|Housing flat in February with only 0.8 per cent growth over last year|
31 March 2011
RP Data – Rismark Home Value Index Release
February's index result (0.0 per cent s.a.) suggests that Aussie home values continue to tread water despite robust household income growth. There was little revision to RP Data-Rismark's January estimates.
After a natural disaster-affected January (-1.5 per cent seasonally-adjusted or -0.7 per cent raw), RP Data-Rismark's Hedonic Index reports that Australian home values held ground during the month of February.
In the capital cities, RP Data-Rismark recorded flat dwelling values (0.0 per cent seasonally-adjusted or a slightly stronger +0.7 per cent in actual 'raw' terms). The 'rest of state' areas, which account for the 40 per cent of homes not located in the capitals, also displayed some improvement during February with house values rising by 0.5 per cent seasonally-adjusted (+0.3 per cent raw).
Over the 12 months to end February, Australia's capital city home values have hardly moved, rising by only 0.8 per cent. The story is the same in the rest of state regions, where home values remain unchanged (-0.2 per cent) over the last year.
In the property investment market, RP Data-Rismark estimate that gross apartment and detached house yields were 4.8 per cent and 4.2 per cent, respectively, in February. Darwin (5.7 per cent), Canberra (5.3 per cent), Sydney (5.1 per cent) and Brisbane (5.1 per cent) all offer reasonable rental yields in the apartment market. Melbourne is the laggard at 4.2 per cent.
The median dwelling price in the capital cities has eased down to $459,000 over the three months to end February from a peak of $473,000. (Note: rates of return or capital growth should not be inferred from these medians.) The median in the rest of state markets is markedly lower at just $323,000. Across all Australian regions, the national median dwelling price was $410,000 over the past quarter.
A (near) double interest rate hike in November 2010 combined with numerous natural disasters has conspired to make the last three months difficult ones for Australia's housing market. In the capital cities, home values are down 1.3 per cent in seasonally-adjusted terms. The rest of state areas are also off -0.9 per cent (seasonally-adjusted). While the weakness has been evidenced right across the nation, it has been especially acute in Darwin
RP Data's senior research analyst, Cameron Kusher, observed that Darwin's housing market looks to have fallen back to the pack, "In the two years to December 2010, Darwin dwelling values had expanded by a sprightly 20.5 per cent. That rapid growth now appears to have disappeared."
"Recent RBA analysis also shows that repossessions have been highest in Perth and South East Queensland, which helps explain the poor performance seen in these states. Indeed, Perth home values remain 0.7 per cent below their December 2007 levels", Mr Kusher added.
Over the 12 months to February, Sydney (+3.3. per cent), Melbourne (+2.5 per cent), Canberra (+0.7 per cent) and Adelaide (+0.6 per cent) have ground out modest capital gains. In contrast, Brisbane (-5.3 per cent) and Perth (-4.1 per cent) have experienced more material corrections.
Mr Kusher continued, "When you consider that Australian inflation was 2.7 per cent in the year to December 2010, in real terms Australian residential property values have been declining, which is a good outcome for prospective buyers."
Christopher Joye, joint Managing Director of Rismark International, commented, "Since the end of the last housing cycle in 2003, Australian households have realised healthy disposable income growth of 6.3 per cent per annum according to the ABS's National Accounts."
"Over this same period, Sydney dwelling values have generated annual capital growth of just 2.1 per cent. Across all the capital cities, Australian dwelling values have risen by only 5.2 per cent per annum since December 2003 according to RP Data-Rismark's hedonic indices."
"Australian home values have therefore underperformed disposable household income growth by a striking 1.1 per cent per annum since 2003. In cumulative terms, Australian household incomes have risen by 11.0 percentage points more than Australian dwelling values over this period."
"If one simply looks at 'average' dwelling prices, rather than RP Data-Rismark's more accurate hedonic indices, and compares them to the ABS's quarterly estimate of 'average' disposable household income from the National Accounts (adjusted on a per household basis), one finds that Australia's dwelling price-to-disposable income ratio was 4.5 times as at December 2010."
"Importantly, this ratio has not increased since the end of the last housing cycle in 2003. And if we measured the change in the cost of Australian housing using RP Data-Rismark's regression-based hedonic indices, rather than via simple 'averages', the house price-to-income ratio would have actually declined materially during this time."
According to RP Data's Mr Kusher, the key leading indicators indicate that capital growth is likely to remain very subdued for the time being, as Rismark and RP Data have previously forecast.
"Auction clearance rates have been a little weak, the number of homes advertised for sale is at the highest level it has been since we started collecting this data, and other lead indicators, such as the time it takes to sell a home, and the margin by which vendors have to discount their properties, are climbing again after reaching a plateau in recent months. Conditions are certainly in the favour of prospective investors. The large stock of homes available for sale should afford potential buyers increasing scope to negotiate on price and get the best possible deal," Mr Kusher said.
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 (211kb).