Building construction rate expands, led by apartment permits
The Australian Bureau of Statistics released figures yesterday showing a monthly increase of 14 per cent in building approvals in May – 9.9 per cent year-on-year, to 16,425 permits. Apartment construction led gains with approval rates rising 27.2 per cent for the month after a fall in April. Detached house construction rates rose only slightly, by half a point, but remain near a four-year high. Analysts say they believe that the increase in housing supply – particularly of units in Sydney and Melbourne – may start to impact the meteoric rise in home prices as apartment towers begin to open for lease. Building approvals in Queensland increased by 45 per cent, rising 29.3 per cent in Western Australia, 14.4 per cent in NSW and 9.6 per cent in Tasmania. Victoria and South Australia sustained falls in approval rates. Read the full story here.
High home prices will not force RBA’s hand on interest rates
The Reserve Bank of Australia will not allow talk of a property bubble to spur an increase in interest rates, said RBA Governor Glenn Stevens at an economics event in Hobart this week. The rising pace of construction and the recent slowdown in rising prices may do enough to control a bubble, making an interest rate increase superfluous while on a balanced growth path for the economy. Recent ABS data shows GDP growth of 3.5 per cent, a figure Mr Stevens said “probably overstates" real growth. A sustained period of robust growth would require the RBA to rethink their caution on interest rates, particularly if that growth came paired with increasing inflation. But an increase in interest rates would complicate property investment and may cause values to fall. Read the full story here.
More comment from Stevens directed to Sydney’s investors: don’t get cocky
In America, amid the dot-com bubble of 1996, Federal Reserve Board chairman, Alan Greenspan warned stock investors of “irrational exuberance” in the market. Yesterday, RBA Governor Glenn Stevens warned Sydney’s property investors about “overconfident expectations of continuing gains". Neither man was willing to say outright that the wild market had left assets mispriced. Stevens said yesterday that the amount of new borrowing does not appear imprudent. But he singled out the Sydney market for concern, noting that credit approvals for investor loans in New South Wales are up 130 per cent in six years, with evidence of increased lending at loan-to-value ratios above 80 per cent this year. “People should not assume that prices always rise,” he said. “They don’t; sometimes they fall.” Read the full story here.
Two dozen Melbourne city blocks considered “super-dense” with more than 150 dwellings per hectare
Southbank doesn’t have a school, or a bank, or a post office. But it does have people – more than 11,000 Melburnians. It’s one of Melbourne’s densest post codes, which are now starting to attract more attention from city planners and political leaders. Melbourne added about 28,000 new homes between 2002 and 2012 to the CBD and surrounding areas. The city council has begun tagging developers with fees to mitigate the infrastructure issues associated with density – a $4,500 per unit developer contribution for metropolitan strategic development areas, a $15,000 per dwelling in Fishermans Bend and up to $3000 per unit for Southbank and City North to pay for streetscape upgrades and a community centre. Read the full story here.
Abbott: Foreign investors benefit Australia
Prime Minister Tony Abbott likened the modern wave of foreign investment to Britain’s original foreign investment in “scarcely-settled” Australia. Speaking to The Australian-Melbourne Institute conference yesterday, he said foreign investment in residential real estate was contentious and emotional, but that the country would be “unimaginable” without it. “As a general principle we support foreign investment. Always have and always will,” he said. Read the full story here.