26 February 2010

RP Data – Rismark Home Value Index Release

Australian home values are up 2.4 per cent over the three months ending January

Based on the RP Data-Rismark Hedonic Home Value Index, Australia’s housing market started 2010 with a resilient showing, registering a solid 1.8 per cent capital gain in the month of January based on the indicative index results. This, however, employed a small sample of sales due to the seasonal summer slowdown (the volumes recorded in January were around half the sales in a typical month). The indicative December 2009 estimate, which was -0.3 per cent, has revised only very slightly to -0.4 per cent.

Looking through both December and January, the average monthly growth rate was 0.7 per cent, which possibly implies that the double-digit capital gains seen in 2009 may start to moderate to more realistic single-digit levels.

According to rpdata.com’s National Research Director Tim Lawless, a number of positive market indicators during January suggest that the residential market has started the year with some confidence.

“Week-on-week, we are seeing an increase in the number of new property advertisements coming to the market.  Whilst new stock has been increasing rapidly, the total number of properties available for sale has been falling which is an indicator that buyers are for the time being outweighing sellers and new supply is being quickly consumed.”

“In addition, auction volumes are higher than at the same time last year and the national weighted clearance rate last week was a very healthy 73 per cent,” Mr Lawless said.

According to Rismark International CEO Christopher Joye, “While the January sales data is typically thin, we have yet to observe a sustained cooling in market conditions, which Rismark expects to see given the recent tapering in seasonally-adjusted housing finance commitments. In the long-run, one would anticipate that house prices should track disposable incomes.”

“The RBA Governor recently noted that while Australian house prices have risen ‘smartly’ during the last year, credit growth is not excessively strong while lending standards are tightening rather than deteriorating. That is, Australia is not experiencing a credit-fuelled asset price boom. Rismark’s affordability index shows that Australian house prices are around 4.1x disposable incomes, which is where they have been for the last six years. In my debate with Steve Keen this week I argued that anyone wanting to stimulate media hysteria by spruiking a house price bubble needs to at least back up their claims with objective analysis, which I have yet to see,” Mr Joye said.

Rental yields
During the second half of 2009, the strong growth in property values has seen rental yields trend downwards. Of course, investors benefit from both capital growth and rents, Mr Lawless noted. 

Nationally, the gross rental yield for houses has fallen from 4.7 per cent in January last year to 4.2 per cent in January 2010.  Similarly, gross rental yields for units are down from 5.3 per cent in January last year to 4.9 per cent in January this year.

According to Mr Lawless, the rental market now appears to be stabilising. 

“We are beginning to see the first signs that the softening of yields is slowing and, in some cities, yields are now beginning to improve.”

“With rental demand likely to be higher during 2010 due to continuing strong migration and fewer first home buyers, we anticipate that rents and consequently yields, will improve over the year,” Mr Lawless said.

Ends. 

Background

The RP Data‐Rismark Index results are reported by the RBA in its Statement on Monetary Policy. Moody’s and SIRCA have both independently concluded that the RP Data‐Rismark Index results are the most accurate measures of house price change in Australia.

In May 2009, CommSec’s chief economist, Craig James, commented, “The RP Data-Rismark index has emerged as Australia’s authoritative source on home price trends. The property database is Australia’s largest and, unlike the Bureau of Statistics, all properties are counted, not just free-standing homes.”

Macquarie Bank’s interest rate strategist, Rory Robertson, has also commented, “RP Data-Rismark’s monthly estimates are more timely and reliable than the ABS’s quarterly readings.”

The RP Data-Rismark Hedonic Indices benefit from exclusive access to the most comprehensive property database in Australian and NZ, which is owned by RP Data Limited (ASX: RPX). RP Data spends over $9 million annually collecting new property information and has amassed a database comprising over 130 million property data records covering around 99 per cent of the market.

Additional information – please contact Mitch Koper at RP Data on 0417 771 778 or Christopher Joye on 0414 980 264.

Key statistics, tables and graphs available in the PDF (264kb).