RP Data – Rismark Property Value Index Release

Released 28 November 2008

For expanded Media Release click here to view the PDF document (253kb)

Nationally, property value growth is back in the black

Claims that the Australian property market would in 2008 experience a major downturn have been proven incorrect based on the most recent findings of the RP Data-Rismark Hedonic Property Value Index, which in October again showed that Australian capital city property prices had increased for the second consecutive month.

Released today, the RP Data-Rismark Hedonic Property Value Index showed that Australian dwelling prices had increased by 0.3 percent over the three months ending October ’08. On a month-on-month basis, Australian dwelling prices have now risen in the months of both September (+0.2 percent), based on the ‘final’ RP Data-Rismark index numbers, and in October (+0.4 percent) using the latest ‘indicative’ estimates.

Using Australia’s largest property database, the RP Data-Rismark Index results are reported by the RBA in its Statement on Monetary Policy and have recently been selected by the ASX as the basis for the ASX’s new residential property derivatives market. Moody’s and SIRCA have both independently concluded that the RP Data-Rismark Index results are the most accurate measures of house price change in Australia.*  

Based on RP Data-Rismark Index results, RP Data head of research Tim Lawless believes that the doom and gloom merchants have misunderstood the fundamentals and the diversity of the Australian residential property market by predicting that Australia was headed for a market-wide implosion in 2008.  

“The facts are that over the past 12 months Australian property values have declined by just 0.8 percent which is a phenomenal result when compared to the S&P/ASX 200 index which reported a decline of 40.5 percent,” Mr Lawless said.

“The October RP Data-Rismark Index results reinforce my suggestion that the Australian property market has moved through the bottom of its cycle.”  

“While we are likely to see property values remain relatively flat for the first half of 2009, it appears from the RP Data-Rismark Indices  that Australian property values have proven to be remarkably resilient despite multiple interest rate hikes in early 2008 and the effects of the credit crisis.”

Rismark International managing director Christopher Joye said “The recent recovery is consistent with the big improvements in affordability brought about by the RBA’s decision to cut rates by 1.25 percent in September and October, combined with the government’s announcement that it would increase the first home owner’s grant as part of its $10.4 billion fiscal stimulus package. 

“The RBA’s 0.75 percent rate cut in November has lent further support to the market with mortgage rates having fallen from a peak of 9.6 percent in August to around 7.7 percent today.  Based on current futures market pricing, we should see mortgage rates fall below 6 percent during 2009,” Mr Joye said. 

“The recent improvements in market conditions are also in line with housing finance volumes released by Australia’s largest mortgage broker, AFG, which announced that its October 2008 home loan volumes were the strongest since November 2007 rising by 18 percent in the month. Australia’s biggest property listings website, realestate.com.au, has also released data showing record increases for 2008 in home buyer activity during the months of September, October and November.”

“Recent dramatic improvements in affordability combined with Australia’s substantial housing supply shortages, low mortgage default rates and the absence of large volumes of distressed sellers will see the residential property market continue to deliver robust performance in 2009. The RBA has also recently noted that it believes that the Australian housing market is actually ‘leading’ the US by about 3 years with the local market experiencing its downturn back in 2004.”

“With home loan rates likely to fall below 6 percent in 2009 and record low vacancy rates driving up rental yields, it is likely that more and more investors will begin to view the market in a positive light. For example, a recent report by RP Data identified 45 suburbs around Australia where the average rental property was likely to be cash-flow positive,” Mr Joye said.  

For savvy investors the timing to enter the market is now better than ever according to RP Data’s Tim Lawless – “For investors who are willing to go against the flow, buying conditions are exceptionally strong and yields are improving every month,” he said.

“The fundamentals underlying the Australian property market are extremely robust. Investors need to take into account current supply constraints, infrastructure delivery, immigration, vacancy rates, rising rents and expectations that interest rates will continue to fall.  These are the basics that should fuel capital gains for investors.”

“There is a very strong likelihood that more and more suburbs around Australia will move into the realm of positive cash flow.”

“With dwelling values flat, interest rates falling and rental rates increasing, yields are improving every month.  These positive cash flow suburbs will be mostly concentrated in either the inner city unit markets or the regional townships driven by the mining sector or agriculture.” Mr Lawless said.

Housing market dynamics

Adelaide & Darwin
In the 10 months to October 2008, Adelaide and Darwin have been the best performing capital cities with residential values rising by 3.5 percent and 6.2 percent, respectively. Adelaide values have, however, shown signs of slowing down in the last three months to end October, with only 0.5 percent growth. Regardless of its recent robust price growth, houses in Adelaide remain the most affordable of any capital in Australia with a median price of $410,942 as at end October 2008. The least expensive units in an Australian capital city are in Darwin with a median price of $312,146 as at end October 2008. 

Melbourne, Brisbane & Sydney 
In the 10 months to October 2008, Melbourne residential values have been flat (+0.2 percent) while Brisbane (-1.7 percent) and Sydney (-1.9 percent) are off slightly. However, during August, September and October 2008 Melbourne (+1.1 percent) and Sydney (+0.5 percent) property values have increased consistent with the overall market recovery following the Q2 contractions. 

Canberra
Canberra property values are also off by -2.6 percent in the year to end October, however the three months to end October have seen prices rise by +1.1 percent.

Perth
The worst performing capital city remains as Perth, which has seen residential property values fall by 4.8 percent over the year to October. Over the 3 months to end October this trend has continued. Despite the ongoing slowdown in the Perth market, it still has the most expensive units in Australia with a median value $455,286 as at end October 2008.

Houses have outperformed units in the three months to end October with national value growth of 0.3 percent for houses and 0.2 percent for units.

The capital city with the most expensive houses is Sydney: Sydney’s median house price currently sits at $564,376 as at end October 2008.

Rental yields are highest in Darwin: the current annualized yield is 6.55 percent for houses and 6.94 percent for units. Yields in Sydney remain above the national average: the current annualized yield for a Sydney house is 4.59 percent and 5.74 percent for Sydney units.

The lowest rental yields in an Australian capital city can be found in Perth where yields sit at 4.14 percent for houses and 4.64 percent for units.

Median time on market in Sydney for houses and units over the 3 months to 30 September 2008 is 37 days and 34 days, respectively.

Median time on market in Melbourne for houses and units over the 3 months to 30 September 2008 is 33 days and 29 days, respectively.

Median time on market in Brisbane for houses and units over the 3 months to 30 September 2008 is 49 and 44 days, respectively.  

Ends.

NOTE:

*RP Data and Rismark recommends that caution be used when interpreting property indices results as these results can
vary depending on the methodology used and sample size.

In all RP Data and Rismark published indices, methodology is clearly indicated. More information on the RP Data‐Rismark indices can be found here: http://www.rpdata.net.au/indices/

For media enquiries contact:

Mitch Koper, National Communications Manager, RP Data Limited – 0417 771 778 or mitch.koper@rpdata.com