30 November 2011

RP Data – Rismark Home Value Index Release

In raw terms, capital city home values declined by -0.2% in October (-0.5% seasonally adjusted) prior to the RBA’s decision to cut interest rates. On a raw and seasonally-adjusted basis, the decline in capital city home values in 2011 has been 2.8% and 4.0%, respectively. Adding in gross rents, total housing returns are up +0.9% in 2011.

Based on around 285,000 sales over the first 10 months of 2011, the market-leading RP Data-Rismark Home Value Index recorded a decline in the month of October prior to the RBA’s decision to cut interest rates in November.

In raw and seasonally-adjusted terms, capital city home values slid 0.2 per cent and 0.5 per cent, respectively over the month of October.

Over the 10 months to end October 2011, Australian capital city dwelling values have declined by 2.8 per cent on a raw basis and by 4.0 per cent seasonally-adjusted.

With fixed and variable home loan rates falling to below-average levels while disposable household incomes grew quickly, and the cost of housing also lower, Australians are benefitting from a very welcome boost in overall housing affordability.

Across the capital cities there remains considerable dispersion in housing value movements.

Sydney and Canberra have been most resilient with dwelling values off just -1.4 per cent (s.a.) and -1.1 per cent (s.a.) from their peaks, respectively.

In the month of October, Sydney and Canberra homes both produced flat to positive capital growth; 0.0 per cent (s.a.) and +1.6 per cent (s.a.), respectively, while the other capitals posted declines ranging from -0.6 per cent (s.a.) in Melbourne to -1.6% (s.a.) in Brisbane.

RP Data’s director of research, Tim Lawless said, “The year-to-date results highlight the divergent outcomes more clearly. Over the 10 months to October, Canberra and Sydney dwelling values have not moved a great deal: up +0.9 per cent (s.a.) and down -1.4 per cent (s.a.), respectively.”

“In contrast, Brisbane home values have been hit hard and are now off -7.5 per cent while Melbourne dwellings have corrected -5.8 per cent after very strong 25-30 per cent capital growth over 2009-10.”

“The combination of lower interest rates, cheaper homes, and rising incomes is generating a welcome boost to housing affordability, particularly in those markets where value falls have been more significant,” Mr Lawless said.

Rismark’s Managing Director, Ben Skilbeck, added, “While home owners and property investors have endured a 2.8 per cent tapering in actual home values over the course of 2011, rental growth has been very solid. According to the ABS, the dollar value of rents has been rising at a 4 to 5 per cent pace over 2011. On a gross, total return basis, residential property remains in the black and its stability has been impressive compared with the volatility experienced in Australian shares.”

“Our October results obviously precede the RBA’s crucial November rate cut. Yet even prior to the RBA’s decision, the ABS reported that the seasonally-adjusted number of new home loans approved to people buying established dwellings had increased for seven months consecutively. New housing finance approvals are a critical proxy for housing demand.”

“With fixed-rate home loans as low as 5.99 per cent now available in the market, and variable rate loans being offered at 6.39 per cent, we expect that the substantial improvement in affordability will flow into overall housing activity by the end of the first quarter next year”, Mr Skilbeck said.

RP Data’s Tim Lawless noted that premium housing markets are continuing to record the largest falls in value.

“Based on the RP Data-Rismark Stratified Hedonic Index, the top 20 per cent of capital city suburbs ranked by price recorded a -2.4 per cent fall in values over the three months to October compared with a
-0.8 per cent decline in the bottom 20 per cent of suburbs ranked by price. The more affordable end of the housing market has weathered market conditions better than homes at the premium end of the spectrum. We have also recently seen an uptick in first home buyer participation numbers suggesting the cheapest end of the market may be responding to improved affordability earlier than other market segments,” Mr Lawless said.

In relation to the investment property sector, Rismark’s Ben Skilbeck remarked, “With rental vacancies in Sydney and Melbourne meaningfully below their long run average, national weekly rents showing growth and dwelling prices tapering, we are seeing continued improvement in gross rental yields.

“Over the past year the average gross yield on a capital city house has moved from 3.9 per cent to 4.3 per cent. Similarly, the average gross yield on a typical capital city unit has increased from 4.7 per cent last year to 5.1 per cent today. This is encouraging news for investors looking to get set.”

Ends.

Media enquiries contact:

RP Data: Mitch Koper, corporate communications manager on 0417 771 778 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Rismark: Ben Skilbeck, managing director on 0403 138 172 This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Key statistics, tables and graphs available in the PDF (995kb).