First-home buyers face a difficult future
Amid the white noise of near daily property statistics, it is clear now that, in general, Australia’s real estate market is growing strongly. This week’s numbers tell us investors are gaining market share at the expense of first-home owner-occupiers and that national house prices rose a record 2.3 per cent from February, dragged higher particularly by Sydney, where prices jumped 15.6 per cent.
Clearly for property owners and the economy broadly, a steady rise in prices is a good thing. But for first-home buyers, the run-up seems to be leaving them out in the cold. One veteran products supplier sums up what he sees as the key issue of the booming local market. “Do we want to have a situation where it is too expensive for a policewoman married to a nurse to buy a home in Sydney,” asks Brickworks boss Lindsay Partridge.
The country’s largest bricks producer has benefited from a surge in building activity around the country. As someone at the front line, Partridge has had an up-close view of the new, detached home market in Australia. He, along with Perth-based mortgage broker AFG (and many others), has raised concerns about affordability for would-be first timers.
Partridge warns about the implications of a chronic land shortage, particularly in Sydney and Western Australia, on middle Australia. Brickworks, of course, benefits directly from any additional home-building activity, as do mortgage brokers such as AFG, but the statistics show it is getting ever harder for average earners to buy their own homes.
Each month, AFG analyses its mortgage book, and releases the information publicly. This week’s figures showed first-home owners continue to be elbowed out, with investors accounting for 39.6 per cent of all mortgages – the highest level since the company began reporting this data seven years ago.
And these figures don’t take into account those who buy their properties outright: predominantly empty-nesters downsizing, cashed-up foreign investors and, to a lesser extent, super funds, all of which would reduce first-home owners as a proportion of the market.
Indeed, according to Digital Finance Analytics’ Martin North, more than one million baby boomers are likely to downsize over the next few years, with the financial firepower to push first-home buyers further out.
Investors now hold 40 per cent of all mortgages. In the most expensive property market, New South Wales, investors account for 49 per cent of all new home loans, compared with 37 per cent in Queensland and Victoria, and 32 per cent in South Australia and WA.
With Australia’s population growing at one new person every one minute and 17 seconds, we need to find homes for an extra 400,000-plus people each year. By 2040, Victoria is forecast to have grown by 50 per cent, and NSW by 35 per cent.
According to North, the question of how to create enough new homes – 900,000 over the next few years – needs to be considered much more broadly.
All local, state and federal laws covering planning, and the financial and tax environments, need to be examined to see how affordability can be improved to enable average income earners throughout Australia to get a chance to buy their own homes.
Time of reckoning for McLennanand Ten Network
The latest health check of Network Ten – its interim results – is due to be released next week, a little later than its media stablemates. It should be worth the wait.
It’s now been a year since former advertising supremo Hamish McLennan took the helm. At the time of his appointment, McLennan told the stock market: “I look forward to leading Ten through a period of creative renewal and financial growth … [and] continuing the strategy to restore Ten’s performance as a leading entertainment and news content company across all our platforms and so increase value for our shareholders.”
At the interim financial results, and over the next year, he will be judged against his words. The results will show if the advertising boost from the Sochi Olympics and the Twenty20 Big Bash League has been able to outweigh a dire showing in the ratings before then.
As for “value for shareholders” – Ten’s shares have been unloved by both the analysts and the markets for quite some time. The price has ranged between 24 and 37 cents in the past 12 months – above its 22-cent record low – but it was this week back at similar levels to when McLennan was appointed. In the first days of April last year, in the week after his arrival, Ten’s shares were worth about 31 cents. So the results will need to be good enough to lift – and sustain – the share price above the current levels to achieve his goal of increasing value for shareholders. (Something briefly achieved when the markets surged in early 2014.)
Ten had been plagued by management instability – four chief executives in four years, and a brief acting stint from former chairman and major shareholder Lachlan Murdoch – and McLennan has inherited some poor programming commitments. The “third” commercial network has long been the laggard in audience share among the free-to-air players. In late March it suffered the ignominy of its worst ratings week on record – attracting just 13.8 per cent of viewers, in a dramatic slide after the successes of the Winter Olympics and Big Bash series. But, again, this followed dismal audience share last year of just 17 per cent, compared with 30.7 per cent for Seven, 28.8 per cent for Nine, and 18 per cent for the ABC.
The slide comes as online continues to take share away from traditional media, and a recent Citi report notes:
• The amount spent on advertising in all Australian media has failed to keep pace with economic growth in five of the past six years, although free-to-air television has fared better than most;
• Live television viewing has been falling since 2006.
But one sliver of good news from the report for Ten is that, with costs tightly under control, any rises in revenue will boost net profits at the network far more than most of its media brethren. Citi estimates a 1 per cent rise in revenue in 2015 would translate into a 30 per cent jump in after-tax profits. Of course that can only happen if it lifts market share.
This article was first published in the print edition of The Saturday Paper on Apr 5, 2014 as "First-home buyers face a difficult future". Subscribe here.