‘Surprise’ 1.4% rise in capital city dwelling values highest in 30 months but moderate growth ahead: RP Data-Rismark

‘Surprise’ 1.4% rise in capital city dwelling values highest in 30 months but moderate growth ahead: RP Data-Rismark
‘Surprise’ 1.4% rise in capital city dwelling values highest in 30 months but moderate growth ahead: RP Data-Rismark

Capital city property markets have recorded their strongest gain in more than 2 ½ years, rising 1.4% over September led by a 2.4% gain in Adelaide, with strong support from Perth, Sydney and Melbourne.

The result was the largest month-on-month rise recorded since March 2010 and means that capital city dwelling values are now 0.8% higher over the first nine months of 2012, with a median dwelling price of $450,500.

Five of the eight capital cities are now in the black for the first nine months of the year, led by Darwin, up 6.3%, with Sydney dwelling prices up 3.4%.  Melbourne dwelling prices are down 1.2% for the year.

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Source: RP Data

The September gain followed capital city property markets recording no gain in traditionally quiet August, following a 1% gain in June and 0.6% rise in July.

RP Data research director Tim Lawless told Property Observer he expected a continued recovery in prices over the next few months, but not at the magnitude of the September gain.

“It’s a pretty big number (1.4%) and it was quite a surprise – but we are tipping more moderate growth in capital values with the market remaining in the black.”

Lawless highlighted the fact that there had now been four straight months where the property market has avoided a decline.

 


 

He said the property market was also showing more appeal for investors, with rents rising faster than capital values, while renters were also starting to "do the sums" and considering buying.

Lawless says Perth has the best property market fundamentals going forward, with rents growing at double-digit rates and a “burgeoning level of confidence, despite tremors in the resources sector”.

Lawless said the Sydney market also had strong fundamentals, while Melbourne “continues to surprise”, with prices up 4% since bottoming out in May.

“Melbourne is looking like a pretty reasonable market.”

Lawless labelled the Adelaide results also something of a surprise given the recent announcement regarding BHP’s decision not to go ahead with the Olympic Dam mining expansion project suggesting a more resilient than expected housing market.

He said the improving market conditions could mostly be tied back to the low interest rates currently in place.

“It’s no coincidence that housing market conditions bottomed out at the end of May, after the Reserve Bank cut the official cash rate by 50 basis points.

“A further cut of 25 basis points in June and the anticipation of further rate cuts in the pipeline appear to have instilled renewed confidence in the housing market which has driven the growth in home values,” Lawless said.

However, he said he expected the RBA to leave rates on hold at its October meeting, though it would be a close call.

“This renewed strength in the housing market is likely to be one of the key deliberation points when the Reserve Bank meets today.

“The Bank will want to keep a lid on housing prices from a financial stability perspective, while at the same time ensure interest rates are low enough considering the decline in commodity prices and Australia’s terms of trade.”

Lawless said other factors supportive of a housing market recovery are auction clearance rates tracking about 10 percentage points higher than what they were last year, capital city listings now lower than at the same time last year and vendors discounting their asking prices by a lesser amount.

 


 

Adelaide recorded a gain in both its detached house and unit prices over September.

House prices rose 2.4% to a median of $385,000 while unit prices were up 1.9% to a median of $315,000.

The second best performer over September was Perth, with capital values up 1.6% to a median of $450,000.

This gain was mainly the result of Perth units, which was the est performing market in September across both houses and units was the Perth unit, with median prices up 4% to a median of $380,000.

Perth house prices were up by a more subdued 1.4% to a median of $467,000.

Sydney dwelling prices gained 1.5% in September to a median of $522,000 with Melbourne just behind with a 1.4% gain to a median of $470,000.

Sydney gained ground on the back of 1.9% rise in house prices ($587,000) with unit prices treading water, down 0.1% to a median of $470,000.

It was a similar story in Melbourne, with stronger gains in house prices (up 1.5% to median of $507,750) and smaller rise in unit prices (up 0.6%) to median of $417,500).

Brisbane managed dwelling price capital growth of 1.1% over September ($427,500).

The smaller capital city markets of Darwin (-2%), Canberra (-0.6%) and Hobart (-0.2%) all lost ground in September.

Darwin remains an investor hotspot returning the highest rental yields of all the capital cities for both houses (gross rental yield of 6%) units (6%).

Melbourne is delivering the weakest returns to investors with houses yielding a 3.6% and units, 4.3%.

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Source: RP Data

On a quarterly basis, capital city dwelling values recorded a 2.0% capital gain, which is the highest quarterly result since the three-month period ending May 2010.

Rismark International CEO Ben Skilbeck noted that the recovery in the housing market “is broad based and not simply attributable to a seasonal spring uptick”.

“Over the four months from end May to end September actual Australian capital city house values have increased by 3.4%.

“If we adjust this to take into account seasonality, the increase is still a strong 2.9% which represents an annualised pace of 9% per annum.”

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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