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Aussie Home values up 1.4 per cent in March; 4.2 per cent over quarter Monday, May 03, 2010 The RP Data – Rismark March Hedonic Home Value Index results released today reveals that home values in Australia’s capital cities rose by a sprightly 1.4 per cent in March (and a still healthy +1.1 per cent on a “seasonally adjusted” basis**) following on from similarly strong 1.7 per cent and 1.1 per cent growth rates across Australia in the months of January and February, respectively. In the 12 months to end March, Australian capital city home values have increased by 12.5 per cent. In the first three months of 2010, Australian dwelling values rose by 4.2 per cent. While this growth appears especially strong, on a “seasonally-adjusted” basis the March quarter capital gain was 2.9 per cent. RP Data – Rismark believes that this is the first time seasonally-adjusted property data have been publicly released by a major index provider (see note on next page). RP Data – Rismark consulted closely with the Reserve Bank of Australia when developing the methodology to control for the significant seasonality in residential property values. The 2.9 per cent increase in Australian dwelling values over the first quarter of 2010 is strikingly consistent with the (season. adj.) capital growth recorded in Q2 (+2.9 per cent), Q3 (+2.9 per cent) and Q4 (+3.2 per cent) 2009 using RP Data – Rismark’s Hedonic Index. “The housing recovery has remained surprisingly resilient in the face of sustained interest rate hikes. The lively capital growth observed in the major cities runs against the grain of relatively anemic housing finance flows. This implies that underlying demand- and supply-side fundamentals are driving Australia’s housing rebound, as opposed to simply credit”, commented Rismark CEO, Christopher Joye. Rpdata.com Director of Research, Tim Lawless, concurred, adding “We expect capital growth rates to cool in 2010 as the cost of mortgage finance is normalised by the RBA. Over the longer-term home values should be expected to track disposable incomes.” In stark contrast to the capital cities, the ‘rest of state’ areas of Australia have recorded considerably lower growth rates. RP Data – Rismark’s new Rest of State Hedonic Index, which was developed for the RBA and covers all non-capital city markets, shows dwelling values in these areas have risen by a much lower 5.3 per cent in the 12 months to end March 2010. The performance gap between capitals and regional markets was most noticeable in Victoria where Melbourne home values gained 19 per cent over the last 12 months while regional markets increased by a comparatively weak 5.9 per cent. According to rpdata.com’s Tim Lawless, the weaker regional growth rates can be tied back to demand for housing in the capital cities. “Capital city markets represent just 0.5 per cent of the national land mass but account of around 60 per cent of home sales. The bulk of Australia’s population growth is concentrated in the capital cities, in turn driving housing demand.” Mr Lawless also noted that interest rates are starting to have an impact. He said the headline growth figure masks a changing dynamic where we have seen capital gains in the cheapest suburbs fall to almost half of what the top suburbs have recorded (see second chart). Over the last year, the most expensive suburbs have recorded a 16.6 per cent gain in values compared to just 7.8 per cent across the most affordable suburbs. Detached house values increased by 4.5 per cent over the March quarter while unit values gained 3.4 per cent. The median house price is $480,000 in capital cities, while the median unit price is $400,000. Darwin is once again the top performing city, with home values up 6.9 per cent over the March quarter. Darwin values are now up 20.2 per cent over the last 12 months and 113 per cent over the last five years. Rental rates have mostly kept pace with Darwin property values, with yields in Darwin remaining the highest in the nation. Darwin houses and units are providing an average gross yield of 5.6 per cent and 5.7 per cent, respectively, offering investors the best of both worlds (capital gains and yield). Melbourne has almost equaled Darwin’s remarkable capital growth, with home values up 19.0 per cent over the year. Unlike Darwin, rental rates have failed to keep pace with increasing property values resulting in an erosion of yields. Rental yields on Melbourne houses are now the lowest in the nation, averaging just 3.7 per cent. - RP Data Rismark Home Value Index Release  |
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