Including rents, total returns are +0.7 per cent over the first nine months of 2011 and +0.9 per cent over the 12 months to end September.
According to the market-leading RP Data-Rismark Home Value Index, which captured nearly 251,000 sales in the first nine months of 2011 alone, Australia's soft housing market may be starting to turn the corner. The RBA's decision tomorrow will determine whether the commencement of any recovery occurs quickly, or is more elongated into 2012. Since 90 per cent of all home loans are variable rate, housing is one of the most interest rate sensitive sectors of the economy.
In the month of September, capital city dwelling values declined by just -0.2 per cent (both seasonally-adjusted and in actual raw terms). This was the smallest decline since February 2011 and was crucial in reversing a trend of accelerating capital losses since end March 2011.
Over the first 9 months of 2011, capital city home values have now declined by -3.6 per cent. In the 12 months to 30 September, capital city home values were off by -3.4 per cent.
RP Data's research director, Tim Lawless, said, "In the month of September there were wide divergences in the performance of the individual cities. In contrast to recent index results, seasonally-adjusted dwelling values actually rose in Brisbane (+0.4 per cent) and Adelaide (+0.5 per cent). They were flat in Darwin (0.0 per cent) and down just slightly in Perth (-0.1 per cent)."
Rismark executive director, Christopher Joye, added, "With home buyers budgeting on 2-3 rate hikes in 2011 that never eventuated, the housing market has been weighed down by concerns about families' future finances. The RBA's apparent switch to an "easing bias" has taken hikes off the table with the financial markets pricing a high probability of a rate cut on Tuesday.
Rismark forecasts imply that a reduction in interest rates on Tuesday, which could see discounted variable home loan rates fall to as low as 6.6%, would kick-off a recovery in housing activity. Based on our assumption that there were more hikes to come in this cycle, we had been projecting the recovery would commence in around mid 2012. This timing would be brought forward a quarter or two by any decision by the RBA to normalise its cash rate tomorrow."
Rismark's Christopher Joye commented, "Notwithstanding the extraordinary hysteria whipped about house price bubbles and so forth, the fact is that the gross total return of 0.7 per cent generated by Australian housing in 2011 is very reasonable in the scheme of things. Indeed, it looks positively attractive compared to the extreme volatility, and stunning losses, sharemarket investors have had to endure."
The number of homes advertised for sale remains high, which RP Data's Tim Lawless suggests is one of the key explanations for the secular softness. "We are counting almost 300,000 homes advertised for sale across Australia, which is more than 30 per cent higher than the same time last year. Melbourne supply is especially plentiful, with listing volumes more than 60 per cent higher than a year ago. The large number of properties available for sale implies buyers will continue to hold the balance-of-power at the negotiation table," he said.
Source: RP Data Press Release
- Month = 3.2%
- Quarter = 3.2%
- Year to date = negative 0.8%
- Year on year = negative 0.9%
- Median Price for settled sales of apartments in Brisbane over quarter = $365,000