Based on around 285,000 sales over the first 10 months of 2011, the
market-leading RP Data-Rismark Home Value Index recorded a decline in the month
of October prior to the RBA‟s decision to cut interest rates in November.
In raw and seasonally-adjusted terms, capital city home values slid 0.2 per
cent and 0.5 per cent, respectively over the month of October.
Over the 10 months to end October 2011, Australian capital city dwelling
values have declined by 2.8 per cent on a raw basis and by 4.0 per cent
seasonally-adjusted.
With fixed and variable home loan rates falling to below-average levels while
disposable household incomes grew quickly, and the cost of housing also lower,
Australians are benefitting from a very welcome boost in overall housing
affordability.
Across the capital cities there remains considerable dispersion in housing
value movements.
Sydney and Canberra have been most resilient with dwelling values off just
-1.4 per cent (s.a.) and -1.1 per cent (s.a.) from their peaks, respectively.
In the month of October, Sydney and Canberra homes both produced flat to
positive capital growth; 0.0 per cent (s.a.) and +1.6 per cent (s.a.),
respectively, while the other capitals posted declines ranging from -0.6 per
cent (s.a.) in Melbourne to -1.6% (s.a.) in Brisbane.
RP Data‟s director of research, Tim Lawless said, "The year-to-date results
highlight the divergent outcomes more clearly. Over the 10 months to October,
Canberra and Sydney dwelling values have not moved a great deal: up +0.9 per
cent (s.a.) and down -1.4 per cent (s.a.), respectively."
"In contrast, Brisbane home values have been hit hard and are now off -7.5
per cent while Melbourne dwellings have corrected -5.8 per cent after very
strong 25-30 per cent capital growth over 2009-10."
"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," Mr Lawless said.
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.
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.
In relation to the investment property 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: RP Data
