Just received the below newsletter from RP Data.
What do you think of their analysis of current market conditions? Interesting about sustained falls in Hume City, Melbourne.
Australian marketplace continues to soften
The value of the average Australian home has increased by 10.7 per cent over the twelve months ending March ‘08, however quarterly rates of growth indicate the market has slowed considerably.
The RP Data/Rismark International end of month Property Value Indices Report now indicates that while the Australian property market has softened, it remains steady with national values increasing by 1.46 per cent over the three months to March ’08, an annualised return of around 6 per cent.
Despite interest rate rises and inflation fears, this is quite a good result and demonstrates the good risk/return characteristics of diversification in an Australian residential property portfolio.
When compared to the share market, this return seems all the more positive. As an example, during the March quarter the ASX200 and All Ordinaries dropped 15.5 per cent and 15.8 per cent respectively.
Based on the RP Data – Rismark findings, the only capital cities to record a fall in property values were Perth and Canberra where dwelling values declined by 1.0 per cent and 0.6 per cent respectively over the quarter. Despite the fall, Perth units hold the most expensive median value of any capital city at $464,000.
Around the nation
Adelaide has the most affordable housing with a median value of $419,156, and is still the number one performing city in the country. The city recorded the strongest gains in the market with values increasing by 23.4 per cent over the year to March ’08. Adelaide appears to have largely shrugged off the recent rate rises with consistent growth across all its regions.
Brisbane recorded growth of around 20 per cent with most regions delivering returns of 15-20 per cent over the year to March ’08. Inner city Brisbane stands out as the best performing region with growth of 35 per cent over the year. The city’s outer regions are starting to show the first signs of weakening with Beaudesert, Caboolture and Logan all recording fairly flat markets during the March quarter. Redland property values fell slightly during the most recent quarter.
Melbourne growth rates are still healthy on an annual basis, however quarterly growth figures show a considerable slowing. The separation between the affluent inner suburban markets of Melbourne and the outer mortgage belt areas is becoming more apparent. While the inner and middle ring suburbs averaged around 3 to 6 per cent capital growth over the March quarter, the outer regions such as Melton-Wyndham, Frankston and South Eastern Melbourne were flat. Hume City is the first Melbourne region to experience sustained falls, averaging 5 per cent over the quarter for houses and units.
Darwin continued to record a solid performance. Annual growth in dwelling values has remained above 10 per cent since late 2005. Demand for housing remains very high due to the strong population growth and economic conditions. At the same time, housing supply is very short. Rental rates in Darwin are providing the highest rental yields for both houses and units of any capital city. Houses are returning 5.5 per cent gross and units are returning 6.2 per cent gross.
Canberra values fell over the last quarter with houses down on average by 1.0 per cent and units down 2-3 per cent. Yields remain high in the national capital, second only to Darwin. Houses are averaging a gross rental yield of 5.1 per cent and units are averaging 5.8 per cent.
Sydney values increased by around 1.0 per cent for houses and units over the first quarter of 2008 which, according to RP Data’s Tim Lawless, is not a bad result considering the impact that affordability pressures have already had on the market. Many of the city’s prestige areas are starting to show weakness with markets in the Inner City, Eastern Suburbs, Lower North Shore and Northern Beaches all recording flat to slightly negative capital growth.
Perth values remain very flat with a rise in dwelling values of just 0.3% over the twelve months to March. The Central Metropolitan area of Perth is the only market to record a more significant gain. House values in this area have increased by 7.4 percent over the year. In contrast, the south west and south east regions of Perth have both recorded a decline in house values.
Reserve Bank to meet on Tuesday May 6 With interest rates now at 12 year highs the likelihood of another interest rate rise may be reduced. Apart from unexpectedly high inflation figures, the most recent quarterly data suggests that interest rates may stay on hold. Investment in the housing sector has slowed to historic lows, new home sales have slumped, consumer spending and credit levels are slowing and both consumer and business confidence is trending down. On top of all that, private banks have lifted rates out of step with the RBA since the start of 2008.
Another rise in interest rates will certainly cool the market further. The markets most affected will be the mortgage belts of Australia where mortgage stress is already at critical levels. A further rate rise could see property prices fall a further five percent in these locations.
On the other hand, a constant interest rate environment would likely put a floor under many areas which have seen significant value falls. If rates remain stable over the next twelve month we would expect national dwelling values to remain in positive growth territory.
What do you think of their analysis of current market conditions? Interesting about sustained falls in Hume City, Melbourne.
Australian marketplace continues to soften
The value of the average Australian home has increased by 10.7 per cent over the twelve months ending March ‘08, however quarterly rates of growth indicate the market has slowed considerably.
The RP Data/Rismark International end of month Property Value Indices Report now indicates that while the Australian property market has softened, it remains steady with national values increasing by 1.46 per cent over the three months to March ’08, an annualised return of around 6 per cent.
Despite interest rate rises and inflation fears, this is quite a good result and demonstrates the good risk/return characteristics of diversification in an Australian residential property portfolio.
When compared to the share market, this return seems all the more positive. As an example, during the March quarter the ASX200 and All Ordinaries dropped 15.5 per cent and 15.8 per cent respectively.
Based on the RP Data – Rismark findings, the only capital cities to record a fall in property values were Perth and Canberra where dwelling values declined by 1.0 per cent and 0.6 per cent respectively over the quarter. Despite the fall, Perth units hold the most expensive median value of any capital city at $464,000.
Around the nation
Adelaide has the most affordable housing with a median value of $419,156, and is still the number one performing city in the country. The city recorded the strongest gains in the market with values increasing by 23.4 per cent over the year to March ’08. Adelaide appears to have largely shrugged off the recent rate rises with consistent growth across all its regions.
Brisbane recorded growth of around 20 per cent with most regions delivering returns of 15-20 per cent over the year to March ’08. Inner city Brisbane stands out as the best performing region with growth of 35 per cent over the year. The city’s outer regions are starting to show the first signs of weakening with Beaudesert, Caboolture and Logan all recording fairly flat markets during the March quarter. Redland property values fell slightly during the most recent quarter.
Melbourne growth rates are still healthy on an annual basis, however quarterly growth figures show a considerable slowing. The separation between the affluent inner suburban markets of Melbourne and the outer mortgage belt areas is becoming more apparent. While the inner and middle ring suburbs averaged around 3 to 6 per cent capital growth over the March quarter, the outer regions such as Melton-Wyndham, Frankston and South Eastern Melbourne were flat. Hume City is the first Melbourne region to experience sustained falls, averaging 5 per cent over the quarter for houses and units.
Darwin continued to record a solid performance. Annual growth in dwelling values has remained above 10 per cent since late 2005. Demand for housing remains very high due to the strong population growth and economic conditions. At the same time, housing supply is very short. Rental rates in Darwin are providing the highest rental yields for both houses and units of any capital city. Houses are returning 5.5 per cent gross and units are returning 6.2 per cent gross.
Canberra values fell over the last quarter with houses down on average by 1.0 per cent and units down 2-3 per cent. Yields remain high in the national capital, second only to Darwin. Houses are averaging a gross rental yield of 5.1 per cent and units are averaging 5.8 per cent.
Sydney values increased by around 1.0 per cent for houses and units over the first quarter of 2008 which, according to RP Data’s Tim Lawless, is not a bad result considering the impact that affordability pressures have already had on the market. Many of the city’s prestige areas are starting to show weakness with markets in the Inner City, Eastern Suburbs, Lower North Shore and Northern Beaches all recording flat to slightly negative capital growth.
Perth values remain very flat with a rise in dwelling values of just 0.3% over the twelve months to March. The Central Metropolitan area of Perth is the only market to record a more significant gain. House values in this area have increased by 7.4 percent over the year. In contrast, the south west and south east regions of Perth have both recorded a decline in house values.
Reserve Bank to meet on Tuesday May 6 With interest rates now at 12 year highs the likelihood of another interest rate rise may be reduced. Apart from unexpectedly high inflation figures, the most recent quarterly data suggests that interest rates may stay on hold. Investment in the housing sector has slowed to historic lows, new home sales have slumped, consumer spending and credit levels are slowing and both consumer and business confidence is trending down. On top of all that, private banks have lifted rates out of step with the RBA since the start of 2008.
Another rise in interest rates will certainly cool the market further. The markets most affected will be the mortgage belts of Australia where mortgage stress is already at critical levels. A further rate rise could see property prices fall a further five percent in these locations.
On the other hand, a constant interest rate environment would likely put a floor under many areas which have seen significant value falls. If rates remain stable over the next twelve month we would expect national dwelling values to remain in positive growth territory.
