State of the States report poses more questions than answers
In four of the last five weeks, Canberra has achieved the highest national preliminary auction clearance rate for capital cities, according to Domain data. The significant divergence between clearance rates this time last year illustrates how favourable lending policies have had a significant impact on our property market.
Commsec’s State of the Statesreport ranked the ACT first in two categories, both related to housing, which were housing finance and the value of owner occupier lending commitments and dwelling commencements (starts) both benchmarked against long-term averages. Below are some excerpts I found particularly interesting when compared to their forecasting in April 2020 of 10% declines in ACT property values over the following six months, reconfirmed again recently.
“Housing finance is not just a leading indicator for real estate activity and housing construction, but it is also a useful indicator of activity in the financial sector. It would be useful to compare figures on commercial, personal and lease finance, but long-term data is not available. In five of the states and territories, housing finance commitments are above decade averages, down from six in the previous quarter. But only in three states and territories were home loans above year-ago levels (NSW, Victoria and the ACT).
“The ACT remains in top spot with the value of home loans up by 31.2% on the long-term average. Next strongest is Victoria (up 24.4%) followed by NSW (up 11.1%) and Tasmania (up 7.5%).”
Typically, strong auction clearance rates and increasing home loan values would be a widely accepted indicator of appreciating property values, especially given both Domain and CoreLogic have reported data confirming this to be the case.
“The measure used was the trend number of dwelling commencements (starts) with the comparison made to the decade-average level of starts. Starts are driven in part by population growth and housing finance and can affect retail trade, unemployment and overall economic growth. However, any over-building or under-building in previous years can affect the current level of starts.
“Home building is strong in the ACT due to relative strength in the job market. Home building is strong in Tasmania because population growth is well above ‘normal’. The ACT is now in top spot for dwelling starts, ahead of Tasmania and South Australia. In trend terms, starts in the ACT were 21.7% above the decade-average, followed by Tasmania (up 20.5%).”
In my opinion, Commsec’s State of the States report poses more questions than answers in relation to Canberra’s property market, and the bank’s forecasting relating to it. In their own words, home building is strong in the ACT due to relative strength in our jobs market, value of home loans are up 31.2% on the long-term average. Add supplementary data of auction clearance rates exceeding 70%, what could be identified causation to achieve their forecasted significant decline in values? If anything, Commsec’s own data and commentary supports quite positive conditions and what is quickly becoming an indefensible position relating to property values in Canberra.
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