Consecutive dwelling value gains boosted by improving access to housing finance are all positive signs for Melbourne real estate although the apartment market has a struggle ahead, says Sam Tamblyn Urban Property Australia.
Urban Property Australia Founder and Managing Director, Sam Tamblyn said the improvement in credit availability will support housing values and that Melbourne’s economic and population growth will boost the recovery of the residential market, albeit with gains at a more sustainable growth rate.
Following APRA’s easing of lending restrictions in May 2019 and multiple interest rate cuts made by the RBA, housing finance levels have jumped.
Having fallen to seven-year lows as at May 2019, volume of Australian housing loans has increased for three consecutive months.
At a glance:
As at August 2019, monthly owner occupier finance in Victoria has increased 2.4 per cent with investor lending up 9.8 per cent since May 2019.
“First home buyers are also becoming more active having increased by 8.5 per cent over the year and now account for 21 per cent of all finance commitments, significantly higher than their proportion of 11 per cent in 2016,” said Mr Tamblyn.
Mirroring the increasing housing finance loan activity and improving consumer confidence levels, the auction market has also strengthened.
Although the number of auctions remains below the levels last year, across Melbourne the clearance rate increased to 77 per cent, compared to 50 per cent a year earlier.
Impacted by the tighter lending environment however, there are 70,100 dwellings currently under construction across Victoria, 4 per cent lower than the peak of 73,100 in early 2018.
“Looking even further ahead, reflecting the difficulty in developers sourcing development finance coupled with the soft environment of pre-sales, new apartment development will continue to decline,” said Mr Tamblyn.
In the 12 months to August 2019, a total of 58,400 dwellings were approved in Victoria, 22 per cent lower over the preceding year.
The number of dwelling approvals in Victoria has now fallen to its lowest level since October 2014.
Within the Inner-City precinct, the development outlook is more evident with Urban Property Australia predicting that the level of new apartments which will be delivered to the City of Melbourne in 2019 to be the lowest annual total of new supply since 2013.
In 2019 to date, 2,548 apartments have been completed with a further 1,366 apartments scheduled for completion this year.
Of the apartments projected to be completed in 2019, 40 per cent are located in the Southbank followed with 17 per cent located in North Melbourne and 15 per cent based in the CBD.
"With development lending from major banks constrained, a number of projects previously being actively marketed have been withdrawn,” said Mr Tamblyn.
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