Aussie Property Values Slip

The most recent RP Data-Rismark Home Value Index indicates a slip in Australian residential property values in April. The 0.5% drop comes after a three-month gain that of …

The most recent RP Data-Rismark Home Value Index indicates a slip in Australian residential property values in April. The 0.5% drop comes after a three-month gain that of 2.8% at the end of March. Experts believe the slip is temporary and likely driven by a natural seasonal lapse, and that the overall gains for 2013 indicate a start to recovery for the Australian housing market. The tumble reflected value losses in many major cities including Perth, Melbourne, Sydney and Brisbane. Rents in many of these locations, however, were on the rise during the same time period. For more on this continue reading the following article from Property Wire.

Residential property values in Australia fell by 0.5% over the month of April after posting a solid 2.8% gain over the first three months of 2013, the latest figures show.

Based on the April RP Data-Rismark Home Value Index, capital city property values recorded their first month on month decline since last December.

Since the housing market reached a recent low point at the end of May last year, capital city dwelling values have recovered by 4.2%.

The negative result for April brings the rolling quarterly movement in capital city property values back to a more sustainable 1.1%, according to Tim Lawless, RP Data’s director of research, who explained that last month’s figures represent more of a stumble along the path to recovery than a sign of a renewed trend in value falls.

‘When viewed in line with other metrics such as auction clearance rates, private treaty indicators and some improvement in housing finance demand, it is likely that the negative April result will be a blip along the path to recovery,’ he said.

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‘We weren’t expecting that the high rate of growth evidenced over the first three months of the year would be sustained into April. A more measured pace of growth is a much more realistic outcome for the Australian housing market, especially considering that the first quarter is typically the strongest for value growth,’ he added.

The fall in values is seasonally typical of a market pause, according to Rismark chief executive officer Ben Skilbeck. ‘If one were to take seasonal movements into consideration the market is not currently showing any downward trend,’ he said.

Softer capital city property values were recorded across every capital city apart from Adelaide where values increased by 2.8% and in Darwin where values rose by 0.2%.

According to Lawless, the April results for Adelaide should be interpreted with some caution. ‘The strong month on month result for Adelaide is more likely the result of natural volatility across a relatively small market rather than the any sort of sustainable surge in dwelling values over the month,’ he pointed out.

Across the major cities, Sydney values were down 0.4%, in Melbourne they were down 0.5%, in Brisbane values were down 0.7% and in Perth values recorded a 2.5% fall.

Overall house values are up 2.7% over the past 12 months while unit values have risen by a slightly lower 2.5%. On a quarterly basis house values rose 1% and unit values 1.1%.

The index also shows that rental prices continue to trend higher with most cities recording an increase in rents. Across the combined capital cities, house rents were up 1.4% over the three months ending April and unit rents were up 1.3%.

‘Despite the improvement in rental rates, gross yields across the combined capital cities have held fairly firm due to the fact that dwelling values are also rising. The greatest yield improvements over the past year have been recorded across the Darwin and Perth markets where rents have been rising much faster than dwelling values,’ said Lawless.

Perth rents are up 10.4% over the past year and Darwin rents are up an even higher 11.4%. At the other end of the spectrum, rents are falling across both the house and unit market in Hobart, down 1.3% and 3.5% respectively over the past year. Canberra rents are also showing weakness, down 1% for houses over the year.

On a total return basis, that is capital values plus gross rents, the national market is now 8.3% above its May 2012 lows and 6.9% above the previous market high of October 2010. Capital returns for the last 12 months are a modest 2.7% but total gross returns over this period of 7.1% are compelling in an environment where five year fixed rate loans can be obtained for as low as 5.39%, according to Skilbeck.

Overall the housing market is in much better shape than it was a year ago where values were still falling and market sentiment was very low, according to Lawless. ‘Despite the weak April results we are in a market where auction clearance rates are consistently higher than 60% cent nationally and around the 70% mark in Melbourne and Sydney. Vendors aren’t discounting their asking prices as much as they were a year ago, providing further evidence that buyers and sellers are starting to find some even ground,’ he said.

This article was republished with permission from Property Wire.


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