With media hype focusing on the supply of new dwellings, Ray White Group’s September research indicates that established dwelling market is showing signs of slowing despite growing sales volumes.
‘Off the plan’ headlines distract from established market volumes
With media hype focusing on the supply of new dwellings, Ray White Group’s September research indicates that established dwelling market is showing signs of slowing despite growing sales volumes.
On a state by state basis, based on transaction values, sales markets showed moderate growth with the ACT recording the highest change (2.5%), NSW (1.9%), Vic (1.3%), QLD (0.3%), SA (0.3%), Tas (0.6%), WA (0.1%) and the NT (-2.2%). These figures demonstrate the national property market equalising with the eastern states slowing and the western states making up lost ground.
Despite this slowdown, nationally, the total volume of sales reached $467 billion (rolling 12 month basis) which is a $1.5 billion increase over the previous 12 month period.
Auction volumes increased by 2.1% over the previous 12 months indicating a continued enthusiasm and optimism by vendors. According to last weekend’s auction clearance rates, Sydney was the strongest performer recording an 82%, Melbourne 80%, Adelaide 77%, Canberra 66% and Brisbane 53%.
August saw the number of listings remain steady with national growth of 0.3%.
The flat nature of new listings and a growing volume of sales will likely add to the frustrations of buyers in relatively active markets such as Sydney and Melbourne where a lack of supply helps maintain strong property values.
Latest housing figures released by the ABS show national dwelling approvals rising by 11.3% over the previous month. The majority growth was spurred on by approvals in Vic and NSW which have both enjoyed over 8 months of consecutive growth.
Growth in private lenders and the launch of White & Partners Debt Management
Latest housing figures released by the ABS show national dwelling approvals rising by 11.3% over the previous month. The majority growth was spurred on by approvals in Vic and NSW which have both enjoyed over 8 months of consecutive growth. Concurrently construction volumes in NSW and Vic have also grown with the remaining states either falling or being steady. This combination and a busy three years in residential development has resulted in senior debt lenders reaching their lending caps. Together with increasing concern over settlement risk and fears over pricing levels and resultant market uncertainty is causing banks to shy away from funding further residential development projects.
The Reserve Bank in April warned banks over the potential for “large losses” from soured loans to property developers. Over recent months the big banks have indicated they now require the following terms to be fulfilled prior to considering funding a new development:
- Proven development experience
- 120% debt coverage
- 50-60% LVR for recourse
- 40-50% LVR for non-recourse
- Working history with the bank
- less than 20% FIRB sales
As a result of these tightening criteria, developers are approaching private debt providers. On the back of the this gap in senior debt funding, White & Partners have established White & Partners Debt Management (WPDM). It is the view of WPDM that projects with strong underlying attributes can fall victim to policies that are ‘blanketed’ across the entire market. Already WPDM has seen and bid on a large number of such opportunities over the past month or so.
Real estate agency Ray White Group has cashed in on the strong Australian and New Zealand residential markets, posting an 8 per cent increase in full-year gross fee income to $1.11 billion.
Real estate agency Ray White Group has cashed in on the strong Australian and New Zealand residential markets, posting an 8 per cent increase in full-year gross fee income to $1.11 billion.
The result includes all residential and commercial transaction fees earned but excludes revenue from the group’s mortgage origination business Loan Market.
Equally, the total value of property sales transacted through the group amounted to $44 billion, a 10 per cent increase over the previous year.
“It was one of the golden years,” Ray White Group chairman Brian White said.
“People that have believed in property have been amply rewarded. The record low interest rates created an environment not previously experienced. The benefit of these lower interest rates more than counterbalanced the increase of prices in terms of the affordability of the overall market.”
The group also said its overall market share in Australia and New Zealand increased as it expands its commercial and residential project services.
The company also settled 74,000 transactions, up 5 per cent from last year, and is already banking on an equally strong 2017.
It is expecting the coming spring bumper selling season to deliver more listings, and alleviate the pressure of low stock levels seen in Sydney and Melbourne.
“The feature of both the markets in Australia and New Zealand is in the inner-city property markets. Perhaps the biggest generational change,” Mr White said.
“The previous overwhelming preference for families to move to the newer suburbs has, to a degree, been reversed as the inner-city community facilities and services become more developed.”
Buyer interest in inner-city units and houses continue to show in auction clearance rate – more than 80 per cent for Sydney two weeks in a row and close to 80 per cent for Melbourne in the same period.
Ray White has expanded its agency services to China, signing an agreement to list new and old properties for sale with China’s largest real estate agency, Lianjia, also known as Homelink.
Ray White has expanded its agency services to China, signing an agreement to list new and old properties for sale with China’s largest real estate agency, Lianjia, also known as Homelink.
Lianjia, which has more than 6000 branches in more than 25 cities in China, will co-list Ray White’s Australian and New Zealand properties in Mandarin on its websites.
The exposure to Lianjia’s audience – about 260 million Chinese buyers – will provide Ray White with the leverage into China and more importantly, fulfil the organisation’s strategy of becoming more diverse and a brand that is more attractive to the Chinese community.
With Australia’s business dealings with China increasing, and critical, Ray White Group director Dan White said the small percentage of Ray White’s employees with Chinese ancestry was not enough.
“As we continue our transition into becoming a genuine regional business, our aim is to be able to provide our clients with solutions across Asia Pacific and ensure that we’re comprised of a rich diversity of cultures,” he said.
“[The strategy] has two big advantages for us. Understanding and servicing the unique requirements of clients across different regions and attracting talent to a group who have a regional perspective,” he said.
“We’re happy to take a very long-term view because of how important this issue is.” Apart from co-listing with Lianjia in China, Ray White now uses Chinese Wechat social media – known for its viral reach – where every local listing can be viewed in Mandarin.
Local Ray White agents can also convert their listings into Mandarin through a new translation service the company has set up. A translated listing can be uploaded to local websites as well as Australian Chinese property website ACProperty.com.au. The company has already sold a $1 million apartment in Lane Cove in Sydney’s north and an Auckland apartment for $650,000 since signing the agreement with Lianjia a few weeks ago.
Lianjia, which had $140 billion in sales last year and is worth about $6 billion, is looking to raise another $1 billion from private investors. It already has investments from Chinese internet heavyweights Tencent Holdings and Baidu.
