Rates are again on hold this month. The Reserve Bank’s decision to leave interest rates unchanged for the 13th straight month was announced Tuesday afternoon.
“With muted inflationary pressures and mixed demand conditions it is unlikely the cash rate will change in 2017,” HIA’s principal economist, Tim Reardon said.
Comments issued by the Reserve Bank Governor today confirmed that the indicators in the housing market vary considerably around the country.
“Residential building activity is now starting to contract having been a key driver of growth up until recently. New dwelling commencements peaked in the March 2016 quarter and remain relatively high.
“The RBA correctly notes that investors in residential property are facing higher interest rates. [T]here are also additional restrictions on foreign investors which could have a negative impact on the building industry.
“These factors are impacting the industry at a time when it is has commenced a downward cycle.
“Mortgage delinquency in Australia remains very low, but growth in housing debt has been outpacing growth in household incomes." Reardon said.
“For these reasons, Australia’s economy will continue to require low interest rates in order to achieve stronger growth over the medium term.
“There is nothing in the Governors statement today, or in recent housing indicators, to suggest that interest rates need to increase anytime soon."
Land price increases across Australia 'unrelenting'
Meanwhile, the quest for housing affordability has again been impeded by the continual rise in land prices according to HIA’s latest report.
“The substantial increase in the price of residential land continues to be the single biggest factor behind recent deteriorations in housing affordability,” HIA senior economist, Shane Garrett said.
The HIA-CoreLogic Residential Land Report, revealed that a typical vacant lot of land for housing increased in price by 2.1 per cent in the March quarter of 2017.
“The HIA-CoreLogic Residential Land Report shows a small increase in the supply of residential land on the market during the quarter and the price of land is now 9.3 per cent higher than a year ago.
“Land price increases in Australia are unrelenting,” Garrett said.
“The solution to the housing affordability challenge lies in ensuring that the additional residential land needed across our cities and regional towns is delivered in the right place, at the right time and at the lowest price. This should be a key imperative for governments at all levels."
[Related reading: Slowdown in residential building to have a negative impact on growth]According to Eliza Owen, CoreLogic’s commercial research analyst, “The latest [report] suggests that demand remains strong for residential land as a result of strong dwelling price growth. The hedonic price index suggests that while capital growth in the Sydney market is slowing, it is not slow: annual gains in Sydney dwellings were still 12 per cent in the year to July.
“An interesting dynamic to follow will be in Melbourne, where annual housing returns were over 17.2 per cent as shown by the hedonic index, but units grew by just 4.6 per cent. High growth in housing assets may make houses on relatively cheap land the preferred dwelling type for developers. This is already evident around the fringes of the Melbourne metropolitan area, where residential subdivisions for housing estates are in the pipeline for Whittlesea, Casey and Plumpton,” Owen said.
At $253,525 per vacant lot, the price of residential land has stretched to yet another record high according to the latest edition of the HIA-CoreLogic Residential Land Report published by the Housing Industry Association and CoreLogic, Australia’s leading property information analytics provider.
Source: HIABased on sales during the March 2017 quarter, the pace of annual residential land price growth was strongest in Melbourne (+16.6 cent), followed by Sydney (+11.1 per cent) and Adelaide (+7.4 per cent). Price pressures were a little more modest in Brisbane (+3.6 per cent) and Perth (+2.7 per cent) over the same period. Hobart was the only one of the six capital cities features in the report to experience a reduction in land prices over this period (-8.0 per cent).
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