Housing market remained soft prior to RBA rate cut

The latest RP Data figures came out today showing that capital city home values declined by 0.5% in October prior to the RBA’s decision to cut interest rates on Cup Day. 

For the year to date, dwelling prices are down 4% for around our capital cities. Regional dwelling prices declined by 3.4% over the past 12 months.

Overall this is not a bad overall performance considering what’s going on in the world

As always different states are at different stages of their property cycles.

Brisbane house prices registered the biggest fall in dwelling prices with values down 2.9% for the month and down 8.0% compared with a year ago.

Brisbane units have proved far more resilient, with values up 1.1% for October to be down only 1.4% over the past 12 months.

Canberra was the only capital city to register an increase in dwelling values over the month, up 1.6%, but Canberra house prices slid 1.1% over the last year

Sydney house prices also fell 1.1% over the last year, while dwelling prices fell 0.6% in Melbourne in October to be down 5.4% year-on-year and 5.8% off Melbourne’s peak.

Adelaide’s average house price fell 5.2% over the last year, Perth was down 5.0%,Darwin -3.1% and Hobart -4.0%

What RPdata had to say:
RP Data’s director of research, Tim Lawless said, “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.”

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.

Top end performing worst.
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.

What about investors?
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.”

Source: RPdata.com


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