House prices fall slightly in best result in seven months: RP Data-Rismark

Capital city house prices fell just 0.2% in September to $450,000, their best result in seven months, suggesting the housing market may have turned the corner, according to the latest RP Data-Rismark Hedonic Home Value Index.

This was the smallest decline since February 2011 and reversed a trend of accelerating capital losses since the end of March 2011.

Over the first nine months of 2011, capital city home values have now declined by 3.6% while over the 12 months to September 30, capital city home values were off by 3.4%.

Despite the fall in values, houses have delivered total returns of 0.7% for the year to date and 0.9% over the last 12 months.

“Housing market conditions are starting to show some green shoots now.  While the September index declined further, the -0.2% result was the best outcome we’ve seen in seven months,” says RP Data research director Tim Lawless.

“The 8.1% lift in consumer confidence, as well as rising speculation that interest rates are heading south soon, are likely to be the drivers of this improvement,” he adds.

Regional house values rose 0.1% on a seasonally adjusted basis.

Speaking to Property Observer, Lawless said he would be surprised to see an increase in house prices at the macro level over the next few months due to the performance of Sydney and Melbourne and their heavy weighting in the index.

“It is doubtful we will see any real improvement in capital city values for some time,” Lawless says.

“Melbourne is a weak spot. Melbourne had been a solid over performer in 2007, 2009 and 2010 and is now entering a large correction phase. 

“Melbourne had a great deal of momentum, which carried house prices perhaps higher than they should have been. But there are now a lot of homes available to buy. We would need to have stock absorbed for any improvement,” Lawless says.

Looking at the performance of regional house prices, Lawless says regions associated with the commodities boom are the strengths in this market while lifestyle and coastal regions are countering any real growth – a two-speed situation.

Rismark’s Christopher Joye notes the overall strength of the housing market “notwithstanding the extraordinary hysteria whipped about house price bubbles and so forth”, pointing to the gross total return of 0.7% generated by Australian housing in 2011  as  “very reasonable in the scheme of things”

“Indeed, it looks positively attractive compared to the extreme volatility, and stunning losses, sharemarket investors have had to endure,” he adds.

Over the month, the strongest performing capital city was Adelaide, with house prices rising 0.5% to $370,000 followed by Brisbane, up 0.4% to $415,000.

Source: RP Data/Rismark

Sydney recorded the biggest monthly drop of the major capital cities, with prices falling 0.6% to $500,000 to be down 1.2% year on year. The Sydney market is still the strongest-performing capital city market, delivering 12-month returns of 3.5% ahead of Canberra (3.2%) and Darwin 1.2%. 

Fall since peak (Click to enlarge)

Source: RP Data/Rismark

Over the three months to September, Darwin remained the best-performing capital city, with values down 0.3% on a seasonally adjusted basis. Hobart was the weakest capital city, with values down 6.6% over three months to August.

Darwin is also delivering the highest rental yields, with gross rental yield of 5.3% for houses and 5.8% for units.

Melbourne, where house prices are down 4.4% for the year, is returning the lowest rental yields with gross rental yields of 3.8% for houses and 4.3% for units.