Perth bucks 1.2% "broad-based" property market decline in May: RP Data-Rismark

Perth was the only mainland capital city to buck a "broad-based" 1.2% decline in capital city dwelling values in May, the latest RP Data- Rismark monthly index shows.

This follows a 0.5% fall in April with RP Data-Rismark recording an eight capital city median value of $491,000 for May.

Capital city dwelling values are now just 1.1% higher over the first five months of 2013 and 2.9% higher compared to May last year, when the market bottomed out following a a 7.4% peak-to-trough fall.

Melbourne stood out as being one of the weakest performers with values down 2.1% over May and 1.9% over the quarter to a median of $512,500.

Adelaide dwelling values fell 2.3% to $380,000, Sydney dwelling values fell 1% to $580,000 and Brisbane dwelling values fell 0.9% to $425,000.

In contrast, Perth dwelling values lifted 1% over May to a median of $500,000 with the gain restricted to detached houses, which lifted 1.1% over May to a median of $519,000 with Perth unit values falling 0.4% to $423,250.

Perth house values are up 6.9% over the past 12 months while unit values have fallen 0.5% over the same period.

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Among the smaller capital city markets, Darwin experienced a notable correction, with its dwelling values down 3.5% to $487,500 while Canberra dwelling values fell 1.3% to $512,250.

Dwelling values declined despite key housing market metrics such as auction clearance rates, vendor discounting, time-on-market and transaction volumes performing well with a drop in consumer confidence and weak mortgage growth factors in receding property values.

According to Rismark CEO Ben Skilbeck there are one of two means by which these metrics improve: “either buyers increase their offer price in order to meet vendor expectations or, alternatively, vendors reduce their expectations in order to meet buyer offers”.

“The first is usually associated with a rising market, while the second relates to a flat or declining market.

“If credit growth is anaemic and consumer confidence is weak, both of which is currently the case, it’s a good indication that strength in auction clearance rates, and other associated metrics, may largely be driven by vendors reducing their initial expectations in order to meet buyer offers.

“Given the weak housing markets of 2011 and 2012 were followed by a very robust 2013 first quarter, we may well be seeing some natural market volatility associated with vendors acquiescing and taking the opportunity to sell,” he says.

The same point  - that a stellar autumn auction season and speedy private treaty sales did not translate into price growth - was made on Property Observer last week.

Combined with these metrics, the May 7 RBA rate cut to 2.75% - passed on in full by nearly all lenders – also failed to drive up property values.

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RP Data national research director Tim Lawless notes that the fall in dwelling values over the month of May and for the quarter was “broad-based with all capital cities apart from Perth and Hobart (up 2.2% over May to $321,000) recording a fall in values over the month, and with half of the capital cities recording a fall in values over the quarter”.

Despite its correction in May, Darwin remains the strongest performing housing market since the market bottomed out in May last year with values up 10.1%

It also has the highest gross rental yields for both houses (6.2%) and units (6.3%).

Melbourne is the weakest rental market with houses offering a gross rental yield of 3.7% and Melbourne units at 4.6%.

Lawless says the weak May result comes on the back of a substantial fall in consumer confidence over both April and May which can partly be attributed to a growing level of uncertainty about domestic economic conditions and possibly a sour reaction by consumers to the Federal Budget announcements in mid-May.

“The RP Data-Rismark daily index tracked higher from late April through to the 10th of May, and then went into a consistent decline over the remainder of the month.

“How much of this downwards pressure can be attributed to the lower confidence reading is anyone’s guess, but the correlation of housing market conditions with consumer confidence is a strong one.

“If we see confidence levels remain in the doldrums, there is likely to be a similar dampening effect on the housing market,” he says.

RP Data’s combined capital city index is stock weighted, meaning that larger cities like Sydney, Melbourne and Brisbane have a larger impact on the aggregated results.

“With Melbourne dwelling values down by 2.1% over the month and 1.9% over the last three months, the pull-down effect on the aggregated index has been substantial,” says Lawless.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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