Wealth Street Journal: Week 19, 2024

Wealth Street Journal: Week 19, 2024

This week’s Australian real estate news: Top 5 headlines

Explore the newest developments in Australian real estate news, covering soaring auction results, budget-friendly neighborhoods, utilising superannuation for first home deposits and housing crisis tax cuts:

  1. Steady auction market performance: The auction market remains robust with a 72.9% clearance rate & over 1,950 properties listed in capital cities. Already, 2.2K auctions booked for next weekend.
  2. Affordable suburbs revealed: These suburbs, some even just 10km from the CBD, offer affordability, based on buyers allocating 25% of their pre-tax income to mortgage repayments.
  3. Superannuation for first home: Soon, first-home buyers can save their home deposit using their superannuation fund, with up to $15K in voluntary contributions eligible for withdrawals.
  4. Tax cuts solution to housing crisis: Reducing taxes on home building is seen as a crucial step to address Australia’s housing crisis, according to HIA’s Chief Economist, Tim Reardon.
  5. Home financing hotspots: Queensland leads home loan activity, surpassing all other states in owner-occupier loans in the past quarter. The value of home loans in Queensland is up by 21.1%.

Steady auction market performance

Despite the cooling weather, the auction market remains robust, maintaining clearance rates above 70%.

According to CoreLogic, last weekend’s preliminary auction clearance rate stood at 72.9%, with a higher number of properties listed compared to the previous year, totalling 1,950 in capital cities.

While the Adelaide auction market has been performing well of late (around 80% or higher) it was Sydney that had the highest clearance rate last week at 78.3%.

It was followed by Adelaide (76.4%), Brisbane (71.7%), Melbourne (69.8%) and Canberra (63.3%).

Houses (73.3%) outperformed units (71.1%) in clearance rates across capital city markets.

Outside capital cities, clearance rates were strongest in Sydney’s inner west (92.6%), Melbourne’s outer east (83.3%) and Newcastle and Lake Macquarie (81.5%).

CoreLogic predicts a rise in auction volumes for the upcoming weekend, with approximately 2,200 auctions already scheduled.

Real estate news: Steady auction market performance


Affordable suburbs revealed

Some suburbs, some even just 10km from the CBD, offer great value for buyers, as per PropTrack’s Affordability Hotspots Report.

The report assesses affordability based on buyers allocating 25% of their pre-tax income to mortgage repayments, reflecting what’s feasible for locals.

PropTrack senior economist, Paul Ryan, underscores that the methodology aligns with residents’ realities.

In Sydney, Parramatta emerges as the top spot, with nearly half the homes within reach for average Sydney households. Canterbury, Mount Druitt and Liverpool follow suit.

In Victoria, the Melton region was the most affordable, alongside CBD units.

Queensland boasts affordable options like Rocklea in Greater Brisbane and Stapylton on the Gold Coast, while Adelaide’s affordability hubs stretch from Port Adelaide to Semaphore South and Devon Park.

Affordable suburbs revealed
Source: PropTrack

 


Superannuation for first home

From September 15, first-home buyers can save their home deposit using their superannuation fund.

The Federal Government’s First Home Super Saver Scheme, set to launch almost a year after its legislative inception, enables buyers to make voluntary contributions to their super to save for a home.

Those using it can salary sacrifice, which means their savings are being put into superannuation before they are taxed, as opposed to banking after-tax dollars.

These contributions, along with earnings, can be withdrawn (up to a limit) to aid in purchasing a first home, whether new or existing, in Australia.

Under the scheme, individuals can include a maximum of $15,000 of voluntary contributions from any one financial year in their eligible withdrawals.

It’s important to note that funds contributed by employers into superannuation are not accessible; only personal voluntary contributions can be withdrawn.

Real estate news: Superannuation for first home


Tax cuts solution to housing crisis

Cutting taxes on home building is a quick solution to Australia’s housing crisis, according to the Housing Industry Association (HIA).

According to HIA Chief Economist Tim Reardon, with persistent high interest rates, it’s vital for the government to consider tax reductions on homes to boost supply.

“Government taxes and charges account for as much as 50% of the cost of a new house and land package,” he says.

“Governments are the biggest impediment to home building in Australia. They cannot continue to blame the consequence of their decisions on foreigners or investors who build homes and make them available for rent or sale.”

Reardon warns that hiking taxes on homes will inevitably lead to fewer homes being built.

He dismisses proposals by Senators Jacqui Lambie and David Pocock to limit negative gearing to new builds, suggesting it won’t increase investment in new homes.

“If politicians want to increase the supply of housing, then they should look at proposals to reduce taxes on housing,” he says.

Real estate news: Tax cuts solution to housing crisis

 


Home financing hotspots

Queensland leads home loan activity, surpassing all other states in owner-occupier loans in the past quarter.

The latest State of the States economic analysis by the Commonwealth Bank of Australia shows the value of home loans in Queensland was the strongest as of February 2024.

The value of home loans in Queensland is up by 21.1% on the long-term average.

It was above the decade average in most states and territories (excluding the Northern Territory).

Western Australia home loan values are up by 17.5% on the decade average, followed by South Australia (14.2%) and the ACT (12%).

Victoria saw an 8.9% rise, New South Wales at 8.3% and Tasmania at 0.7%, while the Northern Territory experienced a 15% decline compared to the decade average.

According to the Australian Bureau of Statistics, total housing loan commitments rose by 1.5% to $26.4 billion in February, with investor lending also climbing by 1.2% to $9.5 billion.

Real estate news: Housing finance commitments, percent change February 2024 on the decade average


Catching up on Australian real estate news?

Read last week’s Australian real estate news article covering:

  1. Property confidence rises: Property industry confidence rises with stable interest rates and improved access to finance, despite challenges with government inefficiencies.
  2. First-time investor hotspots: First-time investors favour capital cities, with top locations including Sydney CBD, Melbourne’s West and Brisbane CBD, attracting consistent interest since 2019.
  3. Where prices have doubled: Australian property prices soar, with some areas doubling in the past four years, driven by low borrowing costs and lifestyle changes, particularly notable in Adelaide, Western Australia, Queensland, Victoria and regional New South Wales.
  4. Construction costs normalising: Construction cost growth slows to its lowest since 2007, with a significant easing seen in the first quarter of 2024, despite costs remaining elevated, indicating subdued growth in the upcoming year.
  5. Australia ranks global top four: Australia ranks among the top four countries globally for house price growth over the past five years, with a surge of over 10% since 2019, driven by strong demand in affordable cities, particularly Perth and Adelaide, showcasing further upside potential.

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Wealth Street: Luke Burgess

“The level at which property prices rose in 2021 in particular was the fastest episode of price growth seen in over 30 years.”

Tim Reardon

Housing Industry Association's Chief Economist
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