Home values in May
The price of real estate in Australia is a hot topic at the moment, and is something that is never far from the headlines. However, as housing affordability again becomes a nexus for debate, easing home values in May could assuage some feelings of angst.
The CoreLogic RP Data Home Value Index as at 31 May reveals a slight downward trend in the price of apartments and houses for sale across the country, with the combined capitals dropping 0.9 per cent for the month. However, it should be noted that the recorded dip could simply be a minor correction after especially high capital gains in previous months.
“The weaker reading across the May results is likely to be short-lived, with the Index expected to show [better value] growth next month,” said head of research Tim Lawless on 1 June.
He went on to note that the latest interest rate announcement, as well as a positive reaction to the federal budget, should see home values continue their upward march in June. So, if this slight slowdown is only a brief interlude, what is to be done to ensure housing remains affordable for the next generation?
Cooling our heels
It’s no secret that investor activity, especially in real estate in Melbourne and Sydney, has been a large part of the demand for property in recent times.
“Clearly, investors are not bothered by the low rental yields that are currently available with housing finance data showing investors comprise a record 51 [per cent] of the value of new home loan originations,” commented Mr Lawless.
With this sector of the market showing a preference for capital gains over short-term profitability, it seems that demand is not likely to ease back any time soon. However, the Australian Prudential Regulation Authority (APRA) announced their intention to reduce the exposure of banks to investor loans at the end of last year, causing some institutions to voluntarily pare back their lending activity.
However, the Housing Industry Association reports that the biggest impact on housing affordability is the high level of taxation on new homes. Chief economist for the HIA Harley Dale notes that this has come up before – in the Senate Inquiry into Housing Affordability. He points out that government has the answers in front of them – they just need to act on the findings of the Senate’s report.
Mr Lawless says that although the effect of APRA’s announcements or banks’ changes aren’t evident in the economic data yet, combined with a record number of new dwelling starts they could pave the way for more cost-effective housing.