Australian Property News

Residential property values fall slightly

Posted on Friday, October 01 2010 at 4:47 PM

Home values in Australian capital cities fell by 0.2 per cent seasonally adjusted in August, according to property analyst RP Data.

Over the year to the end of August capital city home values have risen by eight per cent, but since the market peak in May 2010 they've declined by 1.2 per cent.

The RP Data-Rismark Hedonic Home Value Index also found that property prices in Australia's non-capital city markets - or 'rest of state' - stayed the same during August.

The 'rest of state' markets, which cover the 40 per cent of homes not located in capital cities, have seen growth in dwelling values of 3.7 per cent over the year to the end of August. After peaking in April 2010, 'rest of state' values have fallen by 0.5 per cent.

The national capital city median dwelling price is now $457,000 and the national median dwelling price - for all regions - is $410,000.

Rismark International managing director Christopher Joye says the Australian housing market's soft landing has been broad-based, with the weakness since the end of the first quarter seen across all cities. Canberra has been the best performing capital city over the three months to the end of August, with home values up by 1.2 per cent.

Canberra, Sydney and Hobart were the only capitals to record an increase in values over that time; all others experienced a fall in prices.

Perth was the weakest performing capital city, with values having fallen by 4.8 per cent over the three months to end of August.

Darwin has recorded the highest rental yields and Melbourne has recorded the lowest rental yields.

RP Data research director Tim Lawless points out that just 12 months ago, mortgage rates were 160 basis points lower and the market was still benefiting from the Federal Government's First Home Owner Boost.

"Since the RBA (Reserve Bank of Australia) has normalised rates with six hikes, combined with additional bank top-ups, capital growth has halted," he says.

"However, property owners are still realising positive total returns due to the effect of direct or imputed rents.

"Rental yields across the capital cities are now showing signs of improvement.

"RP Data and Rismark estimate that the gross yield on units is 4.9 per cent while for detached houses it's a lower four per cent.

"On a total return basis, Australian housing has outperformed most other asset classes over the last 10 years."

Further capital growth in the second half of 2010 isn't expected, according to Joye.

If the RBA lifts the cash rate four to six times by the end of 2011, he says nominal dwelling values would likely decline modestly.

But that's not a bad thing - he points out that asset prices can't always rise.

"Since 1993 there have been five instances when the RBA has lifted the cash rate sharply and on every single occasion national capital city dwelling prices have flat-lined or declined," he says.

"If the RBA aggressively raises rates, there is no reason to expect 2010-11 to be any different."

Capital growth in Australian capital cities to August 2010 (indicative)
	Sydney	Melbourne	Brisbane	Adelaide	Perth	Darwin	Canberra	Hobart*	Australian Capitals
Month	0.1%	-0.1%	-0.1%	-0.3%	-2.7%	-0.8%	3.2%	N/A	-0.2%
Quarter	0.2%	-1.5%	-2.3%	-0.2%	-4.8%	-1.4%	1.2%	N/A	-1.2%
Year to date	5.5%	6.8%	-0.7%	4.0%	-3.3%	6.1%	5.4%	N/A	3.9%
Year on year	9.1%	13.2%	0.8%	5.7%	0.8%	10.7%	11.4%	N/A	8.0%
Median price based on settled sales over quarter	$505,000	$470,000	$434,000	$387,500	$460,000	$485,000	$480,000	$325,000	$457,000

* The inherently low sales volume recorded in Hobart, which is due to the small population base, gives rise to naturally higher levels of volatility. As a consequence preliminary results for Hobart are not made available. That is, the Hobart data lags by one month the other national results.