With Australia’s housing market experiencing a mild recovery over the past twelve months, five of the country’s eight capital cities have recorded growth according to the February RP Data and Rismark home value index results.
To the end of February 2013, the index results revealed that capital city dwelling values rose by 0.3 per cent, following a 1.2 per cent rise in January.
The strength in the monthly result was largely driven by Australia’s second largest housing market, Melbourne, where dwelling values were up 1.5 per cent.
Values also appreciated across Sydney (+0.1 per cent), Canberra (+1.9 per cent) and Darwin (+2.3 per cent), while the remaining capital cities recorded a fall in values.
Brisbane recorded the largest month-on-month fall where dwelling values were down -1.1 per cent after rising 2.0 per cent in January.
On a quarterly basis, every capital city of Australia, apart from Adelaide and Darwin, has recorded a rise in dwelling values.
The largest increase over the past three months has been in Hobart where dwelling values are up 4.2 per cent. Canberra (2.3 per cent) and Melbourne (2.2 per cent) also stand out as showing a solid jump over the past three months.
The February results are not as broad-based as what was recorded in January with half of Australia’s capital cities recording a lift in dwelling values over the month, while the other half recorded a drop. The trend for most cities remains positive however, with six out of the eight capital cities showing growth over the past quarter and five of the eight capitals over the past twelve months.
Rismark International’s Ben Skilbeck said,
“In an environment of significantly improved consumer confidence, the housing market is responding positively to almost record low monetary policy settings. A recent statement by the RBA Governor and the House of Representatives noted that lending rates have fallen to levels not far from their historic lows and the share of household income devoted to interest payments has declined considerably while housing affordability, as conventionally measured, has improved a lot over the past two years. Consistent with the RP Data-Rismark indices, the RBA Governor also noted housing prices have been rising since may last year.”
Most housing markets bottomed out around May last year and since that time the combined capital cities index has recorded a 3.3 per cent improvement in values.
While the housing market is staging a demonstrable recovery, we need to see values rise a further 4.3 per cent before we can say that a technical recovery has been achieved. That amount of value appreciation is likely to be at least six months away.
Unit markets are generally showing a stronger performance compared to detached houses.
Over the past year, unit values across the combined capital cities index have increased by 2.3 per cent compared with 1.2 per cent gain in house values.
There are several other factors which are also reflecting a more positive housing market; auction clearance rates have been at 55 per cent or higher so far this year where last week they recorded a clearance rate of 64 per cent which was the highest since May 2010.
The number of homes being advertised for sale has also seen a reduction with RP Data tracking 2.2 per cent fewer listings than at the same time last year. In addition, the level of vendor discounting has also improved consistently which suggests that buyer and seller expectations are becoming more evenly balanced. The rate of vendor discount across the combined capital cities is now recorded at -6.4 per cent, the strongest reading since October 2010.
Rismark International managing director Ben Skilbeck said:
“Auction clearance rates of 70 per cent in Melbourne and 63 per cent in Sydney, combined with housing credit growth of 0.4 per cent in January, indicates that home buyers are moving away from the sidelines and back into the market.”
From an interest rate perspective, the February results from the RP Data and Rismark International index are likely to provide further reason for the Reserve Bank of Australia to keep interest rates on hold when they meet next week.
The RBA will be keen to see the housing market remain reasonably stable.
The quarterly trend rate of housing value growth is slightly higher than inflation and pretty much in line with wages growth, which is arguably exactly what the RBA is hoping for.