'Precarious' housing market recovery halts in October: RP Data-Rismark

A four month mini-rally in capital city dwelling values has ended, with RP Data-Rismark recording a 1% fall over the eight capital cities in October to a median national dwelling value of $460,000.

The small fall in October follows dwelling value gains of 1.4% in September, no change in August, a 0.6% rise in July and a 1% gain in June.

A noticeable decline was the 3.2% fall in Melbourne unit values over the month, down 6% year-on-year to a median of $420,000.

“In particular, Melbourne unit values have shown a greater decline in values than any other mainland capital city over the past 12 months,” notes RP Data-Rismark.

Market commentators have warned that the Melbourne apartment market is heading into a situation of oversupply, particularly due to the large number of projects underway in the city and Docklands.

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Delivering housing forecasts last month, BIS Shrapnel managing director Robert Mellor said there would a big rise in new apartments being completed in Melbourne over the next two to three years, exacerbating the current oversupply of housing in the city.

RP Data research director Tim Lawless says the weak October result highlights how “delicately balanced the Australian housing market is”.

“Whether the October decline is a blip on the path to a recovering market or a sign of further weakness is yet to be seen.

“Other indicators are suggesting the market has gathered some strength, with auction clearance rates holding firm around the 60% mark across the two major auction markets and owner-occupier housing finance numbers showing steady improvements since February 2012, albeit from a very low base.”

However, he also points out that despite the current cash rate of 3.25% being just 25 basis points higher than the “emergency lows seen in 2009, there has yet to be a real improvement in consumer confidence or housing market transaction volumes”.

“Until we see optimists outnumber pessimists in consumer confidence surveys, a recovery in the housing market is likely to remain precarious,” he says.

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Among the major capital city markets, the greatest decline was recorded in Adelaide where dwelling values declined by 2.4% to a median of $370,000 though they are still up for the quarter (1.3%).

Melbourne dwelling values fell 1.1% to a median of $470,000 to leave its housing market flat (0.4%) over the past three months.

Sydney property values fell by 0.9% to a median of $530,000 to be largely unchanged on a year ago (up 0.6%). It remains the strongest performing mainland capital city market for 2012 up 2.4% since January.

Brisbane also registered a 0.9% decline to a median of $410,000 – down just 0.8% year-on-year.

The stand-out major capital city market remains Perth, which recorded a modest 0.4% gain to $460,000, with property values up 3.5% since October last year.

Among the smaller markets, Darwin continues to surge, with a 4% rise recorded over October to a median of $486,000 and up 8.6% on a year ago.

Hobart (down 4.5% in October, 4.6% year-on-year) and Canberra (down 1.3% in October and 1.6% year-on-year) continue to fall.

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Unit values were slightly more resilient that houses in October, declining 0.6%, compared with the 1% decline for houses.

Rismark International’s CEO, Ben Skilbeck, commented, “We are starting to see a reversal of the relatively poor performance of the top 20% of the market as compared to mid-market segment. Over the last quarter the top 20% of suburbs by price have outperformed both the mid-market and the bottom 20%.”