10 Years on from the GFC

Ten years after the GFC how’s the housing market look? The local economy is going along OK. The stock market numbers look solid, in the US those numbers are setting new records. Unemployment remains low the drought is yet to impact.  Apart from some cooling of prices and slower construction the housing market is stable.

In many ways, Australia and the world has moved on from the 2008 financial crisis, triggered when very sloppy lending dramatically burst the over inflated U.S. housing bubble. But there are scars from the GFC and some are being picked over on the margins of the banking Royal Commission.

In the run up to the crisis, falling interest rates saw lenders hand out loans to almost anyone who could muster the most basic application. But lending today is much stricter and getting more so. However, while the tighter lending rules may have helped push home prices down in some market, if we see supply markedly fall this may disadvantage first time buyers in the longer term and lead to a greater reliance on the rental market. The GFC is still a lingering influence.

Renters to Access Solar Power

It’s a question often asked by apartment owners and renters, and that’s when will solar power access be more generally available. For renters there’s some positive news. More than 800,000 renters in NSW are a step closer to sharing in the benefits of rooftop solar thanks to a NSW Government initiative backing clean energy projects. The Minister for Resources has announced that SunTenants, a Sydney company that helps renters and property owners access the benefits of solar, has received $33,000 from the NSW Government Clean Energy Knowledge Sharing Initiative to install solar panels on 100 residential and commercial rental properties. The pilot project aims to help people who are renting property to access solar power, it’s also good news for property investors keen to retain and attract tenant, an earlier pilot scheme that has already been shown to have halved tenants’ energy bills. There are 10 projects across NSW involved.

New Home for Cruise Ships

Finding a new home for cruise ships visiting Sydney may become another planning hotspot with NIMBY objections already emerging. After the Commonwealth said no to the use of Garden Island the focus has shifted to Port Botany. Ships could arrive in Sydney Harbour to grab a view of the Opera House and the Harbour Bridge and then return to ‘park’ and Port Botany. The NSW Government is preparing a business case to develop Port Botany as a cruise ship hub. Yarra Bay and Molineaux Point in Port Botany have been flagged for a third possible cruise ship terminal in Sydney, as the Overseas Passenger Terminal and White Bay struggle to meet demand in peak season. However, locals and Randwick Council are already objecting, let’s hope this gets sorted without further drawn-out delays.

Record Housing Supply

Detached house starts in March 2018 were the strongest quarterly result in 18 years. Leading indicators published by the HIA suggest that we should expect another strong result for the June 2018 quarter. On this basis, it now looks like we will round out the 2017/18 year with over 223,000 detached house and apartment starts. Making this the strongest four quarter performance for the sector since the mid 1990s. The increased level of supply has started to boost affordability in some markets, including apartments in metropolitan areas. In the March 2018 quarter Victoria posted a record high of 12,000 multi-unit starts, which accounted for nearly half of the 26,300 units nationally.

FHB Loans at 6 Year High

The First Home Buyer share of owner occupier housing loans increased during June 2018 and is now at its highest since late 2012. Recent ABS housing finance figures for June 2018 indicate that First Home Buyers accounted for 18.1% of owner occupier home loans during the month. Over the past 12 months, the volume of first home buyer owner occupier loans has increased by an impressive 11.4%. The results were also boosted as several state governments, including NSW and Victoria, improved their first home buyer incentives. A further boost comes from the record numbers of newly built apartments many of these projects appealed to first home buyers in terms of size, location and price.

Investor Loans Fall

However, in contrast to the rise in FHB loans, the value of housing investor loans recently fell to a 5-year low. Recording a fall of 22.4% in June after reaching their peak at the beginning of last year. Investment participation in the housing market plays a big role in the supply of new housing supply, a robust rental market remains important. Recent policy and regulatory changes have made it more difficult for investors however, there needs to be balance in supply with the population hitting 25 million, any major deflection of investors may well have a negative impact on housing supply.