With consumers wary of taking on more debt and home buyers holding out for interest rate cuts in response to the slowing economy and market jitters overseas, our capital city home values fell 0.6% in July, with Canberra, Darwin and Sydney bucking the trend with slight increases.
The July RP Data-Rismark report shows a wide divergence across different cities but overall the decline over the first seven months of 2011 in Australian capital city home values was 3.4% taking the median dwelling price to $455,000.
Australia’s housing market could be at a crucial inflexion point, according to Rismark International economist Christopher Joye.
“If rates do remain on hold, or begin to fall, we would expect to see Australia’s housing market find a base and begin to generate capital gains again.
“If the RBA has really come to the end of its tightening cycle – which we would find surprising given the high core inflation revealed over the last six months – 2011-2012 will likely be judged one of the best buying windows seen in quite some time.
“The turning point will arrive when otherwise hawkish Australian consumers accept the notion that rates are not going to inexorably increase,” Joye says.
“The financial markets are pricing in five rate cuts while leading economists from Goldman Sachs, Deutsche Bank, Westpac and Macquarie Bank all believe that the RBA’s next move will be down.
“As the most interest rate-sensitive sector of the economy, the housing market will be the chief beneficiary of any decision by the RBA to reduce the cost of debt,” Joye says.
“Indeed, borrowers are already benefiting from de facto rate cuts. The inversion in the yield curve has seen many banks start to slash the cost of fixed-rate home loans.
“Lenders like Members Equity Bank are offering three-year, fixed-rate loans of just 6.35%, which is well below the standard variable rate benchmark of 7.8%.
“And while the rhetoric coming out of the central bank of late has been conflicting, UBS believes that the governor’s testimony to Parliament last week shifted the RBA to a ‘neutral’ stance,” Joye says.
The July RP Data-Rismark reports the following median house price movements:
Canberra had risen by 1.9 per cent since January.
Sydney gained 0.1% to $500,000 in July, but is down 1% over the past seven months.
The median price in Melbourne, where home prices had rose 29% over 2009 and 2010, has so far fallen 5.3% per cent this year.
Perth’s median dwelling price dropped 6.3% over the last year, making it the second largest yearly fall for a capital city behind Brisbane.
Brisbane median house price dropped 0.4% in July to $420,000, seasonally adjusted. The fall brings the total decline in the city’s property prices to 6.6 per cent over the past 12 months – the worst in the country.
Source: RP Data
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