In a recent report David de Garis, Senior Economist, Global Markets Research, National Australia Bank explained that our housing markets are cooling, but clearly not collapsing like many had anticipated.
The report showed that after rising by 0.2% in April the RP Data-Rismark (hedonic) home values index rose by a slightly faster monthly rate of 0.6% in raw terms in May, with the annual rate virtually steady at 12.1% in May (the annual rate of house price growth around Australia to April was 12.2%)
The NAB concluded that while it is certainly true that the rate of growth in house prices is slowing, it nevertheless still rising. At the end of last year house prices around Australia were growing at over 1% per month; but that growth has since halved to around ½% per month.
However, while capital city prices continued to grow, regional prices fell in May by 0.2% with annual growth at a slower 5.8% to May, down from 6.7% to April.
De Garis explains that the fact that while our market are cooling, but not collapsing should show to the Reserve Bank of Australia that there is more resilience across most capital city markets than might have been anticipated give reports of increased supply and rate rises. And particularly since these latest rises occurred against a background of another RBA rate rise, some further decline in consumer sentiment and a ramp up of global market volatility.
It would seem to us that prices growth will likely ease further, but the next big test might have to wait now until the spring season gets underway with reports that market supply has been enhanced recently in response to higher prices. But for now, the housing market is holding up rather well in most capitals.
Looking deeper into the figures, on a non-seasonally adjusted basis, Sydney prices rose by 0.4% for the second month in a row (11.3% for the year to May), whileMelbourne prices rebounded with a vengeance, up 1.5% in the month after being up 0.4% in April (and up 18.2% over the last year).
So did Brisbane prices, up 1.4% (up 6.7% for the year), Adelaide prices growth slowed to 0.5% from 1.2% (up 10.5% for the last year), while Perth prices fell further, down a large 2.4% after a 0.3% April fall (Perth prices rose 6.1% over the last 12 months).
Darwin prices rose 0.8% (up 16.8% for the year) and Canberra prices rose 2.5% (up 16.4% for the year). Hobart prices fell in April by 3.4% (up 6.2% for the year).
Not surprisingly the property markets performed differently across the various price categories.
The bottom 20% of capital city suburbs have seen virtually no growth, while the top 20% has seen prices growth cool markedly in the past two months from over 2% per month to barely positive growth.
At the same time the middle market (the other 60% of suburbs) held up much better with prices still growing at 0.8% per month.
I see our housing markets softening further in coming months. By this I mean price growth will slow. It doesn’t mean prices will fall, but they may in some areas; particularly at the bottom-end of the market if interest rates rise again too soon.
If you are in the market for a home or an investment this means it’s a good time to take advantage of keen sellers. The market has moved from a seller’s market to a buyer’s market, but you can only take advantage of it if you buy!
Source: NAB Market Research. www.nab.com.au
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