With mortgage rates anticipated to remain low over the next six months it will be important to monitor how the housing market responds, particularly in light of a slowing resources sector, an anticipated increase in the unemployment rate, low levels of credit growth and a high level of household savings. The Reserve Bank (RBA) still has scope to cut official interest rates further if required.
The residential housing market is Australia’s single largest asset class with a total estimated value of $4.89 trillion as at June 2013. In comparison, the total value of listed Australian equities is almost three and a half times smaller at $1.4 trillion.
The national gross domestic product over the year to March 2013 was $1.48 trillion indicating that the value of housing assets is 3.3 times larger than the economy’s annual output. With such a large proportion of Australian wealth allocated to residential housing, providing timely, complete and accurate measurements about the performance of Australia’s largest and most valuable asset class is essential.
Over the 12 months to June 2013, home values across the eight capital cities of Australia, which account for 65.5 per cent of the national population, have increased by 3.8 per cent. In contrast, over the 12 months to June 2012, combined capital city home values had fallen by 3.6 per cent, indicating a sharp reversal of the housing market’s performance over the past year. Over the first six months of 2013, home values have increased by 3.0 per cent, indicating that much of the annual value growth has occurred during 2013. Capital city home values have been recording moderate rises over the past 12 months, however, they remain 2.9 per cent lower than they were at their peak in October 2010.
Most encouraging is the fact that the rise in home values is being accompanied by a rise in transaction numbers. Over the three months to May 2013, capital city house and unit sales were 19.3 per cent higher than over the same period a year ago. The fact that values are rising in line with transaction numbers suggests that the current increase in values is likely to be more sustainable.
Sydney houses took an average of 38 days to sell in June 2013 compared to 58 days a year earlier. Units are taking an average of 31 days to sell currently, compared to 46 days a year earlier.
Melbourne homes are selling much quicker than they were at the same time a year ago. In June 2012, it took an average of 57 days to sell a house and 60 days to sell a unit. Currently it takes an average of 41 days to sell a house and 37 days for a unit.
It is taking a similar length of time to sell a Brisbane home to what it was a year ago. Houses and units are currently selling after an average of 62 days and 65 days respectively on the market. In June 2012 it took an average of 63 days to sell a house and 68 days to sell a unit.
Homes are also taking a shorter length of time to sell across Adelaide than they were at the same time last year. A year ago, houses took an average of 70 days to sell and units 74 days. In June 2013 houses took an average of 56 days to sell and units took 54 days.
The length of time it takes to sell a house in Perth has also improved over the year. Houses are currently taking an average of 49 days to sell and units 52 days. In June 2012 they were taking an average of 60 days and 59 days respectively.
This is the Executive Summary from the Capital Markets Report - Spring 2013. The report includes: