Australia Property

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“It has been less documented than the Chinese, but I think it (Indian buyers) will be the next wave,” Mr McGrath said.

Sunshine State looking hot as city prices tipped to lose their glow
THE AUSTRALIAN SEPTEMBER 08, 2014 12:00AM

Turi Condon

Property Editor
Sydney
http://cdn.newsapi.com.au/image/v1/exter...z9c5xuj3mc
John McGrathReal estate mogul John McGrath predicts southeast Queensland is about to become the nation’s property hotspot. Picture: Renee Nowytarger Source: News Limited
John McGrath on the housing marking outl...John McGrath
SYDNEY’S blistering housing market will ease over the coming year with prices likely to grow a still-solid 5 per cent to 10 per cent, while southeast Queensland will finally see a surge in prices overtaking the growth rates of its southern neighbours, according to real estate agent John McGrath.

“It won’t be a correction, but a slowdown,” the McGrath Estate Agents chief executive said of the Sydney housing market.

The ascendance of the prestige market, re-emergence of first-home buyers, interest from Indian investors and continued activity from Chinese buyers would be among the big trends in the year ahead, Mr McGrath said.

In Sydney, the historic CBD harbourfront precinct at The Rocks and adjoining Millers Point was Mr McGrath’s top pick for price growth. The inner-west’s Camperdown-Erskinville-Newtown triangle would also continue to deliver, and he believed Botany and Mascot, near the airport, would transform from industrial to residential, fast becoming fashionable.

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The 2014 McGrath Report, released exclusively to The Australian, tips Brisbane’s middle-ring suburbs of Indooroopilly, Carindale and Hendra as likely to see the best price rises.

John McGrath’s Top Picks

Mr McGrath forecast housing prices in Brisbane would rise 20 per cent or more this cycle, over the next two years. “If you had $1 million, there is nowhere but southeast Queensland that could compete for growth over the next three years,’’ he said, noting that the hard-hit Gold Coast and Sunshine Coast markets were also beginning to rebound. Melbourne’s house price growth was likely to trail that of Sydney, but only by a small margin. In the ACT, the ­report puts Ainslie, Turner and newly developed Crace/Franklin at the forefront of price growth.

Mr McGrath said the top and bottom ends of the housing market would be the most active in the next year, particularly homes priced at more than $2m.

In Sydney, 259 homes sold at more than $5m in the 2014 financial year, an increase of 13 per cent, while 80 homes sold at more than $3m each in Brisbane, a rise of 36 per cent on the previous year.

“Over the last four years there has been relatively slow growth in the top end, and it was hardest-hit during the GFC,” Mr McGrath said.

The improving economy and sharemarket and interest from ­expats would see buyers “snapping up what they perceive as bargains”, he said. While there was offshore interest, most of the top-end demand was from local buyers, he noted.

First-home buyers — currently at historically low levels — would return on the back of pent-up demand, record low interest rates and spiralling rents. “It’s hard for a first-home buyer buying at Bondi or Paddington (in Sydney’s east), but if you are a little bit creative and look at Tempe or Brighton-Le-Sands or somewhere in the more affordable belt, there are ­opportunities,” Mr McGrath said.

While Chinese and Chinese-Australian buyers were a force in the market and would remain so, Australia had 450,000 people of Indian heritage, with India the biggest source of permanent migrants to Australia at 20 per cent, the report said. “It has been less documented than the Chinese, but I think it (Indian buyers) will be the next wave,” Mr McGrath said.

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No bubble here, say Beck, Little

Michael Bleby
504 words
5 Sep 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Developers Paul Little and Max Beck say property values are not in a ­"bubble" because the number of apartments is growing to meet the rising population and more Australians want to rent rather than buy.

Mr Little and Mr Beck, ranked 56th and 120th respectively on BRW's Rich 200 list, said the warnings on Wednesday by Reserve Bank governor Glenn Stevens of overheated property prices driven by investors expecting ever-rising prices were logical but did not signal the need for any drastic action to cool the market.

"If you are investing in property as an investment product, then I don't believe that prices have made that form of investment any less responsible," said Mr Little, the former head of Toll Group and owner of Little Properties.

Some experts say Australia property prices are among the most expensive in the English-speaking world and a ­bubble is building.

Mr Beck, who retired in 2007 from the Becton Property Group he founded, said a large number of apartments had been built and Australia doesn't need "much more".

"It's probably okay at the moment," he said.

"I think it will be fine."

The risks Mr Stephens raised were no different now from any other time and the market was working fine to self-regulate, Mr Beck said.

"He should be a driver for ­moderation in these things," Mr Beck said. "But while interest rates are where they are, the next thing to moderate [prices] will be interest rates going up."

Approvals of new apartments and townhouses are on a long-term trend downwards and fell in July for an eighth straight month, figures this week showed. In seasonally adjusted terms, the 6733 new such dwellings were approved, equivalent to an annualised rate of 80,796. Apartments make up about one-third of the total number of dwellings approved.

Concerns that investors – often enticed by favourable tax rules – will expect interest rates to stay low and ­borrow too much on property investments has always been a concern, Mr Little said. One difference now was the ­growing preference of younger ­people to rent rather than buy a house with backyard and ensure they live in their preferred location and avoid a lengthy commute, he said.

"The whole dynamic around property ownership have changed," he said.

"For people to rent you do need to have properties that are owned by investors. That part of puzzle is being filled in many cases, the majority of cases, by Asians wanting to buy ­property here in this country."

Still, the willingness of Asian ­investors to offer higher prices for development sites was pushing up some apartment prices, Mr Little said.

Mr Beck agreed that while the need for investors – or even owner-occupiers – to be cautious was not new, the rules for investing were no different now than from at any other time in recent history.

"It just gets down to rarity like any other commodity," Mr Beck said.


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Melbourne leads unit sales, Parramatta a surprise contender, RP Data finds
THE AUSTRALIAN AUGUST 07, 2014 6:10PM

Turi Condon

Property Editor
Sydney
The first stage of the Promenade, a $550m residential development by Starryland Australia
The first stage of the Promenade, a $550m residential development by Starryland Australia in Parramatta, sold out in a single weekend in May. Source: Supplied
A HEFTY 23,000 apartments have changed hands across the country’s 50 most popular apartment locations as more Australians embraced high-rise living last year.

The apartment boom sweeping through Sydney and Melbourne — and moving into Brisbane — is reflected in the rush of new development and healthy turnover of existing apartments.

The Top 50 apartment report compiled exclusively for The Australian by researcher RP Data shows Melbourne’s CBD — where nearly 1300 units sold in the year to May — as the country’s sales hotspot. The second-highest number of apartments changed hands in Queensland’s Surfers Paradise followed by the nearby Gold Coast suburb of Southport.

“The big surprise is Sydney’s Parramatta,” says RP Data research director Tim Lawless. Just under 700 apartments sold in Parramatta, a third more than in Sydney’s CBD — making it the biggest-selling suburb for apartments in NSW,” according to the research which ranks suburbs by the number of sales.

Western Australia is yet to catch the apartment bug with its first appearance at No 25 on the Top 50 list with more than 400 Perth CBD apartments changing hands.

Sydney’s beachside Manly took the prize for strongest value growth, up nearly 26 per cent for the year.

Perth’s beach suburb of Scarborough took second place for price growth with a rise of nearly 19 per cent. Other Sydney beaches also fared well with Dee Why up 15.3 per cent and Cronulla’s median values rising 13 per cent. Dee Why also ranked as the second-most popular NSW apartment spot with 666 sales in the year to May.

INTERACTIVE: Get more details on the most popular suburbs with unit-buyers

Values on the Gold Coast were still under pressure with Surfers Paradise down 1.4 per cent on 1200 sales, Broadbeach off 13.1 per cent and Southport bouncing back 9 per cent in value.

Billionaire apartment developer Harry Triguboff’s confidence is high with his Meriton Group recently spending an aggressive $190 million buying a site in Sydney’s inner-southern suburb of Rosebery — the highest price paid for a site in the company’s 50-year history.

While offshore demand is one reason the market will remain buoyant, Triguboff argues the changing nature of households also plays a significant role.

More people are sharing apartments, Triguboff says. “Where it was two people per apartment, now sometimes it’s four.” And if apartments can be made more affordable it may well drop to two again, spurring more demand, Triguboff says.

The strong price growth across the housing market has allowed those who had been planning to downsize for some time to achieve good prices for their homes and buy an apartment or smaller property, Rose Group managing director Bryan Rose says. While they may be moving out of a large home, Rose, whose family company is developing a total of 2000 units in Sydney’s harbourside Breakfast Point, says there has been a trend for space with more sales for three-bedroom apartments in the past six months.

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Rose expects the overall demand for apartments to remain strong over the next year and expects continued price growth for good Sydney apartments.

RP Data’s Lawless notes that Melbourne CBD apartments are “startlingly cheap” with median sale prices in the 12 months of just $415,000. In Sydney’s CBD, the median unit sales price was $649,000.

“(Melbourne CBD’s) overall value is pulled down by a number of very small apartments,” says Lawless, who notes that apartment sizes can be 50 square metres or less.

Another stark difference between Sydney and Melbourne is the nature of the hot spots. In Melbourne, the turnover is concentrated in the CBD. In Sydney, Lawless says, the middle ring and outer-middle suburbs figure strongly. Parramatta, Dee Why, Rhodes and Cronulla chalked up more sales than the Sydney CBD. And Wollongong, 82km south of Sydney, achieved more unit sales than in Sydney’s core.

However, this will change with new apartment projects planned in Sydney’s city centre, both in terms of new buildings, and office towers converted to apartment living.

While values were still sluggish on the Gold Coast, the number of sales is high showing a bounce back in demand, Lawless says.

Both Triguboff and long-time Brisbane developer David Devine expect to see growth in Brisbane’s unit prices.

Devine, whose Metro Property Development is building or marketing 1465 apartments with another 1000 planned, says Brisbane’s apartment prices are one-third below those in Sydney and that gap will narrow.

“I have never been so bullish about property as I am today,” Devine says.

Meanwhile, Triguboff also sees sustained low interest rates as contributing to the demand for housing and expects to see one more cut to rates before this cycle is done.

Lawless says rental returns also held up with the average yield across Melbourne 4.2 per cent and Sydney 4.5 per cent. “As capital gains taper, eventually it will be helpful to have solid yields.”

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First-home buyers get lowest loan share yet
THE AUSTRALIAN SEPTEMBER 10, 2014 12:00AM

Adam Creighton

Economics Correspondent
Sydney

FIRST-home buyers, struggling to gain a foothold as Sydney and Melbourne house prices surge, have dropped to their lowest share of new home-loan approvals as ­investors pile in, in defiance of ­repeated Reserve Bank warnings.

In July, slightly more than 6700 Australians were granted a loan to buy a home for the first time, 12.2 per cent of the total number approved for owner-occupiers — the lowest percentage since records began in 1991.

“There is anecdotal evidence that some first-home buyers are being squeezed out by investors given tight housing supply … but the lower numbers of first-home buyers also reflects the preference for young people to rent rather than buy,” said Commsec economist Savanth Sebastian.

While the value of loans to owner-occupiers flatlined bet­ween June and July at $17.1 billion (up 7 per cent from a year ago), the value granted to investors jumped 6.8 per cent to $11.5 billion (up 30 per cent from a year ago).

“On a value basis, investors now comprise more than 40 per cent of new-loan commitments, well above the longer-term average and only slightly below the highest high seen during the property boom of 2003,” said economist Tom Kennedy at JPMorgan.

The Reserve Bank’s record low interest rates have fuelled a home-building and buying boom that has prompted a rapid rise in building and loan approvals and helped house prices post double-digit growth in Sydney and Melbourne — a development that has worried the Reserve Bank.

“In our efforts to stimulate growth in the real economy, we don’t want to foster too much build-up of risk in the financial sector, such that people are overextended,” Reserve Bank governor Glenn Stevens said last week.

“While we may desire to see a faster reduction in the rate of unemployment, further inflating an already elevated level of housing prices seems an unwise route to try to achieve that.”

His remarks were widely interpreted to rule out further interest-rate cuts. The average loan size for first-home buyers fell to $307,400, but increased for all owner-occupiers to $327,400 — a record high — between June and July.

The surge in local investment in housing comes as a federal parliamentary committee due to report next month investigates if rising foreign investment in residential real estate is pushing up house prices.

Meanwhile, separate data showed business confidence and trading conditions deteriorated in August. However, economists noted the trend level remained at the highest point since 2010.

National Australia Bank’s monthly survey of businesses showed unused capacity in the economy rose to 19.3 per cent from 19 per cent a month earlier while labour costs continued to outpace input and final product prices.

“If anything, the business sector shrugged off the negative budget headlines and focused on the big picture and it seems to be ­paying dividends. What is now ­required is an ongoing lift in business conditions — which would be good news for the job market,” Mr Sebastian said.

Loans for the construction of new dwellings, to both investors and owner-occupiers, comprised only 8.5 per cent of the total.

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Detached housing starts tipped to drive growth
THE AUSTRALIAN SEPTEMBER 11, 2014 12:00AM

Kylar Loussikian

Journalist
Sydney

THE booming high-density apartment sector is reaching its peak and growth over the next year will be driven by the detached housing segment instead, according to a BIS Shrapnel report released ahead of its business forecasting conference today.

Detached housing starts are expected to increase from 100,324 in the year ending March 2014 to 113,900 in the 2015 calendar year, while other residential dwelling starts will decline by 4 per cent, albeit remaining at historical highs.

The forecast suggests first-home buyers will be a key contributor to the increase in detached houses, gradually returning to the market “as they fully adjust to the new policy measures and demand begins to recover from its historically weak base”.

“However, the key drivers of demand will continue to be the upgrader/downsizer and investor segments of the market,” the analysis notes.

In July, about 6700 first-home buyers were granted loans, only 12.2 per cent of the total number approved for owner-occupiers, the lowest percentage since 1991.

But Kim Hawtrey, an associate director at BIS Shrapnel, said while the proportion of loans to first-home buyers had fallen, the number of loans had begun to grow.

Dr Hawtrey said it was a mixed picture across the states, with high-density development continuing to grow strongly in NSW. “NSW is leading the building ­recovery and is very much the good news story out of these ­figures,” he said.

“It’s entering a super streak for the economy and for building, the likes of which hasn’t been seen in more than a decade.”

But he warned that inner Melbourne remained oversupplied, with an “unsustainable” building rate 75 per cent above the long-term average.

The BIS Shrapnel research also forecast a bumper year for non-residential building, with the accommodation sector — resorts and hotels — expected to perform strongly over the next two years.

“Room rates are rising, occupancy is rising, so we are very positive about the outlook, especially in Queensland and NSW,” Dr Hawtrey said.

The non-residential building sector is expected to lift 6 per cent to $34.87 billion for the current ­financial year, with strong growth coming from accommodation, up 106 per cent, retail, up 23 per cent and warehouses, up 14 per cent.

The value of health and ­education projects is expected to decline as government spending tightens.

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Aussie Office Sector - Real estate risk 'ignored'

Matthew Cranston
690 words
11 Sep 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Australian commercial real estate is overheating, say some of the country's most prominent executives, who are now heavily scrutinising the market.
Stockland's chief executive of commercial property John Schroder said the group, which recently backed off a $2.5 billion bid for Australand, will stay disciplined in the face of rising prices.
"Together with Darren Rehn, our chief investment officer, we've just finished reviewing a property portfolio that's for sale, but we said 'forget it'. Some of the prices being paid for commercial property are, in some cases, excessive at the moment," he said.
Yields for office towers this year have tightened. The landmark 52 Martin Place in Sydney sold at 5.17 per cent.
In the retail sector, the three shopping centres in Lend Lease's Real Estate Partners portfolio are set to sell for over $600 million – a yield of near 6 per cent.
Abacus Property Group managing director Frank Wolf, who has made several astute property transactions in the in the last six months, joined the chorus.
"We are very concerned about what I would call a disconnect between the physical and capital markets," Mr Wolf told The Australian Financial Review.
"The physical markets suggest that values should be decreasing because of the softness in the leasing market. But the weight of money distorts the pricing of assets."
Australia remained a very strong alternative to other international ¬jurisdictions, but buyers needed to be careful of the underlying dynamics.
"It is difficult not just in the office ¬sector but in many sectors and I think the market is disregarding the cost of retaining tenants and incentivising them," he said.
"We think the market is very fully priced and it is not cognisant of the risk inherent in the asset class and the ¬illiquidity of the asset class," he said.
His comments follow that of Cromwell Property Group chief executive Paul Weightman's who was concerned that risk was being underpriced and that some investors were buying because there was so much equity and cheap funding available.
"Because this risk is not being priced well, [Cromwell] is not prepared to say it will deploy the cash," Mr Weightman said when delivering full-year financial results in August.
"I think there are people who are buying for the sake of it. I think that is because a lot of investment managers think they have to buy something because they have the money to buy something, not because they are a good value investment," said.
In the last year, yields have compressed as vacancies have risen.
Despite this, there have been notions from many commercial property executives, including Investa chief executive Campbell Hanan, QIC's Steven Leigh, GPT's Michael Cameron and DEXUS Property Group's Darren ¬Steinberg, that patient equity from groups such as pension funds is forcing a new benchmark in pricing.
"My personal view is that prices will continue to go up despite the soft operating conditions in office markets," Mr Hanan said.
"The difference now is the expectation of return or IRR is falling and this is more than offsetting the benign rental growth and forcing prices higher."
Analysts such as Deutsche Bank are aware of both side s of the story .
The bank's Asia Pacific Review report noted last week that total returns for major office markets were expected to moderate this year.
"Continued global and domestic ¬capital flows into quality assets can ¬outpace underlying fundamentals while interest rates will likely rise in the medium term," the report said, "We are forecasting short-term challenges due to softer demand."
Valuers LandMark White have noted the disconnect.
"The data certainly indicates a ¬disconnect between recent market ¬fundamentals," research manager Ally McDade said.
Even bankers such as the ANZ's global head of institutional property Eddie Law said the capital in Australia for commercial property was unbalanced.
"I think Australia is a jurisdiction where there is probably more capital than there are assets," he said. "What we are evidencing is that [institutional investors] will probably change their investment mandate from local to more broader international mandate."

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People-boom buoys demand for houses

Rebecca Thistleton
478 words
12 Sep 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Apartment construction is nearing its peak while detached housing is set to rise, BIS Shrapnel forecasting shows.

Managing director Robert Mellor told a BIS Shrapnel forecasting conference on Thursday there was still room for growth in house prices over the next year or so, with little chance of a price bubble forming.

The price rises and housing demands, fuelled by rising population levels, will continue to drive underlying housing needs.

While apartment construction has driven investor demand and eased some of Sydney's housing shortage, gains for the building supplies industry have only been small.

Apartment starts have risen 15 per cent in the past year, compared to only 12 per cent for detached houses.

But the outlook is more positive for the building supplies industry, Mr Mellor said, as new detached housing approval was expected to rise, particularly as land sales have peaked.

Already, there has been a jump in detached housing approvals over the last two years.

"This has got a long way to run – just look at the land sales . . . building approvals are going to run for a long time," he said.

BIS Shrapnel has pulled back on previous forecast figures for new apartments, particularly in Sydney.

Apartment construction is expected to rise in Brisbane, where new planning rules allow for more density.

By contrast, in Melbourne, unit construction will fall back considerably after 2015.

The existing Melbourne pipeline – particularly for high-density CBD apartments – means new starts will continue at more than 50,000 next year.

However, that number will wind back in the years after, leaving an ­oversupply of units in its wake.

Although new residential construction is strong, Mr Mellor observed that today's market felt different from past growth bursts, such as the two years before the Sydney Olympics, or during the 1992-1995 construction spike.

He suggested the difference in sentiment between the growth phases could be that housing floor space is no longer increasing. In the '90s, average house floor areas grew dramatically to about 255 square metres. That growth flatlined and has fallen about 3 per cent in the past three years.

In addition, first home buyers now account for about 6 to 7 per cent of the market. BIS Shrapnel associate director Kim Hawtrey said underlying demand for housing would continue.

While overseas net migration has eased, housing stock was not keeping pace with the number of people arriving and born in Australia each year.

"We're in a sweet spot for residential development . . . two years ago it was in a funk," he said. "Australia is having a boom in human beings."

Although BIS forecasters agree with broader housing market sentiment that suggests price rises will continue in the buoyant market – leading to more construction in the year ahead – they also agreed interest rates would have to rise.


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Easy credit and soft taxes fuel house bubble
Nick Lenaghan
428 words
9 Sep 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.
Australia is facing a "land bubble" driven by cheap debt and a tax system that encourages property speculation, lobby group Prosper Australia has warned a Senate inquiry into ­housing affordability.

The NGO group, which focuses on economic justice, called on the inquiry to "critically reconsider" any "simple" claims that high housing prices are the result of a housing shortage. "If we are faced with a genuine mismatch between supply and demand, rents would have risen dramatically," its ­submission said.

"They have not, except for a short period between 2007 and 2010. A solitary focus upon supply and demand is a convenient distraction from the twin determinants of land market bubbles: liberal lending standards and non-taxation of land."

The current tax regime – low property and land taxes and inefficient stamp duties – encourages land-owners to extract an economic rent from their property by capturing the uplift in land values, it said.

Australia has the highest rate of tax expenditures relating to the housing market – including exemptions, deductions and offsets – compared with other OECD peers.

Those tax expenditures provide a strong incentive to speculate on housing prices and are reinforced by already low property taxes, it said.

"Investors perceive rental income as secondary to expected rises in capital prices, while first home buyers over-leverage themselves to enter a bubble-inflated market."

Prosper Australia said residential property is commonly seen as "a speculative asset to flip, rather than shelter to raise a family in".

"The behaviour of Australians is profoundly influenced by irrational exuberance, amply demonstrated by a large cohort of negatively geared property investors; overwhelmingly middle-income earners seeking to escape the PAYE tax system."

The group has called for reform of the states' land tax systems, along with the introduction of a 1 per cent federal land tax, which is rebatable on state land tax paid.

Prosper Australia has added to recent calls for macro-prudential reforms to restrict highly geared ­residential lending.

Reserve Bank of Australia board member John Edwards last week flagged the prospect of a cap on lending as a means to stem house price growth.

That came after RBA governor Glenn Stevens warned housing was not the fail-safe investment many Australians believed it to be.

The current land bubble is centred on residential land rather than structures, Prosper Australia said.

It is the largest on record and follows bubbles in the 1830s, 1880s, 1920s, mid-1970s and late 1980s, according to the group, who gives evidence to the inquiry on Tuesday.


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Spring fever propels Sydney auction clearances

PUBLISHED: 14 SEP 2014 12:31:00 | UPDATED: 15 SEP 2014 05:23:51

Spring fever propels Sydney auction clearances
A 1-bedroom unit in this building on Pelican Street, Surry Hills, sold after spirited a contest by five bidders, for $720,500, well above the reserve price of $650,000. The buyers were renters in the same building.
MICHAEL BLEBY
Sydney‘s auction clearance rate topped 80 per cent for a sixth straight week as the spring market kicked into gear at a record-breaking pace.

A five-bedroom family home in Pyrl Road, Artarmon, sold for $2.95 million at auction on Saturday, well above the vendor’s reserve price of $2.6 million.

The sale of the house on a 700 square metre site eclipsed the record for the lower north shore suburb set just two months earlier in July, when a four-bedroom house on a double block – 1385 square metres – went for $2.82 million.

“We were never expecting above that,” said LJ Hooker agent Sam Green. “It was half the land size, a similar home, and the other had a tennis court. Competition forces good prices.”

Low interest rates and growing competition is pushing the Sydney market at a faster pace than the rest of the country. Sydney is particularly strong due to the higher proportion of investors competing with owner-occupiers.

Investors account for 44 per cent of housing loan approvals in NSW, compared with 33 per cent in Victoria and an other-capital average of 29 per cent.

The difference can be seen in prices’ growth. Notwithstanding a 0.3 per cent decline in median home values last week, Sydney is up 0.7 per cent on the month and 14.9 per cent on a year ago, RP Data figures show. The closest rate of gain is Melbourne, with 8.5 per cent.

EXCITED VENDORS: NERVOUS BUYERS
“There are a lot of excited home sellers out there, but home buyers remain nervous,” said Andrew Wilson, the senior economist of Fairfax-owned Domain Group. “There was no sign of a flattening or moderating.”

Sydney’s highest clearance rate for the week came in the upper north shore, where it was just below 91 per cent. The city’s overall clearance rate was 83.3 per cent, up from 80.4 per cent a week earlier, Domain figures show.

The strength isn’t just at the top end of the market. In Surry Hills a one -bedroom unit on Pelican Street sold after spirited a contest by five bidders, for $720,500, well above the reserve price of $650,000. The buyers were renters in the same building. The picture is different in Melbourne, where the 77.1 per cent clearance rate was little changed from last weekend’s 77 per cent.

A five-bedroom, three-bathroom house in French Street, Artarmon sold at auction on Saturday for $2.4 million.

While there had been a lot of prior interest in the property, only two bidders ended up competing for the house, which McGrath Real Estate agent Greta Simpson represented “good value”.

There are signs, however, that the mid-range market is gaining speed as top-end buyers become more selective. The city’s highest clearance rate of 86 per cent came in the north-eastern suburbs – around Alphington, Northcote and Ivanhoe. The inner south, around Brighton, posted a clearance rate about 81 per cent, Domain figures show.

This marked a change from the recent pattern of activity centred in the more expensive inner-eastern and outer-eastern suburbs.

BOXES MUST BE TICKED
“They’re not flying out unless they’re ticking all the boxes,” said high-end buyers’ advocate David Morrell.

“Some vendors have got their head in the clouds.”

Melbourne values fell 0.9 per cent for the week and are down 1.6 per cent on the month, RP Data figures show. The city is due for a ‘Super Saturday’ – with more than 1000 auctions – next weekend, the last before the AFL grand final.

“This is not a boom market,” buyers’ agent Richard Wakelin said. “This is a market that is one of healthy demand, but we are not in a boom and bust type bubble.”

While both Sydney and Melbourne listings were up on last week, they were down on the equivalent weekend a year ago, as that was the first after the September 7 federal election, and there was pent-up demand after a quieter weekend.

With median dwelling values in Brisbane and Perth flat for the week, Adelaide was the only mainland capital city to show a rise, with an uptick of 0.4 per cent. Over the past 12 months, Adelaide values are up 5.5 per cent, Brisbane 5.1 per cent and Perth 3.6 per cent, RP Data figures show.

The Australian Financial Review

BY MICHAEL BLEBY
Michael Bleby
Michael covers business from our Melbourne bureau.

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Few fears of house price bubble
DANIEL PALMER BUSINESS SPECTATOR SEPTEMBER 15, 2014 1:16PM

LOCAL property prices were a major talking point at last week’s Australian Investment Conference in New York, but while the kind of house price growth witnessed over the past 12 months is seen unlikely to reoccur in the next few years, analysts and market participants see little reason to worry about a bubble.

Property developer Stockland is among those to tip a more restrained growth rate in the coming year, though population growth will ensure demand remains strong.

“The future is one of growth, albeit likely more moderate than what we have seen in the last 12 months,” Stockland chief executive Mark Steinert told Business Spectator at the Bank of America Merrill Lynch-run conference.

“We think that (the growth) number in 2015 is going to look a lot more like 3.5 to 4.5 per cent, with Sydney and Brisbane probably being the strongest and Perth being the most moderate given the impact of the slowdown in mining capex.”

Questioned over whether a bubble may be forming given the recent run up of prices, Mr Steinert said most measures indicated a market that was not overvalued.

BIS WARNS ABOUT HOUSE PRICES

“Looking at all (the) metrics they would suggest that the level of the market is sustainable. That’s not to take away from the fact that there is some affordability challenges in Australia but there’s affordability challenges in most developed markets,” he said.

Such sentiments were echoed by Saul Eslake, Bank of America Merrill Lynch’s chief economist in Australia, who said the risk of a price crash appeared low.

“There’s been very little lending to people at the bottom end of the income distribution. Moreover, most Australians have a considerable amount of equity in their property so the likelihood that there would be a significant amount of forced selling, which is one of the prerequisites for a big fall in house prices, is … pretty small,” he said.

A key element behind the recent surge in house prices has been record low interest rates and a rate rise appears some way off, according to Mr Eslake.

The renowned economist believes investors should look at the unemployment rate to determine the timing of the first rate hike as history shows the Reserve Bank of Australia is cautious on moving while the jobless rate is rising.

“Never since the Reserve Bank started announcing changes in monetary policy … has it initiated a cycle of rising interest rates until the unemployment rate has peaked and begun to come down,” he said.

With current forecasts for the jobless rate to peak in early 2016, it means the RBA could be on hold for some time.

Meanwhile, Bendigo and Adelaide Bank, which also foresees rates left untouched for “a long time”, is confident the property market hasn’t got too far ahead of itself as the areas of strongest growth in recent times were slower to grow out of the financial crisis.

“Sydney, for instance, had a very long period of little to no growth,” Bendigo and Adelaide Bank managing director Mike Hirst told Business Spectator.

“In fact the average price growth in Sydney over the last 10 years is 3.7 per cent, so it’s barely above inflation.”

Still, the bank expects prices “won’t rise significantly over the next 12 months”.