Prices tumble in top end of town

The fall in house prices in expensive suburbs has been the biggest drag on median values in capital city dwelling markets over the past year, with the trend continuing during April, according to the Rismark RP Data index.

Dwellings in the most expensive capital city suburbs recorded a 5.4% slump over the past year to April 2011.

“The uber-luxury segment is risky and highly illiquid and has the rug whipped from under it via a combination of the soaring Aussie dollar and the volatile share market,” Rismark joint managing director Christopher Joye says.

“Luxury homes in areas like Sydney’s eastern suburbs will continue to face valuation headwinds as banks deal with the new normal of subdued credit growth.”

Joye suggests another fly in the ointment is the much lower growth – and pay packets – expected in the financial services industry.

By contrast, the Rismark RP Data Index found home values in the middle 60% of suburbs were down by 0.9%.

Dwellings in the cheapest 20% of suburbs were the best performers, easing just 0.5%.

 

Capital city dwelling markets declined by 0.3% during April, according to seasonally adjusted figures. It was the fourth consecutive month in which a fall was recorded.

The national median dwelling price across Australia stands at $418,000, with a $468,000 median in the eight capital cities.

Sydney dwelling values eased 0.5% (seasonally adjusted) to a $515,000 median in the three months to April.

Perth, Brisbane and Adelaide had the most turbulent three months. Brisbane was the weakest capital city, with values 3.1% (s.a.) to $430,000. Adelaide values slipped 2.3% (s.a.) to a median price of $381,000, and Perth values fell 3% (s.a.) in the past three months to a $468,250 median.

Darwin values eased just 0.2% (s.a.) to $442,250, and Hobart values were down 2.0% (s.a.) to $315,000.

The best-performing capital city was Canberra, with values up 0.8% (s.a.) over the April quarter to $490,000.

The report noted over the three months since the January floods, dwelling values in Australia’s capital cities have tapered by – 1.2% on a seasonally-adjusted basis.

In raw terms, dwelling values have declined by a more modest – 0.2%.

“The difference between the raw and seasonally adjusted results reflects the fact that the housing market typically experiences higher rates of capital growth at the start of each year, which is reflected in the seasonally adjusted data,” Joye says.

“The solid performance of cheap suburbs runs against the grain of popular claims that default rates are rocketing up amongst first-time buyers, which the RBA recently rejected,” RP Data head of research Tim Lawless says.

“The luxury end of the housing market is showing its volatility.

During the growth phase of the cycle the most expensive homes realised the highest capital gains.

“Yet as the market cools premium home values seem to be losing steam the fastest,” Lawless says.

Rismark expects at least another one to two rate hikes this year, which will solidify the cooling in residential valuations.

According to Lawless, monthly movements in capital city home values have flattened out after the record-low seasonally-adjusted reading for January which was affected by a range of natural disasters.

“On a month-to-month basis, the January result was the worst on record with capital city dwelling values down –1.2 per cent (seasonally-adjusted).

“Since that time the magnitude of declines has moderated noticeably with average monthly seasonally adjusted falls of –0.4 percent between February and April.

“Thus far this has been a very controlled exit from the strong growth conditions of 2009 and the first half of 2010,” Lawless says.