First quarter usually has the year's strongest residential property market: Cameron Kusher

The first quarter of 10 of the past 17 years has seen the strongest property growth for that year.

The seasonal nature of the market suggests that the 2.8% value growth recorded over the first quarter of 2013 is unlikely to be maintained throughout the remainder of the year.

If the growth rate continues at this level for the remainder of the calendar year, it would represent a rise in capital city dwelling values of 11.2%.

However, if history is anything to go by, this rate is unlikely to continue.

It’s important to remember that Australia’s national housing market is highly seasonal with values seeing a greater level of quarterly growth over the first and third quarters of the year and with growth typically lower over the second and final quarters.

Between 1996 and 2012, the first quarter recorded the strongest rate of capital appreciation in dwelling values across 10 of the 17 years.

In each instance, and where the first quarter of the year had not recorded the strongest value growth, it was the third quarter which recorded the greatest value growth.

The results highlight the significant impact of seasonality on the change in capital city home values.

Further analysis of the today’s results show that the second quarter of the year recorded the weakest capital growth conditions on four occasions over the period.

On all other occasions, the fourth quarter experienced the lowest growth in values (note over the past two years Q2 and Q4 have recorded identical levels of value growth).

Across the period for which the analysis has been undertaken, the second and fourth quarters never recorded a greater increase in value than that of the first quarter.

The results underscore the high level of seasonality within the housing market and the fact that growth levels over the first quarter of the year won’t necessarily be reflected in performance over the remainder of the year.

Although seasonality does have an impact on the performance of home values, the housing market does not sit in isolation to the rest of the economy.

As we know, economic conditions can, and do change rapidly.

When these come into play, we often see a significant impact on the housing market despite conditions being typically stronger over the first and third quarters and weaker over the second and final quarters.

Mortgage rates, unemployment, housing finance commitments, retail trade and consumer sentiment also play a large part in determining the direction of home values and whether or not consumers are prepared to buy and sell their homes.

In conclusion, although results confirm that capital growth across the housing market experienced a strong start to 2013, we should not expect the same rate of growth to be carried throughout the remainder of the year.

Testament to this is the March 2013 RP Data-Rismark Daily Home Value Index which provides evidence that home values across the five major capital cities fell by -0.1 per cent over the first fifteen days of April despite the strong capital growth conditions experienced recently.

The housing market is likely to continue along a recovery path, however, we anticipate slower capital growth conditions throughout the remainder of 2013 than those which have been recorded over the first quarter of the year.

Cameron Kusher is senior research analyst at RP Data.