Right now is one of those weird periods working as a property research analyst. We all know that the property market has picked up since election night – the anecdotal evidence is certainly out there in the press, but as per standard most of the supporting data is still yet to become available. So try not to get too confused as we navigate through the time warp that is this month’s ABS stats update.
As would be expected right before a Federal Election, ABS Housing and Lending Finance figures showed the number of dwellings financed were down during the month of August across all buyer segments. On the positive side though we haven’t seen any significant double-digit percentage drops which represents, as I mentioned in my previous blog, a mere pothole on the Queensland property markets’ road to recovery. For some long-term context take a look at the graph below – I’ve placed a marker on each August period to make comparison a little easier and as you can see there have been much worse monthly declines in years past.
Non-First Home Buyer (i.e. upgrader) activity was down 7.2 per cent to 8,322 dwellings financed. Investor activity appears to have cooled down since May, with an estimated 4,238 dwellings financed in August, down 3.9 per cent over the month. However activity in both buyer groups is higher compared to the year before, which has noticeably had an effect on various rental markets around South East Queensland. The recovery in the First Home Buyer segment had stalled during August, falling 4.4 per cent to 1,088 dwellings financed. I’m sure we’ve all seen news articles about the post-election increase in buyer confidence and sales activity, so it will be interesting to observe how soon the upswing is reflected in this set of data.
You’ve probably also seen a lot of articles regarding the ‘threat’ of a housing bubble, particularly given the property price growth seen in the Sydney and Melbourne property markets. If you have the time, CommBank recently published an analysis of the topic in context of the Australia market – it’s certainly the best discussion I’ve seen so far on the subject so far.
One of the points made briefly in the article is that the current price growth is to be expected, due to a rational increase in demand for property given the interest rate environment, coupled with a slow response in the supply of new dwellings. That’s not to say that the concerns regarding property price bubbles are completely unfounded, but it is reassuring to know that the overall picture is being closely monitored by the RBA.
The supply of new dwellings in Queensland has indeed been lacklustre over the past few years, but if you cast your mind back our property market took some time itself to get going again. There are some positive signs emerging though – HIA New Home Sales data since the beginning of the year have shown some, albeit patchy, positive monthly increases (though is still lagging behind the national average). And the latest ABS Building Approvals data, which is an important leading indicator of future building activity, shows the total amount of residential dwellings approved for the month of September at its highest levels since August 2011.
By Ryan Connors, research analyst, REIQ