Land values rising as volumes fall
One might expect developable land prices to rise with home values, but the surprise from the Housing Industry Association’s most recent report with RP Data may be how skewed that increase has been toward Australia’s major metropolitan areas. Overall, residential land prices have risen by 2 per cent year-over-year for the quarter ending in March, while the volume of land sold has fallen by 4.7 per cent. But the weighted average median lot prices across capital cities surged by 3.3 per cent in the quarter and 7.5 per cent compared with the March quarter of 2013. Rural and regional prices only rose 2.4 per cent for the year. The wide difference in appreciation shows how constrained developable land supply has been and, perhaps, how much additional value can be derived from more densely developable land in the nation’s urban cores. Read the full story here.
Clearance rates rise above 70 per cent; transparent reserve price auction succeeds
Australia’s auction market cleared 70.7 per cent of sales this weekend according to RP Data’s early reports, a lift from 68.7 per cent last week. Melbourne’s clearance rate rose to 69.6 per cent, while volume fell in Sydney by 3.8 per cent, but clearance rates spiked more than 10 points above average, to 76.9 per cent. Sydney sustained an experiment in auctions this week; a vendor of a Bexley home published his reserve price during the auction campaign, instead of holding the figure secret until the day of the auction. The vendor sold the home for $613,000, $43,000 over reserve, which may validate the practice for future sales. Buyers have been complaining about published price guides far below reserve value, drawing attention to homes out of bidders’ price ranges. Read the full story here.
Talk of a ban on borrowing in SMSF for property investment draws industry fire
Property investment spruikers have been attracting all kinds of unwanted attention from regulators – and criminal investigators – who fear a wave of losses in self-managed super funds. But managed super fund professionals see a push for rules banning borrowing in SMSFs as a potential industry threat. The chief executive of the SMSF Professionals’ Association of Australia, Andrea Slattery, described a ban as unnecessary as long as SMSF trustees were properly advised, borrowers follow current laws and loan to valuation ratios remain appropriate. Most borrowing within super funds goes to commercial property investment, she noted. But spruikers have been touting residential real estate investments using SMSF money, operating right at the edge of the law governing financial investment advice – if not over it. Read the full story here.
Soul searching continues in the wake of the RBA advice to rent, not buy
Does Australia have a house price bubble? Call it what you like, but the boom in house prices has nonetheless left a massive imbalance in equity between the generations in its wake. Older Australians bought houses at a time when the average debt load stood at 60 per cent of income. Today it’s 177 per cent. Even at the current rock-bottom interest rates, that leaves Aussies wedded to a lender for most of their lives. “Increasingly, ordinary middle-aged Australians will come to rely on the proceeds of inheritances from their deceased parents simply to get themselves out of their debts,” writes Shaun Carney. “In many cases, their wages won’t be enough to pay off the mortgage. At the same time, these same middle-aged Australians are finding their own adult children still living at home with mum and dad, and it’s not because the kids are sooks.” Read the full story here.
What do Australian banks know about how their foreign partners fund investment in real estate?
Apparently, as little as necessary. ANZ Bank and Macquarie Group took inquiries at hearings of the House of Representatives economics committee about how they monitored their partners’ compliance with foreign investment rules, like the Significant Investor Visa. Macquarie’s response: it does not directly monitor how loaned funds were being used but it could call in the loan or seize collateral early if clients were dishonest. (Assuming someone ever told them their clients were dishonest, of course.) ANZ said it did not trace foreign buyers' source of income, though it does check the post-codes of "pre-sales" to make sure they were genuine. Banks do not maintain contact with foreign buyers when lending to developers, noted an industry spokesman. Read the full story here.