Broad ‘middle’ priced market driving growth in home values

Home values across the middle priced 60% of capital city suburbs have recorded growth of 1.6% over the year to February 2013 whereas values have fallen across the most affordable and most expensive suburbs.

The RP Data-Rismark Stratified Hedonic Index measures the housing markets performance across three broad price segments: the most affordable 20% of capital city suburbs, the middle priced 60% of suburbs and the most expensive 20% of suburbs.

The Index provides insight about how values are changing across these broad price segments.

According to the RP Data-Rismark Home Value Index results for March 2013, capital city home values increased by 1.3% over the month, 2.8% over the quarter and 2.4% over the year. Home values have now increased by 4.7% since they reached their recent low.

Although the Stratified Hedonic Index lags the Home Value Index by a month and uses a slightly different calculation methodology, it shows that the increase in home values is being driven by higher dwelling values across the ‘middle’ priced market.

According to the Index, home values have fallen by -0.9% across the most affordable suburbs over the past year, are -0.6% lower in the most expensive suburbs whereas the middle market has recorded value increases of 1.6%.

rpdata's property pulse - research article

Across the major capital city housing markets you can once again see that it has been the rebounding conditions across the middle priced suburbs that have driven value growth across most capital cities. Over the 12 months to February 2013 home values have increased across the middle priced suburbs in each capital city except for Adelaide where they have fallen by -0.7%.

It is also important to remember that over the 12 months to March 2013, each capital city except Adelaide has recorded an increase in home values, with Adelaide home values falling by -0.5%.

On the other hand, the most affordable suburbs have recorded the weakest market conditions over the year in Melbourne, Brisbane and Adelaide whereas in Sydney and Perth the most expensive suburbs have endured the weakest performance.

rpdata's property pulse - research article

At a combined capital city level in February 2013, home values were -6.4% lower than their peak in the most expensive suburbs, -3.4% across the most affordable suburbs and just -1.6% lower across the middle market.

The most expensive suburbs have been noticeably weaker across the more expensive capital cities of Sydney, Melbourne and Perth, with values -3.9%, -11.6% and -10.1% lower than their peak respectively.

In Brisbane and Adelaide the most affordable suburbs have been the weakest performed over recent times with values -16.3% and -10.0% lower than they were at their peak.

rpdata's property pulse - research article

Sydney home values are now back above their previous peak, which is highlighted by the fact that home values across the most affordable and the middle priced suburbs have surpassed their previous peak. Home values across the most affordable Sydney suburbs are 2.8% higher than their previous peak and the middle priced suburbs are 2.4% higher than they were at their previous peak.

In all other major capitals values across each sector of the market remain below their historic highs and in some instances will need to see a significant recovery in order to return to the previous highs.

Overall the data shows that the recent increase in capital city home values has been driven by improving market conditions across the broad middle priced suburbs across each capital city.

Despite the value increases, home values generally remain below their historic highs and in some instances would need to see a significant further improvement to return to these highs.

With home values expected to continue to increase over the coming months we anticipate that the improvement in market conditions is likely to continue to be driven by the middle priced suburbs. However, the recent increase in equity markets and higher rates of auction clearance may result in further improvement across the premium housing market.

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Cameron Kusher

About

Cameron Kusher is Corelogic RP Data’s senior research analyst. Cameron has a thorough understanding of the fundamentals such as demographics, trends & economics. Visit www.corelogic.com.au


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