Figures released today by RPData show median house prices in capital cities around Australia have fallen 0.3% in May and 1.2% in the past three months.
The Rest of State house values (regional Australia) were also weak in May (-0.1%) and are off -0.9% over last 3 months.
At the same time rents increased and gross rental yields for Aussie apartments are now 5.0%.
Across the capital cities performance has been varied and counter-intuitive to the purported resources boom. Sydney is the only market to have recorded a modest capital gain over the last year (up 1.0%).
The biggest falls over the last month were in Perth, which saw values fall 4.6% in the quarter to May, followed by a 1.9% decline in Hobart, and a 1.8% fall inMelbourne.
Prices also fell by 1.3% in Adelaide, by 1.4% in b, and by 0.1% in Sydney.Canberra values fell by 0.7%, while Darwin prices rose by 2.1% over the month.
The highest rental yields were in Darwin, at 5.4% for houses and 5.7% for units, while Melbourne recorded the lowest at 3.6% for houses and 4.2% for units.
RP Data’s research director, Tim Lawless, added “For property investors, rental yields are also improving with RP Data-Rismark’s Index showing that gross Australian apartment yields have now risen to 5.0% (see chart). The best rental yields can be found in Darwin (5.7 per cent), Canberra (5.4 per cent), Brisbane (5.2 per cent) and Sydney (5.2 per cent). The worst yields are in Melbourne (4.2 per cent), Adelaide (4.6 per cent) and Perth (4.9 per cent).”
Over the 12 months to end May, Australian capital city dwelling values are now down -2.3 per cent (seasonally-adjusted). If we just look at the first five months of 2011, Australian home values have stepped back by -2.7 per cent.
Reflecting on Australia’s patchwork economy, RP Data’s Tim Lawless commented, “Despite what appears to be fairly strong fundamentals, the Perth housing market doesn’t appear to be turning just yet. For a city that is recording rapid population growth, low unemployment and a large private capex boom, house prices have nevertheless been contracting since late 2007 after years of above average capital growth in the pre-GFC period. Today the critical missing piece of the puzzle seems to be buyer demand.”
The trend of premium markets taking the brunt of the market correction has continued, with the top twenty per cent of capital city suburbs ranked by price recording a fall of 3.9 per cent over the 12 months to end May compared with a fall of -0.9 per cent across the cheapest 20 per cent of suburbs and -2.3 per cent within the broad ‘middle’ 60 per cent of the market.
According to Tim Lawless the weakness across equities markets is likely to be an important factor affecting the premium housing market: “The S&P/ASX 200 Index remains almost 35 per cent below its November 2007 peak and the index is down 8 per cent since the start of April. The top end of the market clearly benefitted from the circa 40 per cent rise in share prices following the trough in March 2009. However, the recent share market weakness is affecting premium demand.”
According to Mr Lawless, the soft market conditions reflect a weak level of consumer confidence across the country. “Consumers are well and truly focussed on saving, not spending. Despite the low rate of unemployment and the strength of the resources sector, it is clear that the average Australian is content to pay-down debt and wait for some economic certainty to return. As a consequence, transaction volumes in the real estate market are about 20 per cent below the five year average and listing volumes are about 25 per cent higher than what they were last year.”
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