Regional centres outperforming capital cities: CBA

Regional area housing markets are outperforming state capitals in what is now a “nationwide buyers’ market”, according to the inaugural Commonwealth Bank/RP Data Home Buyers Index (HBI) report.

On a national basis, property values have fallen by 2.1% during the first quarter of 2011, compared with a 1.8% drop outside of the state capitals.

Among regional areas performing strongly are the Hunter and Illawarra regions in NSW, which have recorded house price increases of 1.5% and 0.8% respectively

In comparison Sydney, the closest capital city to these regions, is down 1.1% for the first quarter of 2011. For NSW as a whole, the market is up 0.3%

According to RP Data, the Hunter and Illawarra regions are being supported by a “strong mining sector and the fact that they are closely linked to Sydney – currently one of the more resilient capital city markets for capital growth”.

In Queensland, a number of regional areas have recorded declines in value far below those of state capital, Brisbane.

For the first three months of the year house prices in the far north region of Queensland are down 2.8%, on the Sunshine Coast values have fallen 2.3% and on the Gold Coast they are down 2.5% – all outperforming the Brisbane market, which has fallen 4.6% over the same time period. The Queensland market as a whole has declined 2.6% over the quarter.

Melbourne and Adelaide have recorded more modest quarterly declines of 1.5% and 1.6% while the Perth market is down 3.4%.

A drop in purchases and an increase in homes for sale are the primary causes of the current buyers’ market.

Commonwealth Bank executive general manager Michael Cant says the number of houses sold in 2010 was the lowest of any year in more than a decade.

“However, outlook for home prices is hardly dire,” he says. “Resent research suggested home prices will be flat over 2011 before growing by approximately 5% in 2012. As always, conditions will vary substantially from region to region.”

The report provides overviews of all the major markets:

Sydney (buyer’s market): Buying conditions have eased over the quarter, with stock levels rising and finance commitments softening. Prospective buyers in the Sydney market are likely to have an improved bargaining position relative to the same time last year, and vendors are having to adjust their price expectations accordingly. 

Melbourne (balanced market): Selling conditions have been moderating since June of last year, when homes were selling quickly and buyers had little room for negotiation. Melbourne market conditions have now moved to a fairly neutral position, where buyers and sellers are reasonably evenly balanced. 

Brisbane (extreme buyer’s market): The Brisbane market has been one of the weakest performing since the end of 2007, and market conditions are still very much in favour of the buyer. Sellers will need to be realistic in their asking prices as buyers continue to hold a clear upper hand in negotiations. 

Adelaide (buyer’s market): Buyers and sellers are reasonably evenly balanced within the Adelaide market, however conditions are turning in favour of the buyer. At the same time last year the Adelaide market was well and truly biased in favour of sellers. 

Perth (buyer’s market): Prospective home buyers in Perth remain in the driver’s seat, with the number of homes for sale still outweighing effective demand. The index suggests that buyers are still enjoying a strong position when it comes to settling on the purchase price. Sellers will need to be flexible in their price expectations in order to make a sale. 

Hobart (buyer’s market): The index for Hobart shows market conditions remain in favour of the buyer, which suggests some of the best buying conditions in recent times. Effective supply is now outweighing effective demand, which is likely to result in a prime negotiation position for buyers. 

Darwin (extreme buyer’s market): The Darwin market has swiftly moved from being one of the strongest seller’s markets in the country to one where buyers are very much in control. Since about August last year selling conditions have been deteriorating, and they have continued to do so quite rapidly over the last month.

Canberra (balanced market): Selling conditions have eased over the quarter, however, the market remains quite balanced. The scope for price negotiation in Canberra is not likely to be as strong as it is in most other centres of the country.