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RPDataAs predicted by Rismark and RP Data since the start of the year, Australia’s housing market has flat-lined in the second half of 2010. The monthly RP Data-Rismark Hedonic Home Value Index was the first benchmark to report a big shift in housing conditions with a substantial fall in Australian dwelling values in the month of June. This followed annualised double-digit capital growth since the start of 2009. Other house price measures are now starting to fall into line.

In the month of September, this theme continued with RP Data-Rismark’s Capital City Home Value Index effectively unchanged (+0.1 per cent seasonally-adjusted / +0.4 per cent raw). Since the market started turning at the end of May, Australia’s capital city home values have declined by a total of 1.0 per cent seasonally-adjusted (-0.8 per cent raw) according to RP Data-Rismark. (The previous August month capital growth estimate of 0.0 per cent is largely unchanged at -0.1 per cent).

Over the September quarter, Australian capital city home values declined by 0.4 per cent seasonally-adjusted (0.0 per cent raw). Over the 12 months to September, Australian capital city home values have risen by 8 per cent.

RP Data-Rismark’s Hedonic Index is based on Australia’s largest real estate database, which has recorded 266,942 dwelling sales in 2010 alone, and is the preferred benchmark for most economists.

The ‘Rest of State’ markets, which cover the 40 per cent of homes not located in capital cities, have continued to underperform the capitals with seasonally adjusted house values declining by 0.9 per cent in September (-1.5 per cent unadjusted). Over the September quarter the RP Data-Rismark Rest of State Index has recorded a 1.5 per cent seasonally adjusted fall in house values (-2.4 per cent unadjusted). Houses in the Rest of State markets have realised no capital growth at all in 2010, and just 2.7 per cent in the 12 months to end September.

Nationally, the median Australian dwelling price in the three months to end September was $406,500 which is $9,500 (or 2.3 per cent) lower than it was at the end of June 2010 (note: medians should not be used to measure changes in value over time).

After falling 1.7 per cent since the end of May, the 20 per cent most expensive (capital city) suburbs in Australia staged a comeback in the month of September by generating modest capital gains of 0.4 per cent.

In contrast, the cheapest 20 per cent of suburbs fell in value by 0.4 per cent. The most resilient part of the market has been the middle 60 per cent of suburbs, which realised 0.7 per cent capital growth in September.

The rental market continues to offer solid cash-flows, with gross apartment yields rising in the month of September to 4.9 per cent while yields on houses remained unchanged at 4.0 per cent.

Some of the highest yielding rental markets for apartments are Darwin (5.7 per cent), Canberra (5.3 per cent) Sydney (5.0 per cent) and Brisbane (5.0 per cent). The weakest apartment markets are Melbourne (4.1 per cent) followed by Perth (4.4 per cent).

RP Data’s senior research analyst, Cameron Kusher commented that with market conditions expected to be flat for the remainder of 2010, astute investors should now look for opportunities to enter into the market.

“Early signs suggest that rental rates are once again improving, listings are at above average levels, and leading indicators such as time on market and vendor discounting are creeping up.

“For those active in the market there is increasing scope for price negotiation and less competition amongst buyers with an above average number of properties for sale. These conditions are likely to afford opportunities to purchase property at more competitive prices,” Mr Kusher said.

Rismark Managing Director, Christopher Joye, remarked, “2010 has panned out exactly as we expected. A strong start to the year followed by little-to-no capital growth in the second half. Through-the-cycle, Australian dwelling values track disposable household incomes very closely. In the medium term, the RBA is projecting above-trend household income growth care of Australia once in a century terms of trade boom.”

Mr Joye continued, “There are nevertheless risks in the near-term: home loan rates will eventually start increasing with the prospect that the peak mortgage rate could converge to close to 9 per cent, which is more than 1.5 per cent higher than the current average variable mortgage rate of 7.4 per cent. Our analysis suggests that a substantial increase in rates would put some downward pressure on dwelling prices. Household balance-sheets will be supported by a strong labour market and robust income growth. But let’s be clear: it is now just a matter of time before the RBA and/or the banks raise rates again. New borrowers taking out loans should be prepared to service rates 1.5 per cent higher than what they are currently paying.”

Mr Kusher said, “The middle of the year is typically a much slower time for sales activity and this year was no exception, with capital city property values declining during winter. Following on from these soft conditions there is little to suggest there will be any significant rebound during spring. The first month of spring has been relatively flat and with total stock in the market at above average levels and weekly auction clearance rates remaining below 60 per cent, we expect relatively flat growth in property values for the remainder of the year.”

“Research recently undertaken by RP Data highlighted that those markets with the greatest effective supply of properties available for sale were typically recording the weakest growth in values. Perth has an effective housing supply of 9.0 months and has recorded a decline in value of 0.3 per cent over the year. Similarly, Brisbane has an effective supply of 5.9 months and has recorded a below-average level of annual capital growth of 2.1 per cent,” he said.

Rismark’s Mr Joye concluded, “The good news is that these flat index results mean that housing affordability is on the improve.”

Story source: www.australia.to

Tags: investment, news, property, real estate, research, rismark, rpdata

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