AS WE MOVE INTO THE WARMER WEATHER INTEREST IN THE PROPERTY MARKET USUALLY PICKS UP AND THAT IS SHOWING THROUGH OUR WEEKLY DATA WITH THE LOT SALES TREND TICKING UP OVER THE LAST FIVE WEEKS.
Because of where we are in the market cycle however, there is likely to be a lot of mixed messages coming through the data as the peak of the cycle washes through.
The first piece of data we look at is rental vacancy rates, which have risen steadily since the low of 1.8 per cent in December 2012 and are currently sitting on 4% as of September 2014. At 4% there is plenty of competition with the median rent dipping down slightly. This means there is not the financial imperative for people to move from rental into home ownership. The extremely tight rental conditions at the end of 2012 was a major factor that underpinned the record land sales in 2013, which then translated into record housing approvals for the full year to December 2013. The year-to-date figures for dwelling approvals for 2014 are even stronger.
This may be why the number of first home buyer grant applications fell for the four months to August 2014. Changes to favour new construction pulled forward demand for grants for existing properties which had created an artificial high which proceeded those falls; in September applications rose again to be nearly five percent above the long term average. First Home Owner Grants for new construction is now sitting at 38 per cent above the long term average so there is still plenty of activity in that market sector.
While 2014 land sales land sales sit at 130% of long term averages, they have fallen below the 2013 high, which is likely to translate into a moderate fall in private housing approvals over the next few quarters.
It appears that we are riding out the top of the cycle with the return to more sustainable levels of production likely in the 2014/15 year. Not to be too dramatic but in 2013 we ran very close to land supply shortages which had such a catastrophic impact on the market last decade, so most people in the industry are breathing a sigh of relief that the record activity levels were managed without negative consequences. We are forecasting a “steady as she goes” outlook for 2015 with a watching brief on population growth rates and interest rates.