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Has the property investment market recovered – or is it just temporary?

Based on daily movements in the aggregated RP Data-Rismark Home Value Index (updated daily at www.rpdata.comwww.asx.com.au, Bloomberg & Reuters) covering Australia’s five key  capital cities,  Australia’s housing market reached a recent trough on  May 30 of this year  after values peaked 1.5 years earlier and 7.7% higher.  Since the recent low point in the index, dwelling values across the five city aggregate index have gained 2.5%.

As can be seen from the table below, each capital city reached their respective market peak and eventual trough at different times.  Perth’s housing market peaked the earliest (May 9, 2010), followed by Brisbane (May 13, 2010) with the other major capitals finding a high point in October or November 2010.

Additionally, the recovery time frame and duration of the correction varies from city to city.  The cities where housing markets were comparatively weaker recorded an earlier peak, while the stronger markets (Sydney and Melbourne) saw values peak later in the cycle.  The combined Brisbane/Gold Coast market saw values consolidate over a two year period, with values falling by 12.9%.  Adelaide’s housing market correction ran for 1.8 years, with values down 8.4%.  In Melbourne, values fell by 11.1% over 1.6 years, Perth recorded a 12.5% correction over 1.5 years and Sydney’s housing market saw the smallest correction, with values down 6.8% over a 1.5 year period.

An interesting development in the most recent set of daily indices data is that the upwards trend in values that was evident from the end of May has taken a turn.  The five city aggregate index reached a recent peak on the last day of September; over the first sixteen days of October dwelling values have retraced 0.6%, hinting that the October results may finish in negative territory. If the month of October does see the monthly index move back into the red, it will be the first fall since the five city index fell by 1.4% over the month of May 2012.

The market dynamic for each of the capital cities included within the daily index is provided below. Two graphs are presented for each city; the recovery phase (ie market trough to October 16) and the longer cycle of values since June 30, 2009 which provides a depiction of when each market peaked, the duration and magnitude of the correction and the start of what seems to be a recovery.

Has the market entered a recovery phase or are we seeing a temporary improvement in housing market conditions?  If you have a view either way, feel free to make comment.

A further note:  a rolling twelve month time series of the daily index is now available for download (http://www.rpdata.com/research/back_series.html).

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About

Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au


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