. Across Australia the highest volume of auctions in one suburb are 24 in Reservoir Vic . Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

Melbourne Auction Market preview; Week ending 1 March, 2015

There are 1,401 auctions scheduled this week in Melbourne compared to 1,334 for the same time last year. This is the second week with over 1,000 auctions for the year and volumes at auctions have risen to a level that is similar to last year now. Once listings for private sale are taken into consideration there are fewer new homes on the market than a year ago. There were 1.8 per cent fewer homes listed for sale in the past month than last year which suggests consumers are still approaching the market is caution. In respect of the private sale market in the past week, on a citywide basis, the time on market results for houses sold at private sale fell to 60 days, down from 66 days in the previous week. Overall vendor discounting was up slightly to -5.4 per cent from -5.1 per cent. Key data Preliminary clearance rate week ending 22 February: 75.8 per cent Melbourne auctions expected week ending 1 March: 1,401 Melbourne private sales time on market week ending 22 February: 60 days houses Melbourne vendor discounting market week ending 22 February: -5.4 per cent houses Listings being prepared for market are 0.7 per cent higher in the month ending 22 February seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Melbourne Auction Market preview; Week ending 1 March, 2015

There are 1,401 auctions scheduled this week in Melbourne compared to 1,334 for the same time last year. This is the second week with over 1,000 auctions for the year and volumes at auctions have risen to a level that is similar to last year now. Once listings for private sale are taken into consideration there are fewer new homes on the market than a year ago. There were 1.8 per cent fewer homes listed for sale in the past month than last year which suggests consumers are still approaching the market is caution. In respect of the private sale market in the past week, on a citywide basis, the time on market results for houses sold at private sale fell to 60 days, down from 66 days in the previous week. Overall vendor discounting was up slightly to -5.4 per cent from -5.1 per cent. Key data Preliminary clearance rate week ending 22 February: 75.8 per cent Melbourne auctions expected week ending 1 March: 1,401 Melbourne private sales time on market week ending 22 February: 60 days houses Melbourne vendor discounting market week ending 22 February: -5.4 per cent houses Listings being prepared for market are 0.7 per cent higher in the month ending 22 February seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Interest-only and investor lending continued to increase up to the end of 2014 according to APRA

The Australian Prudential Regulation Authority APRA released data earlier today on residential property exposures by Australian Authorised Deposit-taking Institutions ADIs . The data was published up to the end of December 2014. The information provides additional insight into the nature of mortgage lending by Australian banks, building societies and credit unions. According to APRA’s data, at the end of 2014, there were $1.278 trillion in residential term loans with $839.8 billion in owner occupied loans 65.7% and $438.9 billion in investor loans 34.3% . Over the 12 months to December 2014, the value of residential term loans to owner occupiers increased by 7.4% compared to a 12.2% rise in loans to investors. Note that in December APRA raised concerns about annual growth in investor loan books above 10%. Based on this data many ADIs would be growing that segment of their book above that benchmark. Focusing on the characteristics of these loans shows a growing appetite for loans with an offset facility and interest-only loans. Meanwhile, the prominence of low documentation loans and other non-standard loans is reducing. Based on the value of lending, loans with an offset facility increased by 18.4% year-on-year to December 2014, interest-only loans were 15.1% higher, reverse mortgages had increased 1.9% while low documentation loans and other non-standard loans had reduced by -18.6% and -20.2% respectively. At the end of 2014, a record high 37.5% of outstanding loans had an offset facility and a record high 36.9% were interest-only. Just 0.2% of loans were reverse mortgages, a record low 2.5% were low documentation and just 0.1% were other non-standard loans. At the end of December 2014, the Australian Bureau of Statistics ABS estimated that there were 9,448,300 households while APRA reported that there were 5,213,000 mortgages to Australian ADIs. This indicates that 55.2% of Australia’s housing stock was mortgaged to Australian ADIs. The 55.2% figure is the highest on record, noting that records have only been calculated from the September quarter of 2011. The ABS also reports the value of residential housing stock at $5.4 trillion and given the $1.258 trillion in outstanding mortgages to Australian ADIs, 23.3% of the value of all housing stock is mortgaged. The average value of the outstanding mortgages, according to APRA’s data, was $241,400 at the end of 2014, with the average loan size having increased by 3.4% over the past year. Loans with offset facilities $285,900 and interest-only mortgages $311,300 had much higher average loan sizes which have increased by 2.1% and 2.8% over the past year. Reverse mortgages had an average size of $93,100 having increased by 3.8% over the year. Low documentation loans had an average outstanding amount of $204,800 and other non-standard loans had an average of $211,900, outstanding loan sizes have fallen over the year -2.9% and -7.1% respectively. Over the December 2014 quarter, there were 93,231 new loans written by Australian ADIs. Of these loans, 23,183 24.9% had a loan-to-value ratio LVR of less than 60%, 38,964 41.8% had an LVR of between 60% and 80%, 20,464 21.9% had an LVR of 80% to 90% and the remaining 10,620 11.4% had an LVR of more than 90%. Year-on-year, the number of loans with an LVR of more than 90% have fallen by 6.9%. Over the same period, loans with an LVR of less than 60% have increased by 10.8%, loans with an LVR of 60% to 80% have increased by 13.1% and loans with an LVR between 80% and 90% have increased by 17.7%. Given APRA had concerns of the rate of growth in the investment segment of the market, this latest data is likely cause APRA some discomfort. Not only is this data showing the investment segment growing at a rate much higher than 10% annually, but also interest-only lending which tends to be reflective of investment lending is also increasing substantially. On a more positive note, although investment lending is increasing it is encouraging to see the drop in higher LVR lending above 90% which suggests that ADIs are being somewhat more cautious around higher risk lending especially considering the overall number of loans being written has continued to grow. We can expect the regulator will be monitoring lending standards with more focus after the release of this data, particularly from the perspective of investment lending and interest only mortages.

Where are most of Melbourneâ

Key points Over the past 5 years the number of million dollar homes sold has almost tripled; Glen Waverley and Mount Waverley are in the top 10 and were not 5 years ago; Nearly 10,000 homes have sold in the last year for more than $1m. Five years ago there were 3,335 homes sold for in excess of one million dollars in Melbourne – not so surprising is that the top 10 sales were in the city’s most expensive addresses. The top three, Brighton, Camberwell and Kew, saw 266, 162 and 157 houses sold for over a million dollars in 12 months. Remarkably, in the bayside suburb of Brighton, 109 of those were in excess of 2 million dollars. Bay views command incredible sale prices due to their scarcity. The remaining seven in the list are Toorak, Brighton East, Hawthorn, Malvern, Malvern East, Canterbury and Surry Hills. Over the past year, the million-dollar list has changed and shows some interesting shifts in the market. Firstly, there are many more with 9,684 sales over a million. Secondly five of the top 10 are new. Balwyn North, Glen Waverley, Glen Iris, Balwyn and Mount Waverley are newly into the list. Balwyn and Balwyn North are not a surprise, along with neighbouring Mont Albert and Mont Albert North, they have seen the highest capital gains on an annualised basis over the past 5 years in Melbourne. The most significant shift is found in Mount Waverley and Glen Waverley. Between these, 442 houses sold for over a million dollars, 41 of those for over two million. Both have seen increases in demand well in excess of the comparable suburbs to the north and south with buyers attracted by a range of factors from transport choices to schools. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

National clearance rate of 77.7% recorded over the weekend

CoreLogic RP Data National Auction Comment, week ending 22 February 2015 A preliminary weighted average clearance rate of 77.7 per cent was recorded this week across capital cities compared to 74 per cent last week and 76.2 per cent this time last year. At this stage this is the highest clearance rate recorded on a national level since September 2009. Last week’s momentum has been carried into this week with solid demand evident in Sydney, Melbourne and Canberra. The interest rate cut is clearly having a beneficial impact. In Sydney a preliminary clearance rate of 87.8 per cent was recorded and this is higher than any other week in the past year. This is compared to 83.3 per cent last week and 84.2 per cent last year. This result is the sign of a strong market but not against the trend at this time last year. In Melbourne preliminary clearance rate was 74.9 per cent, compared to 70.9 per cent last week and 73.5 per cent this time last year. The Melbourne auction market has lifted by around 15 points in the past two weeks. In Brisbane a preliminary clearance rate of 68.9 per cent was recorded compared to 49.5 per cent last week. In Adelaide a preliminary clearance rate of 55.2 per cent compared to 69 per cent last week. In Canberra a clearance rate of 72.9 per cent was recorded compared to 72.3 per cent last week. This is the third week with a clearance rate in excess of 70 per cent and means the Canberra auction market has had a stronger start than last year. In Perth a clearance rate of 53.8 per cent was recorded. Robert Larocca CoreLogic RP Data Housing Market Specialist

Melbourne Auction Market preview; Week ending 22 February, 2015

There are 936 auctions scheduled this week in Melbourne compared to 1,401 for the same time last year. The highest volume of auctions will be in Richmond with 20 scheduled. There are 17 in Bentleigh East and St Kilda. The Melbourne auction market is sending mixed messages at the moment, on one hand the clearance rate has risen to be closer to the trend rate for last year, when it was 68.2%. In contrast volumes are low suggesting that potential vendors are lacking the confidence shown last year. It is also possible that vendors and their real estate agents are choosing private sale instead of auction as a method of sale. It won’t however be possible to ascertain if that is happening for a few months. In respect of the private sale market in the past week, on a citywide basis, the time on market results for houses sold at private sale was 66 days, slightly up from 65 days in the previous week. Overall vendor discounting was up slightly to -5.2% from -5.1%. Key data Clearance rate week ending 15 February: 70.9% Melbourne auctions expected week ending 22 February: 936 Melbourne private sales time on market week ending 15 February: 65 days houses Melbourne vendor discounting market week ending 15 February: -5.2% houses Listings being prepared for market are 3.5% lower in the month ending 15 February seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Volumes continue to be low but clearance rate rises

CoreLogic RP Data National Auction Preview, week ending 22 February 2015 The trend of lower auction volumes in 2015 continues with 29 per cent fewer homes on offer across capital cities this week. The low volumes appear to have contributed to strong rises in the clearance rate last week in both Sydney and Melbourne. There are 2,497 auctions expected this week across Australia with 2,058 expected in capital cities. This is compared 1,541 last week and 2,905 for the same week last year. In Sydney 775 auctions are expected compared to 662 last week and 1,101 this week last year. The clearance rate last week was the highest in a year and should encourage a few more vendors to list for sale as there is clearly strong demand from buyers. In Melbourne 936 auctions are expected compared to 584 last week and 1,401 this week last year. The 10-point rise in the clearance rate last week is a sign of a healthy market and provides an indication that the interest rate cut has been welcomed by buyers. There are 101 auctions expected in Brisbane compared to 118 last week and 161 this week last year. This week there are 124 auctions expected in Adelaide compared to 91 last week and 118 on the same week last year. In Canberra there are 77 auctions expected compared to 49 last week and 65 this week last year. In Perth 30 auctions are expected compared to 26 last week and 49 this week last year. Across Australia the highest volume of auctions in one suburb are 20 in Richmond Vic . Of the 2,497 homes being auctioned 936 are listed as 3 bedrooms, 666 as 5 bedrooms and only 162 with 5 bedrooms. Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

US real estate agents are harnessing social media and new technology to win customers

In late January I attended the Inman Real Estate Connect Conference in New York. The conference is targeted at real estate professionals and provides insight into the latest news and trends within the market. In this week’s blog I will share some of the new technology, websites and applications as well as some of the ways US agents are now using social media to communicate with clients. Most of the websites and applications are US-centric but here I will highlight those which are also relevant to the Australian market. Social Media In the US, social media is big for real estate agents and brokers. Although LinkedIn, Facebook, Youtube and Twitter may immediately spring to mind, real estate professionals are now starting to effectively create leads from Instagram and Pintrest. In fact, in the US, agents receive more referral traffic from Pintrest than they do from Google Plus, Linkedin and Youtube combined. Real estate professionals are effectively using Pintrest by creating pinboards of design ideas and solutions that they like and local area information. This can include but is not limited to: Smart home design Storage solutions Room designs Local area landmarks shops, cafes, bars etc Local restaurants Furthermore, US agents are pinning the listings information of homes they have, and have had, available for sale so they can show customers on their inspections. Instagram is being used in a similar way whereby agents create a unique hashtags e.g. #ckusherlistings and upload photos of all their current and previous listings to have these immediately searchable to show clients. Websites Buzzsumo buzzsumo.com Buzzsumo is a website that that allows you to analyse how well your social media content is being used. It shows the total number of shares of your content and then breaks it down by the different social media platforms. Social media in real estate certainly isn’t as big in Australia as it is in the US, but this is a good website that allows you to see where both you and your competitors are getting the eyeballs and ultimately the shares. Fancyhands fancyhands.com Fancyhands is a US based business which offers a virtual personal assistance service. As per the website they can do all those tasks that you don’t have the time nor the desire to do, this may include: Managing your appointment schedule Organising travel Administrative tasks such as data entry Reservations Booking travel Floored floored.com Floored create 3D videos of properties so potential buyers can walk through a property before they physically see the property. The models are optimised so you can watch them through an internet browser of through a mobile phone or tablet. The technology can also be used to create 3D real estate models for homes which aren’t even built as yet. You can also include furniture to get an even clearer idea of how things will fit in the space. Oculus oculus.com Oculus is a virtual reality headset which is being backed by Facebook. For the real estate industry it can be utilised by allowing customers to literally walk through the home without having to physically do open-for-inspection. Homekeepr homekeepr.com Homekeepr is a home maintenance app that can be used by both real estate professionals and anyone that owns a home. The app asks 10 questions about the characteristics of your home, it then creates a list of maintenance tasks that are required for the home and sets reminders as to when you should do these tasks. The application provides a description of what the task is and why it should be done. It then recommends local service providers to undertake these tasks. The agent’s app offers customers the opportunity to download the app and it is customised to the clients’ home s . The list of local service providers for each task can be customised by the agent. When the task is due to be completed they receive both a notification on the app and an email from you as their agent reminding them that the task needs to be completed. The agent can even put their own recommendations outside of those specifically for the home such as local restaurants, shops, schools and much more.

National clearance rate of 70% recorded for the weekend

CoreLogic RP Data National Auction Comment, week ending 15 February 2015 A preliminary weighted average clearance rate of 70 per cent was recorded this week across capital cities compared to 67.3 per cent last week and 70.2 per cent this time last year. The market performed to recent trend this week and results between now and the Labour Day long weekend should provide a clearer indication as to the state of the auction market this year. In Sydney a preliminary clearance rate of 77.9 per cent recorded compared to 80.6 per cent last week and 80.2 per cent last year. The Sydney auction market has not shown any sign of weakness following the stand out year in 2014. In Melbourne the auction market improved following the lowest clearance rate in 26 months last week. The preliminary clearance rate was 67.4 per cent, compared to 60.7 per cent last week and 69.2 per cent this time last year. In Brisbane a preliminary clearance rate of 50.6 per cent was recorded compared to 47.6 per cent last week. In Adelaide a preliminary clearance rate of 72 per cent compared to 58.2 per cent last week. In Canberra a clearance rate of 72.2 per cent was recorded compared to 67.9 per cent last week. In Perth a clearance rate of 33.3 per cent was recorded. Robert Larocca CoreLogic RP Data Housing Market Specialist

Melbourne’s Top 10 suburbs by Vendor Discounting

Key points Vendor discount is great metric for buyers and sellers Springvale was the most highly discounted suburb in 2014* Million dollar suburbs dominated the highest discounts in 2009* One of the more interesting property market metrics tracked by CoreLogic RP Data is the average vendor discount. It shows the difference between the advertised price and sale price. It only applies to homes sold through private sale and those that had an advertised price. If the vendor discount is very high it shows that either demand is soft in an area, the vendors expectations are too high, or a combination of both. For a house in the Melbourne metropolitan area the average vendor discount in the most recent 12 months was -5.6 per cent. This does contrast to auctions where the sale price tends to be above advertised price. This can therefore be very useful information for buyers as it can help them make a judgement about how much to offer. Likewise for sellers it can help them set a realistic sale price. In the twelve months ending 30 November the most recent and comprehensive data the top 10 suburbs when ranked by the size of the vendor discount were mostly south of the Yarra and around the metropolitan median. Top of the list was Springvale where the vendors had to discount their desired sale price by 15.3 per cent. Other suburbs in the outer east where vendors’ house price expectations were overpriced for the market conditions were Wantirna, Ringwood East, Springvale South, Bayswater and Bayswater North. Five years ago the most remarkable difference was the prevalence of million dollar suburbs. Half the list had a median house value in excess of a million dollars which reflects the soft market conditions at the time. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist *The above analysis is based on detached houses over the twelve months ending 30 November

National auction market trailing 2014

CoreLogic RP Data National Auction Preview, week ending 15 February 2015 Auction volumes are currently tracking lower than they were this time last year with around 8 per cent fewer across capital cities. Despite being early in the year, this is most pronounced in Melbourne which has had 27 per cent fewer auctions. In contrast volumes are 25 per cent higher in Adelaide and stable in Sydney. As the entire number of auctions so far this year is similar to a large week in spring, this trend may still be easily reversed. Across Australia, there are 1,713 auctions expected this week with 1,289 expected in capital cities. This is compared 987 last week and 1,667 for the same week last year. In Sydney, 509 auctions are expected compared to 255 last week and 614 this week last year. In Melbourne 506 auctions are expected compared to 255 last week, and 783 this week last year. Many prospective vendors appear to be holding back which is contributing to a lower clearance rate. Last week was the lowest recorded for 26 months. There are 103 auctions expected in Brisbane compared to 109 last week and 133 this week last year. In Adelaide the auction market has had a very healthy start to the year so far. This week there are 88 auctions expected compared to 94 last week and 58 on the same week last year. In Canberra there are 51 auctions expected compared to 69 last week and 41 this week last year. In Perth 23 auctions are expected compared to 31 last week and 26 this week last year. Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

Melbourne Auction Market preview; Week ending 15 February 2015

There are 506 auctions scheduled this week in Melbourne compared to 783 for the same time last year. Auction volumes continue to be well below those recorded twelve months ago and last week saw the lowest clearance rate for 26 months. Recent analysis from CoreLogic RP Data & the Australian Bureau of Statistics ABS shows that, once inflation is accounted for, Melbourne home values were not quite yet at a new peak. The results showed that home values were 2.7 per cent below the peak in September 2010; when the improvement in January is included home values will be very close to peak in real terms. It’s also illustrative to compare the strength of the market in this cycle to the last in 2010. Values rose at just half the rate of pace in 2010 which has helped to underscore the more moderate market conditions and consumer conservatism. The private sale market has also begun. On a citywide basis, the time on market results for houses sold at private sale was 65 days over the last week and vendor discounting was -5.1 per cent. Key data Clearance rate week ending 8 February: 60.7% Melbourne auctions expected week ending 15 February: 506 Melbourne private sales time on market week ending 8 February: 65 days houses Melbourne vendor discounting market week ending 8 February: -5.1% houses Listings being prepared for market are 9 per cent lower in month ending 8 February seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Investors surge after APRA warns about investor housing lending in December 2014

The Australian Bureau of Statistics ABS released housing finance data for December 2014 earlier today. The data showed an end of year surge both in the value and the number of loans. The surge coincided with the Australian Prudential Regulation Authority APRA warning Australian Authorised Deposit-taking Institutions ADIs about risky mortgage lending practices during the month. Over the month, the value of housing finance commitments increased by a total of 4.7%, the largest monthly increase since September 2013. The large increase was comprised of a 4.1% increase in owner occupier refinanced loans, a 3.6% increase in owner occupier new loans and a 6.0% increase in investor loans. The surge in investor loans is noteworthy, but so too is the jump in owner occupier new loans which had been flat for the past 12 months. Year-on-year, owner occupier refinances have increased by 27.0%, owner occupier new loans have increased by 4.9% and investor loans have climbed 18.8% higher. In December 2014, there were $5.8 billion in housing finance commitments for owner occupier refinances, $12.3 billion for owner occupier new loans and $12.6 billion for investor loans. Both refinances and investor loan commitments were at a record high. Based on this data, the proportion of owner occupier new loans accounted for an all-time low 40.1% of housing finance commitments compared to 18.9% of all commitments for owner occupier refinances and a near record high 41.0% of commitments to investors. If we strip out refinances, investors accounted for a record high 50.6% of new housing finance commitments in December 2014. Looking specifically at the owner occupier segment of the market, there was $1.9 billion in commitments for construction of dwellings, $1.0 billion in commitments for the purchase of new dwellings, $5.8 billion in refinancing of established dwellings and $9.4 billion in commitments for established dwellings. There has been a surge in finance demand over the year, particularly for newly constructed dwellings and refinances. Year-on-year, the change in owner occupier housing finance commitments has been recorded at: 14.6% for the construction of new dwellings, 1.8% for the purchase of new dwellings, 27.0% for refinances and an increase of 3.5% for purchase of established homes. Focusing on the investment segment, in December 2014 there was $1.0 billion lent for the purposes of both construction of new and $11.5 billion borrowed for investment in established homes. The year-on-year changes have been recorded at 59.8% for new construction and 16.1% for established homes. The other important figure released by the ABS is the owner occupier first home buyer commitments. The ABS has recognized that these figures have been under-reported and have revised these figures this month. Note that these figures still only include first home buyers that are purchasing homes for owner occupation. In December 2014 there were 8,213 owner occupier housing finance commitments to first home buyers, representing 14.5% of all owner occupier commitments. Despite the revisions, the number of commitments is -1.3% lower over the year. Furthermore, the 14.5% represents the lowest proportion of commitments to first home buyers since June 2004. The data indicates first home buyers continue to languish whilst those that already own homes and are upgrading, refinancing or purchasing an investment property continue to dominate the market. What is less clear is how many first time buyers are doing so for investment purposes the ABS doesn’t provide a further breakdown of investment loans by buyer type as they do for owner occupiers . As noted earlier, APRA wrote to Australian ADIs in December reiterating what they determine are prudent measures for lending and potential repercussions for those that don’t follow these guidelines. Given the results you would have to say it had little effect on borrowers or lenders in December. It’s also worth noting that along with an 18.8% year-on-year increase in the value of investor commitments over 2014, the RBA’s housing credit data showed that total investor credit expanded by 10.1% in 2014. APRA noted concerns with lenders growing the investment segment of their loan book above 10% annually. Based on these results you would have to say there remain some concerns for the regulator and it will be interesting to see if or what their next move is. What’s not in doubt is that the ball is now firmly in APRA’s court and we are closely watching what happens next.

National clearance rate of 66.9% on second auction week of 2015

CoreLogic RP Data National Auction Comment, week ending 8 February 2015 A preliminary weighted average clearance rate of 66.9 per cent was recorded this week across capital cities compared to 61.6 per cent last week and 68.2 per cent this time last year. This weeks result compares well to the 2014 market when an overall clearance rate of 67.8 per cent was recorded. It also broadly reflects the moderate growth recorded in home values this year. The positive impact of the rate cut will take a few weeks to be apparent on a national wide scale as volumes are still low. If the rate cut is to encourage a few more active buyers and sellers it will also take a few weeks to be obvious. In Sydney a preliminary clearance rate of 80.5 per cent recorded compared to 77.9 per cent last week and 79.5 per cent last year. Compared to last year this is near identical start. In Melbourne a preliminary clearance rate of 61.4 per cent was recorded compared to 66.3 per cent last week and 67.5 per cent this time last year. It is still early but results so far make it interesting to see which way the market goes as the year has started with lower auction volumes and clearance rates. In Brisbane a preliminary clearance rate of 45.6 per cent was recorded compared to 43.3 per cent last week. In Adelaide a preliminary clearance rate of 61.1 per cent compared to 52.7 per cent last week. In Canberra a clearance rate of 62.8 per cent was recorded compared to 72.7 per cent last week, whilst for Perth a clearance rate of 35.7 per cent was recorded. Robert Larocca CoreLogic RP Data Housing Market Specialist

Auction buyers to benefit from interest rate cuts

This week’s interest rate cut will provide a boost to the auction market over the coming month and deliver a welcome reprieve for buyers looking to reduce costs. Not only will buyers enjoy the increased purchasing power, sellers will welcome the unexpected boost to the market in the middle of their marketing campaigns. This week, there are 1,218 auctions expected across Australia, with 824 of these scheduled for in capital cities. This is compared to 502 last week and 927 for the same week last year. The primary reason for lower auction volumes in capital cities is due to 36 per cent fewer auctions in Melbourne. In Sydney 317 auctions are expected compared to 154 last week and 362 this week last year. In Melbourne 214 auctions are expected compared to 102 last week and 335 this week last year. The main activity this week in Melbourne will be found in the eastern suburbs with 9 auctions in Mount Waverley and 8 in Glen Waverly. In Portarlington, near Geelong, there are also 9 auctions expected. There are 99 auctions expected in Brisbane compared to 85 last week and 98 this week last year. This highest level of activity will be found outside Brisbane with 180 auctions scheduled across the rest of Queensland. For example, the most auctions in any one suburb in Queensland will be in Surfers Paradise where 9 are expected. In Adelaide there are 86 auctions expected. This is slightly lower than the 102 last week but higher than the 70 on the same week last year. In Canberra the volume of auctions is higher than last week and this time last year when there was 50. There are 69 expected this week. In Perth 30 auctions are expected compared to 24 last week and 43 this week last year. The highest volume of auctions will be in Port Macquarie NSW where 10 are expected. Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

Some words of caution on housing supply

In a blog post produced a few weeks ago HERE , we highlighted that the number of dwellings approved for construction reached an all-time high over the year to November 2014 with almost 200,000 approvals registered nationally. Over the year house approvals were up 3.6% compared with an 18% increase in the number of multi-unit dwellings approved. The record level of housing supply in the pipeline comes at a time when population growth ie housing demand is winding down and some of the heat is coming out of the housing market. A deep dive on the Australian Bureau of Statistics approvals data pinpoints exactly where the bulk of the development pipeline from the past year is geographically concentrated. At a broad level we can see the majority of new dwelling approvals are located in Melbourne where 44,633 new dwellings have been approved for construction over the 12 months ending November 2014. Melbourne dwelling approvals accounted for 23% of all approvals nationally and 31% of all approvals across the combined capital city metro areas. Sydney was close behind, recording just over 39,000 new dwelling approvals over the year. 67% of all approvals across the Sydney market were for multi-unit dwellings the highest proportion of apartments approved of any capital city . While new housing supply should generally be viewed as positive and a necessary factor in the Australian housing market and economy, areas where the approved supply pipeline are out of alignment with demand can offer up an element of risk. We recommend that prospective buyers factor supply levels into their housing market analysis and undertake additional research where they fear an area may be in oversupply or at least moving in this direction. The number of multi-unit dwellings, particularly in Melbourne and Brisbane are hovering around record highs. Of course demand for this type of product is increasing but there are risks associated with too much new development of this product type, particularly given values are rising and population growth is slowing. Eight of the top 20 SA3 regions, based on the number of dwelling approvals over the year to November 2014, are located in Melbourne; five are located in Perth, four in Sydney, two in Brisbane and one in Canberra. The tables and maps below highlight exactly where the largest amount of new housing supply is in the pipeline. Seven of the top ten SA3 regions showing the most dwelling approvals across Sydney have a strong bias towards multi-unit dwellings, with the Inner Sydney region topping the list at 2,631 new apartments approved over the twelve months to November 2014. Within the inner city region it is the Waterloo-Beaconsfield area that is attracting the most developer interest. These suburbs account for 1,047 or 41% of the apartments being developed across the Inner Sydney SA3 region. Several areas around Sydney’s inner ring are attracting very little in the way of densification over the past year. The Manly region has only recorded 48 new dwelling approvals over the past year and similarly, Leichardt has recorded only 65 new dwelling approvals. Towards the outskirts of the city, the regions attracting the largest supply pipeline are Parramatta 1,558 new unit approvals over the past year and 119 house approvals as well as the Bringelly-Green Valley region which is seeing an influx of new detached housing approvals 1,449 . Melbourne’s inner city tops the nation with the majority of new dwelling approvals, recording just over 5,000 new apartment approvals over the past year. The high approval reading comes after 3,725 apartments were approved in the same region over the previous year as well as 5,419 the year before that. More than half of last year’s approvals across the Melbourne Inner City were located in the Melbourne CBD 2,418 followed by North Melbourne 682 and Docklands 657 . Outside of the inner city, the majority of new dwelling approvals across the Melbourne metro area have been located in the outer fringes and are primarily detached dwellings. The Whittlesea-Wallan region has recorded the second highest number of Greater Melbourne dwelling approvals over the twelve month period at 2,956 of which 83% were detached dwellings. The data shows that the densification taking place in the Melbourne housing market is very much focussed within the inner city core. The Brisbane Inner North SA3 region has recorded the third highest number of new dwelling approvals of all SA3 regions nationally over the 12 months to November 2014. 2,981 new apartment approvals were recorded over the year and 117 house approvals. The suburbs of Bowen Hills and Newstead comprise the majority of these approvals with 1,535 new apartments approved for construction over the twelve month period. The Inner City region also recorded a high number of multi-unit dwelling approvals, with 1,881 new apartments approved for construction over the year. Outside of the state capital, the regional city of Townsville recorded the third highest number of dwelling approvals across the state over the twelve month period, with 1,228 houses and 410 apartments. Interestingly, the resource-intensive regions of Mackay and Gladstone-Biloela, where market conditions have softened substantially, have also made it into the top ten for the state for new dwelling approvals over the year. Slightly less than one third 31.3% of all new dwelling approvals across Adelaide were for multi-unit dwellings over the twelve months ending November 2014, with the city having a clear preference for detached dwellings. The largest supply pipeline, based on approvals over the twelve month period, can be found in Onkaparinga where 1,103 new dwelling approvals were issued over the year. Most of the approvals were at Seaford 418 , Aldinga 164 and Christies Beach 132 . The Charles Sturt region was the only other SA3 in South Australia to record more than 1,000 approvals over the year. At a time when the Perth housing market is slowing down, new dwelling approvals have moved to historic highs. The SA3 region of Wanneroo ranks as number two nationally for dwelling approvals, with 3,406 new homes approved for construction over the twelve months to November 2014. The Swan region ranked second highest across Western Australia and 8th nationally with 2,557 new dwelling approvals. The urban form of Perth housing continues to be mostly focussed on detached housing, with only 23% of new dwelling approvals being for multi-unit dwellings only Hobart shows a lower proportion at 11% . With home value growth slowing and both sales volumes and rents falling, buyers of new homes, particularly if they are buying for investment purposes, should be cautious. Despite recording the lowest number of dwelling approvals of any state or territory over the twelve months ending November 2014, dwelling approvals across Tasmania have been trending higher to reach their highest point since early 2012. The most significant level of approval activity over the twelve months to November last year was located in the north of the state at Launceston where 329 dwellings were approved for construction. 58% of Darwin dwelling approvals over the twelve months to November 2014 were for multi-unit dwellings, the highest proportion of apartment approvals outside of Sydney. The largest development pipeline, based on dwelling approvals over the twelve month period, was at Palmerston with 818 new dwelling approvals a majority of which were units. The annual number of dwelling approvals has been trending lower across the Australian Capital Territory since early 2014 as housing market conditions broadly soften across the national capital. The Gungahlin region remains the most popular location for dwelling approvals across the Territory, with 2,160 new dwelling approvals over the twelve month period ending November last year. That figure is almost three times higher than the next most popular SA3 location, Cotter-Namadji, where 762 dwellings were approved for construction. Buyers and developers of new stock should be cautious given that values, sales volumes and rental rates are currently falling in Canberra.

Melbourne house owners on track for another year of growth

Residential dwelling values in Melbourne returned to trend in January with a 2.7 per cent rise recorded by CoreLogic RP Data in the latest home value indices results read results here . This sets the Melbourne property market up for another stable year with moderate value increases likely, particularly in the detached house market. Melbourne home owners have seen stable growth in values for two years now and are more likely to record a profit when selling now. House values in the city grew the strongest with a 2.8 per cent rise compared to 1.7 per cent for units. This takes the growth in values over 12 months to 7.5 per cent for houses and 2.7 per cent for units. The rise in property values will be welcomed by vendors seeking to sell over the summer and in autumn as it suggests the poorer performance recorded in November and December last year was a consequence of high supply levels in spring and summer. Demand is not limitless and there is still some caution from buyers. Based on settled sales the median price of a house in the past three months was $613,000 and $480,000 for a unit. The performance of the auction market provides little indication of the markets health due to the very low auction numbers in January and their geographic diversity. Volumes are likely to rise strongly over the next few weeks. Melbourne continues to have the lowest rental yields in Australia with 3.2 per cent for houses and 4.2 per cent for units. This does not appear to have a negative impact on investors who are happy to wait for capital gains. Robert Larocca Victorian Housing Market Specialist CoreLogic RP Data

Low volume of capital city auctions this week

January has seen a fairly typical commencement to the auction market with only 419 auctions held. The market moves up a notch this week with 800 expected across Australia and 391 in capital cities. The volume of auctions in capital cities should rise to exceed 1,000 in the middle of February, as most real estate agents need to allow a reasonable marketing period for the property. It is also fairly typical to see the majority of auctions outside the capital cities and that is the case this week. The highest volume of auctions is expected in Adelaide with 97. There are 94 expected in Sydney, 80 in Melbourne, 72 in Brisbane, 24 in Perth and 21 in Canberra. Before the auction market increases significantly in volume it is useful to reflect on how 2014 ended. On a national basis there 101,444 auctions held in capital cities, the first time ever the volume has exceeded 100,000. Melbourne had the most auctions with 44,089 and just exceeded Sydney for the most sold. The most significant shift in 2014 was the growth in the Sydney auction market. If this is sustained this year it will be difficult for Melbourne to retain the title of the “auction capital”. The highest clearance rate for 2014, 74%, was recorded in Sydney. Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

Residential Property Listings – What’s happening and how does it compare to last year?

Each week, CoreLogic RP Data monitors residential properties coming to the market for sale through what is commonly known as ‘listing activity’. Listings are tracked across three different categories; houses, units and vacant land. Listing counts provide a comprehensive look at stock currently available for sale at a national level and across each state and territory. CoreLogic RP Data also tracks listing volumes across the combined capital cities as well as in each individual Australian capital city. One of the key benefits of this data set is that it can be used to monitor stock levels over time. The listings volumes are a key indicator of how the property market is tracking at any given time. Paired with the number of transactions, listings volumes help to provide a good indication of how balanced a market is, and what proportion of stock is available for sale or is being turned over. Similarly, listings can be paired with sales volumes to help us work out the effective supply across the market and how many months of stock are available at any one time. Over the four weeks ending 25 January 2015 there were 29,107 new listings added to the market and the total number of properties available for sale was 229,453. While not surprising, off the back of the end of year slow down, new listings are much lower than they were three months ago when over the four weeks ending 21 September 2014, 42,650 new listings were added to the market nationally. In comparison to the same time last year, we can see that new listings coming onto the market across Australia are currently -8.3 per cent lower, however, total stock levels are just -2.2 per cent lower. Similarly across the capital city markets, the total number of new listings that were added to the market over the four weeks ending 25 January 2015 16,352 were -6.6 per cent lower this year, compared to last year and total listings 89,521 are -4.1 per cent lower. What is interesting is that across the combined capital cities for the majority of 2014, total listings on a rolling four week basis remained lower than at the same time in 2013. However, new listings numbers were higher in comparison to the previous year for much of the first half of the year and a similar trend was seen in October and November. The fact that new listings were higher, but total listings were lower suggests that stock was being absorbed faster than it was in 2013. This can be further quantified by looking at sales volumes over the start of 2014. Between January and May, the total number of houses and units sold was higher on a month-by-month basis than the previous year, while sales volumes began to ease slightly towards the end of the year. Furthermore, the average time on market trended lower in 2014 further highlighting a more rapid rate of sale. As shown in the above graphs, we know from previous years that the number of homes available for sale will start to ramp up over the next few weeks and we will also see more activity begin to resume across the auction market which over the past six weeks has been relatively quiet. Similarly, we have also seen the CoreLogic RP Data Listings Index pick up after the seasonal slowdown, with the index up 31.6 per cent over the week ending 25 January 2015. This Index is a lead indicator for residential dwellings being prepared for sale, so the rise in the Index is clearly signifying the conclusion of the quiet end of year period.

Melbourne’s ‘Mega suburbs’!

Key points Reservoir is the largest suburb in Melbourne Gilderoy is the smallest suburb in Melbourne The are 12 suburbs in Melbourne with over 10,000 houses Most weeks when the highest volume of auctions are listed, the suburbs of Reservoir, Glen Waverly and Mount Waverly come out near the top. Auctions may well be a popular method of sale in these suburbs but their appearance in the list is more likely due to the fact that they are three of Melbourne’s largest areas. Melbourne’s progressive growth over the past 180 years has seen suburbs planned and developed in many different ways. Sometimes geography provides natural borders and sometimes the common ownership by one developer provided the impetus for the naming or borders. Sometimes names and borders have even moved. As a result Melbourne suburbs vary from 13,741 houses in Reservoir to 18 in Gilderoy. At more than 67km from the CBD the small ‘suburb’ of Gilderoy is more representative of it being a town than a considered decision to create a small suburb. There are 12 suburbs in total that have more than 10,000 houses. Each is bigger than medium-sized regional centres such as, Mildura, Shepparton and Warrnambool and without outlying suburbs. Those 12 suburbs are Reservoir, Frankston, Glen Waverly, Berwick, St Albans, Pakenham, Point Cook, Werribee, Mount Waverly, Hoppers Crossing, Craigieburn and Sunbury. Interestingly many of those were once separate towns which have now expanded considerably as they have become more proximate to the cities outer edge. As many of those are still being developed they are likely to grow further. The vagaries of place naming and suburb size become even more obvious when the case of Croydon is considered. On its own, Croydon is a large but not massive suburb with 7,293 houses. But once neighbouring Croydon North, South and Hills are considered, its size grows to 12,446 houses. When buying in larger suburbs it is therefore sensible to consider where specifically a home is as factors such as distance from a train station, park or school may vary considerably. The form of housing may vary as well. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

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The Federal Government is to shortly release a white paper on taxation reform. Plenty of recent inquiries and taxation documents have specifically noted that the taxation treatment of property should be reviewed and if ever there was a good time to look at changes to stamp duty it would be now. Given where the property market now stands any changes to stamp duty should be implemented sooner rather than later especially given home value growth is slowing and transaction volumes are trending lower. Of course, state governments are heavily reliant on stamp duty revenue and are therefore reluctant to have it removed although we will discuss how these issues can be overcome. Stamp duty is a tax which is payable when someone chooses to purchase a home. Home owners will generally move home because their current home is too big or too small for their needs or because they have changed jobs and need to move elsewhere to be closer to employment. The impost of stamp duty discourages people from moving to more appropriate accommodation. If you don’t yet own your home and are considering purchasing your first home, stamp duty is an additional upfront cost which can make purchasing a home even more difficult. The above chart tracks home sales over time and as you can see, after transaction activity peaked in the boom of 2001 to 2004 it has trended much lower ever since. Although home values have been increasing over the past two and a half years and sales volumes have increased, the rise has been moderate. When sales hit a low point in October 2011 there had been 409,582 house and unit sales nationally over the year. Transaction volumes rose to as high as 490,326 sales over the 12 months to July 2014 which represents an increase of 19.7 per cent. The recent peak in sales was -22.9% lower than the all-time peak of 635,661 sales over the 12 months to May 2002. While increasing home values may make home owners feel wealthier, when you buy your next home stamp duty is calculated based on the purchase price so you have to also pay a higher amount of stamp duty. Over the past, two and a half years, home values have increased by a total of 20.7% across the combined capital cities. Most of that growth has occurred in Sydney and Melbourne however, values have risen across all capital cities. What this means is that when people are buying homes the increase in value is also increasing the stamp duty burden for the next purchaser and subsequently providing additional taxation revenue to government. The impost of stamp duty is also a further barrier to market entry for first home buyers despite some states offering discounts and incentives to first time buyers. Furthermore, stamp duty is acting as a disincentive for home owners from moving eg. upgrading or downsizing to more suitable or appropriately located housing. Data released last year by the Australian Bureau of Statistics ABS showed that across the state and territory governments there was almost $36 billion in taxation revenue from property note this is both residential and other property types over the 2012-13 financial year. Stamp duty was the second largest source of tax revenue at $12.841 billion with only municipal rates at $14.192 billion being higher. Over the year, as home values and sales rose, stamp duty revenue increased by 16.9%. Home values moved even higher during the 2013/14 financial year and sales rose further so it is reasonable to expect a further significant increase in stamp duty revenue. At CoreLogic RP Data we have noted a reduction in sales over recent months and the rate of capital city home value growth is slowing, while this may not be enough to impact stamp duty revenue in 2014/15 it will probably start having an impact by 2015/16 of course different states will see the impact at different times . The point is because stamp duty is a tax collected on the purchase of a home it is collected from a relatively small proportion of the population and is an unreliable source of tax reliant on demand for homes at any given time which can ebb and flow substantially. Although I am an advocate for stamp duties removal I do realise that state government will need to raise that revenue elsewhere. I am also not an advocate for more taxes however, a blanket land tax, paid by all home owners, would seem to make more sense. It is a way of guaranteeing revenue each year as well as broadening the tax base for this revenue rather than just relying on those purchasing properties. Over the 2012-13 financial year $12.841 million was collected in stamp duty, the ABS estimates that as at June 2013 there were 9,226,900 residential dwellings. Based on this dwelling count, land tax of $1,391.69 annually per residential dwelling would cover the cost of this foregone revenue. Keep in mind that stamp duty is collected from any property transaction so revenue would be higher when you include land sales and sales of other property types. This would potentially allow for a reduction in the overall land tax rate per household. By broadening the base of tax collection governments would provide themselves greater surety of revenue as well as assisting the housing market by reducing the costs associated with those who consider it necessary to move home. Given the concerns about investor activity in the market and considering they already reap the benefits of negative gearing perhaps a higher rate of land tax for investment properties should also be a consideration for any stamp duty reform. With home value growth slowing and sales volumes falling, now would seem like the right time to reform stamp duty. Although the impact of a slowing market won’t be felt straight away, no doubt that in years to come Governments will be left with a revenue hole as the effects of the housing market slowdown hit their tax revenue. Providing governments with a higher level of guaranteed revenue would seem like a good idea even if it unfortunately would mean an additional tax for everyone rather than for just those buying property. Note that the ACT is already going down the track of removing stamp duty. In last year’s budget the government announced a plan to phase out the tax over the next 20 years with rates gradually increasing to make-up for the revenue shortfall. Over the period stamp duty rates continue to fall. While the phasing out is commendable I still feel that now is the time to remove stamp duty across the board.

How buyers can use auction results to be better buyers

Key facts Attendence at auctions important for buyer research Clearance Rates – in 2014 these fell to 68.4% Auctions increased to take advantage of rising market In many respects the Melbourne auction market last year was better than in 2013. Auction volumes rose 19.7 per cent compared to last year, however the clearance rate fell a small degree from 69.2 per cent to 68.4 per cent. While there is a great degree of interest in data associated with the auction market, what exactly should buyers be looking at to help inform their judgement? Firstly, when undertaking market analysis it is important to get as much information as possible and understand the data in context, after all the sale of a new home means something different to the sale of an established one. Auctions can provide a rich source of information, even if you are not bidding. Auctions account for around one in five sales in capital cities and nearly one third in Melbourne. With that in mind there are three important things for buyers to look at from auctions; Number of Buyers: The number of active buyers is a slice of the people you are competing against in a given area. If you go to enough open houses and auctions you will get a feel about how strong demand is in an area and that will affect the price you need to pay.. Sale Price or passed in amount : Buyers will be able to compare the sale prices with their expectations of price, even if it is passed in. This information will help you make informed judgments about the market when bidding on the home you want. You can then see this data the day after, however it’s far better to turn up and see it live. Local Auction Conduct: Auctions can be a high-pressure event, as a result the more you attend the more used to the process you will get which in turn will help you stick to your budget and strategy. Attending auctions in the area you aim to buy in will allow you to become acquainted with the styles of different auctioneers and the level of competition in the area. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Boroondara sellers make $232m in three months

Key facts 35.7% of sellers made a 100% or higher profit Sellers in Boroondara made the highest total profit of $232m 98.6% of sellers in Knox made a profit The latest CoreLogic RP Data Pain and Gain Report compares the sale price with purchase price for all homes sold in the most recent quarter and for which there is comprehensive data available. Note: The report does not cover developer sales. The central message of the CoreLogic RP Data Pain & Gain Report is that owners are more likely to make a profit if they hold the property for a reasonable length of time, especially when the upfront impost of stamp duty and other transaction costs are taken into account. For example, nationally, 3.3 per cent of sellers made a 100 per cent profit selling within one year of buying and almost passed this mark by half after 10 years of ownership. In the September quarter last year, 6.5 per cent of sellers in Melbourne made a loss in nominal terms. This was a slight improvement on the 6.6 per cent in the June quarter and a substantial improvement on the 7.4 per cent a year ago. On a more local basis there are two ways of looking at the data; the proportion of sellers that made a profit and the gross profit made. Obviously the total profit made was higher in the more expensive municipalities. For example the highest profit was recorded in Boroondara at $232m. By comparison the total profit in Brimbank was $66m. The other way of assessing the data looks at the proportion of owners who made a profit. Of municipalities wholly within the metropolitan area Knox topped the list with 98.6 per cent. It was followed by Monash on 97.4 per cent, Casey with 96.6 per cent and both Glen Eira and Whitehorse with 96.4 per cent. Interestingly this demonstrates that through medium to long-term ownership a profit can be found in more than just the most expensive parts of Melbourne. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

The 2014 Melbourne rental market

Key facts Median advertised rent for a house in Melbourne $448 Median rent for house rise 2.5 per cent in 2014, units 1.9 per cent Melbourne yields lowest of all capital cities Historically speaking, the performance of last year’s rental market in Melbourne was relatively moderate. In the last three months of 2014 the median advertised rent for a house in Melbourne increased by a minor 0.3 per cent to $448 per week, the opposite to the -0.3 per drop in the unit market. September’s result is reflective of the broader performance of the rental market over 2014 where low rental growth and low yields persisted. Over the course of 2014 house rents increased by 2.5 per cent and units increased by 1.9 per cent. For houses, 2014 was not dissimilar to the past five years. On a annualised basis, rents rose by 2.5 per cent in 2013, 1.3 per cent in 2012, 2.7 per cent in 2011. The only year that recorded a substantially different result was 2010 when rents grew 5.5 per cent. The unit market recorded similar results. In many respects the rental market is following the changes in value seen in the ownership market. With the exception of the unit market, the last two years were similar and 2010 saw boom-like conditions. Similar to the ownership market, the biggest question for 2015 is whether the growth in supply in the unit segment will further moderate advertised rents. Yields remained low. For both units 4.2 per cent and houses 3.3 per cent the yield in Melbourne is the lowest of all capital cities. This does not seem to concern investors who are clearly focused on the longer term prospects for capital gains. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Housing finance commitments start to ease in November 2014

The November 2014 housing finance data from the Australian Bureau of Statistics ABS indicates that demand for mortgages is starting to wane. We would expect that this trend will continue over the coming year as APRA crack down on higher risk mortgage lending and focus on curtailing growth to the investment segment of the market. In November 2014, the total value of housing finance commitments fell by -1.0%. The total value of owner occupier housing finance commitments fell by -0.2% with owner occupier refinance commitments 0.1% higher while owner occupier new loan commitments fell by -0.3%. The investor segment of the market recorded a sharp fall in lending over the month down -2.2% following rises over the previous six months. Year-on-year housing finance commitments have increased by 7.3% which is their slowest rate of year-on-year growth since January 2013. The year on year increase in the value of housing finance commitments has decelerated from a peak of 26.6% in December 2013. Owner occupier refinance commitments rose 18.2%, owner occupier new loan commitments fell -1.8% and investment finance commitments rose 13.0%. Although lending to the housing investment segment is up 13.0% over the year, this represents the lowest year-on-year growth rate since December 2012. The first chart above shows the total value of housing finance commitments over time broken down by owner occupier refinances, owner occupier new loans and investors. While lending for home refinance and investment purposes have continued to trend higher over the past year there has been clear weakness in the new loans to owner occupiers segment. Investor commitments fell -2.2% in November and with APRA trying to slow the growth in lending to investors we would expect the investment segment will follow the lead of the owner occupier new loan segment over the coming year with growth continuing to slow. The total value of housing finance commitments in November 2014 was recorded at $29.0 billion. Over the month there was $11.8 billion in commitments to owner occupier new loans 40.5% , $5.5 billion in owner occupier refinances 19.1% and $11.7 billion in investment loans 40.4% . The proportion of lending to investors eased over the month however, if refinances are excluded the proportion of lending to this segment is still extremely high, accounting for 49.9% of lending commitments for housing. The third chart shows the rolling annual change in housing finance commitments excluding refinances versus the rolling annual change in combined capital city home values. Refinances are excluded because the data is used as a proxy for demand for new borrowings to purchase a home. As you can see there is a correlation between growth in housing finance commitments slowing and growth in home values slowing. Currently we are seeing growth in both housing finance commitments and home values trending lower and we expect that this trend will continue over the coming year. Demand for mortgages remains strong despite the fact that it has started to ease over recent months. With APRA writing to Australian banks, building societies and credit unions late last year reinforcing sound residential mortgage practices we would expect a further slowdown in mortgage demand in 2015. Consequently we would also anticipate that this will result in a slowdown in the rate of growth in home values as demand eases. We have already seen demand from the owner occupier market segment slow over the past year. With APRA advising Australia’s banking sector that they will be watching closely those that grow their investor mortgage book by materially more than 10% year-on-year, the investor segment may well follow suit in 2015.

Melbourne home values rise faster south of the Yarra in 2014

CoreLogic RP Data Melbourne Property Values report – 2014 The top 10 Melbourne suburbs ranked by growth in house values in 2014 were dominated by some of the cities most expensive suburbs and they were located south of the Yarra. Overall, the Melbourne housing market produced a near repeat of 2013 with house values rising by 8.4 per cent and units recorded a rise of 1.1 per cent as a result of high levels of supply; particularly in the inner city high rise market. Armadale, Caulfield North and Kew experienced the highest growth in house values and this is reflective of a number of factors including that the strongest rate of value growth being recorded in the middle and upper segments of the market. The appearance of Box Hill in the Top 10 highlights the continual popularity of the group of suburbs around Balwyn and Mont Albert. Over the last decade these suburbs have provided the best capital gains for owners. These suburbs have broad appeal for myriad reasons such as close proximity to local amenities such as parks, a range of transport choices, local shopping nodes and accessibility to the central business district. At a broader level, the fundamentals of the Melbourne property market remain sound. A major contributor to these fundamentals is the positive impact on housing market from supportive monetary policy in the form of a record low interest rate. Furthermore, ongoing strong overseas migration to Victoria and a record high influx of residents moving to the state from the rest of Australia also helps to support housing demand. House value growth slowed from 3.8% in the September 2014 quarter to just 1.1% over the final quarter of 2014. My big question for the summer and autumn markets is whether this was simply due to higher levels of supply or the start of a softer trend.

A record high number of dwelling approvals in November 2014

The November 2014 dwelling approvals data has been released and it makes for very positive reading. In November there were 18,245 dwelling approvals across the nation. The dwelling approvals data is published from July 1983 and from that month until November 2014 there has never been more approvals over a one month period. Dwelling approvals increased by 7.6% over the month and year-on-year they have increased by 10.1%. Looking at the approvals data, the 18,245 monthly approvals were comprised of 9,404 house and 8,841 unit approvals. House approvals were actually -0.2% lower over the month while unit approvals increased by 17.2%. As the chart above shows, unit approvals tend to be much more volatile than house approvals. Unit approvals are trending higher once again while house approvals are flat. Year-on-year, house approvals have increased by 3.6% compared to a much larger 18.0% increase in unit approvals. There is now a substantial pipeline of dwellings approved for construction. Over the 12 months to November 2014 there were 199,174 new dwellings approved for construction. The annual number of dwelling approvals is approaching 200,000 and is also at an all-time high. Over the past year there were 113,734 houses and 85,439 unit approvals. House approvals have increased by 15.5% and unit approvals have risen by 11.3%. To further highlight the significant number of approvals of late, over the past two years there have been 374,401 new dwellings approved for construction. If we assume the Census figure of 2.6 persons per household, that is enough housing approvals for 973,443 persons. Looking at the relationship between dwelling approvals and population growth we see there has been a significant improvement over the past year or so. Population growth is now trending lower while dwelling approvals are at record high levels. There still remains a significant gap between population growth and dwelling approvals, as has been the case for the past decade, but the gap between housing demand and housing supply is improving. Importantly, net overseas migration which creates more housing demand than natural increase is trending much lower. The population data is only currently published up until June 2014 however, if population growth continues to trend lower and overseas arrivals and departures data indicates that it will this bodes well for a better balance between population growth and approvals. It should also go some way to easing pressure on housing both from a purchase and rental perspective. The capital cities have also had a record month in November with an all-time high 14,816 dwelling approvals over the month. Capital city dwelling approvals were 1.4% higher over the month and have increased by 13.4% year-on-year. In November there were 6,207 capital city house approvals and 8,609 unit approvals. Unit approvals reached an all-time high and were 14.9% higher over the month while house approvals fell by -12.8% and were at their lowest level in five months. Year-on-year capital city house approvals have increased by 5.9% compared to a 19.5% rise in unit approvals. Similar to the national figures, the chart shows that unit approvals across the capital cities tend to be much more volatile than house approvals. The other trend to note is that how over recent years the number of unit approvals has regularly outnumbered house approvals. This reflects the growing appetite for unit product, particularly within inner city areas of the capital cities. Given some earlier concerns that dwelling approvals were starting to fall, this month’s result is quite encouraging. Of course, the rebound was driven by the volatile unit market which could just as easily reverse next month. Nevertheless, when you see a record number of monthly dwelling approvals and annual approvals are at an all-time high it is a positive result. Furthermore, with population growth slowing, if approvals can hold at or close to current levels, a better balance between population growth can be achieved. In-turn this would likely ease some of the value and rental growth pressures in the market. Overall it is a very good result and it would be economically beneficial to see approvals remain at these elevated levels over the next 12 months. Of course, with value growth already slowing across the capital cities and sales volumes trending lower it may start to become more difficult for some of these developers, particularly those of unit product, to achieve sufficient presales to commence construction. While the pipeline of approvals is very strong, it will be important to monitor just how many of these approvals ultimately make it to completion. Particularly given the number of unit approvals is at an unprecedented level.

Capital city auctions to exceed 100,000 for the first time

CoreLogic RP Data National Auction Preview, week ending 21 December 2014 There are 1,807 auctions scheduled across Australia this week. In capital cities there are 1,489 auctions expected compared to 1,332 for the same period last year. With one week to go, the combined capital cities clearance rate for 2014 is 67.9 per cent compared to 66.2 per cent last year. Once this week’s auctions are finalised, the number of auctions held in capital cities this year will exceed 100,000 for the first time. Excluding this week, there has been a 22 per cent rise on last year with 25 per cent more homes selling. Sydney’s auction market experienced the most significant improvement this year where the clearance rate and share of sales by auction increased. Adelaide and Canberra also had notable improvements. The likelihood of these improvements being repeated next year is largely dependent on the state of the broader economy. The use of auctions for residential sales also increased in five of the capital cities this year. Preliminary figures for Melbourne show that the proportion of homes sold by auction rose from 30 per cent last year to 31.3 per cent this year.There are 565 auctions scheduled in Melbourne this week, compared to 1,585 last week, and 531 this time last year. Sydney is expecting 562 auctions compared to 1,357 last week and 532 for this week last year. The use of auctions reached an all-time high with 27.6 per cent of all homes being sold by auction compared to 22 per cent last year. This increase was a result of real estate agents and vendors seeking to take advantage of the improved market. In Brisbane 160 auctions are expected after 252 were held last week. Compared to last year the use of auctions as a sales method remained stable at 5.7 per cent of all sales. Adelaide is expecting 111 auctions, compared to 171 last week. Last year Adelaide recorded 8.2 per cent of sales by auction and this year it has risen to 9.4 per cent. Canberra has 70 auctions scheduled compared to 69 last week. Canberra saw a significant rise in the use of auctions, from 13.4 per cent of sales last year to 17.3 per cent this year. Perth has 16 auctions compared to 51 last week. Auctions remain a very small part of the Peth market with only 1.6 of sales by auction this year compared to 1.5 per cent last year. There are 11 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Marrickville NSW with 13 expected. Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

Melbourne Auction Market preview; Week ending 21 December, 2014

There are 565 auctions scheduled this week in Melbourne compared to 531 for the same time last year. This is the last week for the year in which there are expected to be a substantial volume of auctions. Until early February next year there will be a small number of auctions weekly, mostly outside of the metropolitan area. With one week to go this year the auction market has seen more homes sold by more people. The clearance rate for 2014 is likely to be marginally lower, around 68.6 per cent, than 2013 when it was 69.2 per cent. With one week to go there have been 43,298 auctions held, 17.8 per cent more than last year and 29,632 homes selling. Weeks with over 1,000 auctions used to be a rarity but with 22 occurring this year they are now a regular feature of the market. In the private sale market conditions continue to be healthy for sellers. On a citywide basis, the time on market results for houses sold at private sale was stable at 31 days over the last week and vendor discounting was also stable at -5 per cent. Key data Clearance rate week ending 14 December: 68.6% Melbourne auctions expected week ending 21 December: 565 Melbourne private sales time on market week ending 14 December: 31 days houses Melbourne vendor discounting market week ending 14 December: -5 per cent houses Listings being prepared for market are 1.3 per cent lower in month ending 14 December seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

The economic factors to watch for in 2015 that may impact the housing market

The combined capital city housing markers have seen values increase by 7.0% over the first 11 months of 2014. Throughout the whole of 2013, capital city home values increased by 9.8% indicating that the rate of home value growth is likely to be lower this year than last. On an annualised basis, combined capital city home value growth peaked at 11.5% in April of this year and has slowed to 8.5% over the 12 months to November 2014. As we enter 2015 it is our expectation that the housing market will see another year of home value growth, but not likely at the same pace as experienced over the 2014 or 2013 calendar years. Although this is our base-case scenario, there will still be plenty of potential headwinds to watch out for that may impact on the housing market. Unemployment The national unemployment rate was recorded at 6.3% in November 2014 which is the highest unemployment rate since September 2002. The Mid Year Economic and Fiscal Update MYEFO was released earlier this week by the Federal Government. In the document the Government revised up its forecast of the unemployment rate to 6.5% at the end of the current and the next financial year. It isn’t just the high rate of unemployment which remains a concern. Over the past year, the majority of new employment has been part-time positions which have increased by 2.5% over the year compared to a 0.7% increase in full-time employment. The data also showed that in November 2014 the underemployment rate had increased to 8.6% which was its highest on record. This is reflective of the strong growth in part-time employment, many working part-time would probably like to be working more hours or in full-time employment. With comparatively high rates of unemployment and growing underemployment it has the potential to impact on housing demand. If employees become concerned about job security they will be less inclined to commit to purchasing a home. Furthermore, if employees can work as much as they like and subsequently earn as much as they’d like they may also not be able to purchase a home. New APRA steps to reinforce sound residential mortgage lending practices Last week APRA the Australian Prudential Regulation Authority wrote to all Australian authorised deposit-taking institutions ADIs . The letter highlighted further steps that will reinforce sound lending practices. Although the note didn’t indicate that any macroprudential tools would be formally implemented, the letter noted that APRA will be increasing supervisory surveillance to reinforce sound lending practices. This is in response to specific prudential concerns which are detailed below: Risk profile – higher risk lending such as high loan to income and high loan to valuation ratios, interest-only lending to owner occupiers for lengthy periods and long term lending are of specific concern. APRA is concerned about lenders undertaking larger than normal volumes of lending in these areas Investor lending – fast or accelerating credit growth in this space can be a key indicator of growing risk. APRA highlighted that annual investor credit growth that was materially above 10% per annum will be an indicator of increased risk. Serviceability assessments – APRA is of the view that mortgages should have a serviceability buffer of at least 2% above the loan product rate and with a minimum floor assessment rate of 7% Through these guidelines they have advised the ADIs of the lending environment they expect. Although there have been no blanket macroprudential tools, the letter is pointed and notes that ADIs that do not adhere to these rules will be under review to stricter lending limits. These guidelines are likely to have an impact on the residential housing market. Firstly the very strong growth in investor housing demand over the past two years will likely taper to a more moderate pace. Secondly, some borrowers who are stretching themselves financially to enter the market may find accessing home loans increasingly difficult due to the new serviceability guidelines. Household income growth While home values have increased by 8.5% over the 12 months to November 2014, real household incomes have increased by just 0.8%. One wonders how long home value growth can continue to outpace household income growth. Over the 10 years to September 2014 nominal home values have increased 52.4% compared to real household income growth of 36.4%. These two figures are not significantly different and real home value growth has actually been lower than growth in household incomes. This would seemingly suggest that the current surge in home values, which has started to slow, cannot continue all that much longer without income growth. Consumer sentiment According to the Westpac and Melbourne Institute’s monthly measure of consumer sentiment, consumers have been more pessimistic than optimistic for 10 consecutive months. To put that in perspective, consumers haven’t been this consistently gloomy since the depths of the financial crisis in 2008 and early 2009. Further highlighting the consumer gloom the data shows that when respondents were asked about the wisest place for savings 40.3% chose a banks, building societies and credit unions. This was the highest reading since September 2012. Over the past 15 years, an average of 27.5% of respondents have chosen this segment, highlighting the heightened sense of consumer anxiety. The level of consumer anxiety is more confronting when you consider that those with savings in a financial institution are currently earning virtually no interest with the cash rate sitting at 2.5%. Consumer sentiment is closely correlated with housing demand. If consumers are feeling less confident about the overall economic conditions, they are going to be much less likely to make high commitment decisions such as taking out a new mortgage. Housing finance commitments We have already highlighted that APRA is concerned with the heightened level of investment lending and have provided stricter guidelines for Australian ADIs regarding to this segment of the market. Housing finance data shows that investors are currently the primary driver of housing demand. In October 2014, there were $11.7 billion in housing finance commitments to owner occupiers for new loans, $5.4 billion to owner occupiers for refinancing purposes and $12.1 billion to investors. Year-on-year, owner occupier new loan commitments are 0.8% higher, owner occupier refinances have risen 18.1% and investment loan commitments are 19.8% higher. Owner occupier new loans and investor loans are a much larger driver than refinances. With the new APRA guidelines it looks as if lending to the investor cohort will slow in 2015. It is unlikely this can simply be replaced by lending to owner occupiers for new loans. In fact, new lending to owner occupiers has been trending lower since it peaked at $12 billion in lending in November 2013. If lending to investors slows as owner occupier lending is already doing, it seems that there will be less mortgage demand and subsequently less property transactions. In turn, this is likely to result in lower levels of capital growth across the housing market. Dwelling approvals Dwelling approvals have lifted significantly throughout the past two years, providing a significant pipeline of new construction. Although dwelling approvals have eased over recent months, over the 12 months to October 2014 there were 197,529 dwelling approvals which is hovering around the highest annual number on record. On a monthly basis dwelling approvals peaked in January 2014 and although they remain high, they have trended lower. An important feature of dwelling approvals is that the number of multi-unit dwellings being approved is at near record highs. There is growing demand for inner city units however, a unit development is typically a riskier development proposition than a detached house and ultimately multi-unit dwelling approvals are less likely to proceed into the construction phase. If growth in home values slows throughout 2015 along with a slowdown in housing transactions, we may see some of the pipeline of approvals, particularly unit approvals, not actually make it to construction. In order to commence construction developers typically require a certain level of pre-sales to begin. If sales slow, achieving a sufficient level of presales may become more difficult and may potentially jeopardise some of the progress of these projects. Recommendations for new foreign investment rules The House of Representatives Standing Committee on Economics recently released its findings and recommendations following a review of foreign investment. The four key findings of the report were: Recognising there is no accurate or timely data that tracks foreign investment in residential real estate, the Committee recommended the establishment of a national register of land title transfers that records the citizenship and residency status of all purchasers of Australian real estate. Improving the inner workings of the Foreign Investment Review Board FIRB . Bolstering the compliance and enforcement regime of the foreign investment rules. Recommending an application fee of $1500 for each approval application made to FIRB by non-resident foreign investors in order to fund improved administration and monitoring of the foreign investment rules undertaken by FIRB. The report also recommends the following civil penalties for breaches of the foreign investment framework: Financial penalties to be calculated as a percentage of the property value, rather than restricted to $85,000 as is currently the case; and The regime applies to both foreign investors and any third party who knowingly assists a foreign investor to breach the framework. Although these are just recommendations at this stage, one would hope that the committee’s recommendations do get implemented. More timely, accurate and reliable data about foreign buyers would certainly seem to be valuable and penalties for those who skirt the rules seems appropriate. Importantly, it is unlikely that any of these recommendations would act as a disincentive to foreign investment rather they would result in improved transparency about such investment. Australian dollar In Australia we generally like to compare our currency to the US dollar. After the end of month peak in the exchange rate of $1.08 in February 2012, the exchange rate has now fallen to $0.849 at the end of November. Importantly, most of the fall has occurred recently, six months earlier the exchange rate was $0.93. The fall in the trade weighted index TWI has not been as large as the fall relative to the US Dollar. The TWI was recorded at 68.2 at the end of November, down from 71.5 six month ago and a peak of 79.2 in February 2012. Nevertheless the Australian dollar has weakened. The lower dollar should provide some support for the Australian economy, making our exports more attractive and providing heightened demand for the struggling manufacturing sector. We suspect that demand from foreign buyers has grown over recent years. Furthermore, if the Australian dollar continues to depreciate, it is likely that Australian residential property will potentially become even more attractive for overseas buyers as the relative cost improves. Interest rates Official interest rates were recorded at 2.5% in December 2014, with no meeting of the Reserve Bank’s board in January they will remain at that level until at least February. The average standard variable mortgage rate is currently 5.95%, discounted variable rates are 5.1% as are three year fixed rates. The RBA has repeatedly stated that they believe a period of interest rate stability is the most prudent course. In an interview with the Australian Financial Review last week Glenn Stevens remarked that any change in interest rates would have to help boost confidence while a cut may do the opposite. Nevertheless, over recent months there have been a growing number of economists predicting the next movement in rates would be lower as the overall economic performance slows. The cash rate futures market is now also pricing in a 25 basis point rate cut to interest rates by June next year. A lower interest rate would seemingly make investment in housing even more attractive as returns on cash savings reduce further. Of course, if this were to occur it would likely take place in the face of slowing growth in housing demand and limits on just how much Australian ADIs can lend to the investment segment of the market. As the RBA has previously stated, there are limits to what monetary policy can do. Given this, a further 25 basis points cut to official interest rates may make little material difference to the residential property market….of course it could also make a substantial difference. Conclusion At CoreLogic we are of the view that home value growth will continue in 2015, albeit at a more moderate pace than what we have seen in 2014. As the above analysis shows there are plenty of factors which will impact on the housing market in 2015, not to mention potentially hundreds of other factors which could impact on the direction of the market. It will be important to keep track of the broader economic trends and consider how that may impact on your property in 2015.

Prahran joins million dollar club in Victoria

According to CoreLogic RP Data, Melbourne now has 52 suburbs with a median house value in excess of 1 million dollars – the data covers the 12 months ending in September. Melbourne’s most expensive suburb remains Toorak, with a median house value of $2.92m. The median sale price, which reflects the prices paid over the last year has for the first time, exceeded $3m. This indicates a slightly more expensive segment of Toorak has been selling over the last year. Toorak will clearly be the city’s first $3 million dollar suburb, its just a matter of when. There are three other suburbs with medians in excess of two million, Deepdene, Canterbury and Kooyong. From sales volumes perspective, the highest was in Brighton followed by Balwyn North, Kew, Glen Iris and Camberwell. Putting aside the cost, the million dollar suburb that proved the easiest to buy into was Deepdene were 14 per cent of houses sold in the last year. In contrast Fairfield was a tightly held suburb with only 2.8 per cent of houses selling. Two new suburbs in the list are Prahran and Williamstown. The median value of a house in Williamstown – the second suburb in the west to reach this level was $1.002m. Prahran’s median for a house is now $1m. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

2014 was a stronger year for auctions than 2013

CoreLogic RP Data National Auction Comment, week ending 14 December 2014 A preliminary weighted average clearance rate of 65.2 per cent was recorded this week across capital cities compared to 63.7 per cent last week and 65.1 per cent this time last year. The market may have cooled since the start of spring but that won’t prevent the overall clearance rate for 2014 exceeding last year. In 2013 the capital cities clearance rate was 66.2 per cent and with one week to go this year it is 67.9 per cent. With the exception of Melbourne and Perth the clearance rate has risen in each capital city. More people have sold more homes at auction this year. In Sydney a preliminary clearance rate of 71.2 per cent recorded compared to 66.1 per cent last week and 72.2 per cent last year. The Sydney auction market has delivered very good outcomes for sellers this year with a higher clearance rate and number of sales. The clearance rate for 2014 is likely to be close to 74.4 per cent, higher than 72.7 per cent last year. In Melbourne a preliminary clearance rate of 65.9 per cent was recorded compared to 66 per cent last week and 64.9 per cent this time last year. The clearance rate for 2014 is likely to be marginally lower, around 68.5 per cent, than 2013 when it was 69.2 per cent. In Brisbane a preliminary clearance rate of 47.3 per cent was recorded compared to 39.7 per cent last week. The overall clearance rate in Brisbane for 2014 is likely to be 45.8 per cent, higher than 41.5 per cent last year. In Adelaide a preliminary clearance rate of 57.5 per cent compared to 56.6 per cent last week. The overall clearance rate for 2014 is likely to be 61.9 per cent, higher than 56.5 per cent last year. In Canberra a clearance rate of 59.5 per cent was recorded. The overall clearance rate for 2014 is likely to be 55.9 per cent, higher than 52.3 per cent last year. In Perth a clearance rate of 33.3 per cent was recorded. The overall clearance rate for 2014 is likely to be 41.1 per cent, lower than 46.5 per cent last year. Robert Larocca CoreLogic RP Data Housing Market Specialist

2014 housing market review and outlook for 2015

Combined capital city dwelling values fell by -0.3 per cent in November 2014 according to the CoreLogic RP Data Home Value Index. Over the month, values increased in four cities and fell across the remaining four. Values were higher over the month in Sydney, Brisbane, Perth and Hobart and were lower elsewhere. Over the first 12 months of the year, combined capital city home values have increased by 7.0 per cent. As a result, it looks as if home value growth in 2014 will be lower than the 9.8 per cent increase in 2013. Over the three months to November 2014, combined capital city home values rose by 0.8 per cent. The results over this period show that the growth in the market is quite narrow with only Sydney 3.1% , Brisbane 1.7% and Perth 0.4% recording value rises. Elsewhere, values fell over the three months by -1.6 per cent in Melbourne, -0.5 per cent in Adelaide, -2.5 per cent in Hobart, -2.1 per cent in Darwin and -3.3 per cent in Canberra. The rate of home value growth over the 12 months to November 2014 has continued to slow. After the annual rate of home value growth across the combined capitals peaked at 11.5 per cent in April it has slowed to a rate of 8.5 per cent in November. The 8.5 per cent growth over the year to November is the slowest rate of annual growth since November of last year. Sydney continues to be the key driver of capital growth with home values up 13.2 per cent over the past year. Melbourne has been the second strongest performer with values up 8.3 per cent and Brisbane home values are 6.0 per cent higher. Elsewhere, values have risen by 2.8 per cent in Adelaide, 1.4 per cent in both Perth and Darwin, 5.2 per cent in Hobart and 1.7 per cent in Canberra. The annual rate of home value growth is now lower than the recent peak across all capital cities other than Hobart. Houses have recorded a superior rate of value growth compared to units across the combined capital cities over the past year. Over the 12 months to November, capital city house values are 8.9 per cent higher compared to a 5.9 per cent rise in unit values. Across each capital city annual value growth for houses has been greater than that for units over the last year. Combined capital city home values are now 10.8 per cent higher than they were at their previous cyclical peak in October 2014. Between October 2010 and May 2012, combined capital city home values fell by a total of -7.7 per cent. From their low point in May 2012, combined capital city home values have increased by 19.6 per cent however, the value increases have been narrowly based. The greatest rises in values over the current growth phase have occurred in Sydney 31.2% , Melbourne 17.6% , Darwin 17.5% and Perth 15.5% . Growth across the remaining capital cities has been much more moderate with values rising 10.6 per cent in Brisbane, 7.4 per cent in Adelaide, 5.2 per cent in Hobart and 4.8 per cent in Canberra. As the data shows, Sydney has been the primary driver of value growth followed by Melbourne, Darwin and Perth albeit their growth has been somewhat lower than Sydney’s. CoreLogic estimates that over the third quarter of 2014 there were 53,962 capital city houses and 24,124 capital city units sold across the country. The number of home sales over the most recent three months is -2.8 per cent lower than over the same period in 2013. House sales are actually 1.0 per cent higher than a year ago while unit sales are -10.3 per cent lower. Importantly with so many off –the-plan sales taking place final numbers upon settlement of these projects may revise higher. Within the individual capital cities, sales over the last three months were lower than a year ago in Sydney, Perth and Canberra but still higher elsewhere. Selling conditions are still quite favourable in the market however, stock levels are starting to rise and there are variations across the cities. Discounting levels across the combined capital cities sat at 5.5 per cent while the average time on market is at an all-time low of 36 days. Remember that the stronger markets of Sydney and Melbourne are having a much greater impact on these figures. The number of new properties listed for sale across the combined capital cities is now 0.4 per cent higher than a year ago. Total listings are -2.4 per cent lower than they were a year ago however, they are currently at their highest level since the middle of December last year. With stock on market rising it will be very interesting to see what happens to time on market and discounting levels over the next few months. Value growth on an annual basis remains much stronger than rental growth however, the more recent weaker capital growth conditions have seen the decline in gross rental yields stall. Over the past 12 months, combined capital city rental rates have increased by just 1.9 per cent. House rents have increased by 1.8 per cent and unit rents are 2.3 per cent higher. Although rental growth is slow, rental rates have risen over the year in all capital cities except Perth, Darwin and Canberra. With a strong pipeline of dwellings both under construction and due for commencement it seems likely that the rate of rental growth will remain soft for the foreseeable future. Gross rental yields across the combined capital cities sit at 3.7 per cent for houses and 4.5 per cent for units. At the same time a year ago they were recorded at 4.0 per cent and 4.7 per cent however, yields have been on hold for the past four months for both houses and units. As always, there is likely to be a continued variance in performances from city to city and region to region. Much of the growth over the past two and a half years has occurred in Sydney and Melbourne and this appears to be continuing with the rise in values only moderate outside of these cities. Note that the annual rate of value growth in both Sydney and Melbourne has been slowing over recent months. Subsequent purchasers and investors are the main drivers of the market currently spurred by the low mortgage rate environment. From an investor’s perspective the best opportunity to enter the Sydney, Melbourne or Perth markets has likely passed, especially considering the strong value growth over the past year is now moderating and rental yields are low. The RBA has also flagged that they are concerned with the level of investment lending taking place in both Sydney and Melbourne and APRA has recently announced greater surveillance of mortgage lending, specifically investor and higher risk lending by the banks. It will be interesting to see whether investors start to turn their attention away from cities such as Sydney and Melbourne and towards higher yielding markets that are earlier in their value growth phase such as Brisbane and potentially Adelaide where value growth is now becoming more evident and the cost of housing is significantly lower than in Sydney and Melbourne. Of course, with APRA announcing that banks need to limit their growth in investment lending to around 10% per annum we would expect this will have a significant impact on investor demand for mortgages over the coming year. As a result of these changes and slowing home value growth, investors may potentially start looking at other asset classes. RP Data anticipates that the rate of capital growth, particularly in Sydney and Melbourne will continue to moderate over the coming year. We believe that home values will continue to increase over the coming year however, the rate of growth will continue to slow and markets such as Perth, Darwin and Canberra look susceptible to value falls over the coming year. ENDS. While you’re here… Watch the latest national housing market update, released December 2014, click on the following: Full version 8 minutes Short version 2 minutes Sydney, NSW Melbourne, VIC Brisbane, QLD Perth, WA Adelaide, SA

National Auction Preview; Week ending 14 December, 2014

Notable improvement in conditions for Sydney buyers There are 3,781 auctions scheduled across Australia this week. In capital cities there are 2,995 auctions expected, compared to 3,548 for the same period last year. A softening Sydney auction market has exacerbated the now typical reduction in the clearance rate as Christmas approaches. Improving conditions for buyers continue this week in Sydney, which has its 8th week with over 1,000 auctions. Compared to a month ago there is a lower clearance rate in all capital cities with the exception of Adelaide. There are 1,324 auctions scheduled in Melbourne this week, compared to 1,733 last week and 1,616 this time last year. Last week was the second largest weekend for auctions in the city’s history. The Sydney market is showning signs of excess supply with the clearance rate last week hitting a 18-month low of 66.1 per cent.. In Sydney, CoreLogic RP Data is expecting 1,166 auctions compared to 1,294 last week and 1,396 for this week last year. Mosman has the highest volume of auctions with 26 expected. In Brisbane 223 auctions are expected after 189 were held last week. Adelaide is expecting 154 auctions, compared to 131 last week. Canberra has 64 auctions scheduled compared to 87 last week. Perth has 50 auctions compared to 57 last week There are 24 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Reservoir VIC which has 33 expected. Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

Melbourne Auction Market preview; Week ending 14 December 2014

There are 1,324 auctions scheduled this week in Melbourne compared to 1,616 for the same time last year. The highest volume of auctions will be in Reservoir which has 33 expected. Last week was the second largest weekend for auctions in the city’s history with 1,733 auctions compared to 1,837 in late October. The clearance rate dropped from 71 to 66 per cent; this comparison between the two almost identical weeks provides a very clear summary of the change in the market over two months. There are only 2 weekends for auctions now until Christmas. On a citywide basis, the time on market results for houses sold at private sale contracted from 32 to 31 days over the last week and vendor discounting eased slightly to -5 per cent. Key data Clearance rate week ending 7 December: 66% Melbourne auctions expected week ending 14 December: 1,324 Melbourne private sales time on market week ending 7 December: 31 days houses Melbourne vendor discounting market week ending 7 December: -5% houses Listings being prepared for market are 0.4 per cent higher in month ending 7 December seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Investment lending continues to surge in October, no wonder APRA are concerned

The Australian Bureau of Statistics ABS published housing finance data for October earlier today. The data release coincided with the Australian Prudential Regulation Authority APRA sending Australian Authorised Deposit-taking Authorities ADIs a letter on Tuesday afternoon. The letter highlighted that APRA was going to increase surveillance on risky lending and have a specific focus in growth in investor lending by ADIs. The October housing finance data showed that the proportion of lending to investors had grown to fresh record highs while owner occupier lending is slowing. The value of housing finance commitments continues to become much more important than the headline number of commitments. The reason being that the number of commitments only coves owner occupier commitments, excluding investors completely which are the key driver of the current market. Furthermore, with APRA now focused on ADIs not growing housing credit to investors too fast, a focus on the value of lending becomes even more important. The above chart uses raw not seasonally adjusted data and uses a 12 month average to smooth the volatility of the data. The chart shows an ongoing decline in demand from owner occupier first home buyers and more recently a dip in commitments by owner occupiers that already own a home. Across the four borrower types listed you can see that investors now account for the greatest proportion of borrowings from ADIs. With values continuing to rise across capital city markets clearly they are a key driver of this growth. The second chart shows the monthly value of housing finance commitments across owner occupier new loans excluding refinances owner occupier refinances and investment loans. Over the month, owner occupier refinance commitments increased by 3.7%, owner occupier new loan commitments fell by -0.1%, while investment commitments rose by 1.0%. Year-on-year, the increases have been recorded at 18.1% for owner occupier refinances, 0.8% for owner occupier new loans and 19.8% for investment loans. With $5.4 billion in commitments for owner occupier refinance commitments in October, activity in this space continues to trend higher. Investment lending is also trending higher reaching a record high $12.1 billion in October. Meanwhile, owner occupier new loan commitments have actually pulled back a little of late. After monthly commitments sat at a record high $12.0 billion in November 2013, they have pulled back to $11.7 billion in October 2014. For only the second month on record, the value of investment loans was greater than the value of owner occupier new loans in October 2014. As a proportion of the value of all housing finance commitments, investors were steady at a record-high 41.4% in October. Owner occupier new loans accounted for 40.2% a new all-time low and owner occupier refinances accounted for 18.5% of lending, its greatest proportion since August 2012. If we just look at new lending, excluding refinances, investment lending reached a new all-time high of 50.8% of total lending in October, more than one in every two loans. The capital city housing market has been rising since hitting a low point in May 2012 and at that time investor housing finance commitments totalled $6.9 billion and 33.9% of all housing finance commitments. Clearly there has been a substantial surge in demand from this segment, recorded at $12.1 billion in October 2014 and 41.4% of all borrowings. The headline result that gets reported on each month is the number of owner occupier loans. Although it is a very valuable statistic, it should be read with caution because it is missing a significant proportion of the market, those represented by investors. As the above chart shows, much like the data on the value of commitments, the number of owner occupier new loan commitments is now trending lower while refinance commitments trend higher at a moderate pace. In October, the number of refinance commitments rose 3.6% while new loan commitments fell by -1.4%. Year-on-year, refinances are 7.5% higher while new loan commitments are -4.2% lower. The number of new loan commitments most recently peaked at 35,568 in November 2013 and has since fallen by -5.5% to 33,597 commitments in October 2014. There were 18,123 refinance commitments in October 2014, the highest monthly volume since February 2008. As investor activity has risen, there has been a sharp drop-off in the number of loans to first home buyers. Although there is no data to support it, there are plenty of anecdotal suggestions that many first home buyers are choosing to purchase investment properties rather than homes for owner occupation. Unfortunately, the ABS data only captures those homes purchased by first home buyers for owner occupation. Owner occupier first home buyer numbers continue to languish at near record low levels. The proportion of total owner occupier housing finance commitment to first home buyers hit a record low 11.6% in October 2014. The number of loans actually rose, up 1.2% over the month however, year-on-year first home buyer commitments are -7.8% lower. The Reserve Bank RBA has already highlighted a number of times that they have some concerns with the heightened level of investment activity, particularly in Sydney and Melbourne. With the proportion of loans to investors hitting a new record high in September it will further re-iterate those concerns. Just yesterday APRA wrote to ADIs highlighting some concerns about lending practices and providing a set of guidelines to ensure prudential standards are maintained. With investor activity continuing to rise in October, it seems the concerns are well found. We may see a further increase in the November data next month however, it is likely that growth in the value of investment finance commitments should start to ease thereafter. Of course, owner occupier lending demand is already slowing and if/when investment lending follows suit, demand for mortgages should ease and we would expect that it will also continue to contribute to a further slowing of home value growth. It will be interesting to see how the slowing of demand plays out from a new housing perspective. With the RBA hopeful that a heightened level of housing construction can help assist the economy as it transitions away from resource investment, as value growth slows some of these projects may be in jeopardy. Given most developers are private businesses, they generally need growing demand for housing and some increase in home values to allow enough pre-sales for the project to go ahead. We are already seeing sales volumes and home values trending lower, so if demand for mortgages softens further we will potentially see a fall in dwelling commencements despite the fact that there is such a strong pipeline of development in place. It will be interesting to see how this plays out in 2015.

Clearance rate remains lower than when spring started

CoreLogic RP Data National Auction Comment, week ending 7 December 2014 A preliminary weighted average clearance rate of 66.6 per cent was recorded this week across capital cities compared to 63.7 per cent last week and 64.5 per cent this time last year. High auction volumes and a market where value growth is moderating explain why the capital city auction clearance rate has remained below 70 per cent for the past 10 weeks. In Sydney a preliminary clearance rate of 71.7 per cent recorded compared to 70.6 per cent last week and 73.8 per cent last year. The market in Sydney may have eased from the perspective of the clearance rates however a longer term view shows the remarkable increase in homes offered at auction. Compared to the same recent 4 week period the number of auctions is up 22.6 per cent on last year and 90 per cent on 2012. In Melbourne a preliminary clearance rate of 67.1 per cent was recorded compared to 63 per cent last week and 63.3 per cent this time last year. This week was the second largest on record with the 1,823 auctions missing the previous high in late October by 14. In Brisbane a preliminary clearance rate of 35.2 per cent was recorded compared to 37.8 per cent last week. Not unlike other capital cities the Brisbane auction market is showing a lower clearance rate as we get closer to Christmas. In Adelaide a preliminary clearance rate of 68 per cent compared to 62.3 per cent last week. In Canberra a clearance rate of 62.1 per cent was recorded. In Perth a clearance rate of 38.1 per cent was recorded. Robert Larocca CoreLogic RP Data Housing Market Specialist

High yield, high capital gains in the Melbourne market

Investment decisions in property are often presented as choices between yield and capital gains. In Melbourne, there is a small selection of suburbs where both objectives can be met; they have above average capital gains and a yield higher than the citywide one. As past performance is not a guarantee of future performance in the property market these are not suburbs investors should automatically buy into, rather it shows that with some astute property hunting strong investment outcomes may be found. Over the past decade the compounding annual growth rate for a house in Melbourne was 5.77 per cent and 5.16 per cent for a unit. The gross rental yield over the last year for a house was 3.6 per cent and 4.1 per cent for a unit. In the unit market there were 34 suburbs that recorded capital growth and with yields in excess of the citywide outcome, and five of those stood out. In the market for houses there were 33 suburbs. The five standouts in the unit market, predominantly because of reasonable sales volumes providing opportunities for buyers, were Ferntree Gully, Brunswick West, Chelsea, Mount Martha and Boronia. In the market for houses the five that stood out were Bayswater, Altona North, Boronia, Collingwood and Mooroolbark. In it interesting to note that many suburbs in the outer eastern suburbs, around the base of Mount Dandenong, have recorded above average yields and capital gains over the past decade. The other area of Melbourne that has multiple suburbs with good capital gains and yield is in the inner east. Obviously the skill for an investor is not just finding the right suburb but the right property and that can take time and requires both research and a strong understanding of the local market. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

High volumes after new national auction record

CoreLogic RP Data National Auction Preview, week ending 7 December 2014 Last week saw the highest volume of auctions ever recorded in capital cities with 3,908 auctions held, 10 per cent more than the previous high of 3,548 in December last year. Volumes remain high this week. There are 3,851 auctions scheduled across Australia this week. In capital cities there are 3,226 auctions expected, compared to 3,213 for the same period last year. There are 1,570 auctions scheduled in Melbourne this week, compared to 1,635 last week and 1,535 this time last year. The trend of improved buyer conditions is strengthening after last week saw the lowest clearance rate in 6 months and the second highest volume of auctions on record. The trend was also reflected in the recent home value index that recorded a fall in house values fell of 2.8 per cent In Sydney, CoreLogic RP Data is expecting 1,204 auctions compared to 1,631 last week and 1,139 for this week last year. Once the final auction results were included last week was the largest auction week in Sydney’s history with 9 per cent more auctions than the previous high in April this year. In Brisbane 172 auctions are expected after 294 were held last week. Adelaide is expecting 127 auctions, compared to 179 last week. Canberra has 82 auctions scheduled compared to 94 last week. Perth has 56 auctions compared to 62 last week There are 15 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Mosman NSW which has 39 expected. Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

How does the current growth cycle compare to the 2001 to 2004 boom?

In this week’s blog we take a look at how current housing market conditions compare with the boom in home values between 2001 and early 2004. Immediately a point to note is that the current housing market upswing came off the back of dwelling values falling over the previous two years. If we assume that the previous boom period began at the start of 2001, there had actually been no home value falls prior to its commencement, rather the increase in home values had been more moderate at 6.6% over the 2000 calendar year. The previous boom ran from the beginning of 2001 until October 2004 across the combined capital cities. Over that 46 month period, home values rose by a total of 68.1% across the combined capital cities. This is a monthly rate of value growth over that period of almost 1.5%.The current rise in capital city home values commenced in June 2012 and up until November 2014 values had been trending higher for 30 months. Over this 30 month period combined capital city home values have increased by 19.6% or a monthly rate of growth of 0.7%. Again it is also important to consider that the current growth phase occurred off the back of values having fallen by -7.4% between October 2010 and May 2012. After 30 months of growth in the 2001 to 2004 growth period, combined capital city home values were 52.1% higher. The combined capital city growth really only tells part of the story though. The capital city housing market isn’t homogenous and growth periods begin and end over different lengths of time. Because Sydney and Melbourne are the largest cities by some way and given our Home Value Index is weighted to reflect that, the capital city results are influenced much more by these two cities than the other capital cities. Given there were no home value falls prior to the growth between 2001 and 2004, if we assume that the growth phase stared in January 2001 we see that the growth ran for varying lengths of time. In fact in most capital cities, home values continued to rise following October 2004 albeit the rate of growth was more moderate than it had previously been. Looking at home value growth across the cities from January 2001 to October 2004 you can see that the rate of growth varied greatly. It is interesting to note that Sydney and Melbourne’s rate of value growth over that period was much more moderate than in all other capital cities except Darwin. Furthermore, the growth in home values commenced much later and ran for longer in most other capital cities. Taking a look at the level of value growth over the current growth phase there are quite a few points of note. Firstly growth has been more moderate than what was recorded over the previous growth phase. Secondly, while Sydney and Melbourne were two of the weaker growth performers previously, they have been the standout performers across the current growth phase. Sydney and Melbourne have been the strongest growth performers, value growth has been moderate elsewhere but particularly weak in Adelaide 3.6% , Hobart 0.0% and Canberra 4.6% . To look at the results another way and by way of direct comparison, we should look at the rate of value growth per month. To determine this I have divided total value growth by the number of months and the results make for some interesting reading. Between January 2001 and October 2004, the rate of monthly growth across the cities was recorded at: 1.3% in Sydney and Melbourne, 2.3% in Brisbane, 2.0% in Adelaide, 1.4% in Perth, 3.0% in Hobart, 0.7% in Darwin and 2.1% in Hobart. Looking to the current growth phase, monthly value rises have been recorded at: 1.1% in Sydney, 0.6% in Melbourne, 0.4% in Brisbane and Darwin, 0.1% in Adelaide, 0.5% in Perth, 0.0% in Hobart and 0.2% in Canberra. Clearly the growth in home values has been more moderate over the most recent growth phase. While growth has been more moderate, so too have the number of homes selling. In both growth phases the number of sales has increased however, in the current market the rise in sales has been much more modest than the rise in 2001-04. Over the period from January 2001 to October 2014 there was a total of 1,402,217 capital city house and unit sales or a monthly average of 30,481. In comparison, over the period from June 2012 to September 2014 there have been 716,908 house and unit sales or a monthly average of 25,604 sales. Monthly sales volumes over the current growth phase have been -16% lower than they were between 2001 and 2004 despite a high rate of population growth and development of new housing stock. Across the individual capital cities the number of monthly sales is lower than over the 2001 to 2004 boom period. In Sydney monthly sales are -14% lower and elsewhere the differentials are recorded at: -8% in Melbourne, -28% in Brisbane, -12% in Adelaide, -16% in Perth, -35% in Hobart, -4% in Darwin and -31% in Canberra. So not only has value growth been slower in each capital city this time around, so too has transaction activity. The lower rate of sales can probably be attributed to the low level of first home buyer participation in the market as well as household savings being much higher than what was recorded between 2001 and 2004. Looking at some of the broader economic conditions suggest some sizeable differences between the 2001-04 boom and current market conditions. At the beginning of 2001 standard variable mortgage rates were recorded at 8.05%. By the end of the year they had fallen to 6.05% which was the low point for the cycle. By the time home value growth began to fall standard variable mortgage rates had climbed to 7.05%. Over the current growth phase, standard variable mortgage rates were 6.85% in June 2012 having fallen from 7.05% the previous months. From that level they have fallen to 5.95% and have been on hold at that level for the past 16 months. Given this for the past 16 months standard variable mortgage rates have been lower than they ever were during the 2001 to 2004 boom. Housing credit advanced by a total of 89.1% over the period from January 2001 to October 2004 at a rate of 1.9% a month. Over that period, investor credit expanded at a rate of 2.4% a month, outpacing the 1.7% monthly expansion in owner occupier credit. Over the current growth period, housing credit has expanded by 13.4% at a rate of 0.5% a month. Over the period, owner occupier credit has risen by 0.4% a month compared to 0.6% a month for investor credit. The rate of credit growth really does only tell part of the story because much more is lent for housing now than it was back in the previous boom so you would expect the growth rate to be lower now. It is important to remember that the cost of housing was also lower at that time so the typical mortgage was much lower than it is today. Finally, because the data looks at credit outstanding, if repayment of that credit is being made at a faster pace it will also impact on these figures. Throughout the 2001 to 2004 boom housing credit expanded at a rate of $6.4 billion a month with owner occupier credit up $4.0 billion a month and investor credit rising $2.4 billion a month. Over the current growth phase, housing credit is expanding at a rate of $5.7 billion a month with owner occupier credit rising $2.9 billion a month compared to a $2.8 billion monthly increase in investor credit. This seems to suggest that housing credit is increasing by only a slightly lower amount currently than it was back in the 2001 to 2004 boom. As mentioned before, the biggest influence on this is likely to be the cost of housing now as opposed to then especially when you consider how much lower sales transactions are currently. Looking at the supply of housing, over the 2001 to 2004 period, an additional 654,253 dwellings were approved for construction at a rate of 14,223 per month. Over the current phase there have been 436,130 dwelling approvals at a rate of 15,039 per month. In the current phase the pipeline of approvals has grown at a faster rate of course, the national population is higher so this is certainly a positive outcome. Unfortunately population growth data is only available each quarter. Each month we do receive overseas arrivals and departures data which correlates strongly with net overseas migration data. The other component of population growth, natural increase, does not have as big of an impact on housing demand as overseas migration. Over the 2001 to 2004 boom period, there were 603,550 net long-term and permanent arrivals to Australia at a rate of 13,121 per month. Over the current growth phase there have been 880,120 net long-term and permanent arrivals to Australia at a rate of 31,433 per month. The data shows that net migration to Australia has been much stronger over the current growth phase compared to the previous phase which creates additional housing demand. Household finance data highlighting selected ratios from the RBA is only available each quarter but is worthwhile to analyse. Between December 2000 and September 2004, the ratio of housing debt to household disposable income increased from 78.8% to 118.0%. Subsequently, household debt to household disposable incomes rose from 95.2% to 137.2% and housing assets to household disposable income rose from 333.4% to 448.3%. From June 2012 to June 2014, housing debt to disposable income rose from 130.4% to 137.7% and household debt to disposable incomes rose from 145.2% to 151.1%. Meanwhile, housing assets to disposable income increased from 393.7% to 433.6%. In summary, the comparison between the 2001 and 2004 growth phase and the current one shows: Growth in home values has been much more moderate over the current phase than in what was recorded over the housing boom of 2001-04 and this is also the case across all capital cities. The 2001 to 2004 growth phase was broad occurring in all capital cities where the current phase is characterised as being quite narrow, focussed mainly on Sydney and Melbourne. Importantly, the growth trend in the previous growth phase started in Melbourne and Sydney before rippling to the other capital cities. Transaction volumes for houses and units have been significantly lower over the current growth phase compared to the previous phase despite a larger population and higher overseas migration . Standard variable mortgage rates have typically been much lower over the current growth phase than they were in 2001 to 2004 with rates consistently at record lows for the past 16 months. The rate of growth in housing credit has been much more moderate over the current growth phase compared to the 2001-04 boom phase. Although the rate of credit growth is slower now than before, so too is the value of housing credit increases albeit the gap between 2001 and 2004 and the current phase is much narrower. On a monthly basis we are currently approving more dwellings for construction than we were in 2001 to 2004. Keep in mind that we are also approving a lot more units than we were in 2001 to 2004 and unit approvals have proven to be less likely to ultimately be constructed than houses. Net long-term and permanent arrivals have been significantly greater over the current growth phase than they were between 2001 and 2004. The 2001 to 2004 boom period coincided with a significant rise in housing and household leverage along with a jump in housing assets. Whilst each of these factors have also increased over the current growth phase the slope of the increase has been much more moderate. Furthermore over the current phase the ratio of housing assets to household income has increased by a greater amount than household and housing debt to disposable income while in 2001 to 2004 it increased at a slower pace. Debate around the sustainability of home value growth over the current growth cycle is healthy and warranted, however some lessons can be learnt from how the housing market performed during an even stronger and longer growth phase over the period from 2001 to 2004. As interest rates rose, housing market exuberance was gradually quelled. Values didn’t plummet, but they did retreat in Sydney and growth rates flattened out in most other cities. Australian households are now more sensitive to the cost of debt, with the ratio of disposable income to household debt at record highs which means the market will probably respond even more swiftly to any perception of interest changes ahead. Importantly we are already seeing the housing market move through the peak rate of growth. The CoreLogic RP Data Home Value Index peaked in April this year and the rolling annual rate of capital gain has been drifting lower since that time. Transaction numbers have also levelled, as has the average selling time of a home, the rate of vendor discounting and growth in housing credit. Our expectations looking forward are that growth rates will continue to drift lower, at least at a macro level due to natural affordability pressures, compressed rental yields and further warnings on speculative investment from the RBA.

Combined capital city dwelling approvals reach an all-time high in October 2014

The Australian Bureau of Statistics ABS released building approvals data for October 2014 on Tuesday of this week. The headline data showed that there were 17,062 total dwelling approvals in October 2014. Total dwelling approvals increased by 11.4% over the month and were 2.5% higher year-on-year. Although there was quite a strong rebound in monthly approvals, they remain -3.7% lower than their recent monthly peak of 17,721 approvals in January 2014. The large increase in dwelling approvals over the month was driven by the much more volatile unit approvals. In October, there were 9,478 houses and 7,584 units approved for construction. House approvals were -0.3% lower over the month while unit approvals were 30.4% higher. Year-on-year, house approval have increased by 12.2% while unit approvals have fallen by -7.4%. As the second chart shows, the six month trend indicates a slowing of dwelling approval numbers. The slowing trend in approvals is much more apparent for units whereas house approvals appear to have reached a plateau. It is also important to remember that a multi-unit development of units is more risky than developing a single house and ultimately less likely to ultimately be constructed. Looking at dwelling approvals across the combined capital cities, there were 14,635 approvals in October which was an all-time high. Capital city dwelling approvals have increased by 18.5% over the month and are 4.5% higher year-on-year. You only have to visit any of the major capital cities to see that there has been a significant surge in construction activity of new homes over recent years. The approvals data indicates that the dwelling construction pipeline in these regions is continuing to grow. One factor that sets apart the capital city market from the national market is the much greater prevalence of unit approvals. In fact, over the past two years there have generally been more capital city units approved each month than houses. In October, there were 7,139 capital city houses and 7,496 capital city units approved for construction. The 7,139 house approvals were the highest number of approvals over any month since November 1999. Monthly unit approvals were at their highest level since October 2013. Over the month, capital city house approvals increased by 6.8% while unit approvals rose 32.4%. Year-on-year, house approvals were up 15.7% while unit approvals are -4.3% lower. Looking at dwelling approvals across the major capital cities, you can see that approvals are higher than they were a year ago in most cities. Dwelling approvals were lower in October 2014 than they were in October 13 in Sydney -1.6% , Darwin -42.3% and Canberra -43.9% . Across the remaining capitals, the year-on-year increase in approvals has been recorded at: 5.3% in Melbourne, 5.6% in Brisbane, 16.3% in Adelaide, 23.4% in Perth and 66.1% in Hobart. In Melbourne and Perth dwelling approvals currently sit at near record highs. House approvals are trending higher across each of the major capital cities. Although the trend is towards more house approvals year-on-year approvals are now lower in Adelaide -17.3% and Darwin -1.6% . Across the remaining cities, the year-on-year increase in house approvals have been recorded at: 28.3% in Sydney, 23.8% in Melbourne, 28.4% in Brisbane, 4.5% in Perth, 26.3% in Hobart and 3.8% in Canberra. Across the major capital cities, the above chart shows that nowadays a much greater number and subsequently proportion of units are being approved for construction. It is interesting to note that unit approvals are trending sharply lower in Sydney lately while elsewhere they continue to trend higher. Also note that for most of the past six years Melbourne has been approving a greater number of units than Sydney. As mentioned earlier the unit data tends to be much more volatile than the house approvals data and is reflected in the year-on-year change in approvals to October 2014. Over the period, the change in approvals across the cities have been recorded at: -15.3% in Sydney, -6.1% in Melbourne, -8.3% in Brisbane, +84.4% in Adelaide, +117.8% in Perth, +520% in Hobart, -52.6% in Darwin and -58.4% in Canberra. If we look over the past 12 months, half of all capital city dwelling approvals were for houses. In fact, the result is only really driven down by the fact that in Adelaide, Perth and Hobart so few units relative to houses have been approved. In each of the remaining capitals more than 50% of approvals have been for units. Units have historically been less likely to ultimately reach completion than houses. Given the high number of unit approvals over the past two years and the fact that home value growth is now slowing you do wonder just how many of these units that are approved will actually be constructed in the current cycle. Dwelling approvals remain at a very high level and with the rate of population growth slowing it is encouraging to see that supply has responded on the back of low interest rates and some rises in buyer demand and home values. As the rate of value growth slows along with sales activity, it will be interesting to see how much of this stock which is approved will commence and ultimately make it to completion. Furthermore, we know that much of the unit stock which is now so prevalent in inner city areas is being purchased by investors. With capital growth slowing and rental growth slow this may also impact on some of the future construction of these approved units. The Reserve Bank has also flagged that they, along with banking regulators, are looking to curb higher risk lending to investors. We don’t yet know what these curbs may be but once implemented they may act as a further deterrent to investors and put into jeopardy some of these inner city unit approvals coming to fruition.

Melbourne Auction Market preview; Week ending 7 December, 2014

There are 1,570 auctions scheduled this week in Melbourne compared to 1,535 for the same time last year. The highest volume of auctions will be found in Mount Waverley where there are 26 expected. The November CoreLogic RP Data November Home Value Index showed that house values fell by 2.8 per cent and unit values fell by 1.5 per cent. The market in Melbourne clearly slowed in November as volumes rose and the clearance rate dropped resulting in a reduction in property values. Over the year the Melbourne property market has showed healthy growth. With one month left in 2014 house values have risen by 6.5 per cent and units by 1.6 per cent. Viewed in conjunction with what has been a small rise in transactions compared to last year these results show a moderate and not booming market. The clearance rate for November was 66.8 per cent and there were 5,722 auctions held with 3,819 selling. This is lower than the 68.2 per cent recorded last year Volumes look set to remain high until the end of the year and this will be welcomed by buyers, especially as the clearance rate has been edging lower. On a citywide basis, the time on market results for houses sold at private sale rose from 31 to 32 days over the last week and vendor discounting eased slightly to -4.9 per cent. Key data Clearance rate week ending 30 November: 63 per cent Melbourne auctions expected week ending 7 December: 1,570 Melbourne private sales time on market week ending 30 November: 32 days houses Melbourne vendor discounting market week ending 30 November: -4.9 per cent houses Listings being prepared for market are 0.5 per cent higher in month ending 30 November seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Capital cities record a clearance rate of 66.6% from the weekend

CoreLogic RP Data National Auction Comment, week ending 30 November 2014 A preliminary weighted average clearance rate of 66.6 per cent was recorded this week across capital cities compared to 65.7 per cent last week and 66.9 per cent this time last year. Conditions for buyers at auction are improving as we get closer to Christmas with volumes remaining at historical highs and demand easing, particularly in Melbourne. In Sydney auction volumes are very high and the number of active buyers seem to be rising in line with supply. A preliminary clearance rate of 75.2 per cent recorded compared to 71.8 per cent last week and 72.7 per cent last year. In Melbourne a preliminary clearance rate of 63.7 per cent was recorded compared to 66.1 per cent last week and 67.9 per cent this time last year. The state election has had no impact on results that are on trend with the mild easing in demand seen over November. In Brisbane a preliminary clearance rate of 45.9 per cent was recorded compared to 43.3 per cent last week. Adelaide recorded an above trend clearance rate of 66.7 per cent compared to 61.2 per cent last week. In Canberra a clearance rate of 63.3 per cent was recorded. In Perth a clearance rate of 21.7 per cent was recorded. In Tasmania 8 auction sales were recorded and no homes were passed in. Robert Larocca CoreLogic RP Data Housing Market Specialist

Where owners are queuing to sell in Melbourne

The residential property market differs from suburb to suburb in many different ways. Some suburbs are tightly held, some are in high demand from buyers and in others, sellers are seeking to capitalise on improved local conditions. It is in these suburbs that CoreLogic RP Data has recorded a substantial increase in the number of houses listed for sale compared to a year ago. In undertaking this analysis only those suburbs within a 30 km of the CBD have been considered as outside of this, development suburbs become more prevalent and that affects the outcome. In those suburbs the high rate of listings is a factor of developers’ centralised decision-making as opposed to the individual decisions of 100’s of owners. The suburb where owners have been seemingly queuing up to sell is Doncaster. Compared to a year ago there has been a 41 per cent rise in listings. Over the same time the median sale price has grown by 15.5 per cent, well in excess of the citywide 9.7 per cent. This suggests that sellers have been motivated by high buyer demand. Second on the list is Heidelberg Heights with a 33.3 per cent rise in listings. Not unlike Doncaster, sellers have been rewarded for their decision with the median sale price rising by 14 per cent. Third on the list is Burwood East where those seeking to sell have increased by 30.9 per cent. It is followed by Sunshine, Forest Hill, Preston, Parkdale, Vermont South, Glen Iris and Altona North. The common factor in each case is an above average rise in the median selling price. Now of course there are exceptions to this, for instance Bayswater has seen a 17 per cent fall in listings and 11.5 per cent rise in the median selling price but the in the majority of circumstances strong local markets encourage owners to sell. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Four more weekends of auctions until Christmas

CoreLogic RP Data National Auction Preview, week ending 30 November 2014 There are 3,977 auctions scheduled across Australia this week. In capital cities there are 3,351 auctions expected, compared to 3,472 for the same period last year. So far this month the auction clearance rate for capital cities has dropped from 68.2 per cent in October to 66.5 per cent and this is largely due to the Melbourne market. Unlike the horse racing or AFL the state election this Saturday has had no impact on volumes. There are 1,426 auctions scheduled in Melbourne this week, compared to 1,433 last week and 1,598 this time last year. With one weekend remaining this month the November clearance rate is 67.5 per cent, down from 70.5 per cent in October. In Sydney, CoreLogic RP Data is expecting 1,374 auctions compared to 1,337 last week and 1,402 for this week last year. In line with the national trend the clearance rate has also softened in Sydney. The reduction is minor, from 73.8 to 72.1 per cent. In Brisbane 254 auctions are expected after 219 were held last week. Adelaide is expecting 154 auctions, compared to 147 last week. Canberra has 80 auctions scheduled compared to 97 last week. The auction market appears to be strengthening with the clearance rate so far in November up to 59 per cent from 47.4 per cent in October. Perth has 55 auctions compared to 55 last week There are 10 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Reservoir VIC and Richmond Vic each of which has 23 expected. Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

Melbourne Auction Market preview; Week ending 30 November 2014

There are 1,426 auctions scheduled this week in Melbourne compared to 1,598 for the same time last year. The highest volume of auctions will be in Reservoir and Richmond, each are expecting 23 auctions. The state election may be on this Saturday but it does not have a significant affect on the market, buyers are able to vote and bid with ease as polling places are open from 8am to 6pm. With only four weeks to go for auctions this year one of the features of the year – more auctions – is clearly apparent. So far this year there have been more homes sold at auction, 26,402, than there was over the whole of 2013. In 2013 there were 25,350 home sold at auction. On a citywide basis, the time on market results for houses sold at private sale was stable at a very low 31 days over the last week and vendor discounting eased slightly to -4.8 per cent. Key data Clearance rate week ending 23 November: 66.1 per cent Melbourne auctions expected week ending 30 November: 1,426 Melbourne private sales time on market week ending 23 November: 31 days houses Melbourne vendor discounting market week ending 23 November: -4.8 per cent houses Listings being prepared for market are 3.5 per cent higher in month ending 23 November seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

National clearance rate of 67.7% recorded over the weekend

CoreLogic RP Data National Auction Comment, week ending 23 November 2014 A preliminary weighted average clearance rate of 67.7 per cent was recorded this week across capital cities compared to 68.5 per cent last week and 65.4 per cent this time last year. There are 4 weeks left for auctions this year and there have been 26.5 per cent more auctions than last year with 88,402 auctions compared to 66,908 at the same stage last year. In Sydney a preliminary clearance rate of 74.3 per cent recorded compared to 73.1 per cent last week and 74 per cent last year. With just 4 weeks for auction remaining this year there have already been over 4,000 more homes sold at auction than for the whole of last year. In Melbourne a preliminary clearance rate of 64.9 per cent was recorded on the 19th week with over 1,000 auctions this year. This compares to 68.9 per cent last week and 65.1 per cent this time last year. Below trend results continue to be recorded as high auction volumes are a weekly feature of the market. In Brisbane a preliminary clearance rate of 52.2 per cent was recorded compared to 45.8 per cent last week. Adelaide recorded an above trend clearance rate of 64.3 per cent compared to 55.4 per cent last week. In Canberra a clearance rate of 69.8 per cent was recorded. In Perth a clearance rate of 66.7 per cent was recorded. In Tasmania 3 auction sales were recorded and 8 homes were passed in. Robert Larocca CoreLogic RP Data Housing Market Specialist

APRA data shows investment lending continues to outpace growth on owner occupier loans

The Australian Prudential Regulation Authority APRA released their quarterly Authorised Deposit-taking Institution ADI Property Exposures data for September 2014 earlier today. The data always provides a valuable insight into current and historic mortgage lending by domestic ADIs and this quarter’s release was no different. Based on the value of all outstanding mortgages by households to Australian ADI’s, there was $825.0 billion outstanding to owner occupiers 66.0% of all housing loans at the end of September 2014 and $425.4 billion to investors 34.0% . Over the 12 months to September 2014, the total value of outstanding mortgages to owner occupiers has increased by 7.6% compared to an 11.9% rise in outstanding credit to investors. This represents the greatest annual increase in owner occupier lending since June 2012 and the greatest rise in investor lending since December 2010. Much like other data received more regularly, the chart indicates that there is significantly more momentum in the investor lending space than that for owner occupiers where growth is more moderate. At the end of September 2014, a record high 36.8% of loans outstanding had an offset facility, up from 34.2% a year earlier. Also a record high was the 36.8% of all outstanding mortgages which were interest-only, up from 34.6% a year earlier. Just 0.2% of all outstanding mortgages were reverse mortgages and 2.7% were low documentation which was down from 3.6% a year earlier and at a record low proportion. Other non-standard loans accounted for just 0.1% of all outstanding mortgages. It seems that more and more mortgagees are accessing offset accounts in order to reduce the interest payable on their mortgages and maximise repayments of the principal while interest rates are so low. The data also indicates that a high proportion of lenders are accessing interest-only mortgages which seems somewhat counterintuitive at a time when interest rates are so low. The average balance on all outstanding mortgages at the end of September 2014 was $238,700. The average balance has increased by 3.0% over the past year. Loans with an offset facility $284,600 and interest-only mortgages $308,400 have much higher average outstanding loan balances. It is interesting to note that the annual growth in average outstanding loan balances has been much more moderate for mortgages with an offset and interest-only mortgages at 2.0% and 2.1% respectively. Encouragingly, the data also indicates that outstanding balances are reducing for low documentation and other non-standard loans as they become less common. Over the past year the average balance has fallen by -3.1% for low-documentation loans and by -6.5% for other non-standard loans. With mortgage rates low and fewer of these loan types being written it seems those that have these types of loans are continuing to pay down these mortgages. Turning the focus to new loans written over the September quarter, 62.6% of the total value of new lending was to owner occupiers and 37.4% was to investors. The proportion of new lending to investors has fallen from a record high of 37.9% in the June 2014 quarter. Based on this data it suggests that growth in demand for both owner occupier and investment lending may have peaked. Although after having trended lower over the previous two quarters, the annual change in new owner occupier and investment lending bounced in September, recorded at 6.9% and 21.4% respectively. Over the September 2014 quarter, 0.7% of new loans approved were low-documentation, 42.5% were interest-only, 0.1% were other non-standard loans, 43.2% were third party originated loans and 3.5% were loans approved outside of serviceability. The 42.5% of new loans which were interest only was down from a record high of 44.0% over the previous quarter. The data also seems to reflect the slowing of growth in investment demand, remember that interest only loans tend to be but not always reflective of lending for investment purposes. The ADIs seem to be increasing the usage of their broker channels with the 43.2% of loans originated by third parties the highest proportion since June 2008. With 3.5% of new mortgages approved outside of serviceability over the September 2014 quarter, this was down from a record high 3.7% over the previous quarter. Looking at the loan to value ratios LVR of loans written over the September 2014 quarter, 25.2% of new loans had an LVR of less than 60%, 41.8% of loans had an LVR of between 60% and 80%, 20.9% had an LVR of between 80% and 90% and 12.1% had an LVR of 90% or more. The 12.5% of new loans with an LVR of more than 90% is the lowest proportion since June 2011. The 25.2% of mortgages with an LVR lower than 60% was the highest proportion in a year. This falling proportion of loans above 90% LVR suggests there are proportionally less high-risk mortgages being written. The data indicates that overall interest-only lending is continuing to rise however, new lending of this type has eased of late. Investment lending remains high and continues to ramp-up however, the rate of growth in new lending to investors does appear to have slowed. Keep in mind that the December data will probably tell us much more given it encapsulates more of the spring selling season. Furthermore, after the RBA flagged that they and other regulators are looking at ways to cool investor exuberance with an announcement expected in December we may actually see a run on investor lending over the coming quarter. It is of course important to remember that although investment lending has ramped up sharply over the past year, there is little to suggest that lending to investors is more risky than lending to owner occupiers. Bill Evans provided some insight into Westpac’s investment lending late last week. He noted: Compared to owner–occupier applicants, investment applicants are older 75% over 35 years ; have higher incomes and higher credit scores. 65% of investment loan customers are ahead on their repayments and 90+ days delinquencies are 0.37% compared to 0.47% for the full housing portfolio. Westpac has an interest rate buffer approach to lending linking loan approvals to serviceability at a rate at least 180 basis points above the standard mortgage rate 5% . All investment loans are full recourse and specific policies apply to holiday apartments and single industry towns. Our concern about the high level of investment lending remains over the fact that investors are targeting the residential property asset class because of its superior returns. While these returns remain superior demand is likely to persist. The concern then arises when other investment classes start to show superior returns will these owners exit the residential property class or remain in it for the long-term? As the above chart shows, investor activity is heavily concentrated within the capital city inner-city unit market. Were many investors to exit the market at a similar time in search of superior returns that could have some serious repercussions for the inner city unit market and potentially the wider housing market too.

Strength of the auction market eases as end of year approaches

CoreLogic RP Data National Auction Preview, week ending 23 November 2014 There are 3,240 auctions scheduled across Australia this week. In capital cities there are 2,700 auctions expected, compared to 2,716 for the same period last year. The strength of the auction market has clearly eased over the past two months with the national clearance rate remaining in the 60’s. The softer clearance rate needs to be viewed in the context of volumes, as this is the third consecutive week with over a 1,000 auctions in both Sydney and Melbourne. The clearance rate over the past few weeks has provided further confirmation that the Melbourne market is healthy but not booming. There are 1,187 auctions scheduled in Melbourne this week, compared to 1,504 last week and 1,172 this time last year. This is the 19th week with more than 1,000 auctions this year. In Sydney, CoreLogic RP Data is expecting 1,036 auctions compared to 1,417 last week and 1,060 for this week last year. This is the 11th week with more than 1,000 auctions this year, well in excess when compared to 2013 where there were just 7 weeks in which over 1,000 auctions took place across the city. The highest volume of auctions is again in Mosman with 22 expected followed by 18 in Randwick. In Brisbane 200 auctions are expected after 142 were held last week. Adelaide is expecting 132 auctions, compared to 152 last week. Canberra has 87 auctions scheduled compared to 78 last week. Perth has 49 auctions compared to 57 last week There are 22 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Reservoir VIC which has 24 expected. Robert Larocca CoreLogic RP Data Auction Market Specialist

CoreLogic RP Data Melbourne Auction Market preview; Week ending 23 November, 2014

There are 1,187 auctions scheduled this week in Melbourne compared to 1,172 for the same time last year. The most auctions are expected in Reservoir with 24 expected followed by 23 in both Bentleigh East and Glen Waverley. The clearance rate over the past few weeks has provided further confirmation that the market is healthy but not booming. This is also obvious when the home values are both corrected for inflation and then compared to the previous peaks. At the end of September house values in Melbourne were 3 per cent below their peak in real terms and units 5.4 per cent lower. In many parts of Melbourne buyers have better purchasing power than they did in 2010. Clearance rates may have dropped but the private sale market continues to tighten. On a citywide basis, the time on market results for houses sold at private sale was stable at a very low 31 days over the last week and vendor discounting dropped to -4.7 per cent. Key data Clearance rate week ending 16 November: 68.9 per cent Melbourne auctions expected week ending 23 November: 1,187 Melbourne private sales time on market week ending 16 November: 31 days houses Melbourne vendor discounting market week ending 16 November: -4.7 per cent houses Listings being prepared for market are 4.3 per cent higher in month ending 16 November seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Why the economy desperately needs more than just a housing market recovery

According to the CoreLogic RP Data Home Value Index results in October 2014, combined capital city home values have increased by 8.9% over the past year. The rate of growth is now decelerating after reaching a peak annual growth rate of 11.5% in April 2014. The two cities which have been the real driver of value growth, Sydney and Melbourne, are also now seeing the rate of value growth slowing. The RBA has previously stated that as the economy transitions away from mining investment that it was specifically looking for a pick-up in residential property. To date there has been a pick-up, in buyer demand, as well as home values and dwelling construction however, with value growth having peaked and dwelling approvals now -15% lower than their recent monthly peak will the pick-up in the residential segment of the economy be enough to offset mining? It is beginning to look increasingly unlikely. As we have showed, the residential housing sector is still quite strong but is slowing from its peak. Although approvals have dropped there remains a strong pipeline of housing construction which should continue over the coming years however, the spike in construction could be somewhat short-lived overall. If we look at the other sectors of the economy, economic data appears to be increasingly turning more negative than positive. According to Westpac and the Melbourne Institute, consumer sentiment has been mired in higher levels of pessimism than optimism for the past nine months. The last time pessimism had outweighed optimism for this long was in the middle of the financial crisis. Last week we learned that wage growth remains benign. According to the Australian Bureau of Statistics ABS the wage price index has increased by just 2.6% over the year to September 2014. With inflation recorded at 2.3% there is very little real growth in wages at the moment. With wage growth so low, we are also seeing the highest unemployment rate the country has seen in more than decade. According to ABS data, the unemployment rate was recorded at 6.2% in October and sits at a level not seen since early 2003. If employees can’t negotiate a decent pay rise it is not as if businesses are actively seeking employees. Commodities, which were previously a key driver of the Australian economy have seen prices drop significantly over the past year. According to the Reserve Bank’s RBA monthly index of commodity prices, Australian commodity prices are -16.9% lower over the past year and -38% lower than their July 2011 peak. Earlier this year Australia had recorded international trade surpluses for three consecutive months. The monthly trade surplus reached as much $1.4 trillion however, in September the trade deficit had sunk to $2.3 trillion. This $2.3 trillion figure was the largest monthly trade deficit since November 2012. According to the National Australia Bank, business conditions have improved sharply. Their index of business conditions rose by an all-time high 12 points in October to reach its highest level since February 2008. Although business conditions may be up, confidence across the business sector continues to fall. In October business confidence fell by a point to its lowest level since August of last year. Retail trade recorded a somewhat surprising bounce of 1.2% in September. Although this was the strongest monthly increase since February last year it comes following relatively light increases of 0.7%, 0.4% and 0.1% over the previous three months. One wonders if it is an outlier. In fact Westpac and the Melbourne Institute asked respondents to their consumer sentiment survey about their spending intentions this Christmas. The survey results indicated that 38% of respondents were going to spend less and 50% were going to spend the same. Westpac reported that the net balance more minus less of -26% was the worst since 2008 in the middle of the financial crisis. The latest read on population growth shows that population growth is slowing. Although growth in the number of new Australians remains strong, population growth over the year to March 2014 was at its lowest level since the year to June 2012. Furthermore, the more up-to-date overseas arrivals and departures shows that net long-term and permanent arrivals over the 12 months to September 2014 were at their lowest level since the 12 months to October 2011. This data would indicate a further slowing of net overseas migration, particularly within the mining states where the slowdown in both overseas and interstate migration has been the most substantial. The strong rate of population growth has been a significant driver of gross domestic product. Over the 12 months to June 2014, the Australian economy grew by a quite healthy 3.1%. Although this headline figure is quite good, on a per capita basis the economy grew by a much lower 1.6%. With population growth slowing we would expect GDP per capital to also slow. While there are a lot of negatives here one of the positives recently has been the declining Australian dollar. At the end of October 2014 the exchange rate with the $US was 88 cents which is much lower than it has been of late. A lower Australian dollar should help our manufacturers, exporters and tourism however, that will take a while to flow through. With the housing market and housing approvals seemingly topping out we need some other industries to help with the heavy lifting as commodity prices remain low and the pipeline of larger infrastructure projects related to the resources sector continue to taper away. We aren’t sure who or what these industries are but a further devaluation of the Australian dollar would certainly help some of the prime candidates such as tourism, manufacturing and education for overseas students. The Reserve Bank has stated that monetary policy has largely done all it can to assist and now it’s up to the Government to manage fiscal policy in such a way that can assist the transitioning economy. In my mind this can’t come quick enough because the economy is softening and the housing market needs help to manage this transistion.

Is there an oversupply in Melbourne?

The question of supply levels is a vexed one, after all a high level of supply can be great for buyers as it can dampen price growth, but as most buyers are sellers too it is not that simple. The question is also hard to comprehensively answer, as there are a wide range of data sets and stages in the development cycle to compare. At a citywide level the volume of homes on the market at any given time is a good measure. In the month ending on the 9th of November there were 4.5 per cent more homes newly listed for sale and 6.6 per cent fewer overall homes for sale in Melbourne. Given values have been rising that suggests that there is not oversupply of homes for sale, buyers are buying the new homes and the older stock is also reducing. But what of the unit market? A casual glance at the Melbourne skyline shows a lot of new high rise residential towers being constructed. Our data shows that those units are finding buyers. The number of units listed for sale is marginally, 2.4 per cent lower than a year ago, and the overall number of units on the market is 3.3 per cent higher. That suggests that the supply is exceeding demand to a greater extent than is the case in the houses market. That is not necessarily a bad thing. Over the past decade the state government’s policies to address housing affordability concerns have been centred on increased supply in the inner city unit market and outer suburbs. The data shows that it is working. Robert Larocca RP Data Victoria Housing Market Specialist This was originally published on www.propertyobserver.com.au

Capital cities record a clearance rate of 66.6% from the weekend

CoreLogic RP Data National Auction Comment, week ending 30 November 2014 A preliminary weighted average clearance rate of 66.6 per cent was recorded this week across capital cities compared to 65.7 per cent last week and 66.9 per cent this time last year. Conditions for buyers at auction are improving as we get closer to Christmas with volumes remaining at historical highs and demand easing, particularly in Melbourne. In Sydney auction volumes are very high and the number of active buyers seem to be rising in line with supply. A preliminary clearance rate of 75.2 per cent recorded compared to 71.8 per cent last week and 72.7 per cent last year. In Melbourne a preliminary clearance rate of 63.7 per cent was recorded compared to 66.1 per cent last week and 67.9 per cent this time last year. The state election has had no impact on results that are on trend with the mild easing in demand seen over November. In Brisbane a preliminary clearance rate of 45.9 per cent was recorded compared to 43.3 per cent last week. Adelaide recorded an above trend clearance rate of 66.7 per cent compared to 61.2 per cent last week. In Canberra a clearance rate of 63.3 per cent was recorded. In Perth a clearance rate of 21.7 per cent was recorded. In Tasmania 8 auction sales were recorded and no homes were passed in. Robert Larocca CoreLogic RP Data Housing Market Specialist

Where owners are queuing to sell in Melbourne

The residential property market differs from suburb to suburb in many different ways. Some suburbs are tightly held, some are in high demand from buyers and in others, sellers are seeking to capitalise on improved local conditions. It is in these suburbs that CoreLogic RP Data has recorded a substantial increase in the number of houses listed for sale compared to a year ago. In undertaking this analysis only those suburbs within a 30 km of the CBD have been considered as outside of this, development suburbs become more prevalent and that affects the outcome. In those suburbs the high rate of listings is a factor of developers’ centralised decision-making as opposed to the individual decisions of 100’s of owners. The suburb where owners have been seemingly queuing up to sell is Doncaster. Compared to a year ago there has been a 41 per cent rise in listings. Over the same time the median sale price has grown by 15.5 per cent, well in excess of the citywide 9.7 per cent. This suggests that sellers have been motivated by high buyer demand. Second on the list is Heidelberg Heights with a 33.3 per cent rise in listings. Not unlike Doncaster, sellers have been rewarded for their decision with the median sale price rising by 14 per cent. Third on the list is Burwood East where those seeking to sell have increased by 30.9 per cent. It is followed by Sunshine, Forest Hill, Preston, Parkdale, Vermont South, Glen Iris and Altona North. The common factor in each case is an above average rise in the median selling price. Now of course there are exceptions to this, for instance Bayswater has seen a 17 per cent fall in listings and 11.5 per cent rise in the median selling price but the in the majority of circumstances strong local markets encourage owners to sell. Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Four more weekends of auctions until Christmas

CoreLogic RP Data National Auction Preview, week ending 30 November 2014 There are 3,977 auctions scheduled across Australia this week. In capital cities there are 3,351 auctions expected, compared to 3,472 for the same period last year. So far this month the auction clearance rate for capital cities has dropped from 68.2 per cent in October to 66.5 per cent and this is largely due to the Melbourne market. Unlike the horse racing or AFL the state election this Saturday has had no impact on volumes. There are 1,426 auctions scheduled in Melbourne this week, compared to 1,433 last week and 1,598 this time last year. With one weekend remaining this month the November clearance rate is 67.5 per cent, down from 70.5 per cent in October. In Sydney, CoreLogic RP Data is expecting 1,374 auctions compared to 1,337 last week and 1,402 for this week last year. In line with the national trend the clearance rate has also softened in Sydney. The reduction is minor, from 73.8 to 72.1 per cent. In Brisbane 254 auctions are expected after 219 were held last week. Adelaide is expecting 154 auctions, compared to 147 last week. Canberra has 80 auctions scheduled compared to 97 last week. The auction market appears to be strengthening with the clearance rate so far in November up to 59 per cent from 47.4 per cent in October. Perth has 55 auctions compared to 55 last week There are 10 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Reservoir VIC and Richmond Vic each of which has 23 expected. Robert Larocca CoreLogic RP Data Auction Market Specialist 0409 198 350

Melbourne Auction Market preview; Week ending 30 November 2014

There are 1,426 auctions scheduled this week in Melbourne compared to 1,598 for the same time last year. The highest volume of auctions will be in Reservoir and Richmond, each are expecting 23 auctions. The state election may be on this Saturday but it does not have a significant affect on the market, buyers are able to vote and bid with ease as polling places are open from 8am to 6pm. With only four weeks to go for auctions this year one of the features of the year – more auctions – is clearly apparent. So far this year there have been more homes sold at auction, 26,402, than there was over the whole of 2013. In 2013 there were 25,350 home sold at auction. On a citywide basis, the time on market results for houses sold at private sale was stable at a very low 31 days over the last week and vendor discounting eased slightly to -4.8 per cent. Key data Clearance rate week ending 23 November: 66.1 per cent Melbourne auctions expected week ending 30 November: 1,426 Melbourne private sales time on market week ending 23 November: 31 days houses Melbourne vendor discounting market week ending 23 November: -4.8 per cent houses Listings being prepared for market are 3.5 per cent higher in month ending 23 November seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

National clearance rate of 67.7% recorded over the weekend

CoreLogic RP Data National Auction Comment, week ending 23 November 2014 A preliminary weighted average clearance rate of 67.7 per cent was recorded this week across capital cities compared to 68.5 per cent last week and 65.4 per cent this time last year. There are 4 weeks left for auctions this year and there have been 26.5 per cent more auctions than last year with 88,402 auctions compared to 66,908 at the same stage last year. In Sydney a preliminary clearance rate of 74.3 per cent recorded compared to 73.1 per cent last week and 74 per cent last year. With just 4 weeks for auction remaining this year there have already been over 4,000 more homes sold at auction than for the whole of last year. In Melbourne a preliminary clearance rate of 64.9 per cent was recorded on the 19th week with over 1,000 auctions this year. This compares to 68.9 per cent last week and 65.1 per cent this time last year. Below trend results continue to be recorded as high auction volumes are a weekly feature of the market. In Brisbane a preliminary clearance rate of 52.2 per cent was recorded compared to 45.8 per cent last week. Adelaide recorded an above trend clearance rate of 64.3 per cent compared to 55.4 per cent last week. In Canberra a clearance rate of 69.8 per cent was recorded. In Perth a clearance rate of 66.7 per cent was recorded. In Tasmania 3 auction sales were recorded and 8 homes were passed in. Robert Larocca CoreLogic RP Data Housing Market Specialist

APRA data shows investment lending continues to outpace growth on owner occupier loans

The Australian Prudential Regulation Authority APRA released their quarterly Authorised Deposit-taking Institution ADI Property Exposures data for September 2014 earlier today. The data always provides a valuable insight into current and historic mortgage lending by domestic ADIs and this quarter’s release was no different. Based on the value of all outstanding mortgages by households to Australian ADI’s, there was $825.0 billion outstanding to owner occupiers 66.0% of all housing loans at the end of September 2014 and $425.4 billion to investors 34.0% . Over the 12 months to September 2014, the total value of outstanding mortgages to owner occupiers has increased by 7.6% compared to an 11.9% rise in outstanding credit to investors. This represents the greatest annual increase in owner occupier lending since June 2012 and the greatest rise in investor lending since December 2010. Much like other data received more regularly, the chart indicates that there is significantly more momentum in the investor lending space than that for owner occupiers where growth is more moderate. At the end of September 2014, a record high 36.8% of loans outstanding had an offset facility, up from 34.2% a year earlier. Also a record high was the 36.8% of all outstanding mortgages which were interest-only, up from 34.6% a year earlier. Just 0.2% of all outstanding mortgages were reverse mortgages and 2.7% were low documentation which was down from 3.6% a year earlier and at a record low proportion. Other non-standard loans accounted for just 0.1% of all outstanding mortgages. It seems that more and more mortgagees are accessing offset accounts in order to reduce the interest payable on their mortgages and maximise repayments of the principal while interest rates are so low. The data also indicates that a high proportion of lenders are accessing interest-only mortgages which seems somewhat counterintuitive at a time when interest rates are so low. The average balance on all outstanding mortgages at the end of September 2014 was $238,700. The average balance has increased by 3.0% over the past year. Loans with an offset facility $284,600 and interest-only mortgages $308,400 have much higher average outstanding loan balances. It is interesting to note that the annual growth in average outstanding loan balances has been much more moderate for mortgages with an offset and interest-only mortgages at 2.0% and 2.1% respectively. Encouragingly, the data also indicates that outstanding balances are reducing for low documentation and other non-standard loans as they become less common. Over the past year the average balance has fallen by -3.1% for low-documentation loans and by -6.5% for other non-standard loans. With mortgage rates low and fewer of these loan types being written it seems those that have these types of loans are continuing to pay down these mortgages. Turning the focus to new loans written over the September quarter, 62.6% of the total value of new lending was to owner occupiers and 37.4% was to investors. The proportion of new lending to investors has fallen from a record high of 37.9% in the June 2014 quarter. Based on this data it suggests that growth in demand for both owner occupier and investment lending may have peaked. Although after having trended lower over the previous two quarters, the annual change in new owner occupier and investment lending bounced in September, recorded at 6.9% and 21.4% respectively. Over the September 2014 quarter, 0.7% of new loans approved were low-documentation, 42.5% were interest-only, 0.1% were other non-standard loans, 43.2% were third party originated loans and 3.5% were loans approved outside of serviceability. The 42.5% of new loans which were interest only was down from a record high of 44.0% over the previous quarter. The data also seems to reflect the slowing of growth in investment demand, remember that interest only loans tend to be but not always reflective of lending for investment purposes. The ADIs seem to be increasing the usage of their broker channels with the 43.2% of loans originated by third parties the highest proportion since June 2008. With 3.5% of new mortgages approved outside of serviceability over the September 2014 quarter, this was down from a record high 3.7% over the previous quarter. Looking at the loan to value ratios LVR of loans written over the September 2014 quarter, 25.2% of new loans had an LVR of less than 60%, 41.8% of loans had an LVR of between 60% and 80%, 20.9% had an LVR of between 80% and 90% and 12.1% had an LVR of 90% or more. The 12.5% of new loans with an LVR of more than 90% is the lowest proportion since June 2011. The 25.2% of mortgages with an LVR lower than 60% was the highest proportion in a year. This falling proportion of loans above 90% LVR suggests there are proportionally less high-risk mortgages being written. The data indicates that overall interest-only lending is continuing to rise however, new lending of this type has eased of late. Investment lending remains high and continues to ramp-up however, the rate of growth in new lending to investors does appear to have slowed. Keep in mind that the December data will probably tell us much more given it encapsulates more of the spring selling season. Furthermore, after the RBA flagged that they and other regulators are looking at ways to cool investor exuberance with an announcement expected in December we may actually see a run on investor lending over the coming quarter. It is of course important to remember that although investment lending has ramped up sharply over the past year, there is little to suggest that lending to investors is more risky than lending to owner occupiers. Bill Evans provided some insight into Westpac’s investment lending late last week. He noted: Compared to owner–occupier applicants, investment applicants are older 75% over 35 years ; have higher incomes and higher credit scores. 65% of investment loan customers are ahead on their repayments and 90+ days delinquencies are 0.37% compared to 0.47% for the full housing portfolio. Westpac has an interest rate buffer approach to lending linking loan approvals to serviceability at a rate at least 180 basis points above the standard mortgage rate 5% . All investment loans are full recourse and specific policies apply to holiday apartments and single industry towns. Our concern about the high level of investment lending remains over the fact that investors are targeting the residential property asset class because of its superior returns. While these returns remain superior demand is likely to persist. The concern then arises when other investment classes start to show superior returns will these owners exit the residential property class or remain in it for the long-term? As the above chart shows, investor activity is heavily concentrated within the capital city inner-city unit market. Were many investors to exit the market at a similar time in search of superior returns that could have some serious repercussions for the inner city unit market and potentially the wider housing market too.

Strength of the auction market eases as end of year approaches

CoreLogic RP Data National Auction Preview, week ending 23 November 2014 There are 3,240 auctions scheduled across Australia this week. In capital cities there are 2,700 auctions expected, compared to 2,716 for the same period last year. The strength of the auction market has clearly eased over the past two months with the national clearance rate remaining in the 60’s. The softer clearance rate needs to be viewed in the context of volumes, as this is the third consecutive week with over a 1,000 auctions in both Sydney and Melbourne. The clearance rate over the past few weeks has provided further confirmation that the Melbourne market is healthy but not booming. There are 1,187 auctions scheduled in Melbourne this week, compared to 1,504 last week and 1,172 this time last year. This is the 19th week with more than 1,000 auctions this year. In Sydney, CoreLogic RP Data is expecting 1,036 auctions compared to 1,417 last week and 1,060 for this week last year. This is the 11th week with more than 1,000 auctions this year, well in excess when compared to 2013 where there were just 7 weeks in which over 1,000 auctions took place across the city. The highest volume of auctions is again in Mosman with 22 expected followed by 18 in Randwick. In Brisbane 200 auctions are expected after 142 were held last week. Adelaide is expecting 132 auctions, compared to 152 last week. Canberra has 87 auctions scheduled compared to 78 last week. Perth has 49 auctions compared to 57 last week There are 22 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Reservoir VIC which has 24 expected. Robert Larocca CoreLogic RP Data Auction Market Specialist

CoreLogic RP Data Melbourne Auction Market preview; Week ending 23 November, 2014

There are 1,187 auctions scheduled this week in Melbourne compared to 1,172 for the same time last year. The most auctions are expected in Reservoir with 24 expected followed by 23 in both Bentleigh East and Glen Waverley. The clearance rate over the past few weeks has provided further confirmation that the market is healthy but not booming. This is also obvious when the home values are both corrected for inflation and then compared to the previous peaks. At the end of September house values in Melbourne were 3 per cent below their peak in real terms and units 5.4 per cent lower. In many parts of Melbourne buyers have better purchasing power than they did in 2010. Clearance rates may have dropped but the private sale market continues to tighten. On a citywide basis, the time on market results for houses sold at private sale was stable at a very low 31 days over the last week and vendor discounting dropped to -4.7 per cent. Key data Clearance rate week ending 16 November: 68.9 per cent Melbourne auctions expected week ending 23 November: 1,187 Melbourne private sales time on market week ending 16 November: 31 days houses Melbourne vendor discounting market week ending 16 November: -4.7 per cent houses Listings being prepared for market are 4.3 per cent higher in month ending 16 November seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

CoreLogic RP Data Melbourne Auction Market preview; Week ending 23 November, 2014

There are 1,187 auctions scheduled this week in Melbourne compared to 1,172 for the same time last year. The most auctions are expected in Reservoir with 24 expected followed by 23 in both Bentleigh East and Glen Waverley. The clearance rate over the past few weeks has provided further confirmation that the market is healthy but not booming. This is also obvious when the home values are both corrected for inflation and then compared to the previous peaks. At the end of September house values in Melbourne were 3 per cent below their peak in real terms and units 5.4 per cent lower. In many parts of Melbourne buyers have better purchasing power than they did in 2010. Clearance rates may have dropped but the private sale market continues to tighten. On a citywide basis, the time on market results for houses sold at private sale was stable at a very low 31 days over the last week and vendor discounting dropped to -4.7 per cent. Key data Clearance rate week ending 16 November: 68.9 per cent Melbourne auctions expected week ending 23 November: 1,187 Melbourne private sales time on market week ending 16 November: 31 days houses Melbourne vendor discounting market week ending 16 November: -4.7 per cent houses Listings being prepared for market are 4.3 per cent higher in month ending 16 November seasonally adjusted Robert Larocca CoreLogic RP Data Victoria Housing Market Specialist

Why the economy desperately needs more than just a housing market recovery

According to the CoreLogic RP Data Home Value Index results in October 2014, combined capital city home values have increased by 8.9% over the past year. The rate of growth is now decelerating after reaching a peak annual growth rate of 11.5% in April 2014. The two cities which have been the real driver of value growth, Sydney and Melbourne, are also now seeing the rate of value growth slowing. The RBA has previously stated that as the economy transitions away from mining investment that it was specifically looking for a pick-up in residential property. To date there has been a pick-up, in buyer demand, as well as home values and dwelling construction however, with value growth having peaked and dwelling approvals now -15% lower than their recent monthly peak will the pick-up in the residential segment of the economy be enough to offset mining? It is beginning to look increasingly unlikely. As we have showed, the residential housing sector is still quite strong but is slowing from its peak. Although approvals have dropped there remains a strong pipeline of housing construction which should continue over the coming years however, the spike in construction could be somewhat short-lived overall. If we look at the other sectors of the economy, economic data appears to be increasingly turning more negative than positive. According to Westpac and the Melbourne Institute, consumer sentiment has been mired in higher levels of pessimism than optimism for the past nine months. The last time pessimism had outweighed optimism for this long was in the middle of the financial crisis. Last week we learned that wage growth remains benign. According to the Australian Bureau of Statistics ABS the wage price index has increased by just 2.6% over the year to September 2014. With inflation recorded at 2.3% there is very little real growth in wages at the moment. With wage growth so low, we are also seeing the highest unemployment rate the country has seen in more than decade. According to ABS data, the unemployment rate was recorded at 6.2% in October and sits at a level not seen since early 2003. If employees can’t negotiate a decent pay rise it is not as if businesses are actively seeking employees. Commodities, which were previously a key driver of the Australian economy have seen prices drop significantly over the past year. According to the Reserve Bank’s RBA monthly index of commodity prices, Australian commodity prices are -16.9% lower over the past year and -38% lower than their July 2011 peak. Earlier this year Australia had recorded international trade surpluses for three consecutive months. The monthly trade surplus reached as much $1.4 trillion however, in September the trade deficit had sunk to $2.3 trillion. This $2.3 trillion figure was the largest monthly trade deficit since November 2012. According to the National Australia Bank, business conditions have improved sharply. Their index of business conditions rose by an all-time high 12 points in October to reach its highest level since February 2008. Although business conditions may be up, confidence across the business sector continues to fall. In October business confidence fell by a point to its lowest level since August of last year. Retail trade recorded a somewhat surprising bounce of 1.2% in September. Although this was the strongest monthly increase since February last year it comes following relatively light increases of 0.7%, 0.4% and 0.1% over the previous three months. One wonders if it is an outlier. In fact Westpac and the Melbourne Institute asked respondents to their consumer sentiment survey about their spending intentions this Christmas. The survey results indicated that 38% of respondents were going to spend less and 50% were going to spend the same. Westpac reported that the net balance more minus less of -26% was the worst since 2008 in the middle of the financial crisis. The latest read on population growth shows that population growth is slowing. Although growth in the number of new Australians remains strong, population growth over the year to March 2014 was at its lowest level since the year to June 2012. Furthermore, the more up-to-date overseas arrivals and departures shows that net long-term and permanent arrivals over the 12 months to September 2014 were at their lowest level since the 12 months to October 2011. This data would indicate a further slowing of net overseas migration, particularly within the mining states where the slowdown in both overseas and interstate migration has been the most substantial. The strong rate of population growth has been a significant driver of gross domestic product. Over the 12 months to June 2014, the Australian economy grew by a quite healthy 3.1%. Although this headline figure is quite good, on a per capita basis the economy grew by a much lower 1.6%. With population growth slowing we would expect GDP per capital to also slow. While there are a lot of negatives here one of the positives recently has been the declining Australian dollar. At the end of October 2014 the exchange rate with the $US was 88 cents which is much lower than it has been of late. A lower Australian dollar should help our manufacturers, exporters and tourism however, that will take a while to flow through. With the housing market and housing approvals seemingly topping out we need some other industries to help with the heavy lifting as commodity prices remain low and the pipeline of larger infrastructure projects related to the resources sector continue to taper away. We aren’t sure who or what these industries are but a further devaluation of the Australian dollar would certainly help some of the prime candidates such as tourism, manufacturing and education for overseas students. The Reserve Bank has stated that monetary policy has largely done all it can to assist and now it’s up to the Government to manage fiscal policy in such a way that can assist the transitioning economy. In my mind this can’t come quick enough because the economy is softening and the housing market needs help to manage this transistion.

Is there an oversupply in Melbourne?

The question of supply levels is a vexed one, after all a high level of supply can be great for buyers as it can dampen price growth, but as most buyers are sellers too it is not that simple. The question is also hard to comprehensively answer, as there are a wide range of data sets and stages in the development cycle to compare. At a citywide level the volume of homes on the market at any given time is a good measure. In the month ending on the 9th of November there were 4.5 per cent more homes newly listed for sale and 6.6 per cent fewer overall homes for sale in Melbourne. Given values have been rising that suggests that there is not oversupply of homes for sale, buyers are buying the new homes and the older stock is also reducing. But what of the unit market? A casual glance at the Melbourne skyline shows a lot of new high rise residential towers being constructed. Our data shows that those units are finding buyers. The number of units listed for sale is marginally, 2.4 per cent lower than a year ago, and the overall number of units on the market is 3.3 per cent higher. That suggests that the supply is exceeding demand to a greater extent than is the case in the houses market. That is not necessarily a bad thing. Over the past decade the state government’s policies to address housing affordability concerns have been centred on increased supply in the inner city unit market and outer suburbs. The data shows that it is working. Robert Larocca RP Data Victoria Housing Market Specialist This was originally published on www.propertyobserver.com.au

Housing supply increases again after lowest clearance rate in 21 weeks

RP Data National Auction Preview, week ending 16 November 2014 There are 3,575 auctions scheduled across Australia this week. In capital cities there are 2,907 auctions expected compared to 2,814 for the same period last year. Last week the national clearance rate was the lowest for 21 weeks and it was the third consecutive week in which it fell. This trend is not unique and it happened last year as stock levels rose through November and December. Buyers looking for a home and buying at auction will welcome both the increased stock levels and lower clearance rate. There are 1,338 auctions scheduled in Melbourne this week, compared to 1,139 last week and 1,270 this time last year. It is interesting to note that the clearance rate has now fallen more than 10 points in the past two months. In Sydney RP Data is expecting 1,152 auctions compared to 1,261 last week and 1,099 for this week last year. Last week was the lowest clearance rate in Sydney in 21 weeks and provides a clear indication that the high stock levels are having an impact. Mosman has the highest volume of auctions for the second week in a row with 25 expected. In Brisbane 128 auctions are expected after 188 were held last week. Adelaide is expecting 143 auctions, compared to 131 last week. Canberra has 68 auctions scheduled compared to 141 last week. Perth has 47 auctions compared to 65 last week There are 7 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Bentleigh East VIC which has 29 expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 16 November, 2014

There are 1,338 auctions scheduled this week in Melbourne compared to 1,270 for the same time last year. The most auctions will be found in Bentleigh East with 29. Auctions are generally more popular in the most expensive segment of the market and some suburbs have been recording multiple sales in the ultra expensive category. A review of suburbs ranked by the number of sales valued at more than $2m over the last year shows that three had more than 100; Brighton, Toorak and Kew. Camberwell, Canterbury, Balwyn, Hawthorn and Malvern had between 50 and 100. Outside of the leafy inner east there were some interesting results in Hampton, Elwood, Ivanhoe and Richmond had between 10 and 20 sales over $2m. On a citywide basis, the time on market results for houses sold at private sale was stable at a very low 31 days over the last week and vendor discounting remained stable at -4.8 per cent. Key data Clearance rate week ending 9 November: 65.5 per cent Melbourne auctions expected week ending 16 November: 1,338 Melbourne private sales time on market week ending 9 November: 31 days houses Melbourne vendor discounting market week ending 9 November: -4.8 per cent houses Listings being prepared for market are 4.3 per cent higher in month ending 9 November seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Bentleigh soon to become a million dollar suburb…

The most recent update to the list of million dollar suburbs in Melbourne has seen 50 reach or exceed that mark. This is an increase of one on last month with Caulfield East joining the list. The median value of a house in that suburb is now $1,002,366. Prior to Caulfield East the other recent additions were Fairfield and Aberfeldie. Those additions meant that Melbourne now has million dollar suburbs in the north, east, south and west of the city. The list is headed by the usual suspects; Toorak, Deepdene, Canterbury, Kooyong and East Melbourne. The median house value in Toorak is now $2.85m and unlike the majority of million dollar suburbs this number has fallen over the last year. The suburbs next in line do not contain many surprises but can also tell us a lot about housing values in Melbourne. The suburbs that are within $20,000 of the million dollar mark are Prahran, Carlton North, Port Melbourne, Williamstown and Bentleigh. Bentleigh is quite typical of the next group of suburbs that will join the list. It would have been quite surprising a few years ago to think of Bentleigh houses costing this much but with 97 selling for over a million in the last twelve months it now a regular feature of the area. A cursory glance at the ‘for sale’ advertisements shows a suburb undergoing significant change with an increase in multi unit dwellings replacing the older homes on what are now large blocks. These homes coexist with a mixture of styles that are clearly proving to be very popular with buyers. Robert Larocca RP Data Victoria Housing Market Specialist

The proportion of investment lending hits a record high in September

The Australian Bureau of Statistics ABS published housing finance data for September earlier this week. The data showed that the proportion of lending to investors hit a record high in September. At the same time the data indicates that demand from owner occupiers is starting to slow. Over recent years the data on the value of housing finance commitment has, to my mind, become much more important to focus on. The main reason being that this is the only data from the ABS that tracks the level of investment lending. The above chart uses raw not seasonally adjusted data and uses a 12 month average to smooth the volatility of the data. Nevertheless you can see the ongoing decline in demand from owner occupier first home buyers and more recently a dip in commitments by owner occupiers that already own a home. Across the four borrower types listed you can see that investors now account for the greatest proportion of borrowings from Australian Authorised Deposit-taking Institutions ADIs . Seasonally adjusted data for September 2014 showed that the value of owner occupier refinance commitments was 0.6%, owner occupier commitments excluding refinances rose 1.8% and investor commitments were 3.7% higher. Year-on-year, owner occupier refinance commitments are 13.7% higher, owner occupier commitments excluding refinances are 3.4% higher and investor finance commitments are 25.4% higher. The above chart highlights a couple of important things. Firstly, while owner occupier refinances and new loans those excluding refinances have flattened over recent months it seems as if there has been a resurgence in investor demand. Secondly, this is the first time ever that the value of monthly investment loans $11.9 billion has been greater than the value of owner occupier new loans $11.8 billion . The seasonally-adjusted data for September showed that investor finance commitments accounted for an all-time high proportion of lending by Australian ADIs. Comparing lending to investors against owner occupier refinances and owner occupier new loans investors accounted for 41.4% of lending, owner occupier new loans were 40.8% and owner occupier refinances were 17.9%. The proportion of lending to investors is at a record high while the proportion of lending for owner occupier new loans is at a record low. Of course, there is only a certain amount that can be borrowed each month but it is clear demand is strongest from the investment segment. In fact, if you exclude refinances, a record high 50.2% of new loans written are to investors. The headline result that gets reported on each month is the number of owner occupier loans. Although it is a very valuable statistic, it should be read with caution because it is missing a significant proportion of the market, those represented by investors. Over the month, there were 51,465 owner occupier housing finance commitments, the lowest number since January 2014. Month-on-month the number of loans for refinancing of established dwellings was -2.9% lower while non-refinances increased by 0.5%. Like the value growth chart presented earlier, the above chart indicates that the number of loans to owner occupiers has flattened over recent months. As investor activity has risen, there has been a sharp drop-off in the number of loans to first home buyers. Although there is no data to support it there are plenty of anecdotal suggestions that many first home buyers are choosing to purchase investment properties rather than homes for owner occupation. Unfortunately, the ABS data only captures those homes purchased by first home buyers for owner occupation. Owner occupier first home buyer numbers continue to languish at near record low levels. In September, first home buyers accounted for 12% of all owner occupier finance commitments however the number of loans actually rose by 4.7%. As mentioned earlier, the value of investment loans is at a record high, the previous peak was October 2003 and at that time investors accounted for a slightly higher 13.6% of all owner occupier housing finance commitments. What is more alarming is the drop off in volumes over recent years with that 13.6% actually being 8,481 finance commitments. The Reserve Bank RBA has already highlighted a number of times that they have some concerns with the heightened level of investment activity, particularly in Sydney and Melbourne. With the proportion of loans to investors hitting a new record high in September it will further re-iterate those concerns. The RBA has already flagged that themselves along with other regulators are already looking at ways to curb the level of investment however, they flagged in early September that any announcement would likely come by December. In the meantime, it looks like investor finance commitments have got another leg up and over the coming months we may see a further flurry of activity as investors look to enter the market prior to the implementation of any macroprudential curbs. With investor focus to-date very much on Sydney and Melbourne, it will be interesting to see if this remains the case when the lending finance data for September is released on Wednesday. If so, you do have to ask yourself what some of these investors are thinking. The housing markets in Sydney and Melbourne have been recording value growth since June 2012 and over that time value have increased by 29.8% and 20.7% respectively. Gross rental yields have fallen from 4.5% to 3.7% in Sydney and from 3.8% to 3.3% in Melbourne. I understand that investors need a return and aren’t getting that from keeping their cash in the bank but after almost two and a half years of value growth and a significant compression of rental yields you wonder how much value growth is left in these markets. Furthermore, with yields so low if there is little or no growth investors will be left with an asset that provides very little rental return.

National clearance rate of 63.7% recorded

RP Data National Auction Comment, week ending 9 November 2014 A preliminary weighted average clearance rate of 63.7 per cent was recorded this week across capital cities compared to 68.7 per cent last week and 68.3 per cent this time last year. It is interesting to note that due to an increase in the popularity of auctions more homes have been sold in Sydney at auction this year than Melbourne. This is the first time this has occurred. After this week there have been 24,590 auction sales in Sydney and 24,336 in Melbourne. In Sydney market a preliminary clearance rate of 69 per cent recorded compared to 75.6 per cent last week and 76 per cent last year. After a fortnight of mild improvement the ongoing high volumes are clearly having an impact with a lower clearance rate this week. In Melbourne there was a preliminary clearance rate of 63.8 per cent recorded compared to 69.6 per cent last week and 68.1 per cent this time last year. The market is shifting in favor of buyers at the right time of the year with a high volume of auctions expected between now and Christmas. In Brisbane a preliminary clearance rate of 45 per cent was recorded compared to 45.3 per cent last week. Adelaide recorded a clearance rate of 61.3 per cent compared to 57.4 per cent last week. In Canberra a clearance rate of 50.6 per cent was recorded. In Perth a clearance rate of 56.3 per cent was recorded. Robert Larocca RP Data Housing Market Specialist

Melbourne home values rise in October

Last month saw a new record week for auctions in Melbourne and an improvement in the whole residential market. In October there was a clearance rate of 70.5 per cent, down slightly from the same time last year when it was 71.5 per cent. The overall number of homes sold rose by 7.6 per cent with 3,551 selling compared to 3,300 in October last year. The performance of the auction market mirrored the broader one as shown in the RP Data CoreLogic Home Value Index for October. October was a relatively good month for sellers with the growth in home values increasing more strongly than in August and September. The index showed that Melbourne house values rose by 2.1 per cent over the month and by 1.8 per cent over the last three months. Units saw a small rise of 0.5 per cent in the month and 2.2 per cent in the quarter. More important, the longer term house value index outpaced units with a 9.5 per cent rise over this year compared to 3.1 per cent. Melbourne houses continued to return better capital gains based on strong supply in the more affordable unit markets. The Melbourne median house price was $615,000 based on the sales settled in the last three months. The unit median price was $472,000. Robert Larocca RP Data Victoria Housing Market Specialist

Why would deflation of our largest asset class be a good thing?

Balancing an economy is undoubtedly a tough ask for anyone. Our inflation targeting Reserve Bank looks to maintain inflation within a range of 2% to 3% on an annual basis over the cycle. Too much inflation is not ideal, nor is deflation, so the RBA tries to tweak monetary policy to stimulate the economy in order to see some inflation but not too much. If inflation runs too high consumption slows down as consumers simply can’t afford to purchase goods and services because they don’t have enough buying power. If deflation occurs consumers are also likely to stop spending because the value of any debt they have increases as opposed to reduces when there is inflation . Consumer buying power may increase during times of deflation; however the weak economic conditions that have caused prices to deflate are likely to also result in higher unemployment, a contraction in the number of jobs and a pessimistic consumer mindset. With the currently high levels of inflation in housing prices it stands to reason that the purchasing power of many consumers has diminished. When you think about the Australian housing market as a whole I don’t think anyone could argue that shelter in Australia is particularly affordable. In fact over the last two decades home values have increased at a rate much higher than inflation meaning that some in the community don’t have enough buying power to purchase shelter. As a result, many of these people are likely to rent. I am constantly surprised about articles and comments which seem to believe that a significant decline in Australian home values would be the preferred cure to housing affordability and a good outcome for the economy. If we look purely at the inflation and deflation argument some people would say we have had too much inflation of home values however, the solution to that problem is not to aim for deflating current home values. The Australian Bureau of Statistics ABS estimated that as at June 2014, the total value of Australia’s dwelling stock was $5.2 trillion and there were an estimated 9,366,800 dwellings across the country note that RP Data we estimate the total value of residential dwellings to be somewhat higher at $5.5 trillion as at June 2014 . To put this $5.2 trillion in dwellings into perspective, over the 12 months to June 2014, GDP, or the total output of the national economy, was recorded at $1.57 trillion. What this means is that the value of residential dwellings was more than three times greater than the annual output of the economy. According to data released by the Australian Prudential Regulation Authority APRA , Australian authorised deposit-taking institutions ADIs held $1.225 trillion in loans against these dwellings across 5,079,800 mortgages. So what do these figures tell us? 54.2% of dwellings across Australia have a mortgage to an Australian ADI and 23.6% of the total value of Australian dwellings is outstanding to Australian ADIs. The ratio of debt held against the total value of the housing asset class is very low however, this ratio includes all dwellings not just those where a mortgage is held . In the event of a downturn those with high leverage are likely to be much more significantly impacted. It also probably reflects that quite a lot of dwellings have no mortgage the 2011 Census indicated that roughly one third of Australia dwellings were owned outright while a proportion will also have mortgages sourced from non ADI lenders or offshore banks. Australian’s choose to hold a large proportion of their wealth in residential property; this is highlighted by the $5.2 trillion total value of residential dwellings. Data published quarterly by the Reserve Bank shows that while the typical household’s ratio of housing debt to disposable income in 137.1%, the typical household’s ratio of housing assets to disposable income is a much larger 433.6% making up 54% of the typical households assets. Over the past couple of decades Australian ADIs have shown a preference for lending to housing as opposed to lending for personal loans or to business. Of course, the ADIs have had good reason to preference housing lending; it has generally performed well with low mortgage arrears, the return on equity is strong, earnings from mortgages are consistent, higher risk loans are generally insured via lender’s mortgage insurance LMI , home values have generally trended higher and Australian’s tend to prioritise repayments of their mortgage. But this does not mean that home owners and the economy could withstand a significant deflation in home values. Nor does it mean that a significant deflation in housing values would be a tonic for those that can’t afford to own a house to finally achieve home ownership. Why would deflation in an asset which is more than three times larger than the annual output of the economy play out any better than deflation in an economic sense? In fact, were home values to deflate it could be argued that the whole economy would suffer as consumers stopped consuming. As consumers stop spending unemployment would likely rise, ADIs would stop lending and there is a high likelihood the Australian economy would enter a recession. Remember, it isn’t only those with a mortgage which would face the prospect of unemployment, so too would all those people who are yet to purchase a home waiting for the collapse to enter into the market at rock bottom prices. A more desirable solution to improve housing affordability in my opinion is to look for a more moderate level of growth in home values while improving both the supply and demand side of the equations. A sustained period in which home values grow at a rate below inflation would be an ideal way in which to improve affordability rather than a large-scale bust. Interestingly, as we showed in last week’s blog a number of cities have recorded value growth below the rate of inflation over a number of years now although this hasn’t been the case in Sydney and Melbourne . Housing booms make it harder for prospective home owners to enter into home ownership, however I would argue that busts are much worse. Furthermore the level of exposure to the housing market by ADIs and residents would mean a housing bust has much more far reaching repercussions for the economy. Although stress tests indicate that most ADIs could cope with a significant decline in home values the impact on households and the Australian economy as a whole would likely send Australian into a recession. This is why rapid deflation in home values is just as, if not more undesirable than rapid inflation and why the goal should be moderate growth in home values with a growth rate that broadly trends in line with household income growth over the cycle. If we want to reduce the cost of housing from its current level with minimal overall economic damage, home value appreciation below the rate of inflation for a number of years is what I see as an ideal solution. Of course achieving this means that governments need to address the factors that drive a high level of housing demand and those which constrain the overall supply of housing and drive the cost of this new supply higher.

This weekend’s national auction preview sees record auctions in Canberra

RP Data National Auction Preview, week ending 9 November 2014 There are 3,174 auctions scheduled across Australia this week. In capital cities there are 2,607 auctions expected compared to 2,548 for the same period last year. Canberra will have a record number of auctions this week, becoming the second capital city to post a record in the past few weeks. There are 999 auctions scheduled in Melbourne this week, compared to 220 last week and 1,123 this time last year. In October the clearance rate was 70.5 per cent, down slightly from the same time last year when it was 71.5 per cent. The overall number of homes sold rose by 7.6 per cent with 3,551 selling compared to 3,300 in October last year. In Sydney RP Data is expecting 1,112 auctions compared to 1,259 last week and 1, 043 for this week last year. After what had been a lackluster October, with 5.4 per cent fewer sales at auction than in September, vendors intending to sell over the next few weeks will have been pleased to see the moderate improvement last week. In Brisbane 174 auctions are expected after 246 were held last week. Adelaide is expecting 119 auctions, compared to 127 last week. Canberra has 136 auctions scheduled compared to 89 last week. This is the first time in history that the national capital has seen more than 100 auctions in a week. The previous high was 93 auctions in late November last year. The highest number of auctions will be found in Kambah and MacGregor, both of which have 8 scheduled. Perth has 60 auctions compared to 34 last week. There are 16 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Mosman NSW which has 32 expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 9 November, 2014

There are 999 auctions scheduled this week in Melbourne compared to 1,123 for the same time last year. The most auctions will be found in Mount Waverley with 20 followed by 19 in St Kilda and 16 in Glen Waverley. With just under two months remaining in the year it is worth noting that October was a relatively good month for sellers with the growth in home values increasing more strongly than in August and September. The release this week of the RP Data CoreLogic Home Value Index showed that Melbourne house values rose by 2.1 per cent over the month and by 1.8 per cent over the last three months. Units saw a small rise of 0.5 per cent in the month and 2.2 per cent in the quarter. Over the more important longer term, the house value index outpaced units with a 9.5 per cent rise over this year compared to 3.1 per cent. Auction market conditions are similar to those in the private sale market. On a citywide basis, the time on market results for houses sold at private sale tightened again from 33 days to 31 days over the last week whilst vendor discounting remained stable at -4.8 per cent. Key data Clearance rate week ending 2 November: 69.6 per cent Melbourne auctions expected week ending 9 November: 999 Melbourne private sales time on market week ending 2 November: 31 days houses Melbourne vendor discounting market week ending 2 November: -4.8 per cent houses Listings being prepared for market are 5.2 per cent higher in month ending 2 November seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Auction volumes rise 14% on 2013

RP Data National Auction Comment, week ending 16 November 2014 A preliminary weighted average clearance rate of 69 per cent was recorded this week across capital cities compared to 63.5 per cent last week and 67.4 per cent this time last year. Auction volumes were 14 per cent higher than this time last year due to increased listings in both Sydney and Melbourne. Higher stock levels are providing increased opportunities for buyers in capital cities, especially in Melbourne. In Sydney the auction market returned to trend after the second highest volume this year. A preliminary clearance rate of 75.2 per cent recorded compared to 68.1 per cent last week and 75.3 per cent last year. In Melbourne a preliminary clearance rate of 66.7 per cent was recorded compared to 65.5 per cent last week and 69 per cent this time last year. Lower clearance rates have certainly been observed over the last three weeks. Analysis shows that they have returned to trend after what was in retrospect a strong early spring. In Brisbane a preliminary clearance rate of 45.3 per cent was recorded compared to 43.1 per cent last week. Adelaide recorded a clearance rate of 60.7 per cent compared to 57.4 per cent last week. In Canberra a clearance rate of 66 per cent was recorded. In Perth a clearance rate of 66.7 per cent was recorded. In Tasmania 4 auction sales were recorded and 3 homes were passed in. Robert Larocca RP Data Housing Market Specialist

Housing supply increases again after lowest clearance rate in 21 weeks

RP Data National Auction Preview, week ending 16 November 2014 There are 3,575 auctions scheduled across Australia this week. In capital cities there are 2,907 auctions expected compared to 2,814 for the same period last year. Last week the national clearance rate was the lowest for 21 weeks and it was the third consecutive week in which it fell. This trend is not unique and it happened last year as stock levels rose through November and December. Buyers looking for a home and buying at auction will welcome both the increased stock levels and lower clearance rate. There are 1,338 auctions scheduled in Melbourne this week, compared to 1,139 last week and 1,270 this time last year. It is interesting to note that the clearance rate has now fallen more than 10 points in the past two months. In Sydney RP Data is expecting 1,152 auctions compared to 1,261 last week and 1,099 for this week last year. Last week was the lowest clearance rate in Sydney in 21 weeks and provides a clear indication that the high stock levels are having an impact. Mosman has the highest volume of auctions for the second week in a row with 25 expected. In Brisbane 128 auctions are expected after 188 were held last week. Adelaide is expecting 143 auctions, compared to 131 last week. Canberra has 68 auctions scheduled compared to 141 last week. Perth has 47 auctions compared to 65 last week There are 7 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Bentleigh East VIC which has 29 expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 16 November, 2014

There are 1,338 auctions scheduled this week in Melbourne compared to 1,270 for the same time last year. The most auctions will be found in Bentleigh East with 29. Auctions are generally more popular in the most expensive segment of the market and some suburbs have been recording multiple sales in the ultra expensive category. A review of suburbs ranked by the number of sales valued at more than $2m over the last year shows that three had more than 100; Brighton, Toorak and Kew. Camberwell, Canterbury, Balwyn, Hawthorn and Malvern had between 50 and 100. Outside of the leafy inner east there were some interesting results in Hampton, Elwood, Ivanhoe and Richmond had between 10 and 20 sales over $2m. On a citywide basis, the time on market results for houses sold at private sale was stable at a very low 31 days over the last week and vendor discounting remained stable at -4.8 per cent. Key data Clearance rate week ending 9 November: 65.5 per cent Melbourne auctions expected week ending 16 November: 1,338 Melbourne private sales time on market week ending 9 November: 31 days houses Melbourne vendor discounting market week ending 9 November: -4.8 per cent houses Listings being prepared for market are 4.3 per cent higher in month ending 9 November seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Bentleigh soon to become a million dollar suburb…

The most recent update to the list of million dollar suburbs in Melbourne has seen 50 reach or exceed that mark. This is an increase of one on last month with Caulfield East joining the list. The median value of a house in that suburb is now $1,002,366. Prior to Caulfield East the other recent additions were Fairfield and Aberfeldie. Those additions meant that Melbourne now has million dollar suburbs in the north, east, south and west of the city. The list is headed by the usual suspects; Toorak, Deepdene, Canterbury, Kooyong and East Melbourne. The median house value in Toorak is now $2.85m and unlike the majority of million dollar suburbs this number has fallen over the last year. The suburbs next in line do not contain many surprises but can also tell us a lot about housing values in Melbourne. The suburbs that are within $20,000 of the million dollar mark are Prahran, Carlton North, Port Melbourne, Williamstown and Bentleigh. Bentleigh is quite typical of the next group of suburbs that will join the list. It would have been quite surprising a few years ago to think of Bentleigh houses costing this much but with 97 selling for over a million in the last twelve months it now a regular feature of the area. A cursory glance at the ‘for sale’ advertisements shows a suburb undergoing significant change with an increase in multi unit dwellings replacing the older homes on what are now large blocks. These homes coexist with a mixture of styles that are clearly proving to be very popular with buyers. Robert Larocca RP Data Victoria Housing Market Specialist

The proportion of investment lending hits a record high in September

The Australian Bureau of Statistics ABS published housing finance data for September earlier this week. The data showed that the proportion of lending to investors hit a record high in September. At the same time the data indicates that demand from owner occupiers is starting to slow. Over recent years the data on the value of housing finance commitment has, to my mind, become much more important to focus on. The main reason being that this is the only data from the ABS that tracks the level of investment lending. The above chart uses raw not seasonally adjusted data and uses a 12 month average to smooth the volatility of the data. Nevertheless you can see the ongoing decline in demand from owner occupier first home buyers and more recently a dip in commitments by owner occupiers that already own a home. Across the four borrower types listed you can see that investors now account for the greatest proportion of borrowings from Australian Authorised Deposit-taking Institutions ADIs . Seasonally adjusted data for September 2014 showed that the value of owner occupier refinance commitments was 0.6%, owner occupier commitments excluding refinances rose 1.8% and investor commitments were 3.7% higher. Year-on-year, owner occupier refinance commitments are 13.7% higher, owner occupier commitments excluding refinances are 3.4% higher and investor finance commitments are 25.4% higher. The above chart highlights a couple of important things. Firstly, while owner occupier refinances and new loans those excluding refinances have flattened over recent months it seems as if there has been a resurgence in investor demand. Secondly, this is the first time ever that the value of monthly investment loans $11.9 billion has been greater than the value of owner occupier new loans $11.8 billion . The seasonally-adjusted data for September showed that investor finance commitments accounted for an all-time high proportion of lending by Australian ADIs. Comparing lending to investors against owner occupier refinances and owner occupier new loans investors accounted for 41.4% of lending, owner occupier new loans were 40.8% and owner occupier refinances were 17.9%. The proportion of lending to investors is at a record high while the proportion of lending for owner occupier new loans is at a record low. Of course, there is only a certain amount that can be borrowed each month but it is clear demand is strongest from the investment segment. In fact, if you exclude refinances, a record high 50.2% of new loans written are to investors. The headline result that gets reported on each month is the number of owner occupier loans. Although it is a very valuable statistic, it should be read with caution because it is missing a significant proportion of the market, those represented by investors. Over the month, there were 51,465 owner occupier housing finance commitments, the lowest number since January 2014. Month-on-month the number of loans for refinancing of established dwellings was -2.9% lower while non-refinances increased by 0.5%. Like the value growth chart presented earlier, the above chart indicates that the number of loans to owner occupiers has flattened over recent months. As investor activity has risen, there has been a sharp drop-off in the number of loans to first home buyers. Although there is no data to support it there are plenty of anecdotal suggestions that many first home buyers are choosing to purchase investment properties rather than homes for owner occupation. Unfortunately, the ABS data only captures those homes purchased by first home buyers for owner occupation. Owner occupier first home buyer numbers continue to languish at near record low levels. In September, first home buyers accounted for 12% of all owner occupier finance commitments however the number of loans actually rose by 4.7%. As mentioned earlier, the value of investment loans is at a record high, the previous peak was October 2003 and at that time investors accounted for a slightly higher 13.6% of all owner occupier housing finance commitments. What is more alarming is the drop off in volumes over recent years with that 13.6% actually being 8,481 finance commitments. The Reserve Bank RBA has already highlighted a number of times that they have some concerns with the heightened level of investment activity, particularly in Sydney and Melbourne. With the proportion of loans to investors hitting a new record high in September it will further re-iterate those concerns. The RBA has already flagged that themselves along with other regulators are already looking at ways to curb the level of investment however, they flagged in early September that any announcement would likely come by December. In the meantime, it looks like investor finance commitments have got another leg up and over the coming months we may see a further flurry of activity as investors look to enter the market prior to the implementation of any macroprudential curbs. With investor focus to-date very much on Sydney and Melbourne, it will be interesting to see if this remains the case when the lending finance data for September is released on Wednesday. If so, you do have to ask yourself what some of these investors are thinking. The housing markets in Sydney and Melbourne have been recording value growth since June 2012 and over that time value have increased by 29.8% and 20.7% respectively. Gross rental yields have fallen from 4.5% to 3.7% in Sydney and from 3.8% to 3.3% in Melbourne. I understand that investors need a return and aren’t getting that from keeping their cash in the bank but after almost two and a half years of value growth and a significant compression of rental yields you wonder how much value growth is left in these markets. Furthermore, with yields so low if there is little or no growth investors will be left with an asset that provides very little rental return.

National clearance rate of 63.7% recorded

RP Data National Auction Comment, week ending 9 November 2014 A preliminary weighted average clearance rate of 63.7 per cent was recorded this week across capital cities compared to 68.7 per cent last week and 68.3 per cent this time last year. It is interesting to note that due to an increase in the popularity of auctions more homes have been sold in Sydney at auction this year than Melbourne. This is the first time this has occurred. After this week there have been 24,590 auction sales in Sydney and 24,336 in Melbourne. In Sydney market a preliminary clearance rate of 69 per cent recorded compared to 75.6 per cent last week and 76 per cent last year. After a fortnight of mild improvement the ongoing high volumes are clearly having an impact with a lower clearance rate this week. In Melbourne there was a preliminary clearance rate of 63.8 per cent recorded compared to 69.6 per cent last week and 68.1 per cent this time last year. The market is shifting in favor of buyers at the right time of the year with a high volume of auctions expected between now and Christmas. In Brisbane a preliminary clearance rate of 45 per cent was recorded compared to 45.3 per cent last week. Adelaide recorded a clearance rate of 61.3 per cent compared to 57.4 per cent last week. In Canberra a clearance rate of 50.6 per cent was recorded. In Perth a clearance rate of 56.3 per cent was recorded. Robert Larocca RP Data Housing Market Specialist

Melbourne home values rise in October

Last month saw a new record week for auctions in Melbourne and an improvement in the whole residential market. In October there was a clearance rate of 70.5 per cent, down slightly from the same time last year when it was 71.5 per cent. The overall number of homes sold rose by 7.6 per cent with 3,551 selling compared to 3,300 in October last year. The performance of the auction market mirrored the broader one as shown in the RP Data CoreLogic Home Value Index for October. October was a relatively good month for sellers with the growth in home values increasing more strongly than in August and September. The index showed that Melbourne house values rose by 2.1 per cent over the month and by 1.8 per cent over the last three months. Units saw a small rise of 0.5 per cent in the month and 2.2 per cent in the quarter. More important, the longer term house value index outpaced units with a 9.5 per cent rise over this year compared to 3.1 per cent. Melbourne houses continued to return better capital gains based on strong supply in the more affordable unit markets. The Melbourne median house price was $615,000 based on the sales settled in the last three months. The unit median price was $472,000. Robert Larocca RP Data Victoria Housing Market Specialist

Why would deflation of our largest asset class be a good thing?

Balancing an economy is undoubtedly a tough ask for anyone. Our inflation targeting Reserve Bank looks to maintain inflation within a range of 2% to 3% on an annual basis over the cycle. Too much inflation is not ideal, nor is deflation, so the RBA tries to tweak monetary policy to stimulate the economy in order to see some inflation but not too much. If inflation runs too high consumption slows down as consumers simply can’t afford to purchase goods and services because they don’t have enough buying power. If deflation occurs consumers are also likely to stop spending because the value of any debt they have increases as opposed to reduces when there is inflation . Consumer buying power may increase during times of deflation; however the weak economic conditions that have caused prices to deflate are likely to also result in higher unemployment, a contraction in the number of jobs and a pessimistic consumer mindset. With the currently high levels of inflation in housing prices it stands to reason that the purchasing power of many consumers has diminished. When you think about the Australian housing market as a whole I don’t think anyone could argue that shelter in Australia is particularly affordable. In fact over the last two decades home values have increased at a rate much higher than inflation meaning that some in the community don’t have enough buying power to purchase shelter. As a result, many of these people are likely to rent. I am constantly surprised about articles and comments which seem to believe that a significant decline in Australian home values would be the preferred cure to housing affordability and a good outcome for the economy. If we look purely at the inflation and deflation argument some people would say we have had too much inflation of home values however, the solution to that problem is not to aim for deflating current home values. The Australian Bureau of Statistics ABS estimated that as at June 2014, the total value of Australia’s dwelling stock was $5.2 trillion and there were an estimated 9,366,800 dwellings across the country note that RP Data we estimate the total value of residential dwellings to be somewhat higher at $5.5 trillion as at June 2014 . To put this $5.2 trillion in dwellings into perspective, over the 12 months to June 2014, GDP, or the total output of the national economy, was recorded at $1.57 trillion. What this means is that the value of residential dwellings was more than three times greater than the annual output of the economy. According to data released by the Australian Prudential Regulation Authority APRA , Australian authorised deposit-taking institutions ADIs held $1.225 trillion in loans against these dwellings across 5,079,800 mortgages. So what do these figures tell us? 54.2% of dwellings across Australia have a mortgage to an Australian ADI and 23.6% of the total value of Australian dwellings is outstanding to Australian ADIs. The ratio of debt held against the total value of the housing asset class is very low however, this ratio includes all dwellings not just those where a mortgage is held . In the event of a downturn those with high leverage are likely to be much more significantly impacted. It also probably reflects that quite a lot of dwellings have no mortgage the 2011 Census indicated that roughly one third of Australia dwellings were owned outright while a proportion will also have mortgages sourced from non ADI lenders or offshore banks. Australian’s choose to hold a large proportion of their wealth in residential property; this is highlighted by the $5.2 trillion total value of residential dwellings. Data published quarterly by the Reserve Bank shows that while the typical household’s ratio of housing debt to disposable income in 137.1%, the typical household’s ratio of housing assets to disposable income is a much larger 433.6% making up 54% of the typical households assets. Over the past couple of decades Australian ADIs have shown a preference for lending to housing as opposed to lending for personal loans or to business. Of course, the ADIs have had good reason to preference housing lending; it has generally performed well with low mortgage arrears, the return on equity is strong, earnings from mortgages are consistent, higher risk loans are generally insured via lender’s mortgage insurance LMI , home values have generally trended higher and Australian’s tend to prioritise repayments of their mortgage. But this does not mean that home owners and the economy could withstand a significant deflation in home values. Nor does it mean that a significant deflation in housing values would be a tonic for those that can’t afford to own a house to finally achieve home ownership. Why would deflation in an asset which is more than three times larger than the annual output of the economy play out any better than deflation in an economic sense? In fact, were home values to deflate it could be argued that the whole economy would suffer as consumers stopped consuming. As consumers stop spending unemployment would likely rise, ADIs would stop lending and there is a high likelihood the Australian economy would enter a recession. Remember, it isn’t only those with a mortgage which would face the prospect of unemployment, so too would all those people who are yet to purchase a home waiting for the collapse to enter into the market at rock bottom prices. A more desirable solution to improve housing affordability in my opinion is to look for a more moderate level of growth in home values while improving both the supply and demand side of the equations. A sustained period in which home values grow at a rate below inflation would be an ideal way in which to improve affordability rather than a large-scale bust. Interestingly, as we showed in last week’s blog a number of cities have recorded value growth below the rate of inflation over a number of years now although this hasn’t been the case in Sydney and Melbourne . Housing booms make it harder for prospective home owners to enter into home ownership, however I would argue that busts are much worse. Furthermore the level of exposure to the housing market by ADIs and residents would mean a housing bust has much more far reaching repercussions for the economy. Although stress tests indicate that most ADIs could cope with a significant decline in home values the impact on households and the Australian economy as a whole would likely send Australian into a recession. This is why rapid deflation in home values is just as, if not more undesirable than rapid inflation and why the goal should be moderate growth in home values with a growth rate that broadly trends in line with household income growth over the cycle. If we want to reduce the cost of housing from its current level with minimal overall economic damage, home value appreciation below the rate of inflation for a number of years is what I see as an ideal solution. Of course achieving this means that governments need to address the factors that drive a high level of housing demand and those which constrain the overall supply of housing and drive the cost of this new supply higher.

This weekend’s national auction preview sees record auctions in Canberra

RP Data National Auction Preview, week ending 9 November 2014 There are 3,174 auctions scheduled across Australia this week. In capital cities there are 2,607 auctions expected compared to 2,548 for the same period last year. Canberra will have a record number of auctions this week, becoming the second capital city to post a record in the past few weeks. There are 999 auctions scheduled in Melbourne this week, compared to 220 last week and 1,123 this time last year. In October the clearance rate was 70.5 per cent, down slightly from the same time last year when it was 71.5 per cent. The overall number of homes sold rose by 7.6 per cent with 3,551 selling compared to 3,300 in October last year. In Sydney RP Data is expecting 1,112 auctions compared to 1,259 last week and 1, 043 for this week last year. After what had been a lackluster October, with 5.4 per cent fewer sales at auction than in September, vendors intending to sell over the next few weeks will have been pleased to see the moderate improvement last week. In Brisbane 174 auctions are expected after 246 were held last week. Adelaide is expecting 119 auctions, compared to 127 last week. Canberra has 136 auctions scheduled compared to 89 last week. This is the first time in history that the national capital has seen more than 100 auctions in a week. The previous high was 93 auctions in late November last year. The highest number of auctions will be found in Kambah and MacGregor, both of which have 8 scheduled. Perth has 60 auctions compared to 34 last week. There are 16 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Mosman NSW which has 32 expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 9 November, 2014

There are 999 auctions scheduled this week in Melbourne compared to 1,123 for the same time last year. The most auctions will be found in Mount Waverley with 20 followed by 19 in St Kilda and 16 in Glen Waverley. With just under two months remaining in the year it is worth noting that October was a relatively good month for sellers with the growth in home values increasing more strongly than in August and September. The release this week of the RP Data CoreLogic Home Value Index showed that Melbourne house values rose by 2.1 per cent over the month and by 1.8 per cent over the last three months. Units saw a small rise of 0.5 per cent in the month and 2.2 per cent in the quarter. Over the more important longer term, the house value index outpaced units with a 9.5 per cent rise over this year compared to 3.1 per cent. Auction market conditions are similar to those in the private sale market. On a citywide basis, the time on market results for houses sold at private sale tightened again from 33 days to 31 days over the last week whilst vendor discounting remained stable at -4.8 per cent. Key data Clearance rate week ending 2 November: 69.6 per cent Melbourne auctions expected week ending 9 November: 999 Melbourne private sales time on market week ending 2 November: 31 days houses Melbourne vendor discounting market week ending 2 November: -4.8 per cent houses Listings being prepared for market are 5.2 per cent higher in month ending 2 November seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Sydney leads way from the weekend’s auction market results

RP Data National Auction Comment, week ending 2 November 2014 A preliminary weighted average clearance rate of 71.1 per cent was recorded this week across capital cities compared to 69.3 per cent last week and 70.3 per cent this time last year. With volumes low in Melbourne due to the Melbourne Cup the main activity in the auction market was in Sydney which had its eighth week with over 1,000 auctions for the year and continued to record above trend results. The Sydney market continues to strengthen with a preliminary clearance rate of 78.5 per cent recorded compared to 74.8 per cent last week and 75 per cent last year. The improving trend is apparent over the medium term as well with a citywide clearance rate the first ten months of the year of 75.1 per cent compared to 72.5 per cent a year ago. In Melbourne there was a preliminary clearance rate of 68.2 per cent recorded compared to 71 per cent last week and 70.8 per cent this time last year. From a clearance rate perspective the Melbourne market is marginally down on a year ago with a year to date clearance rate of 68.9 per cent compared to 69.6 per cent. In Brisbane a preliminary clearance rate of 47.3 per cent was recorded compared to 46.3 per cent last week. The Brisbane auction market is stronger than a year ago with a clearance rate of 46.3 per cent compared to 41.2 per cent. Adelaide recorded a clearance rate of 61.5 per cent compared to 56.5 per cent last week. In Canberra a clearance rate of 70.6 per cent was recorded. In Perth a clearance rate of 46.7 per cent was recorded. Robert Larocca RP Data Housing Market Specialist 0409 198 350

Growth in Sydney volumes after records in Melbourne

RP Data National Auction Preview, week ending 2 November 2014 There are 2,380 auctions scheduled across Australia this week. In capital cities there are 1,830 auctions expected compared to 1,668 for the same period last year. National auction numbers are lower this week – all due to the break for Tuesday’s Melbourne Cup horse race. There are 175 auctions scheduled in Melbourne this week, compared to 1,837 last week and 196 this time last year. After final results were collected last week’s 1,837 auctions broke the previous record by 13.5 per cent. In Sydney RP Data is expecting 1,159 auctions compared to 961 last week and 1,105 for this week last year. This is the first weekend of the spring selling season with more than 1,000 auctions and the eighth for the year. The fact that at this stage last year there had been none provides another example of how volumes have risen this year. Auction volumes are increasing in Brisbane with 216 auctions expected after 211 were held last week. They are also well up on last year when there was only 133. The highest volume of auctions this week is expected in Ascot, which has 9. Adelaide is expecting 159 auctions, compared to 127 last week. Canberra has 77 auctions scheduled compared to 56 last week. Perth has 23 auctions compared to 34 last week There are 16 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Maroubra which has 22 expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

Inflation adjusted home values have only risen over recent years in Sydney, Melbourne, Darwin and Canberra

Earlier this month the Australian Bureau of Statistics ABS released its quarterly Consumer Price Index CPI or inflation figures. The data showed that over the September 2014 quarter, inflation was recorded at 0.5% and over the 12 months to September 2014 it was recorded at 2.3%. The Reserve Bank has a target range for annual inflation of 2% to 3% and inflation is currently at the lower end of this range. It is important to note that inflation appears to be slowing, recorded at an annualised rate of just 1.8% over the past six months. With the release of CPI data we can also get a picture of what is happening with home values when adjusted for the effects of inflation. Over the 12 months to September 2014, combined capital city home values have increased by 9.3% in nominal terms according to the RP Data CoreLogic Home Value Index, in ‘real’ terms home values have risen by 6.8% over the past 12 months. The impact of inflation is important to consider, as you will note from the above chart. For example in nominal terms home values recorded no annualised falls from September 1998 until December 2008. In real terms, values were falling from December 2004 to December 2005. Of course when you adjust for inflation, real growth in home values is more moderate than in nominal terms. Across the combined capital cities, home values have increased by 9.3% over the past year, 3.8% pa over the past five years, 4.7% pa over the past decade and 7.4% pa over the past 15 years in nominal terms. Adjusting for inflation shows that real gains have been significantly lower. Over the past year real capital city home values are 6.8% higher, over the past five years they are 1.2% pa, over the decade they have risen by 1.9% pa and over the past 15 years they are up 4.3% pa. Home values rose at a rate well above inflation between 1999 and 2004 and again over the past 12 months however over the past five and 10 years overall home value growth has been less than 2% greater than the rate of inflation. Sydney and Melbourne have been the strongest capital cities for value growth over the past year and consistently over recent years. In nominal terms, values have increased by 14.3% and 8.1% respectively over the past year. As the above chart shows, when you adjust the growth in values for the effects of inflation, the level of growth is lower. Note that real home values have still increased in each capital city except for Canberra over the past year. Although, outside of Sydney, Melbourne and Darwin the rate of growth has been 4.0% or less in all cities. As we have already highlighted, real home value falls are much more frequent than falls in nominal terms. This is also the case across the individual capital city markets. As you can note from the above chart, outside of Sydney and Melbourne, real increases in home values over the past two years have been minor. Combined capital city home values began to recover from the financial crisis at the beginning of 2009 after reaching a low point in December 2008. Since that time, nominal home values have increased by 34.0% across the combined capitals, largely driven by increases of 51.2% in Sydney and 44.9% in Melbourne. Notably, Brisbane 6.0% , Adelaide 10.9% , Perth 14.5% and Hobart -1.6% have all recorded nominal gains of less than 15% since December 2008. In real terms, between December 2008 and September 2014, combined capital city home values have increased by a much lower 16.5%. Across the individual capital cities, real changes in home values between December 2008 and September 2014 have been recorded at: 31.6% in Sydney, 26.1% in Melbourne, -8.0% in Brisbane, -3.7% in Adelaide, -0.6% in Perth, -14.7% in Hobart, 11.0% in Canberra and 5.1% in Darwin. The next time you hear someone talk of the booming national housing market remember these statistics. Yes combined capital city home values are rising and this is due to the influence of the Sydney and Melbourne housing markets where values are rising. Real home values in Brisbane, Adelaide, Perth and Hobart are still lower than they were before the financial crisis and have seen no real growth in more than six years. The data also seemingly indicates that low interest rates are not necessarily the driving factor behind the current growth in the housing market. If this was the case we would more than likely be seeing a more broad-based rise in home values. The growth in home values has been contained to Sydney and Melbourne and to a lesser degree Darwin and Canberra. No wonder the Reserve Bank has flagged that monetary policy has largely done all it can and now fiscal policy has to do some of the heavy lifting. Lower interest rates have encouraged rises in values in Sydney and Melbourne accompanied by a substantial lift in activity by investors. However, outside of Sydney and Melbourne the housing market response, in terms of value growth, has been quite muted. Supply is responding across most cities which is certainly a desirable outcome. Yet despite real value falls over a number of years in Brisbane, Adelaide, Perth and Hobart, low mortgage rates and increasing new supply has not yet resulted in an ongoing rise in home values. Of course this is not necessarily a bad thing but is somewhat surprising given the experience in Sydney and Melbourne. I think what we are seeing is a case whereby our largest capital cities are further separating themselves from the rest of the pack. Sydney has pretty much always been the most expensive capital city market and this remains the case but we are now also seeing Melbourne separate itself from the remaining cities. Another factor driving the rising demand are potentially a greater number of overseas buyers investing in our two largest cities unfortunately data capture is such that we don’t really know for sure . Furthermore both New South Wales and Victoria are experiencing a much lower outflow of residents to other states than they have in the past. Finally, the economies of Sydney and Melbourne are much more diversified economies than those of the other capital cities which tend to be much more narrowly focussed. This is likely to be a key driver of higher housing demand and stronger value growth in these cities compared to the other capitals with a greater variety of job options available in these cities. As home values continue to rise in Sydney and Melbourne lower income families and first home buyers may find it more difficult to enter the market. This may result in some buyers looking to other capital cities in which to purchase homes. Of course, if the purchase is for owner occupation, the narrower economies may make it more difficult for these home owners to find appropriate employment in their new cities.

RP Data Auction Market preview, Melbourne; Week ending 2 November, 2014

There are 175 auctions scheduled this week in Melbourne compared to 196 for the same time last year. The low volumes are a result of the Melbourne Cup on Tuesday and ensure that the week’s auction results will not be a useful auction market indicator. Last week’s record volume of auctions and sales provides a clear indication that the remaining 7 weeks should provide healthy outcomes for sellers. On a city wide basis, the time on market results for houses sold at private sale tightened again from 36 days to 33 days over the last week whilst vendor discounting remained stable at -4.8 per cent. Key data Clearance rate week ending 26 October: 71 per cent Melbourne auctions expected week ending 2 November: 175 Melbourne private sales time on market week ending 26 October: 33 days houses Melbourne vendor discounting market week ending 26 October: -4.8 per cent houses Listings being prepared for market are 4.7 per cent higher in month ending 26 October seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Melbourne auctions providing growth in transactions

Melbourne property market transaction numbers are marginally higher on what they were this time last year with the growth largely coming through auction sales. Comparing the months with the vast majority of settled sales, from January to July, the results show a rise of 3.7 per cent compared to a year ago. On a month by month basis, the majority of the growth occurred in March and April when in excess of 1,000 auctions were recorded across 5 consecutive weeks. This same occurrence also took place between 2012 and 2013. In 2013 there were 9,738 more home sales in Melbourne than in 2012 and there were 10,175 extra sales by auction. The growth in volumes was completely accounted for through the use of auctions. The same seems to be the case this year. Based on the first seven months of the year, there have been 1,725 more home sales and at the same time 3,248 more sales by auction. These numbers highlight one of the key characteristics about auctions and where they work well when there is competition between buyers. Competition such as this can arise through many means; there may be an inadequate number of homes on the market or something unique about the property in question. This is why auctions are rarely used in the outer suburbs and more frequently used in the inner city. When making the decision of how to sell, owners would be well advised to keep this factor in mind and listen to the advice of their real estate agent. Robert Larocca RP Data Victoria Housing Market Specialist

Records broken in auction market

RP Data National Auction Comment, week ending 26 October 2014 A preliminary weighted average clearance rate of 70.5 per cent was recorded this week across capital cities compared to 68.6 per cent last week and 71.8 per cent this time last year. This was a strong week for auctions nationally and results suggest that the remaining eight weeks should provide good outcomes for sellers and plenty of choice for buyers. In Sydney a preliminary clearance rate of 78.1 per cent was recorded compared to 72 per cent last week and 79.7 per cent last year. After two lackluster weeks the Sydney market has returned to trend. In Melbourne there was a preliminary clearance rate of 70.6 per cent recorded compared to 71.7 per cent last week and 71.9 per cent this time last year. Not only were there a record number of auctions but a record number of homes sold at auction with the previous high of 1,163 from a year ago surpassed. In Brisbane a preliminary clearance rate of 50.6 per cent was recorded compared to 46 per cent last week. Adelaide recorded a clearance rate of 55.6 per cent compared to 53.3 per cent last week. In Canberra a clearance rate of 58.3 per cent was recorded. In Perth a clearance rate of 28.6 per cent was recorded. Robert Larocca RP Data Housing Market Specialist

Record volumes in Melbourne as national auctions exceed 3,000 mark

RP Data National Auction Preview, week ending 26 October 2014 There are 3,434 auctions scheduled across Australia this week. In capital cities there are 2,883 auctions expected compared to 2,941 for the same period last year. With a record volume expected in Melbourne this week it is interesting to reflect on the highest volumes in other capital cities. Sydney’s record was 1,496 in April this year, in Adelaide the record of 188 was posted in April 2011, in Brisbane it was 245 in December last year, Canberra saw 93 auctions in November last year and in Perth it was 79 in early December last year. There are 1,641 auctions scheduled in Melbourne this week, compared to 1,167 last week and 1,619 this time last year. This will be a new all time record for the number of auctions in a week in Melbourne, exceeding the previous record set last year Based on the past fortnight, the Sydney auction market appears to have softened marginally. In Sydney RP Data is expecting 859 auctions compared to 929 last week and 927 for this week last year. The most auctions will be found in Randwick where 14 are expected Brisbane is expecting 184 auctions after 159 were held last week Adelaide is expecting 115 auctions, compared to 103 last week Canberra has 52 auctions scheduled compared to 55 last week Perth has 22 auctions compared to 23 last week There are 13 auctions scheduled in Tasmania Across Australia, the highest volume of auctions will be in Brighton Vic and Richmond Vic each of which has 27 expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 26 October, 2014

There are 1,641 auctions scheduled this week in Melbourne compared to 1,619 for the same time last year. This is an all time record for the Melbourne auction market. This highest volume of auctions will be found in Brighton and Richmond where 27 are expected followed by 25 in Hawthorn, 24 in Reservoir and 23 in both Brunswick and St Kilda. Prior to this week, the previous record number of auctions was the same week last year. Over the past few years this week in October has regularly featured the peak number of auctions for each of the years as sellers avoid the following week due to Derby Day and the Melbourne Cup. On a city wide basis, the time on market results for houses sold at private sale tightened from 37 days to 36 days over the last week whilst vendor discounting fell from -4.9 per cent to -4.8 per cent. Key data Clearance rate week ending 19 October: 71.2 per cent Melbourne auctions expected week ending 26 October: 1641 Melbourne private sales time on market week ending 19 October: 36 days houses Melbourne vendor discounting market week ending 19 October: -4.8 per cent houses Listings being prepared for market are 4.7 per cent higher in month ending 19 October seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Record interstate migration to Victoria, while mining states are at or approaching record low interstate migration flows

The speed of population growth into Australia has been winding down since reaching a recent annual peak in December 2012 when the national population grew by 1.78% over the year. With overseas migration moderating and a slowdown in the rate of natural increase, the annual rate of population growth across the country has slipped to 1.69% over the year ending March 2014. The more timely overseas arrivals and departures data indicates that net overseas migration to Australia is continuing to slow down, so we should expect the rate of population growth to continue tapering over the near term. Across the states there is a third component of population growth; interstate migration flows. The trends of migration flows between the states has been changing over the past few years with the mining states demonstrating a sharp slowdown in both overseas migration flows as well as less net migration across the state borders. Conversely, the non-mining states are seeing a pick-up in interstate migration flows as workers ‘bounce’ back from resources sector jobs that are no longer there. The following dashboards highlight the interstate migration flows for each state; what are the overall interstate migration trends, where are the migrants coming from and where are they going to? Across NSW interstate migration remains in negative territory in fact there hasn’t been a single period over the ABS historical series where net interstate migration has moved into positive territory in NSW . With a net interstate migration figure of -1,036 over the twelve months ending March 2014, this is the smallest net loss of interstate migrants for NSW on record. The improved interstate migration figures are largely being driven by an improvement in net migration between Queensland where the net rate of interstate migration was at a record low of -4,786 over the year to March 2014. To provide some context, in 2003 the net interstate migration deficit between NSW and Qld was just under 26,000. Victoria is now the national leader for interstate migration, taking the title away from Queensland since the September quarter last year based on annual net migration figures. Net interstate migration into Victoria is currently at a record high with a net 2,468 more residents moving to the state from other regions of Australia. Net migrants from NSW were the most substantial interstate contributors to Victorian population growth; however the trend of interstate arrivals from the mining states to Victoria is at record levels and trending higher. Queensland is no longer attracting the largest number of net interstate migrants, falling to second position after Victoria since the September quarter last year. Over the year to March 2014 the state of Queensland attracted an additional 5,772 net interstate migrants which is only slightly higher than the previous all-time low of 5,384 net interstate migrants recorded over the year ending December 2010. Net interstate migration into South Australia hasn’t changed a great deal over recent years with the quarterly rate of net migrants typically bouncing between -1,500 and -500 over the past decade. The largest portion of state residents are lost to Victoria, where over the year ending March 2014 there was a net interstate loss of 1,827 residents to Victoria. Western Australia still lays claim to the title of ‘fastest growing state’ with an annual population growth rate of 2.5%, there has been a consistent moderation in the rate of growth since a recent annual peak of 3.72% over the year ending September 2012. WA is still attracting a positive net interstate migration rate, however there were only 256 net interstate migrants to WA over the March quarter, down from a recent high of 3,395 over the March quarter of 2012. Net interstate migration into Tasmania has remained in negative territory since late 2010, however the trend is showing some constancy and is now approaching a neutral rate of interstate migration. The last time net interstate migration was substantially positive into Tasmania was between 2003 and 2004 when housing markets were booming.

Fairfield joins group of suburbs with million dollar median

The RP Data CoreLogic Home Value Index for September showed a minor easing in Melbourne dwelling values over the month and a moderate rise in the quarter. Dwelling values in Melbourne dropped by 0.8 per cent in the month of September. This will be welcomed by those looking to buy this spring and summer. The traditional rise in supply is clearly helping to address buyer demand. Over the quarter a 3.8 per cent rise has been recorded in house values and 7.2 per cent this year. Growth in values was concentrated in the first two months of the quarter. Analysis of property values by suburb over the quarter showed that the strongest growth in house values were in the inner east. Armadale saw a 25.4 per cent rise over the last year and similar growth was recorded in nearby Malvern East, Glen Iris and Camberwell. It is often the case that in an improving market the most expensive segment records the strongest increase in values. It was also interesting to note that Fairfield joined neighbouring suburb, Alphington, as a suburb with a median house value of in excess of a million dollars. Buyers who can’t afford Mont Albert or Balwyn are gravitating north of the Yarra. Unit values were stable with a 0.1 per cent rise in the month but they still showed very low growth this year with a 2.6 per cent rise in 2014 so far. Over 1,000 more homes were sold at auction this quarter than in the September quarter last year. The clearance rate was stable, 71.6 per cent compared to 71.4 per cent last year but there was a 17.6 per cent rise in auctions and 18 per cent rise in homes sold. Similar to the growth in values over the last year, this reflects an improving market and increased use of auctions. See full list of HOUSE results See full list of UNIT results Robert Larocca RP Data Victoria Housing Market Specialist

Is this the biggest week ever in Melbourne real estate history?

This week will be a record for the Melbourne auction market with 1,641 auctions scheduled. This exceeds the previous record of 1,619 on the same weekend last year. Will it be the biggest auction week ever? That may depend on your perspective. After all, is ‘big’ defined as the volume of auctions, the number sold or the clearance rate? In the past 6 years there have been 45 weeks with more than 1,000 auctions while the vast majority in the past few years, for instance in both 2008 and 2009, there were just two. In recent times, the symbolic barrier of 1,000 has been regularly exceeded, 1,500 auctions is probably a more useful indicator of very high listings; it was only exceeded five times before this weekend. That occurred in the following instances; 1,619, in week ending 27 October 2014 1,616, in week ending 15 December 2014 1,598, in week ending 1 December 2013 1,535, in week ending 8 December 2013 1,530, in week ending 13 April 2014 A high volume of auctions is an interesting market indicator but for many the number sold is probably more important. In that case there has only been five weeks with more than 1,000 home sold at auction, they were; 1,163, in week ending 27 October 2013 1,085, in week ending 1 December 2013 1,050, in week ending 15 December 2013 029, in week ending 23 February 2014 1,021, in week ending 2 March 2014 The final statistic that may prove useful in analysing this week’s auctions is the top 5 clearance rates over the 45 weeks with more than 1,000 auctions. All are likely to be higher than what is recorded this week. 7% in week ending 28 March 2010 from 1,111 auctions 8% in week ending 28 February 2010 from 1,124 auctions 4% in week ending 13 December 2009 from 1,189 auctions 6% in week ending 29 November 2009 from 1,185 auctions 6% in week ending 2 March 2014 from 1,334 auctions Robert Larocca RP Data Victoria Housing Market Specialist

On trend result in capital city auctions

RP Data National Auction Comment, week ending 19 October 2014 A preliminary weighted average clearance rate of 68.5 per cent was recorded this week across capital cities compared to 67.8 per cent last week and 70.4 per cent this time last year. This result is consistent with the years trend. The year to date clearance rate for capital cities was 68.3 per cent before this week In Sydney a preliminary clearance rate of 75.5 per cent was recorded compared to 71.9 per cent last week and 79.5 per cent last year. Despite the clearance rate not being higher than a year ago the auction market has improved with more homes being sold. In Melbourne there was a preliminary clearance rate of 68 per cent recorded compared to 70 per cent last week and 68.6 per cent this time last year. Concerns the auction market was beginning to weaken have not been added to this week. Next week will prove an interesting test with a record of around 1800 auctions scheduled. In Brisbane a preliminary clearance rate of 50.5 per cent was recorded compared to 48.8 per cent last week. Adelaide recorded a clearance rate of 50 per cent compared to 55.8 per cent last week. In Canberra a clearance rate of 50 per cent was recorded and in Perth a clearance rate of 60 per cent was recorded. Robert Larocca RP Data Housing Market Specialist

Where to find falling rents in Melbourne

Growth in advertised median rents remains low across Melbourne but with significant localised variations. In the current market this makes it important for renters to shop around as much as possible. In the last year the median advertised rent on a weekly basis for a house in Melbourne has increased by 2.8 per cent to $447. In the last quarter it actually fell by a minor 0.1 per cent. In dollar terms, as many renters will assess the matter, the increase has been $13 per week. Over the last two years it has been $21 per week. To put this into context, over the same time in 2010 median advertised rents increased by $25 in one year alone. Pressure in the rental market has clearly eased and the market has shifted in favour of renters. At a suburban level, rents have fallen in many areas. Over the last year the largest falls in rents was recorded in our most expensive suburbs. For instance advertised rents in Middle Park have dropped 11.4 per cent, in Brighton by 10.5 per cent and Sandringham by 9.1 per cent. With median house rents of more than $700 per week that does not affect a large number of renters. Looking around the middle of the rental market for houses, between $400 and $500 per week, advertised rents have also fallen in many suburbs, but by a smaller amount. Eltham, Ascot Vale, Box Hill and Burwood are good examples. No increase has been recorded in Wantirna South, Thornbury, Oakleigh or Doncaster. Advertised rents have increased, but by less than the metropolitan wide number in Brunswick, Seddon and Blackburn South. At the other end of the spectrum, rents have risen in some suburbs. In Newport, Kensington, Chadstone, Flemington, Ashburton and Glen Waverly increases of 4 per cent or more have been recorded over the past 12 months. In the unit market the rapidly increasing supply restraining growth in values is also affecting the rental market. In the last year the median advertised rent on a weekly basis for a unit in Melbourne has increased 2.1 per cent to $398. In the middle of the unit market rents have fallen in Clifton Hill, Brunswick East, Windsor and Richmond. Clearly it is worth shopping around if you are renting. Robert Larocca RP Data Victoria Housing Market Specialist

Small rise in national clearance rate over last 4 weeks

RP Data National Auction Preview, week ending 19 October 2014 There are 2,638 auctions scheduled across Australia this week. In capital cities there are 2,209 auctions expected compared to 2,370 for the same period last year. With the exception of Adelaide, Canberra and Tasmania capital city clearance rates strengthened or remained stable across Australia when compared to the past 4 weeks and rest of the year. This improvement is generally small – for instance nationally the clearance rate rose from 68.2 per cent to 69.1 per cent. There are 1,043 auctions scheduled in Melbourne this week, compared to 1,123 last week and 1,124 this time last year. Based on settled sales this year the proportion of homes sold at auction has increased from 25 per cent a year ago to 30.8 per cent this year. Melbourne is on track for the highest overall volume and proportion of homes sold at auction ever. In Sydney RP Data is expecting 856 auctions compared to 918 last week and 913 for this week last year. The highest volume of auctions will be in Paddington with 18 expected, followed by Randwick and Strathfield with 14. Brisbane is expecting 134 auctions after 167 were held last week. Adelaide is expecting 98 auctions, compared to 115 last week. After a comparatively strong September the auction market has cooled in October, but still remains above trend for the year. Canberra has 47 auctions scheduled compared to 55 last week. Perth has 18 auctions compared to 25 last week There are 12 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in St Kilda Victoria with 23 expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

Mortgage demand still strong but easing

New data was released by the ABS last week on housing finance commitments which showed an ongoing slowdown in the pace of housing finance growth. The slower pace of growth in mortgages is another sign that housing market conditions are starting settle down. Excluding refinance loans, the number of owner occupier housing finance commitments was only 1.9% higher in August this year compared with August last year. The annual pace of owner occupier mortgage growth actually peaked in November last year at 16.1%. The slowdown in mortgage demand is also evident across the stronger investment sector of the mortgage market. Unfortunately, the ABS only publishes investor related housing finance data based on value rather than volume; however the slowdown is still evident. Growth in the value of investment loans has fallen to 27.6% from a recent high of 40% which was recorded in December last year. The value of owner occupier loans increased by a much lower 10.3% over the year, down from a recent peak of 20.3% in February this year. Growth of 27.6% over the past year for investment loans clearly still indicates that investor demand is racing along, however the downwards trend in the rate of growth should provide some reassurance that investor exuberance is slowly starting to dissipate.

RP Data Auction Market preview, Melbourne; Week ending 19 October, 2014

There are 1,043 auctions scheduled this week in Melbourne compared to 1,124 for the same time last year. The highest volume of auctions is in St Kilda with 23 expected followed by Reservoir with 22 and Kew with 19. In the auction market the increased volume has shifted the market in favor of buyers with a lower clearance rate resulting from the almost 2,000 auctions held over the past fortnight. In the private sale market however sellers are seeing a peak in demand with lower days on market and reduced discounting prevalent. On a city wide basis, the time on market results for houses sold at private sale tightened from 40 days to 37 days over the last week whilst vendor discounting fell from -5.1 per cent to -4.9 per cent. Key data Clearance rate week ending 12 October: 70 per cent Melbourne auctions expected week ending 19 October: 1,043 Melbourne private sales time on market week ending 12 October: 37 days houses Melbourne vendor discounting market week ending 12 October: -4.9 per cent houses Listings being prepared for market are 4.3 per cent higher in month ending 12 October seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Volumes rise, auction market improves

RP Data National Auction Comment, week ending 12 October 2014 A preliminary weighted average clearance rate of 68.7 per cent was recorded this week across capital cities compared to 66.9 per cent last week and 72.5 per cent this time last year. Volumes are rising and are projected to reach a high in the last week of October in what will be a significant test for the market, especially in Melbourne with a new record likely to be set. In Sydney a preliminary clearance rate of 75.8 per cent was recorded compared to 76.4 per cent last week. It is interesting to note that there have been 43 per cent more auctions this year than was the case last year, remarkably the clearance rate has not been significantly affected. It is also interesting to note than in another record, 27 per of homes sold this year have been at an auction compared to 17 per cent a year ago. In Melbourne there was a preliminary clearance rate of 67.2 per cent recorded compared to 69.1 per cent last week and 74 per cent this time last year. This was the 15th week with in excess of 1,000 auctions. In Brisbane a preliminary clearance rate of 54.2 per cent was recorded compared to 47.4 per cent last week. Adelaide recorded a clearance rate of 58.7 per cent compared to 53.7 per cent last week. In Canberra a clearance rate of 56.4 per cent was recorded. In Perth a clearance rate of 33.3 per cent was recorded. Robert Larocca RP Data Housing Market Specialist

In June quarter Boorandara sellers made $331m in profit

Over the second quarter of 2014 RP Data recorded 70,357 residential property re-sales nationally; of these, 9.0 per cent recorded a gross loss from the original purchase price. In Melbourne sellers recorded better results than those nationally. The report shows that 6.6 per cent of Melbourne homes re-sold over the June 2014 quarter sold at a loss, down from 8.4 per cent at the same time a year ago and lower than the 7.5 per cent recorded a quarter ago. This is due to two reasons, the impact of the Global Financial Crisis is reducing as it becomes more distant and secondly, the market is in a rising part of the cycle. For sellers the best news is that more than a third, 36.8 per cent, sold their home for at least double what they paid. In regional Victoria this was lower, at 28.4 per cent. The best outcomes for sellers were found in different parts of Melbourne. A stunning 97.9 per cent of sellers in the City of Whitehorse sold at a profit. On the other side of the city, in Hobsons Bay 97.4 per cent sold at a profit, followed by 97.1 per cent in the City of Monash, 97 per cent in the City of Knox and 96.8 per cent in Bayside. On the city’s fringe a remarkable statistic was uncovered, in Murrindindi every single seller made money in nominal terms. Of course the largest aggregate profit on the sales was made in the inner east due to the highest underlying land values. In the City of Boroondara owners made a total of $331m in profit over the June quarter. Robert Larocca RP Data Victoria Housing Market Specialist

Investor owned dwellings are heavily concentrated within the inner city apartment markets

A large proportion of housing demand is currently being driven by investment. Unfortunately in Australia we only receive information on owner occupier and investment ownership of properties every five years with the Census. Because of this RP Data’s Analytics team have built a set of rules to determine the probability that a home is owned by either an investor, owner occupier or the Government. The Reserve Bank has specifically noted that they have concerns with the high level of speculative investor activity, specifically in Sydney and Melbourne. The following thematic maps show the capital cities and measure the proportion of homes owned by investors across each region. The geographic trends in investor activity are very clear from these maps; investors are heavily concentrated within the inner city apartment markets. The below maps clearly highlight that investors overwhelmingly focus their attention on inner city unit markets. When the Reserve Bank raised concerns that there is too much investor activity taking place, it is also clear that the concentration risk is very much centred geographically within these inner city unit markets. If we did see investors pulling out the market ‘en masse’ or investor demand dry up for one reason or another over a short frame of time, then there is a heightened risk of declines in market value.

Sydney on track for above trend result

RP Data National Auction Preview, week ending 12 October 2014 There are 2,679 auctions scheduled across Australia this week. In capital cities there are 2,177 auctions expected compared to 2,229 for the same period last year. After this week there are only 10 weekends left this year for auctions. Of the capital cities it is clear that Sydney will exceed the national trend from a clearance rate perspective, Melbourne is in line with the national trend and the other capital cities are below trend. This broadly reflects the overall performance of their residential markets this year. There are 992 auctions scheduled in Melbourne this week, compared to 912 last week and 1008 this time last year. Last week the lowest clearance rate in 9 weeks was recorded and provides evidence that the market is strong but not booming. In Sydney RP Data is expecting 850 auctions compared to 473 last week and 884 for this week last year. The use of auctions continues to rise in Sydney with 27 per cent of all residential sales by auction this year compared to 17 per cent last year. Brisbane is expecting 150 auctions after 117 were held last week. Paddington has the highest number of auctions with 7 expected, followed by Bardon and Sunnybank, each with 5. Adelaide is expecting 100 auctions, compared to 63 last week. Canberra has 53 auctions scheduled compared to 50 last week. Perth has 19 auctions compared to 23 last week. There are 5 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be in Mount Waverly Victoria with 19 expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 12 October, 2014

There are 992 auctions scheduled this week in Melbourne compared to 1008 for the same time last year the fourteenth week with over 1,000 auction this year . The highest volume of auctions will be in Mount Waverly with 19 expected. After a few weeks where sellers were holding the upper hand, last week showed that they still need to ensure that their sale price expectations are not too high. While the Melbourne market is healthy, it is recording more moderate growth that in the two previous upswings in 2007 and 2010. September quarter property values showed that the strongest growth in house values on a suburb basis were in the inner east. Armadale saw a 25.4 per cent rise over the last year and similar growth was recorded in nearby Malvern East, Glen Iris and Camberwell. It is often the case that in an improving market the most expensive segment records the strongest increase in values. It was also interesting to note that Fairfield joined its neighbor, Alphington, as a suburb with a median house value of in excess of a million dollars. Buyers who can’t afford Mont Albert or Balwyn are gravitating north of the Yarra. On a city wide basis, the time on market results for houses sold at private sale rose from 39 days to 40 days over the last week whilst vendor discounting fe;; from -5.3 per cent to -5.1 per cent. Key data Clearance rate week ending 5 October: 69.1 per cent Melbourne auctions expected week ending 12 October: 992 Melbourne private sales time on market week ending 5 October: 40 days houses Melbourne vendor discounting market week ending 5 October: -5.1 per cent houses Listings being prepared for market are 3.9 per cent higher in month ending 5 October seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

RP Data National Auction Comment; Week ending 5 October, 2014

A preliminary weighted average clearance rate of 65.7 per cent was recorded this week across capital cities compared to 70.9 per cent last week and 69.3 per cent this time last year. From an overall perspective this year’s market is clearly stronger than last year. So far this year there have been 68,651 auctions, 30.5 per cent more than this time last year. Over the same time an additional 12,274 homes have been sold at auction, 35.5 per cent more. Despite a stronger overall performance and more recently, five very strong weeks, the national clearance rate fell this week, primarily due to softening in demand in Melbourne. In Sydney a preliminary clearance rate of 77.4 per cent was recorded compared to 76.9 per cent last week. Volumes took a temporary drop this week due to the long weekend and NRL Grand Final. In Melbourne there was a preliminary clearance rate of 65.6 per cent recorded compared to 77.3 per cent last week and 71.3 per cent this time last year. This weeks result provides more evidence that the Melbourne market does have limits and sellers cannot have unrealistic expectations. In Brisbane a preliminary clearance rate of 52 per cent was recorded compared to 48.9 per cent last week. Adelaide recorded a clearance rate of 63.4 per cent compared to 65.6 per cent last week. In Canberra a clearance rate of 25 per cent was recorded. In Perth a clearance rate of 16.7 per cent was recorded. Robert Larocca RP Data Housing Market Specialist

1900 auctions expected across Australia this week

RP Data National Auction Preview, week ending 5 October 2014 There are 1,900 auctions scheduled across Australia this week. In capital cities there are 1,455 auctions expected compared to 1,501 for the same period last year. Volumes are again affected by sporting events, this time in Sydney. The impact is less than in Melbourne last week as the grand final for the NRL is not on a Saturday afternoon. If a national clearance rate in excess of 70 per cent is achieved this week it will the first time there have been six consecutive weeks over 70 per cent in the last year. Prior to that the last time that was the case was in 2009. This reflects the healthy selling conditions in the main auction markets nationally. There are 812 auctions scheduled in Melbourne this week compared to 112 last week and 866 this time last year. Over 1,000 more homes were sold at auction than in the September quarter last year. The clearance rate was stable, 71.6 per cent compared to 71.4 per cent last year but there was a 17.6 per cent rise in auctions and 18 per cent rise in homes sold. In Sydney RP Data is expecting 410 auctions compared to 933 last week and 398 for this week last year. The highest volume of auctions will be in Maroubra where 10 are expected, followed by 8 in Bellevue Hill. Brisbane is expecting 92 auctions after 179 last week. Adelaide is expecting 61 auctions, compared to 73 last week. Canberra has 49 auctions scheduled compared to 51 last week. Perth has 22 auctions compared to 6 last week. There are 11 auctions scheduled in Tasmania. Across Australia, highest volume of auctions will be in St Kilda Victoria with 19 expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

August 2014 building approvals

The Australian Bureau of Statistics ABS released building approvals data for August 2014 earlier today. At a headline level, dwelling approvals were 3.0% higher over the month and are now 14.5% year on year. With 16,810 approvals over the month there is clearly a strong level of residential development activity with monthly approvals just -5.0% lower than their recent peak. Of the 16,810 dwelling approvals in recorded over the month of August, 9,401 were for houses and the remaining 7,409 were mulit-unit dwellings typically apartments . Over the month, house approvals fell by -1.4% while unit approvals rose by 9.2%. Year-on-year, house approvals are 12.6% higher while unit approvals are up 17.1%. As the chart shows, the six month trend indicates a slowing of dwelling approval numbers and it also shows that monthly movements in unit approvals tend to be much more volatile. Also remember that a multi-unit development is more risky than developing a single house and ultimately less likely to ultimately be constructed. Focussing on dwelling approvals on an annual basis we have seen more house and unit approvals than ever before over the 12 months to August 2014. Over the 12 month period there were 197,571 dwelling approvals, of which 111,020 were for houses and 86,552 were units. The annual number of approvals has increased by 19.2% over the past year. Although approvals have surged, as the chart shows it is largely due to a significant lift in unit approvals. Although the number of unit approvals over the past year was at a record high, house approvals are still -6.8% lower than their previous peak over the year to July 2010 and -21.2% lower than their all-time high of 140,832 over the year to April 1989. Historically, units have been much less likely to move from approval to construction. Units also tend to be much more likely to be owned by investors than houses. With the Reserve Bank flagging that deliberations are ongoing into the introduction of macroprudential policies to slow the level of investor activity in the housing market, there is potentially an even bigger than normal risk that these units won’t make it to completion. Across the combined capital cities, there was an all-time high of 147,122 dwellings approved for construction over the 12 months to August 2014. The number of capital city dwelling approvals has increased by 21.9% over the past year. Over the year there were, 71,662 approvals for houses and 75,460 unit approvals with house approvals up 20.6% and unit approvals 23.2% higher. Much like the national results you can see that unit approvals are at their higher levels while house approvals are only just approaching their previous peak levels. Across the individual capital cities, Brisbane has recorded the greatest increase in dwelling approvals over the year 41.8% followed by: Perth 24.9% , Adelaide 24.0% and Sydney 23.3% . Dwelling approvals are lower over the year in Darwin -6.8% and Canberra -6.4% while Melbourne 16.3% and Hobart 19.4% have recorded only moderate rises in dwelling approvals. Despite certain cities recording significant rises in dwelling approvals, Sydney and Melbourne have accounted for more than 57% of all capital city dwelling approvals over the past year. With 26,123 dwelling approvals over the past year, approvals in Perth are at a record high while Brisbane approvals are just shy of their record high. A key driver of the overall increase in dwelling approvals has been the rising prominence of the unit market. Over the past year, the increase in unit approvals has been greater than the increase in house approvals in Sydney, Brisbane, Adelaide and Perth. Although unit approvals have recorded greater increases in these cities, there has been a substantial decline in unit approvals across Hobart and falls in both Darwin and Canberra. With more than half of all capital city dwelling approvals for units as opposed to houses, all individual capital cities except for Adelaide 31.8% , Perth 25.9% and Hobart 7.0% are seeing a majority of approvals for units. In Sydney, 67.7% of dwelling approvals were for units over the past year, elsewhere 53.0% were for units in Melbourne, 55.9% in Brisbane, 63.2% in Darwin and 57.9% in Canberra. Sydney has consistently approved more units than houses since 1993 and Darwin has consistently approved more units than houses since 2003, while across the other cities it is a relatively new phenomenon. Melbourne has only been approving more units than houses since mid-2012, in Brisbane it has occurred since mid-2013 and in Canberra since mid-2010. Of course there is increasing levels of demand for units but particularly in Melbourne and Brisbane the number of units in the pipeline is largely untested in the market. Furthermore, units tend to be more appealing to the investor market rather than owner occupiers. While demand may currently be strong it remains to be seen whether there is enough investor demand to satisfy all of the supply in the pipeline. Dwelling approvals remain at a very high level and with the rate of population growth slowing it is encouraging to see that supply is finally responding. With their lower price point compared to houses and superior rental returns no doubt we are seeing a rising level of demand for units, particularly in inner city markets. Of course the RBA has raised concerns about the level of investment lending which is most prominent for inner city units. If controls are introduced to slow the level of investment there may be an adverse impact on demand and subsequently values of inner city units, particularly new inner city units which are a strong target from the investment segment of the market.

Small drop in values gives Melbourne buyers breathing room

The RP Data CoreLogic Home Value Index for September showed a minor easing in Melbourne dwelling values that did not change the trend for 2014. Dwelling values in Melbourne dropped by 0.8 per cent in September.This will be welcomed by those looking to buy this spring and summer. The traditional rise in supply is clearly helping to address buyer demand. The trend for 2014 is still strong with a 6.7 per cent rise in dwelling values making Melbourne second only to Sydney across capital cities. House values fell by 1 per cent tempering the very strong rises in some recent months at just the right time for many active in the market. Over the quarter a 3.8 per cent rise has been recorded and 7.2 per cent this year. The median price of a house based on sales settled so far in the September quarter is $590,000. Unit values were stable with a 0.1 per cent rise in the month but they still showed very low growth this year with a 2.6 per cent rise in 2014 so far. Over 1,000 more homes were sold at auction than in the September quarter last year. The clearance rate was stable, 71.6 per cent compared to 71.4 per cent last year but there was a 17.6 per cent rise in auctions and 18 per cent rise in homes sold. Similar to the growth in values over the last year this reflects an improving market and increased use of auctions. Robert Larocca RP Data Victoria Housing Market Specialist

RP Data Auction Market, Melbourne; Week ending 5 October, 2014

There are 812 auctions scheduled this week in Melbourne compared to 866 for the same time last year. The highest volume of auctions will be in St Kilda with 19 followed by Glen Waverley and Mount Waverley, both with 17. This week will see the busiest period of the annual auction market begin. The high volumes do have an impact on the market. Last year there were 13,658 auctions held between the end of September and Christmas and a lower clearance rate was recorded than in the preceding 8 months. On a city wide basis the time on market results for houses sold at private sale fell from 41 days to 39 days over the last week whilst vendor discounting rose from -5.2 per cent to -5.3 per cent. Key data Clearance rate week ending 28 September: 77.2 per cent Melbourne auctions expected week ending 5 October: 812 Melbourne private sales time on market week ending 28 September: 39 days houses Melbourne vendor discounting market week ending 28 September: -5.3 per cent houses Listings being prepared for market are 3.4 per cent higher in month ending 28 September seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Top 5 for Ballarat residential real estate sales during 2013-2014 financial year

With the vast majority of homes sold in the last financial year now settled, it is possible to calculate some of the key numbers in the Ballarat market. Over the year a total of $639m was spent on houses in the City of Ballarat and $68m on units across 1,942 house sales and 281 unit sales. There were 12 million dollar house sales – the median value of a house was $301,001. The median house value rose by 7.1 per cent compared to 7.9 per cent in Melbourne. Largest growth in median house values by suburb; Golden Point, Soldiers Hill, Black Hill, Redan and Mount Pleasant Most house sales by suburb; Wendouree, Sebastopol, Alfredton, Ballarat East and Delacombe Most expensive suburbs by median house values; Lake Wendouree, Lake Gardens, Invermay Park, Mount Helen and Buninyong Most affordable suburbs by median house values; Sebastopol, Wendouree, Redan Mount Pleasant and Ballarat East Highest spend on houses; Alfredton $64m , Wendouree $48m , Sebastopol $42m , Ballarat Central $41m and Lake Wendouree $40m Suburbs with million dollar house sales; Lake Wendouree, Ballarat Central and Newington Suburbs with the highest proportion of houses advertised for sale; Ballarat Central, Miners Rest, Alfredton, Mount Clear and Newington Robert Larocca RP Data Victoria Housing Market Specialist

National auction market – 5 weeks over 70%

RP Data National Auction Comment, week ending 28 September 2014 A preliminary weighted average clearance rate of 72 per cent was recorded this week across capital cities compared to 70.8 per cent last week and 73.5 per cent this time last year. This is the fifth consecutive week where the national clearance rate has exceeded 70 per cent. In Sydney a preliminary clearance rate of 78.5 per cent was recorded compared to 78 per cent last week. This weeks result is above the year to date trend of 75.2 per cent. In Melbourne there was a preliminary clearance rate of 78.5 per cent recorded compared to 72.1 per cent last week. It needs to be noted that there was a very low volume this week. In Brisbane a preliminary clearance rate of 50 per cent was recorded compared to 38.9 per cent last week. Adelaide recorded a clearance rate of 67.4 per cent compared to 68.4 per cent last week. In Canberra a clearance rate of 41.2 per cent was recorded. Robert Larocca RP Data Housing Market Specialist

Auctions halved by AFL Grand Final

RP Data National Auction Preview, week ending 28 September 2014 There are 1,560 auctions scheduled across Australia this week. In capital cities there are 1,210 auctions expected compared to 1,243 for the same period last year, just under half compared to last week’s 2,530. With the AFL Grand Final on this Saturday in Melbourne, real estate agents generally advise sellers to avoid holding an auction. This also applies to Perth and Adelaide to a lesser degree. It’s unlikely that the AFL will have a negative impact on the spring market as volumes will increase again next week. There are 72 auctions scheduled in Melbourne this week compared to 1,221 last week and 92 this time last year. The busiest period of the residential real estate year commences next week and will run through until the third weekend in December. In Sydney RP Data is expecting 862 auctions compared to 883 last week and 891 for this week last year. Volumes may be similar to comparable weeks but that understates the significant rise in auctions this year. There have been 26,111 in Sydney this year, 8,191 more than this time last year at the same time the overall clearance rate has risen from 71.5 to 75.2 per cent. Brisbane is expecting 149 auctions after 154 last week. Adelaide is expecting 68 auctions, compared to 129 last week. Canberra has 47 auctions scheduled compared to 80 last week. Perth has 6 auctions compared to 47 last week. There are 13 auctions scheduled in Tasmania. Across Australia, the highest number of auctions is expected in the Sydney suburb of Maroubra where 12 are expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 28 September 2014

There are 72 auctions scheduled this week in Melbourne compared to 92 for the same time last year. Auction numbers are low this week due to the AFL Grand Final. Conditions in the private sale market are becoming more competitive with homes taking fewer days to sell and a lower vendor discount. Recent data shows that all of the top 10 suburbs when ranked by time on market are in the eastern suburbs. Rowville had the lowest number of days on market followed by Blackburn North, Croydon, Wantirna South and Vermont South. On a city wide basis the time on market results for houses sold at private sale fell from 44 days to 41 days over the last week whilst vendor discounting fell from -5.4 per cent to -5.2 per cent. Key data Clearance rate week ending 28 September: 72.1 per cent Melbourne auctions expected week ending 28 September: 72 Melbourne private sales time on market week ending 21 September: 41 days houses Melbourne vendor discounting market week ending 21 September: -5.2 per cent houses Listings being prepared for market are 2 per cent higher in month ending 21 September seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

The ‘sweet spot’ of Melbourne real estate

Real estate is a medium to long term investment and even though there is considerable focus on day to day and month on month changes, a review of activity over the last decade can be very illustrative and can be especially useful in revealing the areas of sustained strong demand. The period of 2004 to 2014 covers a very volatile time in the local market and thereby evens out the fluctuations over that time and roughly approximates the time most people owned a home for; this is therefore a realistic time for comparison. Ranking Melbourne suburbs by sales value growth since 2004 shows a clutch of 4 neighbouring suburbs where a increase in price has outstripped the rest of the city. These four suburbs are: Mont Albert, Mont Albert North, Balywn and Balwyn North. Each have recorded a compounding annual growth rate over the past decade of 9.2, 8.8, 8.8 and 8.7 per cent respectively. As evidenced by the rapid increase in sale prices, these suburbs have been in high demand from buyers for some time. They also outstripped the city-wide growth rate of 5.7 per cent for houses. And in the last year 8 of 10 houses have sold for more than a million dollars. Past performance is no guarantee of future performance so it is not time to rush out and buy a home in these suburbs, even if the million-dollar price was affordable. Twelve other suburbs also recorded an annual compounding growth of 8 per cent or greater, half of which were not in the eastern suburbs. These were Macleod and Alphington in the north-east, McKinnon, Elsternwick and Albert Park in the south and the newer suburb of Doreen. A change in sale price in Doreen reflects changes in the price of new homes as opposed to established homes and are less representative of market movements. Robert Larocca RP Data Victoria Housing Market Specialist

September 2014 Reserve Bank Financial Stability Review

The Reserve Bank released their bi-annual Financial Stability Review FSR earlier today. From a housing market perspective it makes for very interesting reading with the RBA noting that ‘the composition of housing and mortgage markets is becoming unbalanced, with new lending to investors being out of proportion to rental housing’s share of the housing stock.’ The RBA also states, ‘The Bank is discussing with APRA, and other members of the Council of Financial Regulators, additional steps that might be taken to reinforce sound lending practices, particularly for lending to investors.’ The FSR notes that household risk appetite continues to rise with households more willing to take on debt. Of course, with interest rates so low and subsequently both deposit and mortgage rates so low, there is little benefit in keeping money in a savings account so investors are turning their attention to the housing market. The FSR does highlight that the growth in home values is within the larger cities Sydney and Melbourne . Further, the FSR notes, ‘The apparent increase in the use of interest-only loans by both owner-occupiers and investors might also be consistent with increasingly speculative motives behind current housing demand.’ You may recall that APRA data showed a record high 43.2% of new loans over the June 2014 quarter were interest-only, up from 39.4% the previous quarter. The RBA notes that excess investor demand can exacerbate the housing price cycle and increase the potential for prices to fall later. They note that these risks are macroeconomic in nature rather than direct risks to financial institutions. While this may be true, with most investors borrowing from financial institutions, were these investors in a position where they had no choice but to sell at a time in which prices were falling, the risk to the banking sector of loss given default would also likely rise. The document also notes that the willingness of households to take on more debt is resulting in a rise in the debt-to-income ratio. It notes that although it is up a little over the past 6 months, it is still in its range of the past 8 years at around 150%. It notes that this ratio is historically high and any increase in household indebtedness would be taking place from an already high base. What this commentary fails to note is that the last update to this data was in March 2014 and at that time, the housing debt-to-income ratio rose to a record high 135.8%. With investment activity and home values continuing to rise since March, this ratio is now likely to be even higher. Although household debt levels are high, the document notes that the aggregate mortgage buffer balances in mortgage offset and redraw facilities has risen to around 15% of outstanding balances, which is equivalent to more than 2 years of scheduled repayments at current interest rates. Focussing specifically on the investor cohort of the housing market, the RBA notes that the momentum in investor activity has been concentrated in Sydney and to a lesser extent Melbourne. In New South Wales, investor housing loan approvals are almost 90% higher than they were 2 years ago and in Melbourne they are 50% higher over the same period. As a share of all housing finance commitments nationally they are back around previous peaks. At the same time the level of owner occupier demand has slowed over the past 6 months. The document notes that, ‘Strong investor demand can be a sign of speculative excess, with the risk that additional speculative demand can amplify the cycle in housing prices and increase the potential for prices to fall later. This is particularly the case if that demand is largely based on unrealistic expectations of future price growth, perhaps extrapolated from recent experience.’ In simple terms that means that too much lending to investors is potentially risky for the market and may result in price falls later, particularly if investors are entering the market expecting current price growth to continue. You only have to look at Sydney as an example. The last time investor activity in New South Wales spiked to similar albeit lower levels to those currently, home values in Sydney began to fall and took 5.5 years to surpass their previous peak. The report also notes that an increase in investor speculation can also potentially lead to an oversupply of new housing supply. The report notes that we are a long way from this occurring however, there are certain pockets where this is a risk, most notably inner city unit markets in Melbourne. The secondary risk here is that if there were too many smaller investment units built, whilst they may initially sell off-the-plan they might be much more difficult to sell in the secondary market. The FSR notes ‘Despite the activity and housing price inflation in the Sydney and Melbourne property markets, rental yields have not declined to a significant extent and vacancy rates in these cities remain fairly low However, rental yields may come under pressure if the momentum in housing price inflation continues. Households should therefore be mindful of the risks when making investment property decisions in these conditions.’ This is another statement that is somewhat difficult to reconcile. The RBA has correctly pointed out that price growth and investment activity is strongest in Sydney in Melbourne. In these two cities, rental yields have fallen over the past year. In Sydney, gross rental yields were 4.2% a year ago and in Melbourne they were 3.6%, across these cities they are currently recorded at 3.8% and 3.3% respectively. RP Data has been tracking yields since December 1995, the lowest they have been over that time in Sydney were 3.5% and they are currently at a record low in Melbourne. Overall it is important to note that the RBA is highlighting some growing risks in the residential housing market, specifically within Sydney and Melbourne. Note that some of these risks were highlighted six months ago in the previous FSR and these risks have increased since that time. It is interesting to note that the RBA has stated they are in discussions with APRA, and other members of the Council of Financial Regulators to see how they can reinforce sound lending practices. This suggests that Australian regulators may be seriously considering the introduction of macroprudential tools which place limits on higher risk lending. If the New Zealand experience is anything to go by where the RBNZ applied LVR limits on the lending sector , the introduction of macroprudential ‘speed humps’ are likely to have the effect of slowing housing market conditions and speculative demand, however the New Zealand policies were also accompanied by rising interest rates which arguably had a more substantial effect on the market slowdown.

Is there a shift in attitudes towards home ownership underway?

The state government recently delivered the final installment of its stamp duty cut for most first home buyers. Stamp duty is a significant impost on the purchase of a house, coming at a time when buyers, and in particular first home buyers, need every cent they can get. As stamp duty bills are generally unwelcome it is surprising to see the change in the market. When the first 20 per cent cut was made in July 2011 first home buyers accounted for 17.2 per cent of all dwellings financed in Victoria. According to the ABS there were 2,036 dwellings financed for first home buyers that month. Fast forward to the most recent housing finance data, for July this year and the proportion fell to 11.3 per cent, or 1,691 in raw numbers. Oddly the state has given first homer buyers an effective saving of $10,985 on a $500,000 home, when interest rates are at record lows and they appear to have decided, in unprecedented numbers, to stop buying. When the initial fall in first home buyer activity occurred, in July last year, it seemed a temporary reaction to the ending of the $7,000 First Home Owners Grant. Since then the value of the duty cut has grown to exceed the value of the old grant for most first home buyers. Since 1991 first home buyers have accounted for 21.5 per cent of all loans in Victoria, over the last year it has been 12.2 per cent, nearly half. July was an all time low at 11.3 per cent. Interestingly Victoria is not alone. In NSW first home buyers accounted for 17.6 per of dwellings financed since 1991 and 7.6 per cent in the last year. In Queensland the long term average of 20 per cent has also plummeted, to 11.4 per cent in the past year. Given different incentives apply across the nation and first home buyer activity has been significantly higher in other times of rising prices, with higher interest rates, it suggests that something else is going on. Affordability issues are a legitimate concern but the question must be asked, is this significant drop in first home buyer activity part of a change in the home buying aspirations of young people in Victoria and what will it mean for the structure of the residential market in 10 years time? After all the progression of first home buyers through the market, as they sell the first home to upgrade to the second is an important factor in real estate. It helps supply the market with comparatively affordable homes and provides buyers for more expensive ones. Robert Larocca RP Data Victoria Housing Market Specialist

National clearance rate of 69.2% recorded over the weekend

RP Data National Auction Comment, week ending 21 September 2014 A preliminary weighted average clearance rate of 69.2 per cent was recorded this week across capital cities compared to 72.3 per cent last week and 73.1 per cent this time last year. The capital cities auction market has clearly lifted since winter, primarily due to strong demand in Sydney and Melbourne to a lessor extent. In Sydney a preliminary clearance rate of 76.9 per cent was recorded compared to 78.4 per cent last week. Volumes continue to rise and are expected to double the lows of winter soon thereby increasing choice for buyers. In Melbourne there was a preliminary clearance rate of 69.3 per cent recorded compared to 73.4 per cent last week. Spring has started strongly but it is worth noting that due to significant rises in stock levels the auction market shifted towards buyers this time last year after the grand final. In Brisbane a preliminary clearance rate of 41.4 per cent was recorded compared to 48.2 per cent last week. The low clearance rate compared to the larger capital cities masks the improvement, a 75 per cent rise in homes sold at auction, compared to two years ago. Adelaide recorded a clearance rate of 69.1 per cent compared to 64.3 per cent last week. In Canberra a clearance rate of 57.8 per cent was recorded and in Perth there was a clearance rate of 52 per cent. Robert Larocca RP Data Housing Market Specialist

Auction numbers rise 12% in capital cities this week

RP Data National Auction Preview, week ending 21 September 2014 There are 2,757 auctions scheduled across Australia this week. In capital cities there are 2,339 auctions expected compared to 2,109 for the same period last year and 2,080 last week. Auctions are occurring across 1,130 different suburbs with 73 per cent of those auctions for houses. Conditions are favouring sellers in the main capital city auction markets this spring with the increasing number of homes on the market finding buyers. There are 1,090 auctions scheduled in Melbourne this week compared to 1,018 last week and 984 this time last year. This will be the 13th week this year with in excess of 1,000 auctions in Melbourne. Last week’s clearance rate showed that demand is strong enough to absorb multiple weeks of high volumes. In Sydney RP Data is expecting 846 auctions compared to 743 last week and 766 for this week last year. The clearance rate over the last four weeks, 78.6 per cent, is marginally below the same time last year, 79.9 per cent, however with 14 per cent more auctions the overall market remains strong. Brisbane is expecting 138 auctions after 134 last week and has recorded 8 per cent more homes sold over the past four weeks compared to the same time last year. Adelaide is expecting 124 auctions, compared to 89 last week. Canberra has 78 auctions scheduled compared to 51 last week. Spring is proving to be strong with more homes being offered for sale at auction and more being sold. Perth has 45 auctions compared to 34 last week. There are 15 auctions scheduled in Tasmania. Across Australia, the highest number of auctions is expected in the Sydney suburb of Mosman where 26 are expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 21 September, 2014

There are 1090 auctions scheduled this week in Melbourne compared to 984 for the same time last year. The highest volume of auctions this week is in Reservoir with 24 expected followed by 23 in Hawthorn and 22 in Brighton. Last week was the 12th time this year where in excess of 1,000 auctions were recorded; the highest for year was 1,510 in mid April. In 2013 there were 11 weeks with more than 1,000 auctions and in 2012 there was 4. Given an increase in auctions as a popular mechanism for selling, the prevalence of 1,000 plus auctions each week is much higher than ever before, making weeks of 1,500 plus a more significant indicator of confidence from vendors. There were 4 weeks with more than 1,500 auctions last year, all after the AFL Grand Final. There is no reason this won’t be repeated this year. Time on market results for houses sold at private sale fell from 45 days to 44 days over the last week whilst vendor discounting fell from -5.6 per cent to -5.4 per cent. Key data Clearance rate week ending 14 September: 73.4 per cent Melbourne auctions expected week ending 21 September: 1090 Melbourne private sales time on market week ending 14 September: 44 days houses Melbourne vendor discounting market week ending 14 September: -5.4 per cent houses Listings being prepared for market are 0.4 per cent higher in month ending 14 September seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Why are home values still rising?

According to the RP Data CoreLogic Home Value Index, combined capital city home values have increased by 10.9% over the 12 months and by 18.7% over the current growth phase. With many economic indicators heading in the wrong direction it seems counter-intuitive that home values would continue to rise as strongly as they are. The answer to why home values continue to rise can partly be explained by the level of equity sitting in our homes. The Australian Bureau of Statistics ABS estimated that as at June 2014 there were 9,366,800 residential dwellings across the country. Over the 12 months to June 2014, RP Data estimated that there were 484,000 dwellings sold across the nation. Based on these figures, just 5.2% of total dwelling stock sold over the past year. Equity is difficult to truly calculate as there are no regular statistics available on home equity levels, as you’d imagine the banks hold this data quite tight. So whilst we can’t determine the reduction in the initial borrowings over time, we can determine how much home values have increased over time which is a key component of how much wealth has been accumulated in a property. Over the past two decades, the level of value growth across Australia’s capital cities has been strong. As deregulation of financial markets has taken place lending for residential housing has ramped up significantly. Subsequently, the cost of housing has risen and those who own a home or have a mortgage have seen a large rise in their equity. Since national home values reached a low point in December 2008 after a cumulative -6.1% fall from March to December of 2008, there has been a significant divergence in the level of capital growth across individual capital cities. From the end of 2008 to August 2014, total home value increases have been much greater in Sydney and Melbourne than across the other capital cities. This is by virtue of value rises of 27.2% and 19.5% over the current growth cycle as well as quite strong value rises throughout the 2009 and 2010 growth cycle. The impact of this growth in home values means that even those who have only recently purchased in Sydney and Melbourne, say in 2009 or 2010, have already seen a large increase in the value of their home. As a result, some are using this equity to purchase investment properties, others will use the equity to upgrade into more suitable housing for their needs and of course others will have different or no strategies for the equity. Housing finance data from the Australian Bureau of Statistics ABS shows that investment lending for new loans this excludes refinances has recently hit record levels while first home buyer demand is at an all-time low. The two driving segments of the housing market are investors and subsequent buyers those upgrading or downgrading their principal place of residence . But why are they choosing property, why now and why Sydney and Melbourne? Standard variable mortgage rates are currently recorded at 5.95%. Outside of an eight month period between February 2009 and September 2009, standard variable mortgage rates haven’t been lower than they currently are since the early 1970’s. Over recent years, discounted variable mortgage rates have become much more prevalent in the mortgage market. Currently, discounted variable mortgage rates are 85 basis points lower 5.1% than standard mortgage rates. With the banks competing heavily for mortgage business currently a large proportion of borrowers are able to get that discounted rate or even lower on their home loan. The low interest rates also have an impact on investment decisions by making certain other asset classes less attractive. With official interest rates sitting at 2.5% the amount of interest for cash sitting in the bank is very little. According to data from the Reserve Bank RBA in August, a three year term deposit with $10,000 or more receives just 3.65% interest per annum. When you consider that inflation is at 3.0%, the real returns from a term deposit are miserly. The relatively low cost of servicing a mortgage currently and the low returns on risk-free investment is attracting increasing investor activity to the housing market. The historical performance of an asset should not be used as guidance to the future returns. Although this is the case and a disclaimer many use when providing investment advice, the historic returns from residential housing have been impressive and difficult to argue with. Obviously many people believe that these returns will continue into the future. It is important to note that housing market returns have generally been much more moderate following the financial crisis than they were prior to the crisis. In fact on an annual basis home values have fallen over three of the past seven calendar years 2008, 2011 and 2012 . With returns so low amongst risk-free investments, investors have clearly shifted their focus to slightly riskier asset-classes such as residential housing. In particular the focus has been centred on our two largest cities, Sydney and Melbourne. Although housing has proven to be a low-risk investment class over recent times it is not a one-way bet. Values are rising on the back of increased competition for stock however, with values rising at some point a proportion of the market will no longer be able to afford the homes available for sale. At some point in the future who knows when growth in values will slow and interest rates will increase. We are also seeing a very strong supply-side response with a record high number of dwelling approvals over the past 12 months. Additional supply should ease some of the upwards pressure on values. It has already resulted in a moderation of rental growth, with rental pressures subsiding we may also see more potential buyers choosing to remain in the rental market rather than purchase their own owner-occupied property. When value growth slows or starts to fall we may see investors shift from housing to other more liquid asset classes. As interest rates rise, servicing the mortgage becomes more expensive. The point being, housing has generally provided solid capital gains over the past two decades and growth conditions across Sydney and Melbourne are currently spectacular, however the market moves in cycles and the growth being seen in Sydney and Melbourne will eventually transition to less expensive markets that show stronger fundamentals for capital gains.

RP Data 2013-2014 financial year top 5 for Melbourne residential real estate

With a vast majority of homes sold in the last financial year now settled, it is possible to calculate some of the key numbers in the Melbourne market. Suburbs with the lowest number of house sales: Narre Warren East, Gilderoy, Sherbrooke, Tremont and Gruyere. Each only recorded one sale Suburbs with the biggest spend by house buyers; Brighton $805m , Glen Waverly $613m , Kew $592m , Toorak $576m and Balwyn North $502m Suburbs with the biggest spend by apartment buyers; Melbourne $649m , Southbank $378m , South Yarra $353m , Docklands $346m and Brighton $307m Suburb with the most house sales over $2m, Brighton with 147 Suburbs with the largest house blocks sold; Park Orchards, Belgrave South, Kalorama, The Patch and Sassafras Suburbs with the largest increase in sale price for houses: Ashburton, Balwyn North, Fairfield, Kew East and Balwyn Municipalities with the largest increase in sale price for houses: Monash, Glen Eira, Manningham, Whitehorse and Yarra Municipalities with the least increase in sale price for houses: Hume, Cardinia, Mornington Peninsula, Nillumbik and Brimbank Suburbs with the least increase in median advertised rents for houses: Brighton, South Melbourne, Middle Park, Sandringham and Armadale Suburbs with the largest increase in median advertised rents for houses: Balwyn, Caulfield South, Fitzroy North, Beaumaris and Carlton Suburbs with the highest proportion of houses advertised for sale: Mount Eliza, Taylors Hill, Point Cook, Pakenham and Mount Martha Robert Larocca RP Data Victoria Housing Market Specialist

Capital city auctions deliver healthy returns

RP Data National Auction Comment, week ending 14 September 2014 A preliminary weighted average clearance rate of 70.8 per cent was recorded this week across capital cities compared to 74.1 per cent last week and 72 per cent this time last year. This week will have added to the already substantial growth in auction volumes this year across capital cities. Prior to this week there had been 61,056 auctions in capital cities, 33.6 per cent more than the 45,696 held over the same time last year. In Sydney a preliminary clearance rate of 78.3 per cent was recorded compared to 80.1 per cent last week. Last week was only the 5th time in the past 5 years a clearance rate of over 80 per cent was achieved and this week has returned a similar result. In Melbourne there was a preliminary clearance rate of 70.5 per cent recorded on the first week with over 1,000 auctions for the spring season compared to 76.6 per cent last week. Higher volumes have translated into more sales, so far this year there have been 5 homes sold at auction for every 4 last year. In Brisbane a preliminary clearance rate of 49.4 per cent was recorded compared to 44.7 per cent last week. Adelaide recorded a clearance rate of 62.7 per cent compared to 68.8 per cent last week. In Canberra a clearance rate of 52 per cent was recorded and in Perth there was a clearance rate of 43.8 per cent. Robert Larocca RP Data Housing Market Specialist 0409 198 350

Rising national clearance rate

RP Data National Auction Preview, week ending 14 September 2014 There are 2,289 auctions scheduled across Australia this week. In capital cities there are 1,904 auctions expected compared to 2,073 for the same period last year. The national clearance rate has averaged 71.8 per cent over the past four weeks and is displaying a clear rising trend with increases recorded in each of the past three weeks. With stock increasing and over the next fortnight the pattern for spring will be clear by the AFL Grand Final in the week ending 28 September. Over the past four weeks the Melbourne auction market has recorded the highest clearance rate in just under a year with 73.5 per cent of 3,258 homes selling. There are 927 auctions scheduled in Melbourne this week compared to 872 last week and 975 this time last year. The Sydney clearance rate exceeded 80 per cent last week for only the fifth time in five years last week. This week RP Data is expecting 684 auctions compared to 705 last week and 805 for this week last year. The highest number is expected in Turramurra. Canberra has 45 auctions scheduled compared to 69 last week. Brisbane is expecting 118 auctions after 128 last week. The highest volume of auctions in any one Queensland suburb is found outside Brisbane with 5 expected in Broadbeach Waters, Buderim and Noosa Heads. Adelaide is expecting 83 auctions, compared to 86 last week. Perth has 29 auctions , the same number as last week. There are 11 auctions scheduled in Tasmania.Across Australia, the highest number of auctions is expected in the Melbourne suburb of Prahran where 19 are expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 14 September, 2014

There are 927 auctions scheduled this week in Melbourne compared to 975 for the same time last year. The highest number of auctions is expected in the Prahran where 19 are scheduled. As the market enters spring there are fewer homes on the market than a year ago with 28,988 active listings in Melbourne and 54,619 in Victoria. Twelve months ago the comparable number was 32,454 in Melbourne and 58,664 in Victoria. This is a positive sign as it highlights a more active market with more buyers. The extent that this translates into higher prices will depend in many ways on the volume of new listings. Thankfully for buyers the number of homes being newly listed for sale is rising compared to last year. Time on market results for houses sold at private sale fell from 47 days to 45 days over the last week whilst vendor discounting rose from -5.3 per cent to -5.6 per cent. Key data Clearance rate week ending 7 September: 76.7 per cent Melbourne auctions expected week ending 14 September: 927 Melbourne private sales time on market week ending 7 September: 45 days houses Melbourne vendor discounting market week ending 7 September: -5.6 per cent houses Listings being prepared for market are -1.1 per cent lower in month ending 7 September seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Investor demand for housing reaches an historic high

The Australian Bureau of Statistics ABS released housing finance data for July 2014 earlier today. The headline result was the 0.3% rise in owner occupier housing finance commitments over the month. In my opinion, a more significant result was the 6.8% monthly rise in investment lending. Investment lending had shown signs of slowing over recent months but has come surging back in July. Looking at the value of housing finance commitments over the month, the total value increased by 2.7% in July 2.6% excluding refinances . Owner occupier refinance commitments increased by 3.1%, owner occupier new mortgage commitments fell by -1.3% and investment finance commitments increased by 6.8%. Year-on-year, the total value of finance commitments has increased by 17.4% or 17.2% excluding refinances. The year-on-year increase in owner occupier refinance commitments was 18.6%, new home loan commitments to owner occupiers were 7.1% higher and lending to investors surged 29.6%. In the current climate, subsequent purchasers and investors are occupying the majority of housing finance demand. Looking at the same data but focussing on the proportion of total lending reconfirms the high level of lending to investors and subsequent purchasers. In July, 41.4% of total mortgage lending was for new loans to owner occupiers, 18.3% was to owner occupiers for refinances and 40.3% was to investors. The 41.4% of total commitments to owner occupiers excluding refinances was the lowest proportion of lending to this cohort on record. Conversely, at 40.3% of all mortgage lending, investment lending was at its highest proportion since October 2003 and second highest ever . If you remove refinances from the equation 49.3% of lending was to investors which was a record high. Data focussing on the number of loans to owner occupiers shows there were 52,251 owner occupier commitments in July. The number of commitments rose by 0.3% over the month however, it has recorded only a moderate 1.7% rise year-on-year. Loans for refinancing purposes increased by 2.4% over the month and 6.6% year-on-year compared to a -0.7% fall in non-refinanced loans over the month and a -0.7% fall over the year. This data and the data previously detailed suggest that demand from owner occupiers for new loans has slowed with investors and refinances currently driving activity. The owner occupiers that commit to finance overwhelmingly commit to finance for the purposes of purchasing an established dwelling. In July, there were 25,469 new owner occupier loan s excluding refinances for the purchase of established dwellings, 6,157 for construction of new dwellings and 2,871 for the purchase of new dwellings. Over the month, established dwelling commitments were down -0.7%, construction of dwellings were -1.3% lower and purchase of new dwellings was 0.5% higher. Year-on-year, commitments for the purchase of established dwellings are -3.6% lower while commitments for construction are 16.4% lower and commitments for purchase of new are -5.1% lower. The number of housing finance commitments by first home buyers remains stuck at near record low levels. In July, there were 6,717 housing finance commitments to first home buyers, which accounted for 12.2% of total owner occupier commitments over the month. The number of first home buyer housing finance commitments is -2.2% lower over the month and -15.7% lower year-on-year. While the number of commitments by first home buyers is lower over the year, the average loan size has risen by 7.0%. First home buyers largely remain on the sideline in the current market as investors and subsequent purchasers capture much of the mortgage demand. Based on current mortgage rates, fixed rate loans generally have a lower interest rate than discounted variable loans. This is not necessarily unusual however, housing finance data showed that there were just 7,553 owner occupier finance commitments or 13.7% of all owner occupier finance commitments on a fixed rate in July. The number of fixed rate loans has been trending lower after most recently peaking at 17.4% of all mortgage commitments in November 2013. The RP Data Mortgage Index RMI which measures mortgage activity across RP Data’s proprietary platforms recorded a fall in August. As this index is closely correlated with owner occupier housing finance commitments, we anticipate a fall in the number of owner occupier commitments next month when the ABS releases August data. In volume terms, owner occupier loan demand is pretty steady and appears to be at or close to its peak. Focussing on the value of lending it continues to climb as home values continue to increase. After seemingly topping out over recent months, investor commitments recorded a sharp rise in July. As a proportion, investment lending is at its second highest monthly level ever and highest ever level if you exclude refinances. The high level of investment lending remains a key area of concern. With returns on safe asset classes extremely low many investors are purchasing property, mainly in Sydney and Melbourne where capital growth is strong and interest costs on loans are historically low. As we have mentioned many times, such high rates of capital gain won’t continue forever and our concern remains what will happen if once the growth dissipates and interest rates move higher there may be a high number of these investors looking to exit property. We know that historically once value growth slows demand also eases, if these investors look to sell as demand drops a risk develops that value falls could become greater as these investors enter a discounting war in order to sell their homes. Obviously this may be good news for those first time buyers which are currently sidelined from the market however it would be bad news for the two thirds of Australians that own or have a mortgage and have the majority of their wealth stored in their home in the form of equity.

Expensive Melbourne houses record largest value growth

The August RP Data CoreLogic Home Value Indices results released this month show a rise in dwelling values of 0.8 per cent in Melbourne and a 7.6 per cent rise this year. A detailed review of the market shows that the most expensive segment of the market, 25 per cent most expensive houses , recorded the highest value growth this year. This segment of the market will be interesting to follow this spring and over summer as there is a strong correlation between the performance of the auction market. In the first eight months values rose by 9.6 per cent compared to 8.7 per cent for the middle of the market, and 3.7 per cent for the most affordable segment. All segments of the market for houses have outperformed the unit market with the exception of the most affordable segment. Values of the most affordable 25 per cent of the unit market have grown by 4.4 per cent this year compared to 3.7 per cent for houses. A longer term view of the market, comparing its performances since the last peak in values, reveals a slightly different picture. Values for houses in the most expensive and middle segments of the market peaked in October 2010. Since that time it is the middle of this market that has seen the strongest increase in values of 9.8 per cent compared to 7 per cent for the most expensive segment. Given most of the people selling will have bought their homes before 2010, it is this longer-term view that is more relevant. Robert Larocca RP Data Victoria Housing Market Specialist

Spring market commences with high demand and clearance rates

RP Data National Auction Comment, week ending 7 September 2014 A preliminary weighted average clearance rate of 74.4 per cent was recorded this week across capital cities compared to 72.9 per cent last week and 74.9 per cent this time last year. Results across capital cities this week, especially Sydney, provide a clear indication that this will be good spring for sellers. In Sydney a preliminary clearance rate of 82.4 per cent was recorded compared to 79.9 per cent last week. Clearances around 80 per cent in Sydney indicate a high level of competition and confidence from buyers. In Melbourne this spring is shaping as a better one than last year with more homes being listed and sold as both sellers and buyers are confident of a good outcome. There was a preliminary clearance rate of 75.1 per cent recorded compared to 73.5 per cent last week. In Brisbane a preliminary clearance rate of 49.4 per cent was recorded compared to 46.8 per cent last week. Adelaide recorded a clearance rate of 70.2 per cent compared to 64.9 per cent last week. In Canberra a clearance rate of 55.6 per cent was recorded and in Perth there was a clearance rate of 28.6 per cent. Robert Larocca RP Data Housing Market Specialist 0409 198 350

Capital city auction volumes rise compared to this time last year

RP Data National Auction Preview, week ending 7 September 2014 There are 2,057 auctions scheduled across Australia this week. In capital cities there are 1,692 auctions expected compared to 1,054 for the same period last year. Last week represented a healthy lead up to the spring auction market. The market should be positively impacted by the RBA’s decision to keep interest rates at current low levels. A repeat of last week’s results is required if last year’s spring season, with a clearance rate of 70.7 per cent from 25,266 auctions in capital cities, is to be exceeded. There are 765 auctions scheduled in Melbourne this week compared to 901 last week and 530 this time last year. From a vendors perspective the spring auction market is gaining strength at just the right time with buyers driving the clearance rate higher as stock levels rise. Sydney is appearing to be stronger with higher volumes and higher clearance rates, than at the same time last year. RP Data is expecting 633 auctions compared to 810 last week and 337 for this week last year. The highest volume of auctions is in Paddington where 11 are expected. Canberra, which last week experienced its highest clearance rate in four years has 66 auctions scheduled compared to 37 last week. The highest volume of auctions is expected in the suburbs of Forrest and Kambah, both of which have 4 scheduled. Brisbane is expecting 105 auctions after 156 last week. Adelaide is expecting 80 auctions, compared to 88 last week. The highest volume of auctions is expected in Norwood, Parkside and Tennyson, each of which have 3 scheduled. Perth has 30 auctions compared to 29 last week. There are 6 auctions scheduled in Tasmania. Across Australia, the highest number of auctions is expected in the Melbourne suburb of Glen Waverly where 16 are expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 7 September, 2014

There are 765 auctions scheduled this week in Melbourne compared to 530 for the same time last year. The highest number of auctions is expected in the Glen Waverly with 16 scheduled this week. Buyers are likely to face more vibrant market conditions and higher prices compared to the spring selling season last year. The August RP Data Core Logic home value indices results released this week shows a rise in dwelling values of 0.8 per cent in Melbourne and 7.6 per cent rise this year. Due to high levels of supply in the unit market, the majority of the growth occurring in the market is for houses. For houses, the index recorded a rise of 8.3 per cent this year compared to 2.5 per cent for units. Time on market results for houses sold at private sale rose from 44 days to 47 days over the last week whilst vendor discounting rose from -5.2 per cent to -5.3 per cent. Key data Clearance rate week ending 31 August: 73.5 per cent Melbourne auctions expected week ending 7 September: 765 Melbourne private sales time on market week ending 31 August: 47 days houses Melbourne vendor discounting market week ending 31 August: -5.3 per cent houses Listings being prepared for market are -1.3 per cent lower in month ending 31 August seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

July 2014 building approvals data

The Australian Bureau of Statistics ABS released building approvals data for July 2014 earlier today. The data shows that there continues to be a strong pipeline of residential development in place. Focussing on dwelling approvals nationally, there were 9,585 house approvals and 6,733 unit approvals over the month. The number of dwelling approvals increased by 2.5% over the month with house approvals up 1.5% and unit approvals up 4.0%. Although dwelling approvals have increased over the month they were -7.8% lower in July than the most recent peak in January 2014 when there were 17,698 dwelling approvals. Although dwelling approvals increased over the month, they have fallen for eight of the past 12 months. Monthly dwelling approvals data tends to be volatile so I also like to look at annualised data to see a trend. Over the 12 months to July 2014 there were 195,227 dwelling approvals. This was an all-time high number of annual approvals. Unit approvals were also at an historic high level over the year while house approvals were well below their record high of 140,832 recorded over the 12 months to April 1989. Over the 12 months to July 2014, unit approvals accounted for 43.6% of all dwelling approvals, up from 42.1% a year earlier. Across the combined capital cities, there were a record high of 145,065 dwellings approved for construction over the 12 months to July 2014. The number of capital city dwelling approvals has increased by 21.9% over the past year. Over the year there were, 71,085 approvals for houses and 73,980 unit approvals with house approvals up 20.8% and unit approvals 22.9% higher. Across the individual capital cities, Brisbane has recorded the greatest increase in dwelling approvals over the year 44.5% followed by: Sydney 29.0% , Perth 26.6% and Adelaide 25.1% . Dwelling approvals are lower over the year in Darwin -14.5% and Canberra -7.6% while Melbourne 10.9% and Hobart 11.7% have recorded only moderate rises in dwelling approvals. Despite certain cities recording significant rises in dwelling approvals, Sydney and Melbourne have accounted for more than 57% of all capital city dwelling approvals over the past year. A key driver of the overall increase in dwelling approvals has been the rising prominence of the unit market. Over the past year, the increase in unit approvals has been greater than the increase in house approvals in Sydney, Brisbane, Adelaide and Perth. Although unit approvals have recorded greater increases in these cities, there has been a substantial decline in unit approvals across Hobart and falls in both Darwin and Canberra. With more than half of all capital city dwelling approvals for units as opposed to houses, all individual capital cities except for Adelaide 31.1% , Perth 25.0% and Hobart 9.0% are seeing a majority of approvals for units. In Sydney, 68.3% of dwelling approvals were for units over the past year, elsewhere 52.1% were for units in Melbourne, 56.0% in Brisbane, 62.0% in Darwin and 57.6% in Canberra. Sydney has consistently approved more units than houses since 1993 and Darwin has consistently approved more units than houses since 2003, while across the other cities it is a relatively new phenomenon. Melbourne has only been approving more units than houses since mid-2012, in Brisbane it has occurred since mid-2013 and in Canberra since mid-2010. Of course there is increasing levels of demand for units but particularly in Melbourne and Brisbane the number of units in the pipeline is largely untested. Unless the introduction of supply is closely managed there is a potential risk of unit over supply. With dwelling approvals at historic high levels, dwelling construction will continue to help bolster GDP as engineering construction. The challenge will be whether dwelling construction is enough to off-set the fall in engineering construction and it seems that it probably won’t be. Construction work done data for the June quarter showed that residential construction accounted for 25.8% of total work done compared to 57.2% attributable to engineering. At its absolute peak residential construction accounted for just over half of the value 50.2% of all work done. It is likely that residential dwelling construction alone will not be able to off-set the fall in mining investment. Although the pipeline of residential construction is strong, it seems unlikely that it will be able to completely off-set the decline in engineering construction. Furthermore, it is unlikely that all of these approvals will come to fruition in the short-term. Unless there is ongoing demand a proportion of these new approvals won’t commence as they won’t get the necessary pre-sales to receive construction finance. In light of this, interest rates are likely to remain low to try and encourage further housing demand. As a result, unless the RBA and APRA introduce macro prudential tools it seems unlikely home value appreciation will cease until such time as mortgage rates increase.

Clearance rate of 72.2% across capital cities on spring eve

RP Data National Auction Comment, week ending 31 August, 2014 A preliminary weighted average clearance rate of 72.2 per cent was recorded this week across capital cities compared to 69.5 per cent last week and 71.5 per cent this time last year. This is the highest recoded since early March this year. Data from the last four weeks has shown that this the best lead into spring since 2010 with more homes being sold at auction and overall higher prices in most capital cities. In Sydney the market is delivering results comparable to this time last year and looks set to have a strong spring. This week a preliminary clearance rate of 81.1 per cent was recorded compared to 76.1 per cent last week. In Melbourne there was a preliminary clearance rate of 71 per cent recorded compared to 70.7 per cent last week. This has been the most vibrant auction market since the middle of February this year with three consecutive weeks over 70 per cent. In Brisbane a preliminary clearance rate of 47 per cent was recorded compared to 51.2 per cent last week. Adelaide recorded a clearance rate of 66.1 per cent compared to 67.2 per cent last week. In Canberra a clearance rate of 72.4 per cent was recorded and in Perth there was a clearance rate of 46.2 per cent. Robert Larocca RP Data Housing Market Specialist

Five big numbers for Melbourneâ

Real estate is often about numbers. Everything it seems, from the price of the house to the weekly rent, can be expressed as a number. Here are five topical numbers as the market enters spring. 25,080 This is the number of units in the suburb of Melbourne. Melbourne has the most individual dwellings of any suburb in the city which will come as little surprise to anyone who has watched the highrise market take off in the last decade. This is also a very large number in the context of the general density of the city. By way of contrast, the suburb with the most houses is Reservoir with 13,692 and when you include all the units, the number rises to 20,430, still well short of Melbourne. 871 With 871 houses sold in the last twelve months Pakenham has recorded the most house sales of any suburb in Melbourne. The popularity of housing in the suburb is based on many factors, key amongst them is its relative affordability. Based on the sales in the last year the median price was $337,500 compared $532,000 for Melbourne. 49 There are now 49 suburbs in Melbourne that have a median house value of $1m or more. At nearly one in ten sales across the city occurring for a sale price in the million dollar range, it is far more common than it used to be. What has not changed is the most expensive suburb, Toorak, which had a median value of $2.941m and saw 151 sales for more than a million dollars over the past year. 30 The median value of a house in Melbourne has grown by 30.4 per cent over the past 5 years. Only two capital cities have exceeded that over the same time, Sydney and Darwin. 1 One is the number of suburbs in the cities west that have a median house value of more than one million dollars. Overlooking the Maribyrnong River and neighbouring the popular Essendon, Aberfeldie has a median house value of $1.04m after a 14 per cent rise in last year. If you wanted to live there and can afford the price then you will probably need to wait as it is only a small suburb, 1099 houses, and averages only one sale every 6.5 days. Robert Larocca RP Data Victoria Housing Market Specialist

Auctions most popular in Melbourne, Sydney and Canberra

RP Data National Auction Preview, week ending 31 August, 2014 There are 2,281 auctions scheduled across Australia this week. In capital cities there are 1,854 auctions expected compared to 2,000 for the same period last year. This is the highest volume in eight weeks and it will continue to rise over the coming weeks. RP Data recently reviewed the statistical significance of auctions, as while they can dominate the weekly market analysis due to the clearance rate statistic they account for a minority of sales in capital cities. Taking into account all settled sales in the months between February and May this year auctions accounted for 21.9 per cent of all capital city sales excluding Darwin . There are 809 auctions scheduled in Melbourne this week compared to 758 last week and 837 this time last year. Melbourne traditionally has the highest proportion of sales by auction of all capital cities and in the months of February to May this year this remained the case as they accounted for 35.3 per cent of all sales. Sydney is expecting 741 auctions compared to 641 last week and 851 for this week last year. Sydney is beginning to rival Melbourne as the nations auction capital, in the months of February to May this year auctions accounted for 30.5 per cent of all sales. Canberra has 36 auctions scheduled compared to 51 last week. In the months of February to May auctions accounted for 17.9 per cent of all sales. Brisbane is expecting 140 auctions after 134 last week. As is usually the case there are more auctions in Queensland outside of Brisbane, with 201 expected. In the months of February to May auctions have accounted for 6.4 per cent of all sales in Brisbane. Adelaide is expecting 82 auctions, compared to 71 this time last year. In the months of February to May auctions have accounted for 10.7 per cent of all sales. Perth has 29 auctions compared to 41 last week. In the months of February to May auctions have accounted for a low 1.8 per cent of all sales. There are 11 auctions scheduled in Tasmania. In the months of February to May auctions have accounted for 4.8 per cent of all sales in Hobart. Across Australia, the highest number of auctions is expected in the Melbourne suburb of South Yarra where 21 are expected. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 31 August, 2014

There are 809 auctions scheduled this week in Melbourne compared to 837 for the same time last year. The highest number of auctions are expected in the South Yarra with 21 expected. The auction market is gathering strength with an average clearance rate of 70.6 per cent over the past 4 weeks. This is the last week before spring officially starts and the latest research from RP Data shows that there have been, including last week, 26.7 per cent more homes sold at auction than the same time last year. Importantly there have been almost as many extra sales with 24.7 per cent more sales at auction in Melbourne. At this stage conditions are well balanced between buyers and sellers across the market. Time on market results for houses sold at private sale was stable at 44 days over the last week whilst vendor discounting rose from -5.1 per cent to -5.2 per cent. Key data Clearance rate week ending 31 August: 70.7 per cent Melbourne auctions expected week ending 31 August: 809 Melbourne private sales time on market week ending 24 August: 44 days houses Melbourne vendor discounting market week ending 24 August: -5.2per cent houses Listings being prepared for market are -0.2 per cent lower in month ending 24 August seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Most popular Melbourne suburbs for owner occupiers by distance from the CBD

The suburbs with the highest proportion of owner occupiers differ in value and tend to have one thing in common – they are well established and in contrast to those proving popular for investors. Last week’s blog post revealed that many of the most popular suburbs for investors were those that are more recently developed. In the inner city the suburbs within a 10km of the CBD such as Aberfeldie, has the highest proportion of houses with 90 per cent of these owner occupied. Aberfeldie recently became the first million dollar suburb in the city’s west. Strathmore ranked second with owner occupiers accounting for 88.6 per cent of houses. The top five is rounded out by Kew East, Ivanhoe and Malvern. In the middle ring of suburbs, those between 10 and 20km of the CBD, there is greater disparity in the prices of suburbs popular with owner occupiers. Eltham North recorded 94.3 per cent of houses as being owned by their occupiers and second on the list, Campbellfield, had 91.4 per cent. Campbellfield is much more affordable with a median house value of $334,601 compared to $646,869 in Eltham North. Finally, in the outer suburbs the highest proportion of owner occupiers at 95.2 per cent can be found in Montose. Four of the top five suburbs are in fact are in or near-to the Dandenongs. Second on the list, Mount Evelyn, has 94.1 per cent of houses owned by their occupiers and Warranwood has 93.8 per cent. Fifth on the list, The Basin, recorded 93.7 per cent. Robert Larocca RP Data Victoria Housing Market Specialist

APRA’s ADI property exposures data for June 2014

The Australian Prudential Regulation Authority APRA released their quarterly Authorised Deposit-taking Institution ADI Property Exposures data for June 2014 earlier today. The data always provides a valuable insight into current and historic mortgage lending by ADIs. This quarter’s data showed some very interesting trends. Based on the value of all outstanding mortgages by households to Australian ADI’s, there $811.7 billion outstanding to owner occupiers 66.2% at the end of June 2014 and $413.5 billion to investors 33.8% . Over the 12 months to June 2014, the total value of outstanding mortgages to owner occupiers has increased by 7.5% compared to a 10.9% rise in outstanding credit to investors. At the end of June 2014, 36.0% of loans outstanding had an offset facility, up from 34.0% a year earlier. 35.7% of all outstanding mortgages were interest-only which was the highest on record and up from 34.3% a year earlier. Just 0.2% of all outstanding mortgages were reverse mortgages and 2.9% were low documentation which was down from 3.9% a year earlier. Other non-standard loans accounted for just 0.1% of all outstanding mortgages. The average balance on all outstanding mortgages at the end of June 2014 was $237,200. The average balance has increased by 3.2% over the past year. Loans with an offset facility $282,900 and interest-only mortgages $299,000 have much higher average outstanding loan balances. It is interesting to note that the annual growth in average outstanding loan balances has been much more moderate for mortgages with an offset and interest-only mortgages at 1.6% and 1.8% respectively. Encouragingly, the data also indicates that outstanding balances are reducing for low documentation and other non-standard loans as they become less common. Over the past year the average balance has fallen by -3.5% for low-documentation loans and by 5.9% for other non-standard loans. Turning the focus to new loans written over the June quarter, 62.1% of lending was to owner occupiers and a record high 37.9% was to investors. Compared to the June 2013 quarter, owner occupier lending is up 2.0% and investment lending is 14.4% higher. Over the quarter, 0.7% of new loans approved were low-documentation, 43.2% were interest only, 0.2% were other non-standard loans, 43.0% were third party originated loans and 3.7% were loans approved outside of serviceability. The 43.2% of new loans which were interest only was a record high, interest only loans tend to be but not always reflective of lending for investment purposes. The ADIs seem to be increasing the usage of their broker channels with the 43.0% of loans originated by third parties the highest proportion since June 2008. Although only 3.7% of loans were approved outside of serviceability over the June quarter, this was the highest proportion on record. This may indicate that there has been some relaxation of lending standards over the quarter however it is difficult to conclude any firm conclusions. Nevertheless it is something to keep an eye on over the coming few quarters. Looking at the loan to value ratios LVR of loans written over the June quarter. 24.0% of new loans had an LVR of less than 60%, 42.2% of loans had an LVR of between 60% and 80%, 21.3% had an LVR of between 80% and 90% and 12.5% had an LVR of 90% or more. The 12.5% of new loans with an LVR of more than 90% is the lowest proportion since June 2011. This suggests there are proportionally less high-risk mortgages being written. The data has certainly shifted quite significantly over the past quarter and year. There is definitely a significant level of activity by investors and clearly ADIs appear happy to lend to them. The rise in the proportion of new loans written outside of serviceability is a potential concern however, it is positive to see that the proportion of loans with an LVR of 90% or more falling. The high level of interest only lending is also a cause for concern. Of course interest rates are currently very low but such a high level of interest only lending in light of low interest rates may cause some issues when rates eventually start to rise. As we have mentioned previously, the high proportion of investment lending is our biggest cause for concern in the current market. The lure of strong capital growth in Sydney and Melbourne is attracting the attention of investors as risk-free investments offer very low returns. Of course, that growth in values won’t continue forever and once it slows or values fall our chief concern remains that many investors may look to exit the asset class. Should this occur, inner city unit markets where investor activity is most prevalent could see a more significant drop in values than they otherwise would have as investors exit at a time when demand also falls. This scenario could have greater repercussions for the overall market, not just the inner city areas.

National auction market well placed for spring sales

RP Data National Auction Comment, week ending 24 August, 2014 A preliminary weighted average clearance rate of 66.7 per cent was recorded this week across capital cities compared to 70.8 per cent last week and 70 per cent this time last year. All capital cities have seen a higher number of auctions than last year. Compared to last year the best performing auction markets from the perspective of relative improvement this year have been Sydney, Tasmania and then Adelaide. Sydney has seen a 63 per cent rise in the number of homes sold at auction, Tasmania a 56 per cent rise and a 48 per cent rise was recorded in Adelaide. It should be noted that there have been 357 auctions in Tasmania this year, 2,467 in Adelaide and 22,329 in Sydney. In Sydney a preliminary clearance rate of 76.2 per cent was recorded this week compared to 76.2 per cent last week. Compared to last year and over recent months Sydney has clearly been the strongest auction market. In Melbourne there was a preliminary clearance rate of 64.1 per cent recorded compared to 73.3 per cent last week. Melbourne remains on trend and once final results are in should confirm it has a healthy auction market on the eve of spring. In Brisbane a preliminary clearance rate of 52.1 per cent was recorded compared to 50 per cent last week. Adelaide recorded a clearance rate of 68.5 per cent compared to 65.6 per cent last week. In Canberra a clearance rate of 46.9 per cent was recorded and in Perth there was a clearance rate of 38.9 per cent. Robert Larocca RP Data Housing Market Specialist

How important are clearance rates in the housing market?

Over the first five months of the year, across the combined capital cities of Australia, RP Data has recorded 35,367 auctions of which 24,320 69% sold either under the hammer or shortly before/after the auction date. Over the same time frame we have recorded a total of 128,437 house and unit sales. Based on these numbers, auction sales account for about 19% of all sales across the capital cities of Australia excluding Darwin . Excluding the month of January, where very few auctions are held, the proportion of auctions to total sales increases to 22% between February and May. The remaining 81% of home sales were sold by private treaty. The fact that private treaty sales account for the vast majority of all home sales often gets overlooked when people are commenting on recent market conditions and trends. Of course the proportion of auctions varies substantially from city to city. Melbourne and Sydney have historically had a selling culture that is more heavily aligned with auctions as a method of sale. Between February and May of this year, auction sales accounted for 35% of all Melbourne sales and 31% of all Sydney sales. At the other end of the spectrum is Perth where auctions are comparatively rare, comprising just 2% of all sales over the same time frame. Another trend we have seen in the market since the growth phase kicked off in June 2012 is a substantial rise in auctions as a proportion of the total market. Clearly auctions as a method of sale are more popular when housing market conditions are ‘hot’; a fact which comes as no surprise. Auctions work best when there is high buyer demand providing a competitive bidding environment. Of course, home value growth is strongest at the moment in Sydney and Melbourne which are the two most auction-centric markets. What is interesting though is that auctions as a proportion of all sales are significantly higher over the current growth cycle ie June 2012 to current compared with the previous growth cycle ie Jan 2009 to Oct 2010 . So… considering that private treaty sales account for a larger proportion of housing sales than auctions, what high frequency metrics are available to monitor this side of the market? RP Data publishes a variety of vendor metrics each week, with the most commonly referred to metrics being the average selling time and average level of vendor discounting which are both measures of private treaty conditions. Both of these measures exclude auction results. The average selling time is a measure based on the number of days from when a home is first advertised to the contract date of sale. The vendor discount provides a metric on how much vendors are reducing their initial asking price in order to sell their home. It’s based on the percentage difference between the initial asking price and the contract price on the home. Both indicators are updated weekly by RP Data based on data received over the past 28 days. There are additional weekly metrics where you can follow the housing market trends such as updates to the RP Data Home Value indices, median selling prices, number of listings in the market, and metadata indices that indicate mortgage demand RP Data Mortgage Index and how many homes are being prepared for sale RP Data Listings Index .

National auction market lifting after strongest result in 5 months

RP Data National Auction Preview, week ending 24 August, 2014 There are 1,868 auctions scheduled across Australia this week. In capital cities there are 1,527 auctions expected compared to 1,572 for the same period last year. Last week we saw the best national clearance rate of 70.8 per cent in 5 months as both Sydney and Melbourne exceeded the 70 per cent mark. This improvement was based on ongoing and solid results in Sydney and more moderate improvements in Melbourne. Those vendors holding auctions in Melbourne this week will draw confidence from data showing progressive improvement over the past 5 weeks with the clearance rate rising marginally each week. There are 689 auctions scheduled in Melbourne this week compared to 727 last week and 712 this time last year. Sydney is expecting 574 auctions compared to 578 last week and 557 for this week last year. The year to date clearance rate is 74.7 per cent from 22,239 auctions compared to 70.2 per cent from 14,604 last year. At the same time five years ago, there were only 11,050 auctions. Brisbane is expecting 113 auctions after 98 last week. Overall the auction market this year has improved marginally with a 46.1 per cent clearance rate compared to 40.6 per cent last year. A positive sign is the higher clearance rate which is based on 12.8 per cent more auctions. Adelaide is expecting 61 auctions, the same as last week and this time last year. Canberra has 45 auctions scheduled compared to 31 last week. Perth has 20 auctions compared to 30 last week. There are 8 auctions scheduled in Tasmania. Across Australia, the highest number of auctions is expected in two Melbourne suburbs, Reservoir and Richmond both have 15 scheduled. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 24 August, 2014

There are 689 auctions scheduled this week in Melbourne compared to 712 for the same time last year. It is encouraging for sellers that for each of the last 5 weeks the clearance rate has risen in the lead up to spring. As the market has appreciated over the past year it has resulted in some new suburbs joining the ranks of those with million dollar median values for houses. The new suburbs were Aberfeldie, Caulfield South, Fitzroy North, McKinnon, Ormond, Park Orchards, Princess Hill, South Melbourne and South Yarra. This is particularly noteworthy as Aberfeldie is the first suburb from the western region of Melbourne to upgrade to the million dollar median value ranks while Fitzroy North and Princess Hill are the first in the north. These changes underscore just how much the structure of the housing market has changed in the last decade. Time on market results for houses sold at private sale was essentially stable with a small rise from 43 to 44 days over the last week whilst vendor discounting fell from -5.3 per cent the previous week to -5.1 per cent. Key data Clearance rate week ending 17 August: 73.3 per cent Melbourne auctions expected week ending 24 August: 689 Melbourne private sales time on market week ending 17 August: 44 days houses Melbourne vendor discounting market week ending 17 August: -5.1per cent houses Listings being prepared for market are 1.2 per cent higher in month ending 17 August seasonally adjusted Robert Larocca RP Data Auction Market Specialist 0409 198 350

Investor activity by distance from Melbourne CBD

What drives investment activity in one suburb over another? Is it pursuit of a high yield or is it a desire for good capital gains? These are often debated topics and interestingly the data suggests there is not one clear-cut answer. For instance, a review of the proportion of houses owned by investors in the inner, middle and outer suburbs shows a high level of investment in suburbs with low and high yields. In the inner city, those suburbs within a 10km radius of the CBD is where the highest level of investors can be found in Carlton North, followed by North Melbourne and Richmond. Carlton North has a historically high level of appreciation and low yield whereas Richmond has a very low appreciation and higher yield. In the middle suburbs, those between 10 and 20k from the CBD, the investor activity is highest in growth suburbs with new housing – Laverton, Derrimut and Deer Park. These suburbs have good yield according to the research but lower capital gains prospects given the high level of supply. Conversely, an established suburb such asClayton has a high level of investors and very low yield, presumably because the market is purpose-built around students. Finally, in the outer suburbs the investment activity is again concentrated in growth suburbs which are seeing a high rate of new home construction. For example Point Cook, Tarneit and Truganina. The research suggests that there is more to the decisions of investors than suburb level analysis of yield and historical capital gains. Issues such as the level of supply is important, some suburbs are popular simply because they provide affordable stock for investors. Others are popular because investors are capitalising on a local factor, such as a university. Possibly what’s more important is that investment decisions are also made after consideration of the actual house and its relative location and price. Next week I will look at suburbs popular with owner investors and by distance from the CBD. Robert Larocca RP Data Victoria Housing Market Specialist

National clearance rate stable at 68.4 per cent

RP Data National Auction Comment, week ending 17 August, 2014 A preliminary weighted average clearance rate of 68.4 per cent was recorded this week across capital cities compared to 68 per cent last week and 70.4 per cent this time last year. The health of the national auction market this year is highlighted by the fact that since the start of the year, not including this week, there had been 42 per cent more homes sold under the hammer compared to this time last year. In raw numbers this is 36,608 homes sold at auction compared to 25,623 last year. A significant contributor to the improved national result is Sydney and this continued this week. In Sydney a preliminary clearance rate of 76.7 per cent was recorded this week compared to 74.7 per cent last week. Melbourne returned a result on trend this week with a preliminary clearance rate of 67.7 per cent recorded compared to 69.6 per cent last week. In Brisbane a preliminary clearance rate of 50 per cent was recorded compared to 33.3 per cent last week. Adelaide recorded a clearance rate of 69.2 per cent compared to 69.1 per cent last week. In Canberra a clearance rate of 55.2 per cent was recorded and in Perth there was a clearance rate of 27.3 per cent. Robert Larocca RP Data Housing Market Specialist

Solid auction market a reflection of good capital gains in Sydney and Melbourne

RP Data National Auction Preview, week ending 17 August, 2014 There are 1,819 auctions scheduled across Australia this week. In capital cities there are 1,429 auctions expected compared to 1,470 for the same period last year. The healthy level of listings for auctions is a reflection on the state of the broader market. Auctions traditionally work well as a sales technique in a market with a high level of competition. Due to the strong capital gains reported in the two main auction markets, Sydney and Melbourne this is especially the case in 2014. There are 658 auctions scheduled in Melbourne this week compared to 774 last week and 668 this time last year. There have been 15,871 homes sold at auction so far this year which is 27 per cent more than the same time last year In Sydney there are 529 auctions expected compared to 530 last week and 568 for this week last year. The highest number of auctions in a single suburb will be found in Randwick where 11 are scheduled. Interestingly only one of the auctions there is for a house. Brisbane is expecting 88 auctions after 123 last week. Adelaide is expecting 72 auctions compared to 61 last week. Canberra has 45 auctions scheduled compared to 31 last week. The highest volume of auctions in a single suburb is expected the city’s south, in Kambah and Rivett, both of which have 4 scheduled. Perth has 28 auctions compared to 25 last week. There are 12 auctions scheduled in Tasmania. Across Australia, the highest number of auctions is expected in Melbourne. Bentleigh and Brunswick both have 12 scheduled. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 17 August, 2014

There are 658 auctions scheduled this week in Melbourne compared to 668 for the same time last year. The growth in the volume of homes being listed for sale in Melbourne has slowed following a strong first half of the year. A range of data available which highlights the moderate, but not strong, nature of the Melbourne market. The most recent of this is the settled sales so far for this year. It shows transactions have only risen by 5 per cent compared to 2013 and remain 18 per cent below the peak of 2007. On current numbers the total number of residential sales in Melbourne is projected to be between 85,000 and 87,000 compared to 82,495 last year and 72,757 in 2012. Remarkably the proportion of homes sold at auction is 35 per cent higher than last year. Time of market results for houses sold at private sale contracted from 46 days to 43 days over the last week whilst vendor discounting rose from -5.1 per cent to -5.3 per cent. This reflected a largely stable market for houses at private sale. Key data Clearance rate week ending 10 August: 69.6 per cent Melbourne auctions expected week ending 17 August: 658 Melbourne private sales time on market week ending 10 August: 43 days houses Melbourne vendor discounting market week ending 10 August: -5.3 per cent houses Listings being prepared for market are 2.7 per cent higher in month ending 10 August seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

You can’t always judge a suburb by its median sale price

Around one in ten of all residential home sales in Melbourne transact for more than $1m and most are concentrated in the inner east and south east. Such is the concentration that it is very hard to find a suburb with a median house price of under $1m along the length of Burke Road. That is of course no surprise to anyone who follows the local market. More surprising is the suburbs with million dollar sales in the outer suburbs. For this exercise ‘outer’ includes those suburbs that are 20k or more from the CBD. In those areas the outer suburban million dollar market is most concentrated in the Mornington Peninsula and in the Kingston council area. A common theme in these suburbs is the proximity to the bay and its associated recreational options. The highest prevalence was in Mount Eliza where 83 homes have sold for over $1 million in the past year, 10 of which were sold for more than $2 million. Mount Martha, which shares many of the same attractions recorded 48 sales at or in excess of $1 million, almost one a week. The median sale price in Mount Eliza was $775,000 and in Mount Martha it was $620,000. As you travel further south there are a range of other suburbs that recorded more than 10 sales above the $1 million mark including Sorrento, Mornington, Safety Beach, Rye and Blairgowie. Obviously like Mount Eliza and Mount Martha the majority of homes in all of these suburbs sell for well under a million dollars so the data shows that, due to the location within the suburb, a different group of buyers is active. Clearly you can’t fully judge a suburb by its median sale price. This is also the case in the City of Kingston, in Mentone, Parkdale, Patterson Lakes and Mordialloc where between 24 and nine $1 million sales occurred in the last year. With the exception of Patterson Lakes these sales will mostly be in the section of these suburbs between the Nepean Highway and Port Phillip Bay. The positive impact of The Bay on property values extends to Frankston as well where 13 sales in excess of $1 million were recorded in Frankston South and eight in Frankston. Other areas that saw these sales at the very top end of the market were Eltham, Mitcham and Vermont. Robert Larocca RP Data Victorian Housing Market Specialist

Sydney leads as national clearance rate dips to 65.9%

RP Data National Auction Comment, week ending 10 August, 2014 A preliminary weighted average clearance rate of 65.9 per cent was recorded this week across capital cities compared to 68.9 per cent last week, and 70.1 per cent this time last year. The lower clearance rate was a result of a softening in the Melbourne market. This contrasted with the very buoyant outcome in Sydney and Adelaide. Sydney continues to be the capital city with the strongest and most consistent auction market. A preliminary clearance rate of 75.5 per cent was recorded this week compared to 76.7 per cent last week. The lowest result in 9 weeks occurred in Melbourne where a preliminary clearance rate of 63.9 per cent recorded compared to 69 per cent last week. Auction numbers have risen in the inner east after a seasonal lull. Rising stock numbers in the next month will clearly test the market. In Brisbane a preliminary clearance rate of 35.3 per cent was recorded compared to 36.7 per cent last week. Adelaide recorded a very strong clearance rate of 75 per cent compared to 61 per cent last week. Low stock numbers at this time of the year can affect the clearance rate by making in more variable than in spring and summer. In Canberra a clearance rate of 45.8 per cent was recorded and in Perth there was a clearance rate of 66.7 per cent. Robert Larocca RP Data Housing Market Specialist

Housing finance data for June 2014

The total value of housing finance commitments increased by 1.0% in June 2014. The total value of housing finance commitment is 15.6% higher year-on-year. Meanwhile the number of housing finance commitments to owner occupiers has increased by 0.2% over the month and has increased by just 2.4% over the 2013/14 financial year. The total value of housing finance commitments continues to trend higher however; the strength of the investment segment has waned over recent months. Over the month the owner occupier segment fuelled the increase with refinances up 1.6% and non-refinances up 1.9% while investment lending fell by -0.3%. It was the first time investment lending has fallen over consecutive months since December 2012. Year-on-year, the value of housing finance commitments is 15.6% higher with owner occupier refinances up 14.8%, owner occupier non-refinances up 9.4% and investment loans rising 23.8%. As a proportion of total lending, the level of lending for investment purposes remains inflated on an historic basis although it has eased slightly. Owner occupier non-refinance commitments accounted for 43.4% of total lending in June compared to 18.1% to owner occupiers for refinances and 38.5% for investors. Although investment lending has eased it continues to hover at around its highest levels since late 2003. Remember 2003 was the final days of the housing boom in both Sydney and Melbourne which commenced in 2001. The number of housing finance commitments to owner occupiers increased by 0.2% over the month and was 2.4% higher year-on-year. The year-on-year increase is the slowest rate of increase since February 2013. This indicates that although demand for housing demand has increased, the rate of growth in this demand is slowing. Looking at the more detailed components, refinance commitments are -0.7% lower over the month and 5.1% higher year-on-year. Non-refinance commitments have increased by 0.6% over the month and are 1.2% higher year-on-year. The number of owner occupier housing finance commitments can be further broken down in to the type of commitments the finance is for. The three categories we analyse here are: construction of dwellings, purchase of new dwellings and purchase of established dwellings excluding refinances . Over the month, construction of dwellings rose by 1.1%, purchase of new dwellings was 4.6% higher and purchase of established dwellings edged just 0.1% higher. Year-on-year, the market strength has been associated with construction of new dwellings +17.0% rather than purchase of new dwellings -2.1% and purchase of established dwellings -1.7% . In fact the number of owner occupier finance commitments for construction of new homes is at its highest level since February 2010. Keep in mind that in June 2014, 17.9% of these non-refinance commitments were for construction of dwellings, 8.2% were for purchase of new dwellings and 73.9% were for purchase of established dwellings. The number of owner occupier housing finance commitments for first home buyers fell by -3.6% in June 2014 and are -6.2% lower year-on-year. First home buyers continue to play little role in the market, accounting for just 13.2% of total owner occupier housing finance commitments in June. Interestingly the average loan size for first home buyers is increasing. As home values rise they need to borrow a greater amount, this is highlighted by the 7.1% year-on-year rise which is the largest since December 2009. RP Data’s Mortgage Index RMI which provides a lead indicator to the number of owner occupier housing finance commitments indicates that there is likely to be a lift in July. Activity levels were 6.7% higher in July 2014 compared to June suggesting a likely rise in housing finance commitments over the coming month. The data shows that while demand for housing finance is holding we are potentially seeing a slowdown in demand from the investment segment. Meanwhile demand for owner occupiers is steady, albeit the rate of growth is slowing with the strongest increases arising for those constructing their own home. Spring will be the real test for the market from here, investment activity remains elevated, auction volumes and results have been strong throughout winter and we wait to see if this momentum continues for the remainder of the year. Particularly given that although values are continuing to increase, they are doing so at a more moderate pace than they were throughout late 2013 and early 2014. Although mortgage demand has picked-up over the past two years, it is important to note that the number of finance commitments remain well below 2009 and much lower than activity levels prior to the financial crisis.

Don’t expect Melbourne values to rise by 44% over the coming year

It was surprising to see an article published by Fairfax late last week that criticized our publication of monthly housing market statistics. The article that can be viewed here remarks that the RP Data indices are ridiculous and implies that the monthly results are misleading. The theme of the article focusses on the monthly result for Melbourne where we reported a 3.7% rise in Melbourne dwelling values over the month of July. For starters, the article did not disclose the fact that Fairfax publishes a competing index which is not a monthly measurement and lacks the timeliness of the RP Data series. Fairfax also owns a data business that is competitive with RP Data. The lack of disclosure around this conflict should come as a shock to readers who expect a greater level of transparency in reporting. It’s also worthwhile pointing out that our monthly hedonic index was developed in conjunction with Rismark International after the RBA released a discussion paper calling for more accurate and higher frequency reporting on housing market conditions. Since that time the RP Data monthly hedonic regression indices have become the index of choice for the RBA when it comes to reporting on housing market conditions in Australia. In an attempt to discredit our reporting and highlight what they perceive to be extreme volatility in the index reading, Fairfax take the monthly movement in our index value for Melbourne and annualise it to suggest the Melbourne housing market is heading for a 44%+ rate of growth over the coming year. Do commentators suggest the share market is set to boom when the S&P/ASX200 rises by 1.8% in a day an annualised gain of more than 400% using Fairfax’s logic ? The graph below demonstrates the difference in volatility between our daily housing market index and the daily S&P/ASX 200 index. The volatility in our capital city indices is around 4% per annum which is approximately one fifth of the volatility recorded across equity markets. The difference in volatility levels is clear from the graph below. Housing markets are much more stable than equity markets, however that isn’t to say that housing markets don’t show natural volatility. Housing market volatility simply hasn’t been measured in the past due to the lack of granularity and sophistication in the methods behind the measurements. If we look at monthly data released by the Australian Bureau of Statistics we can also see some significant month-to-month fluctuations that can take commentators by surprise. Over the first six months of this year, dwelling approvals have had the following month-by month changes: +9.0% in January, -6.6% in February, -4.5% in March, -6.1% in April, +10.3% in May and -5.0% in June. Of a similar note, the number of owner occupier housing finance commitments has fluctuated significantly over the first five months of this year. The fluctuations on a month-to-month basis were as follows: 0.0% in January, +1.6% in February, -1.3% in March, -0.5% in April and -1.7% in May. The point here is that volatility is a part of measuring any market on a regular basis and must be considered when looking at the data. Short term movements in the property market cannot be viewed in isolation. A more reliable and informative way to interpret the statistics is to take the monthly change in context with the broader trend of the data. Over the past three months Melbourne values have shown a much lower 1.8% rise; in fact the rolling quarterly rate of growth has been tapering across Melbourne since March and the rolling half yearly rate of growth peaked in January. Subscribers to our index data, such as the Reserve Bank and Federal Treasury, rely on our monthly indices regularly, but they take a much more informed view of the results; interpreting the monthly statistics in context with the trend as well as other market evidence such as vendor metrics, supply introductions, housing finance demand and transaction volumes. We agree that property market information needs to be timely and meaningful, and it’s not just those people looking to buy or sell a home that should take interest. National regulators and policy makers have a high level of interest in housing market conditions; housing is an important component of financial stability. The banking and finance sector track housing market conditions closely, with more than 65% of bank’s loan assets are secured by residential property their requirement to assess housing market conditions is one of the their highest priorities. Industry professionals, who need to understand the ups and downs of housing market conditions on a timely and frequent basis in order to run a successful business, also have a requirement for accurate and timely housing market analytics. Statistics are like a foreign language for most people. While numbers can look straight forward, understanding what the numbers mean and how best to interpret them can be challenging. Unfortunately, when it comes to measuring things like asset values and market movements, whether it is real estate or equities or other asset classes, complex mathematics is often required. Around 15 months ago RP Data, together with Rismark International, launched a new and improved hedonic methodology which provided a daily measurement of how dwelling values were performing. Our daily index tracks the overall change in home values across the complete portfolio of properties across the capital cities; essentially imputing the value of every house and apartment each day and measuring the change across the overall portfolio values between each period. Prior to being released to the market, RP Data’s indices were audited by both Alex Frino at Capital Markets CRC and KPMG from an infrastructure perspective. We consulted with the RBA. White papers on the index methodology are available to be downloaded from the RP Data web site. No other index provider goes to such lengths to provide a transparent level of documentation around their methodologies and processes. RP Data also spends about $15 million each year on data capture, cleansing and improvement. On a weekly basis we typically capture between 85% and 90% of all auction results which is generally much higher than other residential property data businesses. We receive about 60% of our transaction data directly from the industry which provides a much more timely mechanism for collecting property data than waiting on government provided records, however we also collect virtually 100% of all property transactions nationally from the respective state government departments. So in summary, we take data collection and the production and release of our indices very seriously as we fully understand and appreciate the important decisions being made every day by regulators, policy makers, financial institutions, other industry professionals and consumers, in reliance on our data and analytics, including our indices. The nature of statistics is such that from time to time you will get outlier results such as last month’s Melbourne figure and yes, businesses with competing interests to RP Data will use results such as this to attack us from time to time. The important thing is to understand outlier results occur every so often in any statistical model. Like industry professionals, policy makers and regulators, industry commentators need to understand this, not dismiss or discount these figures and pay attention to the longer-term trends.

Volumes and clearance rates stable

RP Data National Auction Preview, week ending 10 August, 2014 There are 1,726 auctions scheduled across Australia this week. In capital cities there are 1,372 auctions expected compared to 1,441 for the same period last year. Based on previous years this annual period typified by low auction volumes should be over by the end of the month. The national clearance rate has been both stable over the past few weeks and in line with this time last year. Given the higher volumes this means more active buyers are in the market. In Melbourne the auction market has now returned three solid weeks with moderate improvement. There are 673 auctions scheduled this week compared to 636 last week and 677 this time last year. The performance of the market may change again as inner eastern suburbs are featuring the highest volumes of auctions once again. In Sydney there are 486 auctions expected compared to 588 last week and 521 for this week last year. Last week’s clearance rate of 76.7 per cent was the highest since March. The auction market is following the trajectory of last year which suggests a very competitive spring ahead for buyers. Brisbane is expecting 97 auctions after 96 last week. Adelaide is expecting 50 auctions compared to 95 last week. Canberra has 31 auctions scheduled compared to 28 last week. Perth has 25 auctions compared to 20 last week. There are 9 auctions scheduled in Tasmania. Across Australia, the highest number of auctions is expected in Malvern East, Balwyn North and Reservoir, each of which has 13 scheduled. Robert Larocca RP Data Auction Market Specialist 0409 198 350

RP Data Auction Market preview, Melbourne; Week ending 10 August, 2014

There are 673 auctions scheduled this week in Melbourne compared to 677 for the same time last year. Buyers are clearly in the market for capital gains, as yields remain low at 3.3 per cent for houses; the lowest of all capital cities. Low yields translate into good conditions for renters in many parts of Melbourne. Recently released rental market data showed that the median advertised rent for a house in Melbourne was stable in July at $447 per week and has risen by 2.4 per cent in the previous twelve months. This means that the median advertised rent for houses is not keeping pace with the CPI, 3.2 per cent in Melbourne, for most relevant period. The comparable data for units showed a drop of a dollar a week to $397 over the month and an increase of 1.6 per cent in the year. This reflects the adequate levels of supply in the higher density market. The average time on market for houses sold last month rose from 44 to 46 days. Vendor discounting rose, but only slightly from -5 per cent the previous week to -5.1 per cent last week. Key data Clearance rate week ending 3 August: 69% Melbourne auctions expected week ending 10 August: 673 Melbourne private sales time on market week ending 3 August: 46 days houses Melbourne vendor discounting market week ending 3 August: -5.1% houses Listings being prepared for market are 0.7% higher in month ending 3 August seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

National clearance rate lifts

RP Data National Auction Comment, week ending 3 August, 2014 A preliminary weighted average clearance rate of 69.7 per cent was recorded this week across capital cities compared to 67.9 per cent last week and 69.3 per cent this time last year. Both Sydney and Melbourne, which account for the majority of the auction market in Australia, had strong results with clearance rates above trend. This week a preliminary clearance rate of 77.6 per cent was recorded in Sydney compared to 75.4 per cent last week. Prior to this weekend the year to date clearance rate was a healthy 74.4 per cent. In Melbourne a result above trend for the year was reached with a preliminary clearance rate of 70.9 per cent recorded compared to 68.5 per cent last week. Not including this weekends resultsthe clearance rate for the first 8 months of the year was 67.3 per cent. In Brisbane a preliminary clearance rate of 32.3 per cent was recorded compared to 44.7 per cent last week. Adelaide recorded a clearance rate of 60.3 per cent compared to 60.3 per cent last week. In Canberra a clearance rate of 59.1 per cent was recorded and in Perth there was a clearance rate of 46.2 per cent. Robert Larocca RP Data Housing Market Specialist

Melbourne house values rise in July as units show no growth

The RP Data Rismark Home Value July index results shows that Melbourne dwelling values continued to grow in July with a new peak reached for houses and minimal value growth for units Based on current trends so far this year, vendors looking to sell houses in spring are well placed to do so. In the three months to the end of July, the RP Data Home Value Index for Melbourne dwellings rose 1.8 per cent bringing the year to date increase to 6.8 per cent. House values in Melbourne reached a new all time high in July after a 2 per cent rise over the quarter and 7.6 per cent rise over the year to date. Based on settled sales over the three months the median house price was $590,000. The unit market has leveled, displaying almost no growth in values as high levels of supply leave values unchanged over the last three months and only a 0.9 per cent rise over the first seven months of the year. The auction market continues to be healthy despite the normally softer winter season. The average clearance rate over the first 8 months of the year was 67.3 per cent, slightly down on the 68 per cent over the same time in 2013. Overall transaction, levels in Melbourne are still not showing rapid growth, the most recent data suggests a rise of only 5 per cent on last year which indicates a residential market that is healthy but not overheating. Robert Larocca RP Data Victoria Housing Market Specialist

Auction numbers up 38% compared to 2013

RP Data National Auction Preview, week ending 3 August, 2014 There are 1,731 auctions scheduled across Australia this week. In capital cities there are 1,391 auctions expected compared to 1,310 for the same period last year. A review of volumes nationally over the first 8 months shows there have been nearly 50,833 capital city auctions in total or, 38 per cent more auctions held when compared to the same period last year. In Melbourne there are 573 auctions scheduled this week compared to 736 last week and 600 this time last year. The clearance rate for the first 8 months of the year is 67.3 per cent, slightly down on the 68 per cent over the same time in 2013. Given the substantial increase in volumes this is not a negative sign. In Sydney there are 519 auctions expected compared to 660 last week and 466 for this week last year. Not only have there been more auctions than the same time last year but the clearance rate is higher at 74.4 per cent compared to 69.3 per cent in 2013. Brisbane is expecting 89 auctions after 162 last week. Compared to this time last year the clearance for the first 8 months is higher at 46.9 per cent compared to 39.5 per cent. Adelaide is expecting 92 auctions compared to 72 last week. The auction market is strong than last year with a clearance rate of 62.4 per cent compared to 51.2 per cent. Canberra has 26 auctions scheduled compared to 40 last week. The clearance rate has also risen in Canberra, at 55.9 per cent compared to 52 per cent last year. Perth has 17 auctions compared to 22 last week and lower year to date clearance of 41.2 per cent compared to 47.6 per cent. There are 10 auctions scheduled in Tasmania. Across Australia, the highest number of auctions is again expected in the northern suburbs of Melbourne where 16 are expected in Reservoir. Robert Larocca RP Data Auction Market Specialist

June 2014 building approvals data

The Australian Bureau of Statistics ABS released building approvals data for June 2014 earlier today. National dwelling approvals fell by 5.0% over the month with house approvals falling by -2.6% and unit approvals down -8.4%. Despite the fall in approvals over the month, a significant number of dwelling approvals remain in the pipeline. Note that dwelling approvals have now fallen over four of the past five months. Year-on-year, dwelling approvals are 16.0% higher in June 2014 than in June 2013. House approvals have increased by 12.2% year-on-year while unit approvals have surged by a greater 22.0%. The greater rise in unit approvals compared with house approvals reflects changing lifestyle patterns and greater acceptance of higher density living. However, a recent analysis we have undertaken indicates units are less likely to be ultimately completed than houses. Although the pipeline is strong, it is reasonable to expect that not all of these units will ultimately be constructed. The month-to-month dwelling approvals data is quite volatile, given this it is worthwhile looking at the annual number of approvals. Over the 12 months to June 2014 there were 108,598 house approvals and 85,067 unit approvals. With a total of 193,667 dwelling approvals over the year there has been a 20.7% increase in approvals year on year. Total annual dwelling approvals are now at their highest level since October 1994. Focussing on dwelling approvals, across the combined capital city housing markets there were 144,278 approvals over the 2013/14 financial year. This was an increase of 25.5% over the year and the highest number of annual approvals on record. Both Sydney and Perth have also recorded their highest ever number of dwelling approvals over the past year. Over the year there were 69,973 houses approved for construction +21.3% over the year and 74,305 unit approvals +29.8% . Most individual capital cities have recorded an increase in dwelling approvals over the year with the largest increases recorded in Brisbane 47.1% , Sydney 30.6% , Adelaide 30.4% and Perth 27.6% . Darwin was the only city where approvals were lower over the year, down -3.7%. Comparatively the annual increase in dwelling approvals has been much lower in Hobart 12.9% , Melbourne 13.9% and Canberra 22.6% . Sydney and Melbourne alone have accounted for almost 58% of all capital city dwelling approvals over the year. As noted earlier, there have been more unit approvals across the combined capital cities than house approvals. Over recent years around 98% of house approvals have ended up as completions compared to only 86% of unit approvals. While units are increasing in popularity there is much less certainty about their ultimate construction than there is for houses. Across the cities Sydney had 68.8% of approvals for units and in the remaining cities the figures were: Melbourne 52.9% , Brisbane 56.0% , Adelaide 32.3% , Perth 23.8% , Hobart 11.2% , Darwin 58.7% and Canberra 61.9% . Despite the monthly fall, the pipeline of dwellings approved for construction is significant. It is important to note that over the past five months, dwelling approvals have fallen on four occasions. This may indicate that the sector has moved through the peak levels of dwelling approvals. The strong pipeline of unit approvals, particularly in capital cities also carries a risk as units are less likely to be ultimately constructed than houses. Nevertheless, the Reserve Bank stated that with low interest rates they didn’t just want to see higher house prices but also a construction response. This certainly seems to be how the current conditions are playing out and with population growth recently starting to slow we may start to see an improvement in the alignment between home construction and population growth.

RP Data Auction Market preview, Melbourne; Week ending 3 August, 2014

There are 573 auctions scheduled this week in Melbourne compared to 600 for the same time last year. This is a rare but minor 4.5 per cent fall which does not reflect the fact that in the first 8 months of the year there have been 29.5 per cent more auctions than the same time in 2013. The current regional variation in auction numbers should be taken into account when analysing the auction market as many sellers in the inner east appear to avoiding winter. The main auction activity in Melbourne remains outside the inner eastern suburbs with 16 homes scheduled to go under the hammer in Reservoir, 11 in St Kilda and 10 in Essendon, Melbourne and Preston. For buyers looking in the more expensive inner east volumes are rising slowing with 6 expected in Camberwell, Kew and Hawthorn East. The average time on market for houses sold last month rose slightly from 43 to 44 days. Vendor discounting contracted from -5.2 per cent the previous week to -5 per cent last week. Key data Clearance rate week ending 27 July: 68.5 per cent Melbourne auctions expected week ending 3 August: 573 Melbourne private sales time on market week ending 27 July: 44 days houses Melbourne vendor discounting market week ending 27 July: -5 per cent houses Listings being prepared for market are 0.7 per cent higher in month ending 27 July seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Calder Freeway provides drive for growth

The Calder Freeway, which makes its way through central Victoria’s has contributed to a increase in capital growth and compared to other regional centres towns along this transit corridor are showing the strong appreciation. For those unfamiliar with Victoria the Calder Freeway is the main road between Melbourne and Bendigo and links Macedon, Kyneton, Gisborne, Woodend and Castlemaine. There is also a matching rail service and both have been upgraded over the past decade. House values in these areas have outpaced Melbourne, Ballarat and Geelong over the past five years. The best growth was recorded in the Macedon Ranges Shire which includes Macedon, Kyneton, Gisborne and Woodend. Over the past five years house values have grown by 46.2 per cent. Following Macedon Ranges Shire was Mount Alexander Shire which is centred on Castlemaine. There house values have risen by 39.5 per cent. The further away from the Melbourne the area is the lower is the growth, presumably as there is less of a flow on from the metropolitan market. In the City of Greater Bendigo values have risen by 38.4 per cent, lower than Macedon Ranges but still well above the 28.4 per cent recorded in Melbourne. Interestingly values in Ballarat, with a rise of 33.9 per cent have also exceeded Melbourne. For many people, the attraction to these areas is highlighted by the availability of more affordable property coupled with a country lifestyle. The data shows that as a result of additional transport options in these areas it has made it more and more possible for people to maintain employment and undertake a tree change. Robert Larocca RP Data Victoria Housing Market Specialist

National auction market softens after drop in Melbourne

RP Data National Auction Comment, week ending 27 July, 2014 A preliminary weighted average clearance rate of 67.3 per cent was recorded this week across capital cities compared to 69.3 per cent last week and 65.3 per cent this time last year. With Sydney recording strong results on a consistent basis the national clearance rate is proving to be variable due to the Melbourne auction market. This is not necessarily a negative sign as results are still stronger than a year ago. Sydney again recorded the strongest preliminary clearance rate, reaching 75.9 per cent compared to 75.2 per cent last week. The consistent strong results should help ensure a spring with plenty of listings as owners will be encouraged to sell. In Melbourne, a preliminary clearance rate of 66.1 per cent was recorded compared to 68.4 per cent last week. The variable results currently being recorded on a weekly basis are not negatively affecting the volume of homes being offered at auction. In Brisbane a preliminary clearance rate of 44.2 per cent was recorded compared to 56.9 per cent last week. Adelaide recorded a clearance rate of 62.8 per cent compared to 69 per cent last week. In Canberra a clearance rate of 53.1 per cent was recorded and in Perth there was a clearance rate of 53.8 per cent. Robert Larocca RP Data Housing Market Specialist

National auction market hits 3 month high

RP Data National Auction Preview, week ending 27 July, 2014 There are 1,900 auctions scheduled across Australia this week. In capital cities there are 1,531 auctions expected compared to only 1,441 for the same period last year. Compared to last week or this week last year capital cities are showing a moderate improvement in key indicators. This is highlighted by the fact that the national clearance rate reached a 3 month high last week. A review of the RP Data Listings Index, which measures forward listings activity, shows a clear rising trend compared to last year. When translated to the auction market this should result in volumes in August and September around 10 to 20 per cent higher than last year. In Melbourne there are 665 auctions scheduled compared to 637 this time last year. In Sydney there are 600 auctions expected compared to 469 for this week last year. Brisbane is expecting 137 auctions, well down on the 220 this week last year. Adelaide is expecting 62 auctions compared to 51 a year ago. Canberra has 37 auctions scheduled compared to 29 a year ago. Perth has 21 auctions compared to 27 a year ago. There are 8 auctions scheduled in Tasmania. For the second week in a row the highest number of auctions across Australia is expected in the northern suburbs of Melbourne where 23 are expected in Reservoir. Robert Larocca RP Data Auction Market Specialist

Inflation adjusted home values are still lower than their previous peak across most cities

According to the RP Data-Rismark Home Value Index, combined capital city home values fell by -0.2% over the second quarter of 2014. With the Australian Bureau of Statistics ABS releasing their Consumer Price Index CPI data this week, we can see that in ‘real’ terms home values across the combined capitals fell by -0.7% over the second quarter of the year. CPI is important to consider because raw or nominal figures don’t adjust for the impact of inflation. At a headline level, combined capital city home values have increased by 10.1% over the 2013/14 financial year. The latest CPI data showed that inflation was recorded at 0.5% over the second quarter and at an annual rate of 3.0% throughout the 2013/14 financial year. Focusing on the ‘real’ home value growth across individual capital cities we can see some significant variation in value growth, with values actually falling over the year in some cities. The above chart details the annual change in capital city home values both in terms of raw change and inflation-adjusted changes. Although according to the RP Data-Rismark Home Value Index, dwelling values have risen over the year across all cities, when you adjust for inflation values are lower in real terms in Adelaide, Hobart and Canberra. Not to mention that growth in most other cities starts to look a lot more moderate. Home values have been rising across the combined capital cities since June 2012 following falls over most of the previous two years. Across the individual capital cities the timing and magnitude of the falls has varied greatly however, with values rising across the board, home values generally remain well below their previous peak in real terms across the capitals. In non-inflation adjusted terms home values are higher than their previous peak in: Sydney, Melbourne, Canberra and Perth. Once you account for inflation, Sydney is the only city where values are currently higher than their previous peak. The above table highlights the previous quarter in which home values peaked in inflation adjusted terms, the maximum falls in values and the difference in values from the previous peak to June 2014. As you can see, the previous peaks vary dramatically across each city. As already mentioned, Sydney is the only city where real values are now higher than their previous peak although it’s important to note that Sydney’s previous peak was all the way back in the first quarter of 2004. Perth’s market peaked in September 2007 and values are still -9.9% lower, Hobart peaked in December 2007 and values are currently -18.8% lower and Brisbane peaked in March 2008 with values currently -14.5% lower than that level. Across all other capital cities values are below their peak however, the real peak in values occurred following the financial crisis. It is important to consider the impact of inflation because it highlights the real purchasing power. In most cities, despite extremely low mortgage rates and value growth throughout the past two years values still remain well below their peaks. For home owners this means the real capital gain from residential property have been quite poor in recent years outside of Sydney and Melbourne. For people who don’t yet own a home it means that you should be able to purchase relatively more for you money now than you could at the market peak. The data also shows that interest rates are not necessarily the main driver of why values are currently rising. If that were the case you would probably expect cities where values peaked much longer ago like Brisbane, Perth and Hobart to have recorded stronger levels of growth. Mortgage rates are but one consideration for the home buyer and obviously considerations such as employment, cost of living and housing demand driven through population growth are equal as important of a consideration as mortgage rates when considering whether to purchase or not.

RP Data Auction Market preview, Melbourne; Week ending 27 July, 2014

As volumes rise, there are 665 auctions scheduled this week in Melbourne compared to 637 for the same time last year. The market returned to trend last week following the aberration the week before. Along with an increase in volumes, demand continues to build slowly in the lead up to spring when buyers will find more choice at auctions and improvement for the range of homes on offer. On a Melbourne-wide basis, the number of days houses are taking to sell by private sale remained above 40 over the last week, higher than was the case over much of summer and autumn. The likelihood of the private sale market tightening substantially will be mitigated by the lack of growth in buyers based on mortgage market activity. Key data Clearance rate week ending 20 July: 68.4 per cent Melbourne auctions expected week ending 27 July: 665 Melbourne private sales time on market week ending 20 July: 43 days houses Melbourne vendor discounting market week ending 20 July: -5.2 per cent houses Listings being prepared for market are 0.5 per cent lower in month ending 20 July seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Melbourne transaction numbers slowly rising

While it’s often not obvious, a sign of a poorly performing property market can be a low level of residential sales. It reflects a low level of confidence, owners may be reluctant to sell for fear of achieving a low price and buyers may also be reluctant to make the significant commitment that is required when entering into a home loan. Low transactions levels have a range of negative consequences; professions related to property suffer, state government incomes drop and buyers can find it more difficult to find the right home due to a lack of choice which is the reason why the number of transactions is an important metric to follow if you are interested in the state of the market – sometimes it can be even more important than prices. For the Melbourne market, the current level of transactions suggests a healthy market below its peak. The first indication of this is that home values are at a peak in nominal terms but are still around 3 years worth of inflation below their value in real terms. The second indication is that the overall number of settled sales at the end of April was only 1.3 per cent higher than a year ago. This is better than 2012 by a reasonable 4.4 per cent but well below the all-time record in 2007 when there was 105,194 sales in Melbourne and four months into this year we are still 22.2 per cent lower. This data may be surprising to anyone who has seen the record number of auctions this year but as that only accounts for around 31 per cent of sales it can’t provide an accurate picture of the entire market. Robert Larocca RP Data Victoria Housing Market Specialist

National auction market continues to strengthen

RP Data National Auction Comment, week ending 20 July, 2014 A preliminary weighted average clearance rate of 70.7 per cent was recorded this week across capital cities compared to 67.2 per cent last week and 64.1 per cent this time last year. Demand in the Sydney market has pushed the national preliminary clearance rate over the 70 per cent mark for the first time since the middle of March this year. Low winter volumes are a factor as the clearance rate recorded its sixth consecutive increase. A preliminary clearance rate of 76.9 per cent was recorded in Sydney compared to 75.6 per cent last week. A clear improvement was seen in Melbourne compared to last week, with a preliminary clearance rate of 69.6 per cent recorded compared to 66.4 per cent last week. In Brisbane a preliminary clearance rate of 54.1 per cent was recorded compared to 43.3 per cent last week. Adelaide recorded a clearance rate of 72.7 per cent compared to 60.9 per cent last week. In Canberra a clearance rate of 71 per cent was recorded and in Perth there was a clearance rate of 30 per cent. Robert Larocca RP Data Housing Market Specialist

RP Data National Auction Preview, week ending 20 July, 2014

Sydney clearance rate records 5 consecutive weeks of improvement RP Data auction spokesperson Robert Larocca reports: There are 1,611 auctions scheduled across Australia this week. In capital cities there are 1,267 auctions expected compared to only 1,180 for the same period last year. The improving trend recorded on a national level in June and early July was halted last week, largely due to an almost 4 point drop in the clearance rate in Melbourne. In contrast demand in Sydney continues to strengthen and this should encourage more vendors into the market between August and December. In Melbourne there are 590 auctions scheduled compared to 567 last week and 519 this time last year. Auction volumes remain very low in the traditionally strong auction suburbs in the inner east, for instance Hawthorn, Balwyn and Camberwell. The market will change and be tested as they rise over the coming weeks. Sydney continues to record improving results with the clearance rate rising in each of the past 5 weeks. In Sydney there are 452 auctions expected compared to 580 last week and 422 for this week last year. Brisbane is expecting 98 auctions after 118 last week. Adelaide is expecting 59 auctions compared to 85 last week and 59 a year ago. Canberra has 45 auctions scheduled compared to 41 last week. Perth has 15 auctions compared to 24 last week There are 3 auctions scheduled in Tasmania. Across Australia, the highest number of auctions is expected in the northern suburbs of Melbourne where 16 are expected in Reservoir. Robert Larocca RP Data Auction Market Specialist

RP Data Auction Market preview, Melbourne; Week ending 20 July, 2014

There are 590 auctions scheduled this week in Melbourne compared to 519 for the same time last year. The highest number of auctions is expected in the northern suburbs where 16 are expected in Reservoir. Seasonally low volumes are not only a factor in the auction market with the overall level of new listings also being lower than a year ago. In Melbourne there were 4.9 per cent fewer homes listed for sale over the last month and 8.8 per cent fewer homes overall on the market. Fewer homes on the market than a year ago is a positive sign, especially from a sellers’point of view, however the lower number of new listings may put pressure on prices if it persists and buyer numbers remain at current levels. The average time on market for houses sold last month rose slightly from 40 to 41 days. Similarly, vendor discounting increased from -5.3 per cent the previous week to -5.4 per cent last week. Key data Clearance rate week ending 13 July: 66.4 per cent Melbourne auctions expected week ending 20 July: 590 Melbourne private sales time on market week ending 13 July: 41 days houses Melbourne vendor discounting market week ending 13 July: -5.4 per cent houses Listings being prepared for market are 1 per cent lower over the month ending 13 July seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

What can be done about the fading hopes of lower income earnerâ

Lower income earner’s hopes of owning a home have faded over the past two years due to the high rate of capital gain, so what can be done? In last week’s RP Data Research Blog I highlighted sales by price point across the capital cities. The data showed a shortening supply of homes selling at lower price points, in particular within some of our largest capital cities. In this week’s Blog I want to investigate what this means for those who don’t already own a home and in particular those that are on lower incomes. The latest quarterly average weekly earnings data from the Australian Bureau of Statistics ABS to November 2013 shows that the average Australian earned $1,114.20 a week. Remember this is the average so plenty of people earn less than this figure which is the equivalent of almost $58,000 a year. Compared to many other countries, Australia’s average wage is quite high however, so too is the cost of living in Australia and in particular the cost of housing as highlighted last week. With a combined capital city median house price of $580,000 and median unit price of $482,000 an average income is not going to go a long way. But why is the capital city median price more relevant than the nationwide median which is $490,000 and $440,000 for houses and units respectively? Well it comes down to the fact that you generally need to be employed to secure a mortgage and work towards owning a home. The latest labour force data from the ABS shows that Australia had 11.578 million employed persons as at June 2014. With a 6.0% unemployment rate the total size of the workforce, or to put it another way the number of people with employment or actively looking for employment, is 12.320 million. For myriad reasons a proportion of the population is not actively working or looking for work at any given time. As at June 2014 the employment participation rate was 64.7% meaning that for whatever reason there are an estimated 4.349 million people over 15 years of age that are not actively working or looking for work. The 2011 Census reported that at that time there were 21.504 million Australian’s living across the six states and NT and ACT. At that time, 65.6% of Australian’s or 14.1 million lived in a capital city. A slightly higher 67.4% of persons reported as being in the workforce working or actively looking for work lived in a capital city. In fact, 58.2% of people in the workforce lived in Sydney, Melbourne, Brisbane or Perth. If we think how this impacts lower income earners and their prospects of entering into home ownership it’s not simply a case that they can move to another city where housing is more affordable. Unfortunately in Australia, jobs, particularly well-paying jobs, are largely located in a handful of major capital cities or on mining sites in the middle of nowhere. The reality of moving to another capital city or to a regional area where housing is cheaper is not a realistic prospect for many low income earners. As I showed in last week’s blog there are still opportunities to purchase lower priced homes across the capital cities however, these opportunities are becoming fewer. If you look at where these lower priced sales are occurring, for houses they are typically located on the outskirts of the city. Houses on the outskirts of cities, particularly the major capital cities, are inherently cheaper because they are often less desirable than those in well-established suburbs closer to the city centre although not always . Although housing is cheaper in these areas the cost of doing day-to-day tasks is more expensive. If you work in the city, the cost of public transport is higher and if you choose to drive you lose hours in traffic, not to mention the additional cost of fuel and road tolls. Local amenities such as shops, schools and health care tend to not be as abundant in outer suburbs as they are closer to the city centre so it will take residents of these areas longer to access these amenities too. Although housing may be more affordable within the outer suburbs, it won’t necessarily make it easier for some lower income earners to afford a mortgage when they factor in all the additional costs of living in that location. Lower priced housing stock is also available within the unit market however, this too has its shortcomings. There are becoming fewer lower priced units available in areas closer to city centres. Unit prices are still generally much lower than that of houses although, most of the newer stock comes with a relatively high price tag these days. Of course units are also much smaller than a house and you tend to get less in terms of area for your money. While a unit may be practical when your single, a couple or have young children, they become less practical if/when the situation changes and the size of the family grows. Units also don’t offer the same level of freedom as a house with limitations generally in place with regard to what you can and can’t do both within and to your unit. Although when you own a home you have to pay for upkeep, in a unit complex you have to contribute strata levies each quarter the cost of which can at times be exorbitant. So what realistic option does the person on a lower income have? Of course housing should be cheaper on the outskirts of the city and it is but even still a lot of lower income earners are not in a position to purchase. This is partly because although housing is cheaper a mortgage is still going to swallow up a sizeable chunk of their income not to mention the other costs associated with living on the outskirts of the city. The commonly recommended solution is to remove urban growth boundaries and cut fees and charges on new developments which would theoretically increase supply and therefore bring down the cost of housing. But I wonder by how much would it really reduce the cost and would it be significant enough to allow lower income earners to purchase. I think possibly not and here’s why. It’s not simply a case that we can fix housing affordability by building more and more homes, if that was the case, lower income earners could just move to a more affordable city. The issue is more to do with employment and specifically where the jobs are located. Even on the outskirts of the capital cities the cost of public transport and fuel will still eat up a sizeable chunk of lower income earners salaries. If residents on the outskirts still have to travel to get to their jobs which often they will they will often encounter a number of hurdles. Firstly public transport is often woefully insufficient in these areas. Anyone who has travelled overseas will know that public transport in our larger capital cities is not of a particularly high standard. The other thing with public transport is that it caters much better to those people living closer to the city centre and transport upgrades often benefit inner city dwellers much more than it benefits those on the outskirts of the city, the ones that need it the most. Secondly, the road network also tends to be insufficient on the outskirts of the cities unable to cope with the growing population. This is due to the fact that Governments tend to put the onus of building the roads on the developers and will often not provide the major roads to a new housing area until such time as it is absolutely critical. Developing the roads before the housing would make these areas much more attractive and accessible. If we can’t provide sufficient public transport and roads to the housing areas on the outskirts of the city, the greatest assistance we can provide when developing these areas is to accompany this residential development with local jobs for these workers. Travelling to work does not become such an issue for low income earners on the outskirts of a capital city if they can find employment locally. Not to mention it is imperative to bring amenities such as shops, schools and health care closer by. If this were to occur, public transport and investment in new major roads becomes not as vital as it is currently when there are so few employment opportunities locally. If lower income earners aren’t lumped with the additional burdens of significant public transport, fuel and road toll costs to get to their employment then the burden of a mortgage whilst still difficult does not become a virtual impossibility. So yes, affordable housing is becoming harder to find in our capital cities and yes, increasing supply of housing will help to improve the opportunities to purchase homes at a lower price. However, local employment drivers and amenities I believe are just as important especially seeing as time and time again we have seen insufficient investment in public transport and road infrastructure on the outskirts of the cities. Not to mention that the cost of utilising public transport is extremely restrictive. Alternatively we should forget pie in the sky proposals such as fast trains between Brisbane and Melbourne and improve the rail network locally. Each of Sydney, Melbourne and Brisbane could use a more expansive rail networks which includes more stations, better linkages to suburbs on the outskirts and faster connections between nearby cities. Investing in improving links and train speeds to the Central Coast, Newcastle, Wollongong, the Blue Mountains and Bathurst from Sydney, to Geelong, Ballarat and Bendigo from Melbourne and to the Gold and Sunshine Coasts and Toowoomba from Brisbane would no doubt be a much more worthwhile investment.

Best suburbs in Melbourne for capital growth within 20k of CBD

Analysis of changes in the median value of houses in suburbs within 20k of the CBD over the medium term shows some interesting trends. In order to smooth out some of the volatility present in the short term this analysis focuses on median value growth over a five year period. The data shows that owners at a range of price points and locations have recorded very healthy increases in value. There are three suburbs with median values in excess of $1 million in the top ten list based on median value growth over the past five years. These three suburbs, Hawthorn East, Middle Park and Ashburton have all recorded a rise in median values of more than 45 per cent over the five years to May 2014. Hawthorn East tops the list with an increase of 78 per cent over the past 5 years, but is followed by a much more affordable location in second place. Watsonia recorded a 63 per cent rise and with a median house value less than a third of Hawthorn East, this shows good capital growth can be found at a range of price points. Third on the list is Derrimut, however as a growth suburb underlying values are driven by new home development across the suburb. Fourth on the list is Pascoe Vale South with a 54 per cent rise. It is a suburb which is undergoing significant change and is seeing values boosted by the good transport options and well-sized blocks. Other suburbs on the list can be seen below but it is worth highlighting Northcote, as it is representative of the gentrification underway in the inner north of Melbourne. Robert Larocca RP Data Victoria Housing Market Specialist

More auctions and more sales in capital cities than a year ago

RP Data National Auction Comment, week ending 13 July, 2014 A preliminary weighted average clearance rate of 68.7 per cent was recorded this week across capital cities compared to 68.9 per cent last week and 67.7 per cent this time last year. Sydney provided the highest clearance rate and when combined with the higher volumes in Melbourne resulted in another solid week. This week a preliminary clearance rate of 76.4 per cent was recorded in Sydney compared to 72.4 per cent last week. Sellers with auctions scheduled in spring will welcome the strong result this week. In Melbourne there was a preliminary clearance rate of 67 per cent recorded compared to 71.4 per cent last week. The market has built a solid basis for spring and continues to offer buyers good opportunity. In Brisbane a preliminary clearance rate of 47 per cent was recorded compared to 59.5 per cent last week. Adelaide recorded a clearance rate of 62.3 per cent compared to 64.6 per cent last week. In Canberra a clearance rate of 64.3 per cent was recorded and in Perth there was a clearance rate of 75 per cent. In Tasmania 1 auction resulted in sales from the 4 held. Robert Larocca RP Data Housing Market Specialist

May 2014 Housing Finance Data

The Australian Bureau of Statistics ABS released housing finance data for May 2014 late last week with the data showing owner occupier housing finance commitments flat over the month. The data also showed that the total value of housing finance commitments was -0.8% lower over the month. Although this may be concerning, the number of housing finance commitments remain high and even if we have reached the summit, the RBA would probably be happy were commitments to remain at these current levels. Over the month of May there were 52,092 owner occupier housing finance commitments, 17,463 of which were refinances and 34,630 which were non-refinances or new loans. Refinance commitments were 2.1% higher over the month and are 10.1% higher year-on-year. New loan commitments were -1.0% lower in May and are only 2.0% higher over the month. Refinance commitments are at their highest level since April 2008 while new loan commitments are -2.5% lower than their recent peak in November 2013. Although owner occupier housing finance commitments are higher over the year they do seem to be at or very close to a peak. In May there was $27.5 billion worth of housing finance commitments which was slightly lower than the all-time peak of $27.7 billion the previous month. Over the month, owner occupier refinance commitments were up 0.8%, owner occupier new loans were -1.4% lower and investment finance commitments were -0.9% lower. Despite weaker results over the month, year-on-year there have been some significant increases with owner occupier refinances 17.7% higher, owner occupier new loans 8.3% higher and investment loans up 23.8%. Again the rate of increase has definitely slowed of late potentially pointing to a peak. Looking at how much housing lending each component is attracting, the data shows that in May 2014, 42.9% of lending was to owner occupiers for new loans, 18.0% was for refinances by owner occupiers and 39.1% is for investment purposes. As a proportion of total lending in May, owner occupier non-refinance commitments are at their lowest level on record while refinances are at their highest level since July 2013 and investment lending remains at around its highest level since late 2003. The pick-up in investment and refinance lending has caused the proportional fall in owner occupier non-refinance lending. If we exclude lending for refinances, 52.4% of lending over the month was for owner occupiers while 47.6% was for investors. This was equal to the second highest level of lending for investment purposes, behind the 49.0% of all loans to investors in October 2003. Lending finance data released by the ABS on Monday for May 2014 revealed that investor activity is significantly higher in New South Wales than in all other states. Nevertheless, New South Wales 29.9% , Victoria 22.5% , Queensland 7.8% and South Australia 2.1% have each recorded a year-on-year rise in investment lending. Investment housing finance commitments account for an historic high 46.9% of all housing finance commitments in New South Wales and elsewhere the proportions are recorded at: Victoria 39.1% , Queensland 34.4% , South Australia 31.5% , Western Australia 31.0% , Tasmania 13.8% , Northern Territory 40.2% and the Australia Capital Territory 33.9% . The data shows that although investment levels are generally rising it is much more exacerbated in New South Wales and Victoria which are of course proxies for rising investment in Sydney and Melbourne. Interestingly when we track the annual change in the value of housing finance commitments, excluding refinances to reflect home sales we can see that it correlates closely with the annual change in combined capital city home values. The recent slower rate of growth in capital city home values is happening in concert with a slowdown in the growth in housing finance commitments. The housing finance data also shows that first home buyers continue to play only a minor role in the housing market. In May, the number of owner occupier first home buyer commitments was up 17.1% over the month however, as a proportion of total owner occupier lending activity it remains quite low at just 12.6%. Across the individual states, the level of activity by first home buyers remains very low in the three largest states New South Wales, Victoria and Queensland . Elsewhere the percentage of owner occupier housing finance commitments for first home buyers is lower now than at the same time last year except in Tasmania and the Northern Territory. Looking ahead, the RP Data Mortgage Index RMI indicates a slowing of demand for mortgages in June. With value growth seemingly having peaked and transaction volumes lower than they were late in 2013 we anticipate that demand for housing finance is likely to remain at fairly similar levels to those current over the coming months. The real test from here will be throughout the spring selling season when housing demand typically escalates. With affordability factors anticipated to slow the rate of value growth we may also see slightly lower levels of mortgage demand. As we have noted plenty of times previously, rental yields are generally low which suggests that most investors are seeking capital growth. This is further highlighted by the high levels of investment activity in New South Wales and Victoria with Sydney and Melbourne having recorded the greatest increases in home values across the capital cities over the past year. The test will be once the value growth in the market abates what then happens with all these investor owned properties? Do they wait it out for the next growth phase or do they exit the market and move to a more liquid asset class? Only time will tell but it is certainly something which lenders and regulators should be considering with such a high level of investment lending currently taking place.

National clearance rate rising in winter

RP Data National Auction Preview, week ending 13 July, 2014 RP Data auction spokesperson Robert Larocca reports: There are 1,613 auctions scheduled across Australia this week. In capital cities there are 1,268 auctions expected compared to only 984 for the same period last year. Over the past three weeks the national clearance rate has shown a rising trend with a 3.5 point rise recorded. If this trend continues it will result in a return to the 70 per cent clearance rates last recorded in February and early March on the eve of spring. In Melbourne there are 527 auctions scheduled compared to 549 last week and 426 this time last year. The clearance rate exceeded 70 per cent last week however with the consumer confidence index trending down and still below 100, the market will be tested as volumes rise over the next two months. In Sydney there are 497 auctions expected compared to 597 last week and only 378 for this week last year. The rising trend apparent in the market nationally is also the case in Sydney, which has seen a consistent 5-point rise over the past 5 weeks and reflects improving confidence levels. Brisbane is expecting 103 auctions following 126 last week. Consistent with Sydney and Melbourne there is a rise in volumes on a year ago when there were 78 auctions. Adelaide is expecting 79 auctions compared to 83 last week and only 47 a year ago. Canberra has 38 auctions scheduled compared to 43 last week. Perth has 22 auctions compared to 34 last week There are 6 auctions scheduled in Tasmania. Across Australia, the highest number of auctions is expected in the Sunshine Coast where 12 auctions are scheduled in Buderim. Robert Larocca RP Data Auction Market Specialist

RP Data Auction Market preview, Melbourne; Week ending 13 July, 2014

There are 527 auctions scheduled this week in Melbourne compared to 426 for the same time last year. The Melbourne market has been delivering consistent results for sellers in the past 4 weeks with very little change in the weekly clearance rate. A review of the change in house values on a suburban basis shows that the largest increase over the last year was found mainly in inner city suburbs. Middle Park, Hawthorn East, Braybrook, Balwyn North and Praharan comprised the top 5 with changes in median value of between 43.2 per cent and 24 per cent. For apartments the top 5 included Caulfield East, Middle Park, Canterbury, Flemington and Spotswood. The average time on market for houses sold last month rose sharply from 35 to 40 days despite average discounting being stable at -5.3 per cent over the previous week. Key data Clearance rate week ending 6 July: 71.4 per cent Melbourne auctions expected week ending 13 July: 527 Melbourne private sales time on market week ending 6 July: 40 days houses Melbourne vendor discounting market week ending 6 July: -5.3 per cent houses Listings being prepared for market are 0.5 per cent lower in month ending 6 July seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Fewer homes selling at lower price points as value growth surges

There’s no doubt about it, housing is becoming more expensive as home values rise. The escalation in the cost of housing is forcing households to spend more to purchase a home; subsequently the deposit is also higher forcing many first home buyers to wait until later in life to purchase a home or consider a more affordable location/housing type than what they would have previously accepted. Looking at the combined capital cities, over the 12 months to April 2014, home sales between $400,000 and $600,000 accounted for the greatest proportion of sales of houses and units at 34.5%. Home sales of properties priced between $200,000 and $400,000 accounted for the second largest proportion 26.8% followed by: $600,000 to $800,000 17.2% , $1 million to $2 million 9.2% , $800,000 to $1 million 8.2% , Less than $200,000 2.2% and $2 million or greater 2.0% . Over the past 12 months there has been almost as many capital city home sales over $2 million than there have been below $200,000. Clearly low income earners are finding it increasingly difficult to purchase homes in capital cities. The above chart shows the proportion of capital city home sales by price point over time. The emerging trend is the sharp decline in sales under $200,000 over time and the recent decline in sales of homes priced between $200,000 and $400,000. As you’d expect, sales which previously occurred within these two price points are pushing higher with an increasing prominence of sales between $400,000 and $600,000 and $600,000 and $800,000. Obviously across capital cities the performances are much more varied across individual price points and it is important to analyse the emerging trends. Across the combined capital cities, sales of homes for less than $200,000 accounted for just 2.2% of all sales. Across the individual capital cities the proportions were: Sydney 1.7% , Melbourne 1.5% , Brisbane 2.4% , Adelaide 6.0% , Perth 1.4% , Hobart 13.5% , Darwin 4.8% and Canberra 0.9% . It is extremely noticeable that there has been a deterioration in the availability of homes for less than $200,000. Even in relatively more affordable capital cities like Adelaide and Hobart, the proportion of sales below $200,000 is low. In fact, in Sydney and Melbourne there have been more sales over $2 million throughout the year than sales below $200,000. 26.8% of all home sales across the combined capital cities were between $200,000 and $400,000 over the 12 months to April 2014. At the individual capital city region, the proportions were recorded at: Sydney 17.3% , Melbourne 29.1% , Brisbane 37.7% , Adelaide 48.4% , Perth 19.8% , Hobart 54.3% , Darwin 19.8% and Canberra 20.0% . In Adelaide and Hobart, the greatest proportion of sales over the year occurred at this price point. In each city, the proportion of sales occurring between $200,000 and $400,000 is falling, highlighting the shortening supply of capital city homes available at more affordable price points. In Sydney for example, more properties transacted for more than $1 million 18.9% than sold for between $200,000 and $400,000. Capital city homes sold between $400,000 and $600,000 accounted for the greatest proportion of total sales, making up 34.5% of sales over the 12 months to April 2014. In Sydney, home sales priced between $400,000 and $600,000 accounted for 29.6% of sales over the year. Elsewhere the proportion of sales between $400,000 and $600,000 were recorded at: Melbourne 33.9% , Brisbane 38.3% , Adelaide 30.1% , Perth 43.2% , Hobart 23.3% , Darwin 41.5% and Canberra 51.7% . In each city other than Adelaide and Hobart the $400,000 to $600,000 price point has recorded the greatest number of sales over the year. Interestingly, in Sydney, Melbourne and Darwin the proportion of sales within this price point is trending lower, further indicating affordability constraints in these cities. Over the 12 months to April 2014, 17.2% of capital city homes sold transacted at a price point between $600,000 and $800,000. Across the capital cities, the proportion of total sales within this price point was recorded at: Sydney 20.5% , Melbourne 17.0% , Brisbane 13.1% , Adelaide 9.2% , Perth 19.0% , Hobart 5.8% , Darwin 23.3% and Canberra 18.1% . Across all capital cities, the proportion of sales occurring between $600,000 and $800,000 has increased over the past year. 8.2% of capital city home sales were at a price between $800,000 and $1 million over the past year, increasing from 6.7% a year earlier. At an individual capital city level, the proportion of sales was recorded at: Sydney 15.3% , Melbourne 8.0% , Brisbane 4.6% , Adelaide 3.2% , Perth 7.8% , Hobart 1.7% , Darwin 5.8% and Canberra 5.7% . Like the $600,000 to $800,000 price point, the proportion of sales sitting within this price point has risen over the year across each capital city. Across the combined capital cities, there were more home sales between $1 million and $2 million 9.2% than there were sales below $200,000 2.2% over the 12 months to April 2014. The proportion of homes sold for between $1 million and $2 million rose across each city except Hobart over the past year. At an individual city level, the proportion of sales between $1 million and $2 million was recorded at: Sydney 15.3% , Melbourne 8.8% , Brisbane 3.4% , Adelaide 2.5% , Perth 7.6% , Hobart 1.2% , Darwin 3.5% and Canberra 3.1% . The data shows that Sydney, Melbourne and Perth are the key drivers between the rising proportion of sales between $1 million and $2 million. Ten years ago just 2.5% of capital city home sales were at a price between $1 million and $2 million. 2.0% of capital city home sales over the 12 months to April 2014 were at or more than $2 million which was the greatest proportion on record. Across individual capital cities, the proportions were recorded at: Sydney 3.5% , Melbourne 1.9% , Brisbane 0.6% , Adelaide 0.5% , Perth 1.3% , Hobart 0.3% , Darwin 1.4% and Canberra 0.5% . Ten years ago just 0.7% of capital city home sales were at or more than $2 million. The data presented highlights the impact of home value growth with fewer lower priced properties selling in the capital cities particularly in markets like Sydney and Melbourne . Although the analysis is interesting at a capital city level, individual areas and suburbs and regions can be very different across broad areas like capital cities. Given this, it is important when selling or buying to understand where the property sits in the context of the local and broader market. Often times purchasers won’t be looking exclusively in one suburb so an understanding of what areas offer a similar price point may help when selling especially if the subject property is in a suburb which offers advantages over other areas. Keep in mind that this analysis has been undertaken across the dwelling market i.e. it is looking at a combination of houses and units . Units are becoming an increasingly popular alternative to houses in many cities because they are generally more affordable and offer the opportunity to live in a more desirable location than a house would at the same price point. Now more than ever buyers are likely to be comparing the cost of a unit or townhouse to the cost of a detached house. This is a point that should be clear to buyers and sellers of any property, particularly as affordability constraints and a subsequent shortening supply of more affordable capital city housing stock grows.

Does land size matter?

The impact of land size on the value of and demand for a property is an interesting question. Analysis of RP Data information comparing the sale price with the land area shows that location is still more important than size when comparing suburbs. After all, a block of land that is twice the size and twice the distance from the amenities you desire is not likely to be as appealing as a well-located smaller one. The value per square metre of houses in Melbourne’s million dollar suburbs demonstrates this. Toorak is the city’s most expensive suburb for houses with a median sale price over the last year of $2.622m. The average block size is however quite large at 8232m which translates to a cost of $3,187 per sqm. Interestingly, this is lower than the $6,274 in Albert Park and $6,074 in Middle Park and the median sale price is less than half that of Toorak These two neighbouring suburbs have, compared to Toorak, very expensive land but this is more a factor of the small block sizes, at 2092m and 2592m respectively. At the other end of the spectrum is Ivanhoe East, a highly sought after suburb with a median sale price of $1.15m; it has slightly larger blocks than Toorak at an average of 9692m, again highlighting that location is the most critical factor. Robert Larocca RP Data Victoria Housing Market Specialist

Buyers drive up national clearance rate in week of low volumes

RP Data National Auction Comment, week ending 6 July, 2014 A preliminary weighted average clearance rate of 69.4 per cent was recorded this week across capital cities compared to 66.6 per cent last week and 65.1 per cent this time last year. Prior to this weekend the national year to date clearance rate was 67.3 per cent. This is very healthy compared to the 63.2 per cent recorded last year and in 2012 when less than half of all auctions resulted in sales when the clearance rates was 49.1 per cent. This week a preliminary clearance rate of 74.6 per cent was recorded in Sydney, a significant rise on the 71.1 per cent last week. In Melbourne there was a preliminary clearance rate of 68.4 per cent recorded compared to 68.3 per cent last week. The Melbourne market has been delivering very consistent results for sellers in the past 4 weeks. In Brisbane a preliminary clearance rate of 59.3 per cent was recorded compared to 42.2 per cent last week. Adelaide recorded a clearance rate of 75.6 per cent compared to 62.7 per cent last week. In Canberra a clearance rate of 48.4 per cent was recorded and in Perth there was a clearance rate of 52.6 per cent. In Tasmania 2 auctions resulted in sales from the 6 held. Robert Larocca RP Data Housing Market Specialist 0409 198 350

Winter and school holidays affect auction volumes

RP Data National Auction Preview, week ending 6 July, 2014 RP Data auction spokesperson Robert Larocca reports: There are 1,651 auctions scheduled across Australia this week. Across the capital cities there are 1,322 auctions expected compared to 1,029 to the same period last year. Generally, the first two weekends in July is the midyear low point of the national auction market, all brought about by cooler weather and school holidays which combine to create a lull in the market. Buyers experiencing difficulty in finding an appropriate home for sale right now will find that by the end of August volumes should be around double what they currently are. In Sydney there are 558 auctions expected compared to 861 last week. The clearance rate for the first six months of this year was 74.4 per cent indicating the market has been slightly below trend for the last month. In Melbourne there are 497 auctions scheduled compared to 811 last week. The clearance rate for the first six months of the year has been 67 per cent with the past three weeks showing an improvement to trend. Brisbane is expecting 115 auctions following 153 last week. Adelaide is expecting 75 auctions compared to 79 last week. Canberra has 38 auctions scheduled compared to 35 last week. Perth has 30 auctions compared to 39 last week There are 9 auctions scheduled in Tasmania. Across Australia, the highest number of auctions is expected in St Kilda VIC and Surry Hills NSW , each of which has 10 scheduled. Robert Larocca RP Data Auction Market Specialist

May 2014 dwelling approvals

Not long before the Australian Bureau of Statistics ABS released building approvals data for May 2014, the Reserve Bank Governor RBA Glenn Stevens completed a presentation in Hobart. Within that presentation Glenn Stevens stated “It would in my opinion be good, for a range of reasons, if it did persist for a while. If the next couple of years saw an unremarkable performance on prices, and construction staying at the higher levels that will clearly be reached over the coming year, it would be an outcome that would contribute to a balanced growth path for the economy and to housing more people at manageable cost.” This was made in the knowledge that home values rose by 10.1% over the 20-13/14 financial year and following three consecutive monthly falls in dwelling approvals between February and April 2014. Luckily the May data which was released earlier today showed a 9.9% rise over the month. Dwelling approvals are now 14.3% higher year-on-year. After three consecutive monthly falls in dwelling approvals it was looking as if the much vaunted rebound in housing construction was running out of puff approval is the initial step before construction can commence . Of course, we don’t want to get too carried away with a one month bounce but it was encouraging to see that the fall in dwelling approvals has, at least for the moment, not continued. Total dwelling approvals in May were 14.3% higher than a year ago with house approvals 14.0% higher and unit approvals 14.5% higher. The data is inherently volatile on a month-to-month basis so I like to also note the annual number of dwelling approvals. Over the 12 months to May 2014, there were 191,088 total dwelling approvals, 107,291 of which were for houses and 83,799 which were for units. The annual number of dwelling approvals is at their highest level since there were 192,614 dwelling approvals over the 12 months to December 1994. Let’s not understate this; the rebound in dwelling approvals is strong and much needed after years of ongoing insufficient supply additions. The challenge from here will be what proportion of these approvals actually end up moving to construction and then ultimately completion. Focussing on the capital cities, it is encouraging that there has been a significant rise in dwelling approvals across these areas where supply issues are generally most dire. On a rolling annual basis, there were 141,845 capital city dwelling approvals over the 12 months to May 2014. Of these approvals, 68,455 were for houses while 73,390 were for units. Note that at a national level dwelling approvals for houses still outnumber units however units outnumber houses in the capital cities highlighting the direction that new development is heading in most of our capital cities. The annual number of capital city house approvals as at May 2014 was 19.6% higher than over the corresponding 12 month period in 2013. Capital city house approvals are at their highest level since the 12 months to February 2011 when 69,524 houses were approved. Capital city unit approvals are 23.4% higher than they were a year earlier and are only slightly lower than their record high level of 73,835 unit approvals over the 12 months to March 2014. Across individual capital cities the annual number of dwelling approvals is higher across each city except for Darwin. The greatest annual lift in dwelling approvals has been recorded in Brisbane and Sydney. Anyone that has visited either of these cities recently would have seen plenty of residential construction taking place and it seems that there is a significant additional pipeline of residential construction to come. As you can see from the above chart, across each of the major capital cities there has been an upswing in dwelling approvals. The most significant upswing has occurred in Sydney and Brisbane however, the number of approvals remains much higher in Sydney and Melbourne than in all other cities. The number of dwellings approved for construction is at an all-time high currently in Perth, is very close to its record high in Sydney and at its highest level since the 12 months to June 2004 in Brisbane. We mentioned earlier about the shift towards unit approvals as opposed to house approvals which is much more prominent in capital cities than nationwide. The above chart highlights the proportion of dwelling approvals which are for units as opposed to houses over time. As already noted over the 12 months to May 2014, 51.7% of all capital city dwelling approvals were for units. In Sydney 69.4% , Melbourne 52.4% , Brisbane 57.2% , Darwin 58.6% and Canberra 62.9% a majority of approvals are for units rather than houses. In the remaining three cities 31.1% of approvals are for units in Adelaide, 23.9% in Perth and 13.6% in Hobart. I have little doubt that particularly in Perth we will see a growing proportion of approvals for units rather than houses over the coming years. The May dwelling approvals data showed an encouraging rebound following three consecutive monthly falls. Keep in mind that Glenn Stevens wants to see higher construction levels over the next few years and that will be the real challenge. If consumer sentiment continues to languish and if and when home value growth slows there will be much less certainty around the viability of new residential developments. Maintaining high levels of new residential approvals and construction over the next few years will be no easy feat.

RP Data Auction Market preview, Melbourne; Week ending 6 July 2014

There are 497 auctions scheduled this week in Melbourne compared to 453 for the same time last year. Across the city, the number of homes listed for auction is temporarily impacted by the school holidays, especially in the eastern suburbs. Interestingly, the private sale market in those suburbs is recording very healthy results. Eastern suburbs comprises of a majority of the top 10 suburbs ranked by vendor discounting for houses sold by private sale over the most recent 12 month period. For example, Oakleigh, Bayswater North, Box Hill, Ashwood and Box Hill South all recorded an average vendor discount of less than 3 per cent, well below the majority of other suburbs in Melbourne. This is reflective of the city-wide private sale market more recently. The average time on market for houses sold over the last month may have risen slightly to 35 from 34 days, however, vendors did not suffer as their average discounting contracted to -5.3 from -5.6 per cent over the previous week. Key data Clearance rate week ending 29 June: 68.3 per cent Melbourne auctions expected week ending 6 July: 497 Melbourne private sales time on market week ending 29 June: 35 days houses Melbourne vendor discounting market week ending 29 June: -5.3 per cent houses Listings being prepared for market are 0.8 per cent higher in month ending 29 June seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Melbourne dwelling values show variable but moderate growth in 2014

According to the RP Data Rismark June home value results released today, Melbourne dwelling values rose by 1.8 per cent over June but are still lower over the quarter with a 2.4 per cent fall. This further highlights some very short term variability against a stable background with a 2.9 per cent rise over the first half of the year. Melbourne is showing all the signs of a stable but shallow growth phase with a 14.2 per cent rise over this cycle. The market is well-placed for spring, well ahead of any of the previous three years. The data shows that this is less of a roller coaster ride than the last two cycles in 2007 and 2010 and is therefore likely to be more sustainable. House values rose by 1.7 per cent in the month and by 3.3 per cent this year compared to a rise of 2.7 per cent for units which have shown zero growth this year. The median sale price from settled sales in the quarter was $630,000 for houses and $468,000 for units. Robert Larocca RP Data Victoria Housing Market Specialist

Property market myths and common facts; Melbourne

Quite often, myths or commonly accepted facts about the property market can turn out to be incorrect when a review of the actual numbers is conducted. Do people really buy and sell every 7 years? It’s often said that most home owners buy and sell every seven years, however, research shows that in Melbourne the average hold period for houses is 11.4 years and for units 9.5 years. While the hold period differs from suburb to suburb, there are a number that match the commonly accepted seven years. In Melbourne these include Pakenham, Narre Warren South, Burnley and St Kilda West. Some of the shortest hold periods for property ownership are in the city’s newest suburbs such as Lyndhurst, Dorren and Truganina where the average hold period for a house is around 4 years. At the other end of the spectrum is Vermont South with a hold period of 18.2 years. Is it true that houses double in value every decade? The answer to this question highlights that sometimes timing is everything in real estate. The RP Data Home Value index for houses in Melbourne shows values doubled in just over 7 years between February 2003 and October 2010 however, the same scenario occurred over 11 years between February 2003 and May this year. Do rents always rise? It seems that rents are often always rising when in fact they may not be. The reality is that it all depends on balance of demand and supply in the relevant suburb. For instance, over the past five years advertised rents for houses in Toorak, Dorren and Mernda have decreased. While in Clayton, Oakleigh and Eltham they have risen by no more than 1 per cent per annum. There are many more that have risen over this time including the popular suburb of Northcote where rents have risen by 28 per cent over 5 years. Houses sell for more than the advertised cost – but do they? A popular topic over dinner tables and in the press is the relationship between advertised prices for houses at auction and the sale price. The main view is that the sale price always exceeds the advertised price. Less often discussed is the fact that most homes sell for less than their advertised price. Around 70 per cent of homes sell by private sale and are usually sold for around 6 per cent below the initial advertised price. However, this does vary across the city with the discount being 8 per cent in Springvale, and 4 per cent in Yarraville. Robert Larocca RP Data Victoria Housing Market Specialist

Capital city auction numbers rise 38 per cent

RP Data National Auction Comment, week ending 29 June, 2014 A preliminary weighted average clearance rate of 68.1 per cent was recorded this week across capital cities compared to 65.4 per cent last week and 66.9 per cent this time last year. Based on the auctions conducted in the first six months of this year volumes have risen by a remarkable 38 per cent since 2013. More people are selling homes by auction this year and this is a sign of a market that is performing well and delivering results for sellers and buyers. Sydney continues to see the highest rates of sale at auction. This week a preliminary clearance rate of 73.2 per cent was recorded compared to 70.1 per cent last week. The improvements in the Melbourne market over the last few weeks have been sustained with a preliminary clearance rate of 69.3 per cent recorded compared to 69.1 per cent last week. In Brisbane, a preliminary clearance rate of 43.9 per cent was recorded compared to 32.2 per cent last week. Adelaide recorded a clearance rate of 66.7 per cent compared to 59.7 per cent last week. In Canberra a clearance rate of 63.6 per cent was recorded and in Perth there was a clearance rate of 50 per cent. Robert Larocca RP Data Housing Market Specialist 0409 198 350

Scheduled auctions in Sydney exceed those in Melbourne

RP Data National Auction Preview, week ending 29 June, 2014 There are 2,169 auctions scheduled across Australia this week across 1,137 different suburbs or towns. In capital cities there are 1,769 auctions expected compared to 1,572 to the same period last year. The overall national auction market is displaying a very consistent performance right now with stable clearance rates. Compared to this week last year, the only significant difference is in volumes with a significant rise expected in Sydney. With the exception of weeks that are affected by public holidays or very low volumes, this is also the first time Sydney has had more auctions than Melbourne for the year. This would have been inconceivable a year ago. In Sydney there are 758 auctions expected compared to 785 last week. Whilst similar to last week, it is significant to note that this is 27.6 per cent more than last year. In Melbourne there are 728 auctions scheduled compared to 946 last week. The Melbourne auction market appears to be improving with the clearance rate being close to 70 per cent in the last fortnight. Brisbane has 132 expected auctions following 141 last week Adelaide has 72 expected auctions compared to 74 last week Canberra has 33 scheduled auctions compared to the 35 last week Perth has 36 auctions compared to 45 last week There are 10 auctions scheduled in Tasmania Across Australia, the highest number of auctions is expected in Preston VIC and Randwick NSW , both of which have 14. Overall volumes are also high in the northern suburbs of Melbourne as Reservoir, which neighbors Preston has 13 auctions Robert Larocca RP Data Housing Market Specialist

RP Data Auction Market preview, Melbourne; Week ending 29 June, 2014

There are 728 auctions scheduled this week in Melbourne compared to 719 for the same time last year. The highest number of auctions are expected in the northern suburbs of Melbourne this week with 14 scheduled in Preston and 13 in neighbouring Reservoir. The Melbourne auction market appears to be improving with the clearance rate being close to 70 per cent last fortnight. That is compared to the clearance rate of 67.6 per cent this year from 18,657 auctions whilst last year the comparative number was 68.45 per cent from 14,226 auctions. The average time on market for houses sold at private sale tightened from 35 to 34 days. Vendor discounting softened slightly over the week, to -5.6 per cent, compared to -5.5 per cent over the previous week. Key data Clearance rate week ending 29 June: 69.1 per cent Melbourne auctions expected week ending 29 June: 728 Melbourne private sales time on market week ending 22 June: 34 days houses Melbourne vendor discounting market week ending 22 June: -5.6 per cent houses Listings being prepared for market are 1.8 per cent higher in month ending 22 June seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Three out of ten properties sold by auction in Melbourne

Last year Melbourne saw 30.5 per cent of sales by auction compared to 21.1 per cent for the previous year. The proportion of sales by auction tends to follow the market; rising when prices and demand increases and falling in soft markets. Early indications this year are showing that new records are likely to be set. At the end of the March quarter, 30.6 per cent of sales were by auction compared to 21 per cent last year, and the previous high of 20.8 per cent in 2010. Due to a lack of auctions in January and a slow start to February, the proportion of sales by auction always rises as the year goes on. The same will be the case this year, especially in light of the records reached in May refer to recent blog . This means we are likely to see a significant shift in selling methods towards auctions this year. This would be unprecedented because price growth and clearance rates are lower than in other years when this occurred. The data points towards a shift in auctions as a selling method by Melbourne real estate agents, and one that vendors are clearly agreeing with. This may be due to research which shows that even if you fail to find a buyer at the auction, there is a high likelihood you will within 4 weeks. The data shows that within 4 weeks of the auction, the proportion of homes sold rises to around 80 per cent as sellers negotiate with buyers after the conclusion of the auction. This shows that the concentrated marketing and ‘sale date’ associated with an auction campaign helps ensure a timely sale. Robert Larocca RP Data Victoria Housing Market Specialist

Auction market stable across capital cities

RP Data National Auction Comment, week ending 22 June, 2014 A preliminary weighted average clearance rate of 66.6 per cent was recorded this week across capital cities compared to 65.5 per cent last week and 66 per cent this time last year. A medium term review of the national auction market shows stable performance after a period of appreciation in 2013 and the previous two years when the clearance rate was at comparatively soft levels of 44.7 per cent in 2011 and 54.1 per cent in 2012. In the Sydney market a preliminary clearance rate of 71.9 per cent was recorded compared to 69.3 per cent last week. The stability present nationally is especially the case in Sydney where the clearance rate has shown little variance over the last three months with high of 76.1 per cent and low of 67.3 per cent. In Melbourne there was a preliminary clearance rate of 69.1 per cent recorded compared to 69.2 per cent last week. Last week was the best result in three months and it has been matched this week as volumes remain strong. In Brisbane a preliminary clearance rate of 38.1 per cent was recorded compared to 43.5 per cent last week. Adelaide recorded a clearance rate of 58.8 per cent compared to 52.3 per cent last week. In Canberra a clearance rate of 65.4 per cent was recorded and in Perth there was a clearance rate of 30 per cent. In Tasmania 4 homes sold from 9 auctions. Robert Larocca RP Data Housing Market Specialist

Unemployment peaks lower than forecast on lower participation

The Australian Bureau of Statistics ABS recently published labour force statistics for May 2014. The data reported that the national unemployment rate was steady at 5.8%, the 3rd month in a row it had been recorded at this level. The rate of unemployment is up from 5.5% a year ago but still well below the 6.25% many had predicted it would have reached by now. The full-time unemployment rate at a national level is slightly higher than the overall unemployment rate, recorded at 6.0%. Although we have seen a fairly stable unemployment rate of late, the employment participation rate is continuing to trend lower. A key challenge for the Government is to encourage the long-term unemployed persons back into the workforce. Although the participation rate data suggests that this may not be working, keep in mind also that with an ageing population more and more baby boomers are reaching retirement age and exiting the workforce. The current workforce participation rate is recorded at 64.6% which is at around its lowest level since March 2006. Turning to actual employment, in May 2014 there was 11,564,555 persons employed nationally, 8,068,338 employed full-time and 3,496,216 employed part-time. As at May 2014, 30.2% of all employed persons were employed part-time. As you would expect, females are much more likely to be employed on a part-time basis compared to males. As at May 2014, 16.9% of total males employed were employed part-time compared to 45.9% of females employed. Although the proportion of males employed part-time is much lower than females it has been trending higher and is close to an historic high. Over the 12 months to May 2014, the number of employed persons has increased by 98,700 persons with a 49,700 person increase in full-time employment and a 49,000 person increase in part-time employment. At the same time a year ago, total employment had increased by 102,900 persons with full-time employment increasing by 22,100 persons and part-time employment rising by 80,700 persons. The national data highlights that the unemployment rate has seemed to have stabilised over recent months and jobs continue to be created however, the data at a state level is somewhat more varied. Based on the less volatile trend data, Tasmania has the nation’s highest unemployment rate at 7.5% and the Northern Territory the lowest at 3.3%. As you can see there is a big discrepancy in unemployment on a state by state basis. Looking at the current tend unemployment rate compared to trend unemployment a year ago we can see some different trends across the states. New South Wales was the only state where there was no change to unemployment over the year, steady at 5.5%. The unemployment rate rose in Victoria, Queensland, South Australia and Western Australia with the largest increases in Victoria and South Australia. In Tasmania, Northern Territory and Australian Capital Territory the unemployment rate is lower over the year with a substantial fall in the Northern Territory. The employment participation rate also varies significantly across the states. As you can see from the above chart, employment participation is trending lower across most states and below its recent peak in each state. The state and territories with the highest participation rate are: Northern Territory 76.2% , Australian Capital Territory 70.9% , Western Australia 68.2% and Queensland 66.4% . Across the remaining states, participation is lower, recorded at 63.0% in New South Wales, 64.2% in Victoria, 62.0% in South Australia and 60.9% in Tasmania. Overall the May release showed a level of stability returning to the unemployment rate. Keep in mind the Federal Budget forecasts indicate the unemployment rate to peak at 6.5% however, it is important to note that previous Government forecasts expected the unemployment rate to be at 6.2% currently. With an ageing population we are likely to see the employment participation rate trend lower which will increase pressure on business to improve productivity. On a state-by-state basis the employment picture varies and it will important to keep an eye labour market conditions particularly in Victoria and South Australia where the unemployment rate has risen sharply over the past year. Keep in mind upcoming high-profile manufacturing closures within the car industry are yet to really bite and will impact both Victorian and South Australian jobs.

NSW regional centre tops the list for auctions across Australia

RP Data National Auction Preview, week ending 15 June, 2014 There are 2,216 auctions scheduled across Australia this week with 1,787 expected in capital cities. The highest volume of auctions in one place this week is in the NSW regional town of Dubbo with 23 auctions planned before the weekend. Auction volumes have dropped from last week, however, in a sign of consistency they are still following the trend compared to last year. There are 8 per cent more auctions scheduled than the same time last year. It is important to note that volumes last week were boosted by the impact of Queen’s Birthday the previous weekend. In Melbourne there are 834 auctions scheduled compared to 1,016 last week. Last week’s clearance rate was the strongest in the past three months and was a very positive sign for the market and it will motivate vendors considering selling in spring. In Sydney there are 688 auctions expected compared to 798 last week. Last weekends clearance rate of 69.3 per cent was well down on the year to date result of 75 per cent and suggests improving conditions for buyers over winter in the auction market. Brisbane has 123 expected auctions following 132 last week. Adelaide has 65 expected auctions compared to 74 last week. Canberra has 33 scheduled auctions compared to the 41 last week. Perth has 36 auctions compared to 32 last week There are 13 auctions scheduled in Tasmania. Across Australia, the highest number of auctions are expected in Dubbo with 23 scheduled, most of which are for residential development blocks. In capital cities the highest volume are in Richmond VIC with 19 expected. Robert Larocca RP Data Housing Market Specialist

RP Data Auction Market preview, Melbourne; Week ending 22 June, 2014

There are 834 auctions scheduled this week in Melbourne compared to 820 for the same time last year. Last week was the eleventh time this year that there were more than 1,000 auctions in a week. The latest data shows the use of auctions as a sales method is consistent with last year. In the first three months of this year 30.6 per cent of sales were by auction. This is consistent with last year but is expected to rise as data for April and May is compiled following the settlement of sales. There was a rise of 7.9 per cent in new residential listings in Victoria over the last month with 9,616 homes being newly listed for sale. The average time on market for houses sold at private sale remained stable and tight at 35 days. Vendor discounting improved slightly over the week, at -5.5 per cent, compared to -5.6 per cent over the previous week. Key data Clearance rate week ending 15 June: 69.2 per cent Melbourne auctions expected week ending 22 June: 834 Melbourne private sales time on market week ending 15 June: 35 days houses Melbourne vendor discounting market week ending 15 June: -5.5 per cent houses Listings being prepared for market are 2.4 per cent higher in month ending 8 June seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Melbourne suburbs where homes rarely come up for sale

Folklore says that people buy and sell every seven or so years. However, the truth does seem to be longer with the average hold period for all the homes sold in Melbourne in the year ending 31 March being 11.4 years, and 9.5 years for units. What’s even more interesting are the suburbs whose owners seem to rarely sell; they cover a range of prices and locations in Melbourne. Topping the list with the suburb for the longest period of ownership are the home owners of Vermont South. In Vermont South the average hold period is 18.3 years. If you really like the area and don’t want to wait that long, the average hold period in the more affordable Vermont is only 13.8 years. The top 10 list also has three suburbs with million dollar house values, Ormond where the average hold period is 16.9 years, Caulfield North at 15.4 years and Parkville at 15.4 years. At the more affordable end of the market is Tullamarine. Owners of houses there sell on average every 15.7 years. The fact that the houses in Tullamarine are as tightly held as Ormond but under half the value suggests owners reasons for selling infrequently is not strongly related to their cost. Rather, there will be a range of other demographic reasons why people sell infrequently, which includes what stage of life they were at when they purchased, along with the actual age of the suburb. One interesting and common factor is that each of the suburbs in the top 10 has a lower than average proportion of investors as owners. Vermont South for instance has less than 1 in 10 homes owned by an investor. In Wheelers Hill, which has an average hold period of 16.2 years, only 10.6 per cent of homes are owned by investors. This factor alone does not explain the long periods of ownership in Tullarmarine in which investors own 16.2 per cent of houses. It is likely to be a special case due to its proximity to the major economic activity centre and employment generator, the airport. Robert Larocca RP Data Victoria Housing Market Specialist

an overview of RP Dataâ

RP Data has just released its quarterly Pain & Gain Report for the March 2014 quarter. Over the first quarter of the year, 9.8% of properties nationally sold for less than their previous purchase price meaning 90.2% of properties sold at or above their previous purchase price. This analysis doesn’t include expenses such as holding costs and purchase and selling costs so the proportion of actual loss-making re-sales would be higher than this reported figure on a net basis. The figures also showed that there was a big discrepancy between the proportion of loss-making re-sales across the capital cities and regional markets. The data showed that loss-making re-sales are much more prevalent in regional areas than across capital cities. This is reflective of the fact that although values are higher over the year in all capital cities, it is not the case across many regional areas. Over the 3 months to March 2014, 6.5% of properties across the capital cities re-sold for less than their previous purchase price compared to 16.0% of re-sales in regional areas. The above chart shows the long-term proportion of loss-making re-sales across both the capital cities and regional markets. Outside of a recent period between the middle of 2004 and early 2009, capital city markets have consistently recorded a lower proportion of loss-making re-sales than regional areas. Recently the differential between capital city and regional markets has been significant which is reflective of the ongoing weaker capital growth conditions within major regional housing markets. Across the major capital city markets the proportion of loss-making re-sales is generally trending lower from a recent peak. This is reflective of the low interest rate environment and the rising home values which results in fewer vendors selling their home for less than what they purchased it for. With mortgage rates touted to remain at low levels for some time we would anticipate that the proportion of loss-making re-sales will continue to trend lower across most capital cities. While we are seeing general improvement in capital cities, regional markets are experiencing a wide variety of performances. Markets that are coastal and linked to the lifestyle segment of the market are seeing a high proportion of loss-making re-sales however, the proportion is now generally trending lower. On the other hand, markets linked to the resources sector, some of which are coastal, are now seeing a much higher proportion on loss-making sales. As many resource projects shift from construction to production demand for workers is much lower which in-turn impacts on the residential housing market, significantly in some instances. Across some of the major lifestyle markets depicted in the chart above you can see that the proportion of loss-making re-sales remains high but is now clearly trending lower. In the Bunbury region of Western Australia, the proportion of loss-making re-sales peaked over the three months May 2012 at 22.3% and have since trended lower and over the most recent quarter were recorded at 16.5% of total sales. In Cairns the recent peak saw 42.6% of re-sales at a loss over the three months to June 2012 and the proportion has since fallen to 28.2%. Loss-making resales on the Gold Coast peaked at 38.6% of all sales over the three months to December 2012 and have since fallen to 25.6% of all sales. Within the Richmond-Tweed region 22.3% of re-sales were at a loss over the March 2014 quarter, down from a peak of 28.9% over the three months to October 2012. On the Sunshine Coast loss-making re-sales peaked at 36.0% of re-sales in October 2012 and have fallen to their current 23.2%. While the proportion of loss-making re-sales is trending lower in coastal markets we’re seeing a rise in other markets, particularly those linked to the resources sector. Over the first quarter of 2014, 16.3% of re-sales were at a loss in the Fitzroy region of Queensland up from 10.0% a year ago. In the Mackay region, 23.3% of re-sales over the first quarter of 2014 were at a loss compared to 14.4% a year earlier. In the Outback region of Western Australia which includes many resource areas loss-making re-sales have risen from 12.0% of sales in the first quarter of 2013 to 17.3% in the first quarter of 2014. There are some clear trends emerging with regard to loss-making re-sales. As home values and sales activity rise across the capital cities the proportion of loss-making re-sales is trending lower as you’d expect . Certainly the capital city markets are experiencing far fewer loss-making sales than regional markets. In many coastal lifestyle markets we are starting to see some low-levels of value growth returning and sales volumes lifting. As a result, loss-making re-sales are still relatively high but are beginning to trend lower. In those areas linked to the resources sector we are seeing the proportion of loss-making re-sales trend higher. This is occurring on the back of many mining projects shifting from construction to production phase. In these areas we are generally seeing falling home values, sales volumes and rental rates while discounting levels and time on market increase. With mortgage rates set to remain low over the coming months we would anticipate that these broad trends will continue. Look for the capital cities and lifestyle markets to see continuing falls in loss-making re-sales whilst markets linked to the resources sector to experience tougher conditions with losses becoming more prevalent.

Demand in Melbourne auction market rises

RP Data National Auction Comment, week ending 15 June, 2014 A preliminary weighted average clearance rate of 66.6 per cent was recorded this week across capital cities compared to 60.6 per cent last week and 63.3 per cent this time last year. Sydney has returned a result consistent with its performance over the year and Melbourne has seen a strong week with another 1,000 plus weekend and a clearance rate above trend. In the Sydney market a preliminary clearance rate of 71.7 per cent was recorded compared to 67.3 per cent last week. In Melbourne there was a preliminary clearance rate of 69.6 per cent recorded compared to 62.4 per cent last week. The traditional winter slowdown is more akin to the spring market in some recent years. In Brisbane a preliminary clearance rate of 44.7 per cent was recorded compared to 37.3 per cent last week. Adelaide recorded a clearance rate of 50 per cent compared to 59.4 per cent last week. In Canberra a clearance rate of 42.9 per cent was recorded and in Perth there was a clearance rate of 25 per cent. In Tasmania 3 homes sold from 14 auctions. For additional information, contact media@rpdata.com or RP Data auction market commentator – robert.larocca@rpdata.com Robert Larocca RP Data Housing Market Specialist

Capital city auction volumes rise 9 per cent on same time 2013

RP Data National Auction Preview, week ending 15 June, 2014 There are 2,345 auctions scheduled across Australia this week with 1,936 expected in capital cities. Auctions will occur in 1,096 separate suburbs. The 9 per cent increase in auction volumes compared to this time last year is driven mainly by the Sydney market where there has been a substantial shift in selling methods for residential property. This increase is indicative of a preference by real estate agents and vendors to capitalise on the increased competition present in the market. In Melbourne there are 922 auctions scheduled compared to 335 last week. In the first three months of this year 30.6 per cent of sales were by auction. This is consistent with last year but is expected to rise as data for April and May is compiled once sales are settled. In Sydney there are 744 auctions expected compared to 577 last week. The substantial shift to the use of auctions for sales is revealed by new data showing that in the first three months of this year an unprecedented 25.5 per cent of all sales were by auction compared to 13.9 per cent last year. Brisbane has 117 expected auctions following 95 last week. Adelaide has 69 expected auctions compared to 78 last week. Canberra has 39 scheduled auctions similar to the 44 last week. Perth has 29 auctions, higher than last week’s 38. There are 15 auctions scheduled in Tasmania. Across Australia, the highest number of auctions are expected in Richmond VIC which has 18 scheduled. There are also 14 in Doncaster East VIC and Mosman NSW . Robert Larocca RP Data Housing Market Specialist

Forget affordability measures and ask yourself some tough questions

There are many measures of affordability in the marketplace, sadly I believe that many of these measures fail to accurately depict the affordability or otherwise of housing in Australia. The main reason being that housing affordability is an extremely complex issue and many factors drive the affordability of housing. In this blog post I am going to investigate some of these factors and tell you what you should really be asking yourself about affordability when purchasing a home. Can I start by stating that simplistic means of comparing property prices between countries I believe are ineffective. Due to different tax regimes, standards of housing and attitudes to property and wealth accumulation there may be perfectly good reasons why a household is prepared to spend more on housing in Australia for example than they are in the United States. I think common measures such as the median multiple ratio of household income to property prices are not necessarily a good way to measure affordability or otherwise, there are a lot more factors at play. Interest rates Interest rates are obviously an important component in determining housing affordability. When interest rates are lower, interest repayments on home loans are lower and as a result ‘affording’ the repayments on a mortgage should be easier. Of course, as we are seeing at the moment, lower mortgage rates often encourage higher property values. So while it’s true that lower interest rates make housing relatively more affordable, if values are rising and sales increase then it can somewhat off-set the affordability benefit of lower mortgage rates. Furthermore, the typical home loan in Australia is 25 years and the vast majority of home loans are on a variable rate. As a result, as the Reserve Bank adjusts monetary policy there is virtually an instant effect on household budgets and balance sheets. For example, at the moment the standard variable mortgage rate sits at 5.95% however, over the past 10 years the variable mortgage rate has averaged 7.27%, over the last 20 years it has averaged 7.45% and over the past 25 years the typical home loan length it has averaged 8.47%. Over the past 25 years, standard variable mortgage rates have been as high as 17.0% and as low as 5.75%. The point is that interest rates can vary greatly over 25 years and over the life of the loan the current interest rate is not a great means of measuring the cost of a mortgage over its lifetime. Wages / Income If you are going to take out a mortgage on a home as most purchasers do you are going to need an income and you are going to need some savings. In Australia there are a number of measures of wages/income and it is difficult to know exactly which one is best to use to measure housing affordability. The National Accounts measure the ‘Real net national disposable income – chain volume’. This measure does have a number of shortcomings in that it is not an individual measure and that it includes items that one can’t really spend such as superannuation. Additionally this data is only available from a national standpoint. The Australian Bureau of Statistics ABS publishes its wage price index each quarter however, it measures wages only and doesn’t measure income captured from other sources. The Census is undertaken each 5 years and does report on the median weekly household income however, the shortcoming here is that it is only updated every five years. We also have the Household Income Survey from the ABS however it is only undertaken bi-annually and takes a fairly macro view of household incomes Unfortunately all of these measures have significant shortcomings which need to be considered when looking at any housing affordability measure. Labour force / unemployment Paying off a mortgage eats up a significant portion of a family’s wage. Undoubtedly if home values weren’t so high and mortgages weren’t so large disposable incomes would be much greater. Although labour force data or unemployment statistics need not necessarily be an input into any housing affordability measure they are a key consideration for someone looking to purchase. The threat of unemployment means that despite the fact housing may seem affordable it is less likely someone would purchase. Obviously if you are unemployed it is going to be difficult to purchase a home. Another factor to consider is although measures of income show that over recent years wages and disposable income have increased, what they don’t take into account is how many more women are working nowadays. Labour force data shows that in May 2014, 54.1% of the workforce was male and 45.9% was female, 30 years ago 62.3% was male and 37.6% was female. Today, 35.5% of full-time workers are female compared to 28.9% 30 years ago. The point here is that although household incomes have increased, a big proportion of the increase is due to the structural change associated with a greater number of women in the workforce. The rising prevalence of dual income households means that whereas 20 to 30 years ago couples could afford mortgage repayments on a single wage, today they largely require dual incomes. Home values / prices Most measures of housing affordability look at median prices or median values. The important thing to remember here is that a median is just the middle value so there are just as many homes worth more and less than that figure. In fact the median price looks only at the middle value of properties which have sold over a period. This obviously has significant shortcomings because what is predominately selling could be at the affordable or expensive end of the market and this could bias the median one way or another. Remember that typically only 5% to 7% of total housing stock transacts in a given year. Another important consideration here is that a national median measure doesn’t really tell you very much at a localised level. In Australia, 66% of residents live in a capital city with around 55% in Sydney, Melbourne, Brisbane or Perth. Quite simply many residents don’t have a choice but to live in a capital city so if you are trying to determine affordability in Melbourne, the cost of housing in Mildura is of no valuable comparison whatsoever. Rental rates If you don’t own a home or pay-off a mortgage you have to live elsewhere, for the most part non-homeowners rent. The cost of renting is an important consideration when trying to determine housing affordability. If rents are increasing but home values are flat or falling purchasing a home may start to look a more attractive prospect. Once again the challenge with a measure which compares rents to house price or mortgage repayments is that it is not a localised analysis. For example for the cost of renting in Paddington in Sydney you may actually be able to pay off a mortgage in Guildford but to the renter is the opportunity cost of owning their own home and being further away from the city centre, harbour and the beaches worthwhile? Who knows but for anyone looking to purchase these are the sorts of questions they need to be asking themselves. The other key consideration is that the ongoing costs associated with owning a home as opposed to renting are difficult to determine, but they are much more than renting. As a renter, the ongoing costs generally include: the rent, the bond, electricity, gas if applicable , cleaning if you move rentals and the cost of moving if/when you move. As an owner of a home the costs incurred include: the mortgage, electricity, gas, council rates, stamp duty when you purchase, ongoing maintenance of the property, strata fees if you own a unit and agent fees if/when you decide to move. The ongoing costs associated with owning a home are much greater than the ongoing costs of renting. Who does housing affordability affect most? Housing affordability affects everyone. The high cost of housing acts as a disincentive for people to move to more appropriate locations, discourages people from upsizing and downsizing and discourages movement intra or interstate for employment. The group most affected by housing affordability however is those who don’t as yet own a home. Again if we think about many of the measures of affordability used they look at typical or median prices values and compare to interest rates and typical wages. The problem with this approach is that very few people are actually typical. As a generalisation, most people that rent are younger, starting out their careers. There is a high likelihood that their wage is currently lower than the median although there is a good chance it will increase as they are promoted or move jobs . If their wage is below the typical wage then they should not be looking to buy the typical or median house . Of course there are plenty of renters that earn above average wages but choose not to purchase as well but when trying to tackle the affordability question I think many of the measures that we look at are far too simplistic, but hamstrung by the quality and granularity of income data. Housing affordability is an individual thing and none of the measures really tell the true story about how affordable or unaffordable housing in Australia is. When determining whether you can afford to buy a home I think the most important things to consider are: What are current mortgage rates and at what higher level would I not be able to repay my mortgage? How secure is my job and what would happen if I was to lose my job for an extended period? Over the next few years what is the realistic expectations for my wage, will it rise and by how much? What impact would it have if I found a partner or lost a partner on my ability to repay the mortgage? If I plan to have children, children cost a lot what impact would that have on my ability to repay the mortgage? Compared to my current rent and associated costs, how much more is paying off a mortgage and the other day-to day costs of home ownership really going to be and can I afford this? What am I willing to sacrifice in order to buy a home; lifestyle, location, overseas travel etc? What is the opportunity cost of buying a home? I am sure there are many more questions to ask when looking to purchase but I think as a start these questions are essential. I say that the measures of affordability which are readily available should be taken with a grain of sale. It’s more important to ask yourself some tough questions about whether or not you can really afford to be a home owner. If you have any doubt you really need to consider whether it is worth the risk or not. For what it’s worth I think that housing affordability is a significant issue for young Australian’s particularly those within our capital city markets. The major problem is that most Australian’s choose to build wealth through property and 23 years of unabated economic growth has on exacerbated this. The challenge now is how can you deliver affordable housing for younger Australian’s without bringing down the cost of existing housing which politically and economically would be detrimental to the overall health of the Australian economy.

RP Data Auction Market preview, Melbourne; Week ending 15 June

There are 922 auctions scheduled this week in Melbourne compared to 868 for the same time last year. Auction volumes remain high despite the season. Based on settled sales in the first quarter of this year, the suburbs with the highest number of house sales were mainly in the growth areas, suburbs with a high supply of new homes, such as Pakenham with 185 sales, Berwick with 139 sales and Frankston with 134 sales. Whilst not a growth suburb, Glen Waverley was fourth at 117; largely the result of it being a large suburb. We also saw a contraction in the average time on market for houses sold at private sale from 39 to 35 days. This was coupled with a rise in vendor discounting to – 5.6 per cent from -5.5 per cent over the previous week. Key data Clearance rate week ending 8 June: 62.4 per cent Melbourne auctions expected week ending 15 June: 922 Melbourne private sales time on market week ending 8 June: 35 days houses Melbourne vendor discounting market week ending 8 June: -5.6 per cent houses Listings being prepared for market are 1.1 per cent higher in month ending 8 June seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Investor activity high in growth suburbs of Melbourne

Research by RP Data comparing the level of property ownership between owner occupiers and investors at a suburb level in Melbourne reveals some clear and interesting trends. The results show that ownership for investment purposes in the Melbourne detached housing market is strongest in the growth suburbs. In many of the cities growing outer suburbs investor ownership accounts for more than 3 in every 10 properties. When ranked by level of ownership by investors, the top three suburbs are Point Cook which has 41.9 per cent of all houses owned by investors, followed by Tarneit with 40.9 per cent and Truganina at 39.8 per cent. In each case, median rents are below the Melbourne average of $444 per week and yields are in excess of the metropolitan average of 3.3 per cent. In Point Cook the median advertised rent is $380 per week and the indicative gross yield is 4.3 per cent. In Tarneit the weekly rent is $315, the yield is 4.4 per cent and in Truganina the rent is $320 per week and the yield is 4.7 per cent. Clearly investors in these areas are motivated by the yield. Only time will tell how these suburbs will fare from a capital gains perspective as they are still experiencing a high rate supply with many new properties being built and sold. Coupled with this is the short length of ownership making it difficult to draw strong conclusions on capital gains into the future. At the other end of the spectrum are the areas with the lowest proportion of investor ownership and highest level of owner occupiers. RP Data’s research shows that less than 1 in 20 houses in the suburbs of Narre Warren North, Wonga Park, Launching Place, Park Orchards and Montrose are owned by investors. Like many other suburbs with a very low level of investor activity, these places tend to be in the outer eastern or north eastern suburbs. In the unit segment of the market, the suburbs with the highest levels of investor ownership are often those with significant and large developments with suburbs such as Travencore, Kingsville, Carlton, Elwood, Notting Hill, Hawthorn and Melbourne topping the list. Each of these areas has more than 7 in 10 units owned by an investor. If you are looking at this data with a view to investing in residential property it is important to appreciate that just because investor concentration is high in these areas it does not mean these are the areas likely to deliver the best return on an investment. When making investment decisions, great care and attention to detail such as using the correct research is imperative. Robert Larocca RP Data Victoria Housing Market Specialist

Low auction volumes across capital cities

RP Data National Auction Comment; Week ending 8 June, 2014 A preliminary weighted average clearance rate of 59.9 per cent was recorded this week across capital cities compared to 66.4 per cent last week and 61.4 per cent this time last year. This is well below the year’s high of 76.2 per cent recorded in late February, however comparatively low volumes this week reduce its value as an indicator to the state of the market. In the Sydney market a preliminary clearance rate of 65.7 per cent was recorded compared to 73 per cent last week. In Melbourne there was a preliminary clearance rate of 61 per cent recorded compared to 65.4 per cent last week. In Brisbane a preliminary clearance rate of 42.9 per cent was recorded compared to 42.5 per cent last week. Adelaide recorded a clearance rate of 63 per cent compared to 55.3 per cent last week. In Canberra a clearance rate of 50 per cent was recorded and in Perth there was a clearance rate of 33.3 per cent. In Tasmania 4 homes sold from 17 auctions. Robert Larocca RP Data Housing Market Specialist

Housing finance data for April 2014

Housing finance data for April 2014 was released today by the Australian Bureau of Statistics ABS . The headline figure for the number of owner occupier housing finance commitments was flat over the month however, dig a little deeper and there are some differing trends emerging. As mentioned, the number of owner occupier housing finance commitments was flat over the month following on from a -0.8% fall in March. This data is split into commitments for refinance purposes and commitments for non-refinances or new loans . Refinance commitments rose by 0.6% compared to a -0.3% fall in non-refinance commitments. Non-refinance commitments fell over consecutive months and it was the first time this has happened since December 2012. Given the number is a count it is important to look at the trend and it is clear from the first chart that the number of owner occupier commitments, whether it be for non-refinances or refinances is beginning to flatten. Year-on-year, refinance commitments are 8.6% higher compared to a 5.7% rise in non-refinance commitments. The number of owner occupier housing finance commitments for the construction of new dwellings and the purchase of new dwellings have shown a strong rise recently however, as the above chart shows there has been some recent weakness in commitments for the purchase of new dwellings The number of commitments for construction of new is almost three times greater than the number for purchase of new nevertheless, the recent weakness is certainly something to keep track of. The data on the number of commitments is important however it is narrow in its scope given it does not include investors. From a banking perspective, the value of the funds they are lending is arguably more important than the number of loans written. The total value of housing finance commitments which includes investor commitments increased by 1.7% in April and increased by the same amount if you remove refinance commitments. Over the month, owner occupier refinance commitments were 1.6% higher, owner occupier non-refinance commitments were 1.3% higher and investment loan commitments increased by 2.3%. As the above chart shows, investment and owner occupier lending is at record high levels whereas non-refinance loan commitments are still -5.7% lower than their previous peak. In terms of the value of finance commitments all three segments continue to record a rise and are trending higher. Year-on-year the total value of housing finance commitments are 20.4% higher with owner occupier refinances up 19.1%, owner occupier non-refinances up 13.4% and investment loans 29.8% higher. It’s also important to look at the make-up of lending across owner occupiers and investment loans. Over the month of April, 43.0% of all lending was to owner occupiers for non-refinances, 39.4% was to investors and 17.6% was to owner occupiers for refinances. As the above chart shows the proportion of lending to investors is high on an historical basis. In fact investment lending is sitting at levels not seen since late 2003. It is clear from the data that there is significant demand for housing from investment currently. The big question of course is how sustainable is that demand given there was a sharp slowdown in this segment of the market shortly thereafter lending last reached similar heights. It is interesting to pair this data with recently released quarterly data from the Australian Prudential Regulatory Authority APRA about Authorised Deposit-taking Institutions’ ADIs exposure to property. The latest data showed that interest-only loans accounted for 39.4% of all loans over the quarter a similar proportion to these investor figures . However, the data also suggested that loans with a loan to value ratio LVR of more than 90% may be getting harder to find with 13.5% of new loans over the quarter with an LVR of more than 90% which was the lowest proportion since September 2011. Focussing on lending to first home buyers, there were 6,074 housing finance commitments to first home buyers in April 2014. This figure was -7.3% lower over the month and -12.7% lower year-on-year. As a proportion of all owner occupier housing finance commitments, first home buyers accounted for an equal record low of just 12.3% of the commitments over the month. The RP Data Mortgage Index RMI which is an index of mortgage events across RP Data’s proprietary platforms has a strong correlation with housing finance data and is a weekly index. The RMI predicted a softening of activity some six weeks ago and is indicating a sharp rebound in the housing finance data once the May data is released. Note that the RMI data is correlated strongly to the raw housing finance data not the seasonally adjusted figures which are referred to elsewhere throughout this post. The data seems to suggest that the growth in the number of new owner occupier housing finance commitments is starting to or has topped out. There is still plenty of activity in the owner occupier refinance and investment segments of the market. Of course our chief concern remains the high level of investment activity in the market. Total returns from residential property have been strong over the past 12 to 18 months however, we believe that the peak level of capital growth has now passed and rental yields continue to fall. Although total returns are still strong they are likely to diminish from here and where will that leave these investors especially if they were simply chasing the short-term value appreciation which has been particularly prevalent in Sydney and Melbourne over the past year. The good news is that the higher risk, high LVR loans are reducing however, there are still a lot of instances in which mortgagees are only paying back the interest component of the mortgage.

Auction market takes a breather for the long weekend

RP Data National Auction Preview, week ending 8 June, 2014 There are 1,425 auctions scheduled across Australia this week with 1,073 expected in capital cities. Volumes remain higher than this time last year and are 38% higher, however, these are lower than last week due to the long weekend in most parts of the Australia. After the record number of auctions in the first five months of the year, Sydney continues as the strongest auction market. In Sydney there are 532 auctions expected compared to 1,316 last week. Sydney’s year to date clearance rate is 75.6 per cent from 15,187 auctions, well up on the 68 per cent from 9,260 this time last year. In Melbourne there are 303 auctions scheduled compared to 1,356 last week. Melbourne has a year to date clearance rate of 67.5 per cent and the market has cooled after the high of 76.6 per cent in early March. Brisbane has 84 expected auctions following 219 last week. Adelaide has 70 expected auctions compared to 87 last week. Canberra has 41 scheduled auctions similar to the 48 last week. Perth has 33 auctions, higher than last week’s 30. There are 24 auctions scheduled in Tasmania. Across Australia the highest volume of auctions will be found in Auburn NSW and Blacktown NSW , both of which have 10 scheduled. Robert Larocca RP Data Housing Market Specialist

Has the housing market moved through the peak of the growth cycle?

The RP-Data Rismark Home Value Index reported its first month on month fall in May after capital city dwelling values consistently rose over the previous eleven months. The extent to which the May decline was a seasonal factor has been a key topic across the media; generally the month of May is a seasonally weak time for housing markets and no doubt the most recent result suggests that was the case again this year. When we adjust our index for seasonality the May numbers are still down 1.2% compared with a 1.9% fall in the original index reading. When we take the adjusted reading and also look at trend rate of growth over a rolling three month period it becomes increasingly evident that the Australian housing market has probably moved through the peak of its growth phase. In fact, the quarterly rate of growth peaked back in June of last year at 1.9% in original terms and has since trended progressively lower. A few other factors are lining up to suggest the housing market may be cooling. Consumer sentiment, which shows a high correlation with housing demand, peaked in September last year. After the index tumbled in May as consumers reacted pessimistically to the May budget announced the consumer sentiment reading is down 16 percent from the recent peak reading. Historically buyer demand tends to move with consumer confidence readings; when consumers are confident they are generally much more willing to make a high commitment decision such as purchasing a property. We have also seen some softening in our vendor metrics. Auction clearance rates peaked in February this year at 76% and last week were recorded at a still healthy but lower 66%. Vendor discounting eased ever so slightly in April, rising from 5.4% to 5.6% in April. And the average selling time showed a modest increase, rising from 36 days to sell the typical capital city property to 37 days which is still a historically low reading . Another factor that is likely to be dampening housing market conditions is affordability and the ratio of rental prices to dwelling prices. Value growth has substantially outpaced rental growth which means purchasing a home is becoming substantially more expensive than renting. Over the past five years Sydney dwelling values have increased by 32.5% while rents are up 25.7%. Similarly, in Melbourne values are up 26.9% over the past five years while rents are up a much lower 16.2%. Both cities have seen investment yields move substantially lower to be the lowest of any capital city. While value growth in the housing market may be moderating across combined capital cities, it’s important to remember that each city and region is at a different stage of the growth cycle. While Melbourne, Sydney and Perth appear to have moved through the peak of their cycle, momentum seems to have gathered some pace in those markets where growth conditions have previously been more sedate than the larger cities. Brisbane, where transaction numbers are more than 20% higher over the March quarter compared with the same period a year prior, has seen a pick-up in the rolling quarterly pace of growth while Adelaide and Hobart have also showed some evidence improving market conditions. Historically these capital cities have lagged behind Sydney and Melbourne in market growth phases. We don’t believe that the falls recorded in May are set to continue however, a slower rate of growth over the coming months is likely. The real test for the market will be throughout the spring selling season where sales and listings ramp up once again. Given the housing market began this year with momentum it seems unlikely that value growth will return to the highs recorded over the second half of 2013.

RP Data market preview, Melbourne; Week ending 8 June, 2014

There are 303 auctions scheduled this week in Melbourne compared to 197 for the same time last year. Volumes are temporarily low due to the long weekend. So far this year there have been 16,357 auctions and a clearance rate of 67.5 per cent compared to 68.6 per cent from 12,341 auctions this time last year. The high volume of residential listings this year is having a positive impact for buyers. Home values have fallen for the second month in a row and auction clearance rates have remained in the 60’s. The RP Data-Rismark May Home Value Index released this week showed that the value of a house dropped by 3.6 per cent in the month resulting in a rise of only 1.6 per cent over 2014. Unit values fell by 2.6 per cent over the year following a drop of 3.4 per cent in the month. It’s unlikely that buyers over winter and into spring will see their purchasing power diminished. We also saw a small fall in the average time on market for houses sold at private sale from 41 to 39 days. This was coupled with a rise in vendor discounting to – 5.5 per cent from -5.4 per cent over the previous week. Key data Clearance rate week ending 1 June: 65.4 per cent Melbourne auctions expected week ending 8 June: 303 Melbourne private sales time on market week ending 1 June: 39 days houses Melbourne vendor discounting market week ending 1 June: -5.5 per cent houses Listings being prepared for market are 1.1 per cent higher in month ending 1 June seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Melbourne house and unit values fall for two consecutive months

The key differences between the past two property cycles and the current one has become much clearer following Monday’s release of the RP Data-Rismark Home Value Indices results for May. The May results showed that the value of a house dropped by 3.6 per cent in May resulting in a rise of only 1.6 per cent over 2014. Unit values also fell by 2.6 per cent over the year following; a drop of 3.4 per cent in the month. After a new nominal peak in Melbourne house values was reached in March, there has been two consecutive months in which values have fallen ensuring buyers in winter and early spring won’t face rapid price rises. In fact, they are likely to see houses valued lower than they were in real terms in 2010. This result should also eliminate any concerns that the local market was locked into a cycle of unstainable growth in prices. This upswing phase in house values started in May two years ago and is clearly more moderate than the 2007 and 2010 cycles due to better alignment between supply and population growth along with the fact that consumers remain cautious. Over the past two years, house values in Melbourne have risen by 13.1 per cent and are now only 0.7 per cent higher than the October 2010 peak. Robert Larocca RP Data Victoria Housing Market Specialist

RP Data National Auction Comment; Week ending 1 June, 2014

Sydney leads a strong week for the auction sales across capital cities A preliminary auction clearance rate* of 68.3 per cent was recorded this week across capital cities compared to 67.1 per cent last week and 72.1 per cent this time last year. Auction volumes reached record levels across the nation in May. This week’s clearance is lower than this time last year however there were 3,037 auctions held compared to only 1,845 in capital cities this time last year. The higher volumes are partly the result of an increased use of auctions to take advantage of improved demand from buyers. In the Sydney market a preliminary clearance rate of 77.1 per cent recorded compared to 73.1 per cent last week. In Melbourne there was a preliminary clearance rate of 64.6 per cent recorded compared to 66.6 per cent last week. In Brisbane a preliminary clearance rate of 48.8 per cent was recorded compared to 49.4 per cent last week. Adelaide recorded a clearance rate of 59.3 per cent compared to 64.2 per cent last week. In Canberra a clearance rate of 64 per cent was recorded and in Perth there was a clearance rate of 58.8 per cent. Robert Larocca RP Data Housing Market Specialist

New listings much higher than a year ago while total listings have recently risen and are now are at a similar level as a year ago

RP Data tracks the number of unique residential properties listed for sale each week across the nation, individual states, individual capital cities and combined capital cities. The data is captured for residential houses and units as well as vacant residential land. The count of listings is undertaken on a rolling 28 day basis and separates the data by new property listings those not seen for six months , re-listed properties those seen within the last six months and total listings new and re-listings . Over the 28 days to 25 May 2014, there were 248,905 unique properties listed for sale across the country. Of this 248,905, 44,848 were new listings over the previous 4 weeks with the remaining 204,057 being re-listed properties. The number of new listings was at its highest level since the week ending 13 April 2014 with new listings having trended higher over the past four weeks. Re-listed properties were at their highest level since the four weeks ending 12 January 2014. Re-listings have also trended higher over the past four weeks. As a result, total property listings are at their highest level since the four weeks ending 16 March 2014. Compared to the same time a year ago, the number of newly advertised properties are much higher +12.4% while total listings were virtually unchanged. Looking at the new stock which has been listed for sale over the past four weeks, 31,925 new listings were for houses, 10,232 new units were listed and 2,691 new vacant land listings entered the market. Over the past four weeks, 71.2% of new listings were for houses, 22.8% were units and 6.0% were for vacant land. Re-listed stock also shows a high proportion of houses compared to units and vacant land. Over the most recent four weeks there were 134,461 re-listed houses 65.9% , 37,679 re-listed units 18.5% and 31,917 re-listed vacant land lots 15.6% . On a state-by-state basis we can see some significant variations in listing performance. The number of new property listings is higher than a year ago in each state except for Queensland -1.3% and the Australian Capital Territory -14.7% . Total listings are higher than a year ago in New South Wales, Western Australia, Tasmania and the Northern Territory but lower elsewhere. New South Wales and Victoria are the most populous states however, Queensland has the highest number of property listings with 4,693 more properties for sale than across New South Wales. Looking at the combined capital city market, there were 28,085 new properties listed for sale over the four weeks to 25 May and new listings were 17.5% higher than a year ago. Capital city new property listings accounted for 62.6% of all new listings nationally. Over the same period, there were 104,705 total capital city property listings which was -4.1% lower than the previous year. Total capital city property listings accounted for just 42.1% of all listings nationally. This reflects the much tighter supply of stock available for sale across capital city markets compared to regional areas of the country and at least partially explains why generally home values are rising at a faster pace in capital cities than in regional marketplaces. Throughout the individual capital cities new property listings are generally higher than a year ago with Canberra the only exception. Sydney in particular is seeing a significant rise in new listings which are 37.5% higher than they were a year ago. Although the amount of new stock coming to the market is generally higher than a year ago, total stock levels are generally lower with Perth, Hobart and Darwin the exceptions. The fact that new listings are much higher than last year but total listings are generally lower indicates a greater level of absorption and the fact that properties are selling quicker than they were a year ago. Although total listings in Melbourne are -7.0% lower than they were a year ago, it is quite interesting to note that Melbourne currently has 31,867 properties for sale compared to 22,124 in Sydney, a difference of 9,743 properties. As we head into a seasonally quieter period for housing market activity it will be interesting to see whether new and total listings continue to rise. In recent weeks we have noted that auction clearance rates have trended lower despite the fact that volumes remain high, particularly high for this time of year. We would expect new listing activity will slow over the coming months and ramp back up in spring. It will be interesting to watch because sales volumes are still trending higher as are housing finance commitments and if new listings fall we may see even greater demand for the available stock in certain markets throughout the coming months.

Sydney & Melbourne auction markets break records in pre Queen’s Birthday auctions

RP Data National Auction Preview, week ending 1 June, 2014 There are 3,439 auctions scheduled across Australia this week with 2,855 expected in capital cities. There are 1,010 more auctions in capital cities than was the case on the same weekend a year ago but only 69 more than last weekend. The high volume this week is a result of a generally buoyant market, a reduction in auctions next week due to the Queen’s Birthday holiday and a shift towards auctions in Sydney and Melbourne. The Sydney and Melbourne markets are both setting records for the number of auctions in the first five months of the year. In Melbourne there are 1,264 auctions scheduled compared to 1,211 last week. With a clearance rate remaining in the mid 60’s buyers continue to be well placed. In Sydney there are 1,223 auctions expected in what is the record run of 7 weeks over 1,000 this year. So far this year there has been a record 13,871 auctions, 60.9 per cent more than the same time last year. In Canberra 45 auctions are scheduled, well down on last weeks 76. Perth has 27 auctions, also well down on last weeks 70. After Sydney and Melbourne the largest volume of auctions are in Queensland outside of Brisbane with 261 scheduled. There are 192 in Brisbane. In Adelaide 83 auctions are expected compared to 121 last week. There are 16 auctions scheduled in Tasmania. Across Australia the highest volume of auctions will be found in Richmond VIC and Randwick NSW , both of which have 24 scheduled Robert Larocca RP Data Housing Market Specialist

Taxation revenue from property continues to climb in 2012-13

Earlier this week the Australian Bureau of Statistics ABS released data which revealed that 46.4% of state and local government taxation revenue over the 2012-13 financial year came from property related taxes. The data showed that over the year, state and local governments collected a record $35.931 billion in taxes from property related sources. In comparison, they collected $20.752 million in taxes from employers, $11,089 million in taxes from the provision of goods and services and $9.638 million in taxes on the use of goods and performance of activities. As this shows, at a state and local government level property taxes are the largest source of revenue. The total value of property related taxes increased by 7.2% over the most recent financial year. In comparison, taxes on employer’s payroll and labour force rose by 5.1%, taxes on the provision of goods and services rose 2.4% and taxes on the use of goods and performance of activities rose 8.6%. With home values nationally beginning to rise in June 2012, it is clear that state and local government are a major benefactor. With higher home values, taxes such as land tax, municipal rates and stamp duty on conveyances all increase. Of the $35.931 billion in property related tax revenue collected in 2012-13, 40% came from municipal rates and 36% came from stamp duties on conveyances. Land tax was the only other sizeable contributor to property related tax accounting for 17% of revenue. Over the year the most significant increase in property related taxes came from stamp duty, up by 16.9%. The amount of tax revenue collected from municipal rates increased by 6.8%, and land taxes increased by 1.5%. Property related tax revenue is only collected by those who own properties. Ultimately every property is owned by someone, some as an owner occupier and some as an investor. The taxes levied against property are typically only payable by the owner of the property. Given this, those who choose to rent rather than own property pay no tax on property. Not to mention the fact that the cost of renting is typically much lower than the cost of owning, it is no surprise more people are choosing to rent rather than own property. State and local governments have clearly experienced a significant revenue boost via the improvement in the residential housing market over the year. Stamp duty in particular has seen a significant rise. With sales volumes and property values rising there have been more sales to receive stamp duty from and at a higher price which also increases the stamp duty collected. Of course, the issue with stamp duty is that it is a tax only collected across those properties which sell. From a residential perspective this is just 5% to 7% of the total housing stock over a given year. Stamp duty also acts as a disincentive for home owners to transact property on a more regular basis because it is a tax paid on a new purchase. Many people have called for the removal of stamp duties which would be a positive move to encourage greater mobility of residents. Of course state and local governments would lose 36% of their property related tax revenue and 17% of their total taxation revenue. Many have called for replacing stamp duty with a blanket land tax, another tax would likely be very unpopular and you’d have to consider how equitable that would be particularly for those who have recently paid stamp duty. To put a blanket land tax into perspective to cover the $12.841 billion in stamp duty revenue over the 2012-13 financial year, each residential dwelling would have to pay $1,391.69 based on the ABS estimate of 9,226,900 residential dwellings as at June 2013. Keep in mind that stamp duty isn’t just payable on residential property transactions. Over the year, stamp duty revenue was higher in each state except for Victoria -1.4% , Queensland -6.7% and the Australian Capital Territory -3.3% . New South Wales 21.4% , Western Australia 33.0% and the Northern Territory 35.5% recorded the greatest rises in stamp duty revenue. According to the RP Data-Rismark Home Value Index, Sydney home values rose by 5.6% over the year, Perth values were 6.0% higher and Darwin values were 6.1% higher. Conversely, Melbourne home values were 3.4% higher, Brisbane values were just 0.6% higher and Canberra value were 1.1% higher. Clearly home value rises have a positive effect on stamp duty revenues. The data highlighted shows that property is the most important source of revenue for state and local governments, accounting for 46.4% of their total taxation revenue. The issue of course is that these levels of government are looking to constantly grow their revenues. The two main sources of property related revenue are rates and stamp duty. Rates can be grown by encouraging a greater number of ratepayers into a region create more housing and stamp duty can only be lifted by changing the rates or encouraging higher prices and/or more sales. In certain regions increasing the supply of ratepayers is not possible so it is clear that stamp duty is an extremely important source of revenue. With the housing market recording significant value growth and much higher sales volumes throughout the 2013-14 financial year no doubt stamp duty revenue will be much higher again. The question is can governments continue to rely on property being a one-way bet? Particularly when the Reserve Bank has repeatedly warned of late that it is not.

RP Data market preview, Melbourne; Week ending 1 June, 2014

There are 1,264 auctions scheduled this week in Melbourne compared to 867 for the same time last year. The strong level of auction listings in the first 5 months of this year compared to 31.6 per cent higher last year is a reflection of two things; firstly it shows the confidence of vendors where they are willing to sell for a reasonable price, and secondly, a preference by real estate agents for auctions as a method of sale in an improving market. The strong volumes will also mitigate price growth as buyers’ bargaining power is increased. We saw a small rise in the average time on market for houses sold at private sale from 40 to 41 days. Vendor discounting reduced to – 5.4 per cent from -5.5 per cent the previous week. Key data Clearance rate week ending 25 May: 66.6 per cent Melbourne auctions expected week ending 1 June: 1,264 Melbourne private sales time on market week ending 25 May: 41 days houses Melbourne vendor discounting market week ending 25 May: -5.4 per cent houses Robert Larocca RP Data Victoria Housing Market Specialist

Melbourne auction market records

With the first 5 months of 2014 almost complete, it is worth noting that a large number of auction records have been broken in the Melbourne market. Highest volume of auctions ever Taking into account the expected auctions this week there have been around 16,236 auctions already held this year which is 30 per cent more than the previous high in 2010. Most 1,000 plus weeks ever Once the planned auctions scheduled for this week are held, there will have been 10 weeks in the year when the volume has exceeded 1,000. This is more than three times the record of three weeks in 2010. Most consecutive weeks over 1,000 Never before has Melbourne seen two or even three consecutive weeks with over 1,000 auctions before June. Single week record for auctions prior to June Melbourne has broken the 1,294 auction recorded three times this year including the peak of 1,530 in the week ending on 13 April. Most homes sold by auction prior to June Even if there are no homes sold at auction this week, the number sold by auction will have been reached a record high. The previous record of 9,758 from 2010 will probably be exceeded by around 1,000. These records are impressive as they show a healthy market but they don’t mean that it has been just a sellers market. Around one third of homes offered at auction have been passed in as the vendors expectations have not been matched by the market on the day. Robert Larocca RP Data Victoria Housing Market Specialist

APRA Data highlights rising prominence of interest-only and high LVR lending

APRA today released data on Australian ADIs Authorised Deposit-taking Institution exposure to property earlier today. The data showed that at the end of the March 2014 quarter, there was $1.2 trillion worth of residential loans to households across Australia, up from $1.17 trillion at the end of 2013. Focusing on the total value of lending, 35.4% of the outstanding loans to domestic ADIs have an offset facility and 35.4% are interest only mortgages. The proportions of each are at a record high level currently. On the other hand, only 3.1% of mortgages are low-documentation loans which is at a historic low proportion. Just 0.1% are other non-standard loans. Looking at the number of loans, 29.6% of all loans have an offset facility and 78.0% have a re-draw facility. In terms of the number of loans, 28.0% are interest-only mortgages and 3.5% are low-documentation loans. The proportion of loans with an offset facility and the proportion of interest-only mortgages are at a record high while the proportion of low-documentation loans is at a record low. The average outstanding balance for residential loans was recorded at $235,000 at the end of March 2014, up from $233,500 at the end of 2013. Loans with an offset facility $281,400 and interest-only mortgages $297,200 have a much higher average balance than the average across all loans. Over the first quarter of 2014, there was $73.815 billion in new residential mortgages, down from $84.160 billion over the final quarter of 2013. Of these new loans, 64.3% were to owner occupiers and 35.7% were to investors. As I mentioned previously, the proportion of interest-only loans which were outstanding to banks was recorded at 35.4% based on value however, interest-only lending was much higher over the quarter with 39.4% of new loans interest-only loans. It is clear that low-documentation loans are becoming harder to receive. Over the March 2008 quarter, 11.5% of loans were low-documentation, over the most recent quarter just 0.6% of new loans were low-documentation. Over the quarter, 3.1% of loans were approved outside of serviceability which was steady over the quarter. The proportion of loans approved outside of serviceability has been higher than it is currently but was consistently lower than 3% of all loans before the June 2012 quarter. The level of higher LVR lending also increased over the first quarter of this year with 34.8% of new loans having an LVR of 80% or more, up from 34.2% over the previous quarter. The proportion of new loans with an LVR of more than 80% is at its highest level since the December 2011 quarter 34.9% . Although higher LVR lending is increasing, the proportion of loans written with an LVR of 90% or more was recorded at 13.5%, down from 13.6% the previous quarter. This indicates that there is growth in the 80% to 90% LVR segment, which accounted for 21.3% of new mortgages over the quarter, up from 20.7% the previous quarter. The proportion of new loans with an LVR of between 60% and 80% accounted for the largest proportion of new loans at 41.2% and sitting at its highest proportion since September 2011 41.5% . By combining the latest data from APRA with recently released data from the ABS, you get some really valuable additional insights into the exposure of Australian ADIs to residential property. The ABS estimates that there were 9.334 million residential dwellings in Australia at the end of March 2014 and the latest APRA data highlights that there was 4,999,800 outstanding mortgages at the end of March 2014. This indicates that only 53.6% of all dwellings nationally have a mortgage. Of course as you can see from the chart which follows the proportion of mortgages properties is rising. The ABS estimates that the total value of residential dwellings across Australia was $5.1 trillion at the end of March 2014. Pairing that with the value of outstanding mortgages reported by APRA at the same time $1.2 trillion it indicates that only 23.4% of the value of Australian housing is mortgaged to Australian ADIs. This analysis highlights that for better or worse, Australian’s store significant wealth within their residential properties. Overall the data indicates that the proportion of interest-only lending and loans with an off-set facility is increasing. No doubt APRA will have a close eye on this phenomenon, particularly interest-only lending which is inherently more risky than when both the principal and interest is repaid. The majority of new mortgages are written on an LVR of less than 80% however, the rising proportion being written between 80% and 90% will no doubt be closely scrutinised. It is encouraging to see that there are fewer new mortgages being written with an LVR above 90%. Although the current value of housing compared to that mortgaged is relatively low, a sharp down-turn in property values would have a significant impact on more recent purchasers. The first five years of a mortgage is inherently the riskiest. Whilst those who have owned their home and have significant equity within it can weather a down-turn, recent buyers with little or no equity, and those who have leveraged their equity for other investments are significantly more exposed in the event of a downturn.

RP Data National Auction Comment; Week ending 25 May, 2014

Volumes rise and demand increases across capital city auction markets A preliminary auction clearance rate* of 66.1 per cent was recorded this week across capital cities compared to 66.6 per cent last week and 67.1 per cent this time last year. Demand from buyers was clearly sufficient to ensure that the clearance rate was largely unaffected by the substantial 61 per cent rise in homes on offer at auction compared to this time a year ago. In the Sydney market demand strengthened with a preliminary clearance rate of 76.2 per cent recorded compared to 69.9 per cent last week. Buyers have welcomed the increased choice this week. In Melbourne demand and supply continue to be well balanced with a preliminary clearance rate of 61.7 per cent recorded compared to 68.8 per cent last week. In Brisbane a preliminary clearance rate of 49.5 per cent was recorded compared to 46.5 per cent last week. Adelaide recorded a clearance rate of 67.2 per cent compared to 63.8 per cent last week. In Canberra a clearance rate of 50.9 per cent was recorded and in Perth there was a clearance rate of 45.2 per cent. In Tasmania there was 2 sales from 4 results. Robert Larocca RP Data Housing Market Specialist *Weighted average

RP Data National Auction Preview; Week ending 25 May, 2014

Unprecedented volume of auctions across Australian capital cities this week There are 3,111 auctions scheduled across Australia this week with 2,589 expected in capital cities – a remarkable 53 per cent more than the 1,687 auctions held a year ago. Vendors may be concerned about the high volume of competing auctions but should gain confidence from last week’s results when there was a small increase in the clearance rate to 66.6 per cent across capital cities from 65 per cent in conjunction with increased supply. The increase in volumes this week is largely as a result of an unprecedented surge in listings in Melbourne and Sydney for May, both of which have more than 1,000 auctions. In Melbourne there are 1,137 auctions scheduled in what is the ninth week this year with over 1,000. In Sydney volumes are almost twice last year’s at 598, with 1,017 homes to be offered for sale at auction. Both Canberra and Perth are expecting a record number of auctions so far this year with 72 expected in Canberra and 69 scheduled in Perth. In Adelaide, 119 auctions are expected compared to 121 last week. In Brisbane 175 auctions are expected following last week’s 133. There are 8 auctions scheduled in Tasmania. Across Australia, the highest volume of auctions will be found Melbourne’s expensive eastern suburbs with 24 scheduled for Glen Iris. In Sydney the highest volume of auctions are in the inner city suburb of Paddington with 21 scheduled. Robert Larocca RP Data Housing Market Specialist

RP Data market preview, Melbourne; Week ending 25 May, 2014

Melbourne auction volumes remain high as there are 1,137 auctions scheduled this week in Melbourne, compared to 823 at the same time last year. This will be the ninth week with more than 1,000 auctions in Melbourne. The highest number of auctions this week is in Glen Iris with 24 followed by Northcote and South Yarra, both with 19. The Melbourne auction market continues to record reasonable clearance rates in light of the very strong volumes. Volumes in the auction market are consistent with those across the residential market which is seeing more new homes being listed and more sold. In Melbourne there are 31,604 homes listed for sale, 8.7 per cent lower than a year ago. At the same time new listings have been consistently higher than a year ago, over the month ending 18 May there was 15.7 per cent more new listings. Key data Clearance rate week ending 18 May: 68.5 per cent Melbourne auctions expected week ending 25 May: 1,137 Melbourne private sales time on market week ending 18 May: 40 days houses Melbourne vendor discounting market week ending 18 May: -5.5 per cent houses Listings being prepared for market are 1.3 per cent lower over the month ending 18 May seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

A case study of Sydney housing over time

Over the three months to April 1990, the median selling price of a dwelling a combination of houses and units across Sydney was recorded at $152,500. As at April 2014, the median selling price of a dwelling was $680,000 which represents a 347% increase in selling price over the 24 year period. Of course a median price is only measured across properties which actually transacted but it is interesting to look at what the median priced home is over time The following charts will look at the changes in median price over time and the location of median priced sales. Note that the each dot represents one sale and the red dots indicate house sales while the blue dots represent unit sales. The buffers shown on the maps represent a 10 kilometre, 20 kilometre and 50 kilometre distance from the Sydney CBD. 3 months to April 1990 The median price of a Sydney home over the three months to April 1990 was $237,000, across the city there was 12 sales at that price over the period, 3 of which were units and the remaining 9 were houses. Apart from 1 sale at Sylvania, the reaming 11 sales all occurred within a 20 kilometre radius of the city. For houses, you will note that 4 of the 9 suburbs are located within a 10 kilometre radius of the city and for units, Epping was the only suburb with a sale outside of the 10 kilometre region. 3 months to April 1994 Moving to April 1994, there were 34 sales at the median price over the three month period and the median price was recorded at $169,000. Comparing this chart to the previous chart you see that the median priced house is beginning to move further away from the city centre with only 5 of the 24 median priced house sales within 10 kilometres of the city centre and 5 of those 24 sales were located more than 20 kilometres from the city centre. For units, 3 of the 10 sales were outside of a 10 kilometre radius of the city, 2 of which were more than 20 kilometres away. 3 months to April 1999 By April 1999, the Sydney median house price was recorded at $237,000 and over that three month period there was 28 houses sold at that price and 31 units. The big shift over the five year period was the fact that none of the median priced house sales were within a 10 kilometre radius and a greater proportion were located more than 20 kilometres from the city than those within 20 kilometres. Within a 10 kilometre radius of the city, units where the only sales at the median price however, units transacting at the median price were becoming more common in areas more than 10 kilometres from the city centre. 3 months to April 2004 The median Sydney dwelling price over the three months to April 2004 in Sydney was recorded at $440,000. Over the preceding 3 months there were 62 house sales and 65 unit sales at that price. Compared to five years earlier there were a few house sales within 10 kilometres of the city centre however, once again the majority occurred more than 20 kilometres from the city centre. For units, most sales still occurred close to the city centre however, more and more were transacting at the median price further away from the city centre. 3 months to April 2009 By April 2009, the median dwelling price in Sydney was slightly lower than from five years earlier, recorded at $420,000. Keep in mind that from early 2004 to mid-2009 there was no growth in Sydney home values after they fell by around 10%. The map is quite similar to the previous one with 102 houses and 103 units sold at the median price. Once again only a few house sales were within a 10 kilometre radius of the city with the vast majority occurring more than 20 kilometres from the CBD. Unit sales were fairly similar and mostly focused within the 20 kilometre radius of the city. 3 months to April 2014 Over the most recent three month period, the median Sydney dwelling price was recorded at $680,000. Over the three month period and note these figures will be revised higher there was 31 house sales at the median price and 40 unit sales. Looking at the above map again we see few house sales within a 20 kilometre radius of the city and the median priced unit is pushing further away from the city centre with more and more sales occurring more than 10 kilometres from the CBD. The analysis is an interesting exercise in how over time, the ‘typical’ home across the city is moving further and further away from the city centre. As a result, it is no wonder we are seeing growing levels of higher density development in the major capital cities. As the typical housing option moves further away from the city centre, those that need or want to be close to the city centre look for more affordable alternatives such as units. As the city continues to grow and density in the inner city increases we would expect a further drift outwards of both the typical house and unit sale in Sydney.

Days on market drops in Melbourne

The average number of days a house spends on the market has fallen to a new low according to the latest RP Data monthly update. In March a house for sale by private sale in Melbourne spent 35 days on the market. As most auction selling campaigns are around 28 days, it is interesting to note that private sales are delivering, in broad terms, similarly quick sales. This is also significant because the majority, around 69 per cent in 2013, of Melbournians sell by private sale. Comparing March this year with the past few years shows the change clearly, last year the time on market was 45 days, the year before that it was 57 days and in 2010, when the market last peaked, it was 38 days. There is clearly a reflection between the strength of the market and the time it takes to sell a house. Units are taking slightly longer; around 37 days – but this is not a significant difference and they show a similar trend over time. On a suburban level the shortest time on market is generally found in the outer east of the city in The Basin, Croydon South and Knoxfield. Time on market data on a suburban level is calculated over a longer time period so fluctuates to a lessor degree but still clearly shows the areas where sales are more rapid. Robert Larocca RP Data Housing Market Specialist

RP Data national auction market comment; Week ending 18 May, 2014

National auction market stable despite a strong rise in the number of properties taken to auction. A preliminary auction clearance rate* of 65.4 per cent was recorded this week across capital cities compared to 65.0 per cent last week and 67.3 per cent this time last year. The auction clearance rate has maintained a stable performance despite a 42 per cent rise in the number of properties taken to auction this week and concerns the federal budget may have a negative impact on buyer demand. In the Sydney market a weaker preliminary clearance rate of 70.9 per cent was recorded compared to 73.3 per cent last week highlighting improving conditions for buyers. In Melbourne a preliminary clearance rate of 64.5 per cent was recorded compared to 61.9 per cent last week. Auction numbers rose steeply this week and it is significant that the clearance rate didn’t drop below the lows of the last fortnight. In Brisbane a preliminary clearance rate of 49.5 per cent was recorded compared to 46.7 per cent last week. Adelaide recorded a clearance rate of 65.5 per cent compared to 62.3 per cent last week. In Canberra a clearance rate of 52.6 per cent was recorded and in Perth there were 8 auction sales from 17 results. In Tasmania there was 2 sales from 5 results. Robert Larocca RP Data Housing Market Specialist For further comment or inquiries from the media please call 0409 198 350. *Weighted average

RP Data national auction preview; Week ending 18 May, 2014

There are 1,994 auctions scheduled across capital cities this week. This is 30 per cent more than last week and 31 per cent more this time last year. Volumes have increased over the last week in all cities with the exception of Canberra. Last weeks improved clearance rate, up 1.8 percentage points to 65 per cent was driven by stronger demand in Sydney. This week Melbourne has 979 auctions compared to 710 last week and there are improving conditions for buyers with clearance rates persistently in the low 60’s. Sydney continues to return strong clearance rates and this week there is a rise in auction numbers to 724 from 618. In Adelaide there are twice as many auctions with 115 expected compared to 57 last week. In Brisbane 112 auctions are expected following last week’s 89. There are 27 auctions expected in Canberra, 37 in Perth and 8 in Tasmania. Across Australia the highest volume of auctions will be found in Reservoir and Richmond in Melbourne, both of which have 20 scheduled. In Sydney the highest volume of auctions are in the inner northern suburb of Waverton with 12. Robert Larocca RP Data Housing Market Specialist

RP Data Melbourne market preview; Week ending 18 May, 2014

There are 979 auctions scheduled this weekend in Melbourne compared to 738 for the same time last year. Conditions in the Melbourne auction market continue to be relatively cool. The clearance rate has exceeded 70 per cent only twice so far in 2014 and has been slowly drifting down since that time. As conditions are shifting in favour of buyers at auction the significant lift in volumes this week will prove to be a challenge for the market. Conditions in the private sale market remain tight with the latest time on market monthly data showing a new low for houses. In March the days on market for houses dropped to 35, the lowest on record. Time on market for units reached 37 days highlighting softer conditions in the higher density market as this is higher than the record low of 32 days in May 2010. Key data Preliminary clearance rate week ending 11 May: 61.9 per cent Melbourne auctions expected week ending 18 May: 979 Melbourne private sales time on market week ending 11 May: 38 days houses Melbourne vendor discounting market week ending 11 May: -5.5 per cent houses Listings being prepared for market are 2.5 per cent higher in month ending 11 May seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

The growing gap in the Melbourne market

In recent times the market for houses in Melbourne has outperformed, in terms of value growth, the unit market. In many respects this is due to increased supply and it also signifies a broader structural change in the market. According to the latest RP Data Rismark Home Value Index April results, the value of houses grew by 12.2 per cent over the last year and by 5.4 per cent over the first four months of this year. In comparison, the value of units has grown by 6.8 per cent over the last year and by 0.9 per cent this year. A review of data over the medium term shows that houses have consistently outperformed units in terms of value growth over time. In April the value of a unit was 70 per cent that of a house. A year ago unit values were 74 per cent that of houses and five years ago it was 75 per cent. Interestingly when the index commenced in 1995 unit values were 88 per cent of a house. Over that time unit sales as a proportion of all sales in Melbourne have risen from 28 per cent to 34 per cent. Houses have recorded stronger levels of value growth than units and as a result are becoming comparatively more expensive than units. The change in values and sales numbers is a reflection of a broad structural change in the Melbourne housing market. Over the past decade the number of medium and high density dwellings has grown as a consequence of planning policies, demand from buyers and affordability issues. As Melbourne continues to grow and requires more dwellings, the most efficient way to supply these new dwellings is through higher density homes. The majority of dwelling approvals in Melbourne are now for units as opposed to detached houses and state governments’ over the last decade have made it clear that in order to cater to the city’s growing population there will be more higher density housing. Robert Larocca RP Data Housing Market Specialist

Housing finance data for March 2014

The Australian Bureau of Statistics ABS released housing finance data for March 2014 earlier today. The data showed that the number of owner occupier housing finance commitments fell by -0.9% in March. In value terms, lending to owner occupiers was -1.2% lower over the month and lending to investors was down -0.8%. Looking at the break-down of housing finance commitments by value over-time, you can see that on a 12 month average basis, the greatest proportion of lending over the past year has gone to investors 37.7% followed by: owner occupier subsequent purchasers non-first home buyers 36.7% , refinances by owner occupiers 17.6% and owner occupier first home buyers 7.9% . As the above chart shows, investment lending is at its highest level in a number of years and there has previously only ever been one period where investment lending was greater than lending to subsequent purchasers. The proportion of lending to first home buyers is at a record low, accounting for an average of 7.9% of the value of finance commitments over the 12 months to March 2014. Turning the focus to the monthly data on the number of owner occupier housing finance commitments, as mentioned these were -0.9% lower with refinance commitments down -1.0% and non-refinance commitments falling -0.9%. Despite the monthly fall, as the above chart shows, both refinances and non-refinances are trending higher albeit non-refinances in particular remain well below historic average levels. Over the month, owner occupier housing finance commitments to first home buyers increased by 12.2% which was the largest monthly rise since May 2012. Despite the monthly rise, first home buyer commitments remain slightly lower than a year ago -0.8% . As a proportion of total owner occupier finance commitments, first home buyers accounted for 12.6% of commitments in March, up from 12.5% in February but down from 14.1% in March 2013. The total value of investment housing finance commitments fell by -0.8% in March 2014 however, it has increased by 27.9% year-on-year. As mentioned, the proportion of investment commitments has, on average, been higher than owner occupier subsequent purchases over the past year. In March, investment finance commitments accounted for 39.1% of total finance commitments. The level of investment activity remains at a level which is well above average and of a magnitude not recorded since late in 2003. Although it is hard to bed down any timely and accurate statistics on overseas buyers it is important to note that if foreign buyers are purchasing with funds sourced from abroad, they are not captured in these figures. With the level of investment remaining stubbornly high, it is no wonder that the Reserve Bank continues to repeat its warning that housing in Australia is not a one-way bet. Obviously low mortgage rates coupled with strong value growth, particularly in Sydney and Melbourne is attracting the attention of investors. The potential challenge will be what happens next with investors once value growth slows and mortgage rates rise. The last time we saw investment activity at these levels we also witnessed a marked slowdown in value growth nationally. As an example, in Sydney, values began falling shortly thereafter and values took five and a half years to return to their previous peaks. Investors jumping into the market at this time should definitely bear this in mind. Overall, the monthly read on housing finance data was weak, however, the trend shows that demand for finance is continuing to escalate. In particular, investors and upgraders are really driving the housing market at the moment. However, the level of activity by owner occupiers purchasing homes as opposed to refinancing remains well below average levels. Obviously the rise in investment lending is to some extent restricting the level of lending to owner occupiers.

RP Data national auction review; Week ending 11 May, 2014

The preliminary auction clearance rate* of 67.4 per cent was recorded this week across capital cities compared to 62.3 per cent last week and 65.6 per cent this time last year. Volumes have been lower this week as the market heads into a traditionally quieter time in winter. The higher clearance rate is largely a factor of a stronger Sydney market where a preliminary clearance rate 76.1 per cent was recorded compared to 71.4 per cent last week. The higher national clearance rate does not represent a significant shift in the market and is broadly in line with the trend this year, particularly with the results prior to Easter and Anzac Day. In Melbourne a preliminary clearance rate of 63.4 per cent was recorded compared to 61.9 per cent last week. Last week’s Melbourne clearance rate was the lowest since late 2012 and is running counter to the established trend through the last year and also reflects moderating growth in property values. In Brisbane a preliminary clearance rate of 54.8 per cent was recorded compared to 42.4 per cent last week. Adelaide recorded a clearance rate of 60.5 per cent compared to 62.7 per cent last week. In Canberra a clearance rate of 58.8 per cent was recorded and in Perth there was one auction sale from eight results. In Tasmania there was two sales from three results. Robert Larocca RP Data Housing Market Specialist For further comment or inquiries from the media please call 0409 198 350. *Weighted average

RP Data National Auction Preview; Week ending 11 May, 2014

Auction volumes fell in all capital cities this week with around 1,376 expected compared to 2,053 last week. This change is consistent with last year’s activity as the market moves into the cooler months. Speculation surrounding the Federal Budget announcements next week is unlikely to have an impact on auctions as buyers and sellers generally made the decision to enter the market many weeks ago. Around the country, the largest volume of auctions is in Melbourne where 643 are expected compared to 891 last week. In Sydney, where there has already been 51 per cent more auctions than this time last year, 565 are expected compared to 821 last week. Adelaide is expecting 53 auctions compared to 97 last week. In Brisbane volumes have halved and are down to 70 from 142. In Canberra 31 auctions are scheduled; down from 47 last week while in Perth there are 14 auctions and 11 in Tasmania. Robert Larocca RP Data Housing Market Specialist

Week ending 11 May, 2014

There are 643 auctions scheduled this week in Melbourne compared to 807 this weekend last year. This is a 20 per cent reduction and reflects the record 7 weekends with over 1,000 auctions already held. Last weekends clearance rate was the lowest since late December in 2012. The most popular areas for auctions this weekend are in the inner north where there are 10 in both Pascoe Vale and Preston. Melbourne is currently returning a below average clearance rate when compared to the market nationally and that should translate into better conditions for buyers over the next few months. The lower clearance rate should also indicate to vendors with an auction in the next month the importance of taking current market conditions into account when setting a selling price. Conditions eased slightly in the private sale market with time on market for houses stable at 33 days and vendor discounting still stable at -5.6 per cent. The lowest vendor discount on a suburban basis is in Armadale for units at -2.6 per cent followed by houses in Vermont at -2.7 per cent and houses in Bayswater South at -3 per cent. Key data Clearance rate week ending 4 May: 61.9 per cent Melbourne auctions expected week ending 11 May: 643 Melbourne private sales time on market week ending 4 May: 35 days houses Melbourne vendor discounting market week ending 4 May: -5.6 per cent houses Listings being prepared for market are 7.5 per cent higher in month ending 4 May seasonally adjusted Robert Larocca RP Data Victoria Housing Market Specialist

Highlights from the March 2014 building approvals data

The Australian Bureau of Statistics ABS released dwelling approvals data for March 2014 earlier this week. Although the monthly reading recorded a fall, the trend of the data showed that the number of approvals is continuing to rise. Total dwelling approvals fell by -3.5% seasonally adjusted over the month however, they are still 20.0% higher year-on-year. House approvals fell by -0.5% over the month compared to a much larger -7.5% fall in the more volatile unit category. Year-on-year both houses and units have recorded a significant increase, up 19.1% and 21.3% respectively. The month-to-month index is inherently volatile; as a result we prefer to look at the rolling annual number of approvals. Over the 12 months to March 2013, there were 188,153 dwelling approvals nationally. This was the highest annual number of approvals since the 12 months to January 1995. Annual house approvals outweighed unit approvals with 104,598 and 83,554 approvals respectively. House approvals are at their highest level since April 2011 while unit approvals are currently at an all-time high. With interest rates currently set at low levels, population growth quite high and property values rising, developers are becoming more comfortable in seeking applications for new developments. Of course this is just the approval stage and it will be interesting to see what proportion of these approvals actually make it to commencement in the near-term. Across the individual capital city markets the annual number of approvals is also generally trending higher with record high approvals in some capitals. Following is the annual number of approvals across the capital cities with the annual change in brackets: Sydney 38,436 approvals 35.7% , 42,231 2.7% in Melbourne, 19,566 43.8% in Brisbane, 8,264 36.4% in Adelaide, 24,375 in Perth 45.1% , 770 5.8% in Hobart, 1,637 -23.7% in Darwin and 5,157 27.6% in Canberra. As you can see dwelling approvals are generally trending higher over the past year. In fact dwelling approvals over the year were at a record high level in Sydney and Perth. In Melbourne dwelling approvals are at their highest level since November 2011, Brisbane approvals are at their highest level since July 2004, in Adelaide approvals are at their highest level since August 2011, Hobart approvals are at their highest level since January 2013, Darwin approvals are trending lower and Canberra approvals are at their highest level since February 2012. The other interesting evolution of the market is the ongoing rise in prominence of unit approvals. The number of unit approvals is at a record high in both Sydney and Brisbane. As a proportion of all dwelling approvals, more than 50% of all approvals over the past year have been for units rather than houses in Sydney, Melbourne, Brisbane, Darwin and Canberra. Sydney has consistently approved more units than houses for the past 20 years and both Darwin and Canberra have approved more units than houses consistently since 2010. The rising prominence of unit approvals in Melbourne and Brisbane is a relatively new phenomenon with unit approvals over-taking those of houses in Melbourne from August 2012 and in Brisbane from June 2013. It is encouraging to see that dwelling approvals are trending higher nationally and across most capital cities. This is a desired outcome of low interest rates with the Reserve Bank hoping that a pick-up in dwelling construction can somewhat offset falling mining investment. New dwelling construction also has a significant multiplier effect throughout the economy creating jobs and encouraging additional retail spending. The main challenge will be that in many cities we are seeing an unprecedented level of units approved for construction. Certainly demand for units has risen over recent years however, the pipeline of approvals is at record levels which are not yet tested. Obviously most developments will need a level of presale to trigger finance to commence construction and it will be interesting to see how many of these unit approvals actually make it to construction phase over the coming months and years.

Investors up, first home buyers down in the Melbourne market

A unique and interesting feature of the current housing market in Victoria is not only a rise in investor activity, but the falling numbers of first home buyers. It may be easy to draw the conclusion that investors have forced first home buyers out of the market, however, this is not supported by the data available from the Australian Bureau of Statistics ABS data, rather it indicates a rise in the overall share of all non first home buyers. Analysis of data from the ABS shows that the market share of local investors has been cyclical over the past decade. In the most recent twelve months investors represented 36.1 per cent of the total value of loans in Victoria compared to 34 per cent in the preceding twelve months. In the twelve months ending Feb 2011 – the last rising cycle – the proportion was 37 per cent. A similar rise was also evident in 2007 suggesting that as the market strengthens so too does the level of investor activity rise. Unlike investors the number of first home buyers have shrunk to record lows. In February there were 1,402 dwellings financed for first home buyers in Victoria, a mere 11.7 per cent of the entir