Melbourne leads slight rebound in capital city house prices in February: RP Data-Rismark daily index

Melbourne led a rebound in capital city dwelling prices in February, with the Victorian capital recording 1.8% growth for the month, according to the new RP Data-Rismark Daily Home Value Index.

On a rolling quarterly basis during the three months ending February 2012, Australian capital city home values fell 0.2%.

Based on the new daily index, this was the best quarterly reading since the three-month period ending March 2011.

RP Data head of research Tim Lawless says the results in February suggest the decline in house prices has been easing  though he does not believe the November and December rate cuts were enough to drive back growth into the housing market.

"The November and December RBA cash rate cut shave improved affordability but have not yet fed into higher home values, which is no surprise. A return to housing market stability is likely the outcome the RBA was hoping for,” he says.

According to Lawless, the amount of housing for sale had fallen 20% since November, but is still 20% higher than the same time last year, which was already relatively high.

“It points to soft conditions but not quite as bad as the market was seeing over the last quarter of 2011."

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Looking at the division between houses and units, Melbourne house prices were up 2% over the month – the strongest gain across the five major capital city markets – while units gained a more modest 0.3%.

According to the new daily index, Melbourne house prices received a boost on the last day of February, rising 0.67%, with gains also recorded in Brisbane and the Gold Coast (up 0.32%) and Sydney (up 0.25%).

The new daily index launched in conjunction with the ASX allows property investors and buyers to track (and eventually trade) the daily changes in capital city house and unit prices.

It replaces the current monthly RP Data-Rismark Home Value index.

Overall the capital city dwelling values increased 0.8% in February 2012, leaving the market relatively flat (-0.2%) during the first two months of the year.

Sydney matched the capital city increase, with dwelling prices rising 0.8%, while Brisbane values were flat (0.1%).

Perth dwelling prices continued to fall, dropping by 1.8%. This was a steeper fall than 1.6% decline recorded in January.

“The strong February results, accented by capital gains in Melbourne and Sydney of 1.8% and 0.8%, respectively, likely reflect the impact of the November and December rate cuts,” says Rismark’s Ben Skilbeck, also the architect of the new daily index.

“Even before the RBA reduced rates, housing finance flows were staging a rebound with the ABS reported seasonally adjusted number of new home loans approved for people buying established dwellings rising for nine consecutive months,” he says.

Of the smaller markets, Darwin was the most impressive, with dwelling prices up 5% during February and Darwin house prices up 6.2%

Hobart had the strongest units market, with gains of 3.4% during the month.

Over the past three months to February Darwin was the strongest-performing capital city market, with dwelling values up 4.1% and is also offering the highest house rental yields of 5.8%.

RP Data’s Tim Lawless says some of the weaker markets over the past few years are now starting to show promise: 

“The Perth housing market is a good example of a city that has been one of the softest locations since 2008. This market appears to be staging a turn-around with dwelling values now 2% higher compared with the October 2011 trough.” 

“Perth dwellings values have corrected by 10.1% since their peak back in April 2010, which has provided a significant affordability dividend. We are also seeing Perth housing demand being driven by strong population growth underpinned by the resources investment boom. Despite a weak monthly result for February, Perth dwelling values were up 0.8% over the last three months,” he says.

Canberra has the strongest unit yields, with a gross indicative yield of 5.8%.

Melbourne offers investors the lowest gross rental yields of 3.5% for houses and 4.3% for units.

RP Data says the next daily index will provide the most up-to-date and sophisticated measure of value movements across the Australian housing market.

The index provides daily capital growth measurements across three broad housing types: houses, units’ and a “combined dwellings” index that includes both houses and units. The index results are released daily for Sydney, Melbourne, Brisbane (including Gold Coast), Adelaide, Perth and the combined capitals, which is a composite of these cities.

It is the first commercially available residential index to track daily value movements across the market portfolio of all dwellings.

“The daily index is the result of three years extensive research and development. It is specifically designed for trading purposes and tracks the value of an investment in a self-financing market portfolio (all dwellings),” Skilbeck explains.

“That is, the index removes bias associated with capital injections such as those arising because of renovations, alterations and additions so as to examine true changes in market value.”

Along with the launch of today’s daily index, RP Data has provided a backdated series for the past year showing the granular changes. 

The benefits of the new index will include timeliness – updated daily to reflect the latest available property market information; granularity – “intra-month” index movement insights available for the first time; and low volatility – measured annual volatility remains comparable, between the monthly adjacent period hedonic and will cover the overall market. All dwellings are included in the measurement, not just those that have transacted.