The bottom line from ANZ
Dwelling approvals continued to consolidate the strong surge from the third quarter of 2013, foreshadowing a solid pick up in new building activity in 2014 buoyed by an extended period of low interest rates. House price momentum also remains strong, particularly in Sydney and Melbourne.
Despite moderating in December, dwelling approvals maintained a solid upward trend to be running at 10-year highs. Notwithstanding concerns regarding potential excess supply (particularly for higher density inner-ring apartments) developer sentiment remains buoyant, bolstered by solid investor and renter demand and low interest rates. After a lacklustre 2013, solid gains in total approvals point to a marked improvement in new dwelling investment in 2014.
Solid gains in house prices continued in January led by Sydney and Melbourne, while Brisbane, Perth and Darwin consolidated recent gains. The solid upturn in house prices over the last 12 months reflects the positive impact of accommodative monetary policy. Despite speculation that strong price gains represent the early stages of a house price bubble, in our opinion recent gains can be largely explained by improved affordability, the release of pent-up sales and some ‘catch up’ following earlier price falls.
Greg McGuinness, Senior Relationship Manager for ANZ, 3rd February 2014
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