Ray White Group rides crest of housing boom

For the last three years pundits have been saying the housing crash is coming, says Brian White, but while
the resilient markets in Sydney and Melbourne might moderate, continued low interest rates would dampen talk of housing bubbles.

The chairman of real estate agency Ray White Group said it was “too early to bring out a crystal ball” on the balance of the year. The timing of the Reserve Bank’s next move on rates would determine the direction of housing markets.
“If you want the market to falter, they just have to start jaw boning,” Mr White told The Australian. “Even this morning, the RBA was hosing down talk of rising interest rates.”

Sydney and Melbourne’s seemingly unstoppable markets helped drive the family-owned real estate group to record revenue for the 2017 financial year, with gross sales reaching $44.7 billion, a 4 per cent increase on the previous financial year.

“We would hope to do another 4 per cent this year,” Mr White said. “If rates stay low, those markets (Sydney and Melbourne) will continue to be powerful.”

Mr White, who last month attended a World Economic Forum offshoot for the world’s 120 most influential family business owners in Gstaad, Switzerland, said the performance of the market over the past year highlighted the critical role that property played to the wealth of the Australian community.

“One of the features of 2016-17 was the improved stability of many markets that had been so damaged in the post-mining boom, particularly in some parts of regional Australia,” he said. But while the cash rate remained at a record low, tightened banking regulations had seen the big banks push up investor mortgage rates, Mr White noted.

Investors were finding other sources of funding through smaller financier and offshore banks that previously held little market share. “They are targeting investors as the big banks step back. They need to elbow their way in,” Mr White said of smaller lenders.He expected investors to return to long-term trend levels of about 28 per cent of the market.

Group director and Mr White’s son, Dan, said the buoyant conditions in Sydney and Melbourne had started to spread with regional NSW and parts of regional Queensland “feeling like the level of activity and prices will go higher from here”. The Gold Coast and Auckland had been particularly strong.

Western Australia was the only market that continued to suffer. “The bottom of the WA market is too early to call,” Dan White said.

“WA keeps your feet on the ground in terms of what can happen in the property markets.”
Dan White said results for most regions — the group has 1000 domestic and international offices — lifted with the exception of WA.

“In terms of the big movement of the needle (for the group’s result), it was definitely Sydney and no less in Melbourne,” he said. “Metro Melbourne had a year to remember. The vibrant market is pretty remarkable.”

Their comments come after Malcolm Turnbull last week joined the chorus of warnings on the housing market advising people to be prudent, and after a handful of commentators predicted the pace of surging housing price growth in Sydney and Melbourne would halve by the end of the year.

Dan White said the group was taking a shorter-term view and “not taking anything for granted”. He also expected the pace of price growth in Sydney and Melbourne to halve by the end of the year to a still healthy 6-7 per cent in Sydney and 7-8 per cent in Melbourne. “The clearances and auctions are still quite strong, but deals are a bit harder to pull together,” he said.

More homes had been listed for sale over the past month, he said. “We are hoping for OK volumes. What prices do is the big question,” he said.

Elsewhere, Ray White expects Brisbane’s housing prices to rise 3-4 per cent, an improvement on the 2 per cent annual pace of growth at June. Perth would remain difficult. The city recorded a fall in housing prices of 1.7 per cent for the year to June, according to researcher Core Logic.

About 10 per cent of Ray White Group’s gross sales came from the group’s commercial activities. It was an agent on the $380m sale of Bakehouse Quarter in Sydney’s inner west earlier this month.