People are paying more for existing homes. New houses and OTP apartments, not so much.
On crunching the numbers since the May election, SQM Research reckons we could see double-digit price growth in existing housing stock before the end of the year. Limited supply, rising asking prices and strong auction clearance rates are all indicators of a rapid surge in existing stock values.
This is true for apartments as well, which saw a 9 per cent increase in sales in the second quarter according to Urbis. But off-the-plan apartments and new-build detached homes aren't experiencing that love yet.
First, apartments. CoreLogic has released data showing that more than half of OTP apartments are being valued below the purchase price. That's 62 per cent of Sydney stock and 49 per cent of Melbourne apartments sold OTP in the past two years. CoreLogic's figures also showed that of the 7775 projects it's tracking nationwide, only 49 per cent have progressed to build stage.
On detached homes, new Housing Industry Association data shows that new home sales have dropped another 4.5 per cent in the past six months, and that we're yet to see any flow-on benefits of recent rate cuts in this section of the market. The plus side is, the HIA says more first home buyers are entering the market due to improving affordability on new home builds.
ABS figures released yesterday showed that home building contracted in the June quarter at the fastest rate in 19 years, and overall construction numbers are at a decade low. Official GDP figures are due to be released next week; the latest construction data is expected to put a significant dent in this update.
Economists are subsequently revising down their forecasts for Australia's latest GDP update. Master Builders Association has called on the federal government to move faster on its infrastructure projects to help turn the sector around, after four straight quarters of negative growth.
Cement group, Adelaide Brighton has warned its shareholders not to hold out for a recovery in construction until 2021. On the other hand, residential developer Cedar Woods has released stellar results, reporting a 56 per cent increase in sales revenue and 14 per cent net profit in the last financial year.
Cedar Woods, which mostly builds homes for owner-occupiers in SA and WA, has - like Melbourne-based home builder Simonds Group - managed to buck the trend of companies attached to the construction sector.