Tuesday, July 5, 2011

RP Data May 2011 Index

RP Data – Rismark Home Value Index Release

Capital city dwelling values declined by 0.3 per cent (seasonally adjusted - s.a.) in May, and are down 1.2 per cent (s.a.) over last 3 months. Rest of State house values were also weak in May (-0.1 per cent s.a.) and are off -0.9 per cent (s.a.) over last 3 months. Gross rental yields for Aussie apartments are now 5.0 per cent.

Based on more than 110,000 home sales nationally in 2011, the market-leading RP Data-Rismark Home Value Index for Australia’s capital cities declined by -0.3 per cent (s.a.) in the month of May (or by -0.5 per cent in raw terms). Capital city home values have now fallen for the last five consecutive months with by far the worst seasonally-adjusted result coming in the month of January (-1.2 per cent), which accounts for 45 per cent of the 2011 decline.

The softening in Australian home values is delivering a valuation dividend with Australia’s dwelling price-to-disposable income ratio falling to 4.2 times, which is its lowest level since June 2003 according to Rismark’s analysis.

RP Data’s research director, Tim Lawless, added “For property investors, rental yields are also improving with RP Data-Rismark’s Index showing that gross Australian apartment yields have now risen to 5.0% (see chart). The best rental yields can be found in Darwin (5.7 per cent), Canberra (5.4 per cent), Brisbane (5.2 per cent) and Sydney (5.2 per cent). The worst yields are in Melbourne (4.2 per cent), Adelaide (4.6 per cent) and Perth (4.9 per cent).”

Over the three months to May 2011 dwelling values in Australia’s capital cities have retraced by -1.2 per cent on a seasonally-adjusted basis. In raw terms, dwelling values have fallen by -1.3 per cent. The quarterly rate of decline has, however, moderated since the end of March when home values were off by -2.0 per cent care of a flood-affected January.

Over the 12 months to end May, Australian capital city dwelling values are now down -2.3 per cent (seasonally-adjusted). If we just look at the first five months of 2011, Australian home values have stepped back by -2.7 per cent.

Across the capital cities performance has been varied and counter-intuitive to the purported resources boom. Sydney is the only market to have recorded a modest capital gain over the last year (up 1.0 per cent). Homes in Canberra have also held ground (-0.1 per cent over the year). All other capitals have slipped into the red, with some down by significant margins.

According to Tim Lawless, the two weakest results have been Perth, where dwelling values are down -7.5 per cent year-on-year, and Brisbane, which is off by -5.9 per cent over the year. ...

According to Tim Lawless the weakness across equities markets is likely to be an important factor affecting the premium housing market: “The S&P/ASX 200 Index remains almost 35 per cent below its November 2007 peak and the index is down 8 per cent since the start of April. The top end of the market clearly benefitted from the circa 40 per cent rise in share prices following the trough in March 2009. However, the recent share market weakness is affecting premium demand.”

Ben Skilbeck, Rismark’s Joint Managing Director, added, “Demand for Australia’s luxury homes has also been sapped by the surging currency, which has made local housing much more expensive for expats located in Europe, North America and Asian countries with US dollar currency pegs to buy. Financial markets are currently pricing in a decent chance of an interest rate cut over the next 6-9 months. If the RBA does indeed reduce rates, this would provide substantial support to the market. However, our central case remains that rates are heading up, not down, and thus we are not looking for any capital gains in 2011. That said, total returns will be boosted by very solid growth in rents, with gross yields in May now at 5.0% for Aussie apartments. Rental vacancy rates remain very tight, so we expect to see further improvements in rental returns.”

See RP Data Press Release.

See also Brisbane Times

"Consumers are well and truly focused on saving, not spending," Mr Lawless said. "Despite the low rate of unemployment and the strength of the resources sector, it is clear that the average Australian is content to pay-down debt and wait for some economic certainty to return. As a consequence, transaction volumes in the real estate market are about 20 per cent below the five year average and listing volumes are about 25 per cent higher than what they were last year."

Vendor discounting in Brisbane has fallen back to 7.8 per cent after peaking at 8.3 per cent last December.

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