SuperUser posted on November 03, 2008 19:48
Housing demand in a nosedive
Author: Natalie Craig
Source: theage.com.au
Date: November 3, 2008 - 12:15PM
UPDATE Interest rates are expected to be cut by at least half a per cent on Melbourne Cup day tomorrow, but the prospect of cheaper lending did nothing to spur on home buyers over the weekend, with the proportion of houses finding a buyer at auction as low as 27%.
- Low auction clearance rates
- Cup day rates cut expected
- House prices may fall
About 50 out of 100 houses sold at auction in Melbourne on the traditionally slow Cup weekend, while in Sydney the auction clearance rate crept up slightly from last weekend's 12-month low to 43%.
According to Australian Property Monitors, Adelaide fared even worse, with only 35% of homes finding a buyer, while Brisbane recorded an abysmal 27% sales rate.
That could be good news for first home buyers - vendors desperate for a sale before Christmas could lower their prices. Figures released on Saturday by the Real Estate Institute of Victoria also found median house prices in the September quarter fell by 3.3%, from $450,000 to $435,000.
But auction clearance rates suggest buyers are still content to wait and watch. The shortage of demand for existing homes has also been mirrored in the new-home market.
Demand for new housing has gone backwards, despite interest rate cuts and government incentives, with one listed builder reporting inquiry levels slumping by a record 80% in the four months to October.
Tamawood builders told the stock exchange its profits in 2009-10 could fall below expectations if the current level of customer inquiry and site investigations persisted. But it confirmed after-tax profit for 2008-09 would be the same as last year, at about $10 million.
Managing director Lev Mizikovsky said the company had been hit because of its focus on new home buyers and investors, who relied heavily on finance.
"Money has not been flowing — it's had an impact on us," Mr Mizikovsky said.
Indeed, the number of new mortgages for owner-occupied housing grew only 0.6% in September, or 9.9% over the year, a nine-year low. Loans to housing investors were up 0.4% in September or 7.9% annually — the weakest growth since records began more than 17 years ago. But Mr Mizikovsky said interest rate cuts and the tripling of the first-home owner's grant for people building a new home should help.
"Last weekend wasn't too bad (for inquiries)," he said. "With interest rates hopefully declining and the price of land hopefully staying still, we will see more buyers."
Louis Milkovits, head of Melbourne-based house builder AV Jennings, said inquiry levels had actually soared by almost 90% in the past few weeks because of the combined effects of rate cuts and new government grants.
But the impact on sales had so far been "negligible".
"People have been sending in inquiry forms and ringing up sales consultants, but there's only been a very small increase in attendance at display suites … and a negligible increase in sales," Mr Milkovits said.
"All that means to me is that we probably have the beginnings of a pull-forward affect. Home buyers have basically just started to do their shopping around, but haven't made any decisions yet about where they want to live and what they want to live in. I expect there will be a build-up of investor participation, but we probably won't see much activity until next year.
"Buyers will stop and have a think through the Christmas period, then we'll see a surge in the last weeks of January."
Clarendon Residential Group head Chris Plant said demand in Melbourne had improved since the increased first-home grants were announced, but Sydney remained a serious problem.
"The first weekend after the (grants) announcement inquiries were up, and we've now started to convert that into sales," Mr Plant said.
"It's also the first life we've seen in the Sydney market. There was nothing — now there's a blip."
Australand Victorian residential division head Robert Pradolin had also noticed an increase in inquiries in the past fortnight. He said the issue now was to make sure enough zoned land wads available when inquiries were converted into sales.
"The battle now is to get those structure plans ready for new suburbs," he said. "If the market turns it's going to turn quickly.
"And we still have a problem with the supply of zoned land."