RP Data - Rismark Index

"The falls in Brisbane property values witnessed during 2008 appear to be a thing of the past. On an annual basis dwelling values in Brisbane are still down by -3 per cent during the year with house values falling -2.9 per cent and unit values declining by -3.4 per cent. Over the first four months of 2009 Brisbane has begun to once again show positive growth. During the first four months of the year house values climbed 1.9 per cent whilst unit values fell by -0.2 per cent despite the fact Brisbane is home to mainland Australia's most affordable unit market. Rental returns for houses have softened slightly and currently sit at 4.6 per cent whilst unit rental yields continue to improve and are now recorded at 5.4 per cent."

Home values continue to recover, recording a healthy 2.8% increase over the first four months of 2009

The RP Data/Rismark Australian Home Value Index out today confirmed that housing values around Australia rose by a healthy 2.8 per cent over the first four months to April 09—virtually wiping out the price falls seen in 2008 according to RP Data National Research Director Tim Lawless.*

Unlike the Australian Bureau of Statistics House Price Index, which excludes terraces, semi-detached homes, and apartments, the RP Data/Rismark International hedonic methodology, which is reported by the Reserve Bank of Australia, includes all dwellings. In addition, RP Data benefits from the largest sample of early property sales and property attributes (such as number of bedrooms, bathrooms and land area) of any index provider in Australia.

Over the first four months to April 09, every mainland capital city apart from Perth recorded an increase in home values with the most significant gains in Darwin (+5.3 per cent), Melbourne (+4.4 per cent), and Sydney (+3.9 per cent).

According to Rismark International Managing Director Christopher Joye, “Our analysis demonstrates that home values are rising in around 80 per cent of all suburbs with only the top 20 per cent of suburbs ranked by price suffering material falls.”

The return to capital growth comes as weekly rental rates start to level. Mr Lawless said, “Rental rates across Australia have powered ahead over the last three years, providing the best gross rental yields investors have seen for a long time. We are now seeing growth rates for weekly rents start to level due to decreasing rental affordability which is causing many renters to consider buying a home instead of renting. Gross rental yields are likely to peak over the coming months suggesting that now is probably the best time for investors to roll up their sleeves and become active,” he said. In terms of housing stock, units are continuing to outperform houses where over the first four months of 2009 values increased by 3.3 per cent while house values increased by 2.7 per cent. In closing Mr Lawless said “The stronger performance of the unit market is due to a number of factors. Comparing median house and unit values nationally, the price gap between is just over $90,000, so the value proposition of a unit is very compelling. Additionally, units are generally located closer to the city and along transport spines which is very appealing to many Gen Y and Gen X buyers,” he said.

See www.rpdata.com/news/rp/20090529_media.html
and Tables

Muddled Market

"The Australian Bureau of Statistic's latest report was of a 6.7 per cent national fall in the prices of detached residential dwellings for the year, and a 2.2 per cent fall since the December 2008 quarter.

That contrasts with figures from Australian Property Monitors and RP Data/Rismark International, both of which recently reported slight increases in national housing prices between the December 2008 and March 2009 quarters. Part of the reason is that ABS statistics are only for detached housing, while the other two include units, terraces and semi-detached dwellings.

But the difference really only highlights that statistics shouldn't be taken in isolation when making decisions about buying. Buyers advocate Curtis Associates says the APM and RP data figures are probably closer to what's really happening."

Source: The Australian

New Vigour in Property

See the debate involving Chris Joye in the Business Spectator, and the Crikey response.

"Of the mainland capitals, Darwin (+2.8 per cent), Sydney (+2.4 per cent), Melbourne (+2.4 per cent), Canberra (+1.4 per cent) and Brisbane (+1.3 per cent) led the charge during this period. The laggards were Adelaide (-0.3 per cent) and Perth (-0.7 per cent)."

"The most expensive houses are in Sydney (median value $565,928) and the cheapest in Adelaide ($410,442). The most expensive units are in Perth (median value $439,042) and the cheapest in Brisbane ($330,390)."

Insignificant Price Decease in Brisbane for Apartments

See RP Data Rismark Indices released at the end of December.

Brisbane Apartment prices decreased by 1.25% for October quarter and deceased by 2.45% October 2008 year to date. Not a huge decrease.

"In 2009, Mr Lawless believes the affordable segments of the property market will offer the best opportunities for capital growth.

“This will be somewhat of a turnaround for the property market where over the last four years; it has been the affluent properties which have

generally provided the best capital growth.”

“Market activity is already showing signs of increasing at the lower end of the pricing scale,” he said."

See also Press Release

Not all Doom & Gloom

"THE economics of Australia's $3.3 trillion housing market is widely misunderstood, with sensationalist claims that a housing bubble caused the global credit crisis and that Australian house prices will fall by 30 per cent to 50 per cent. In fact, the latest RP Data-Rismark Index results show that Australian house prices declined by just 0.8 per cent in the 12 months to October this year, and increased during the most recent three months.
...

In Australia, the hyperbolic predictions of economists Steve Keen and Gerard Minack that house prices will fall by 30 per cent to 50 per cent have been relentlessly recycled in newspapers and purportedly credible programs such as 60 Minutes and The 7.30 Report.

The doomsayers' claims are based on the assumption that housing affordability is at an all-time low.

They dismiss the fact house prices are determined by supply as well as demand (affordability is a demand-side factor) and conclude that prices must fall by some arbitrarily large margin. Keen likes to shock by quotingstatistics about the rise in household debt without acknowledging that debt-servicing ratios have remained unchanged thanks to vastly lower real interest rates, the emergence of two-income households and higher real incomes.

Recent analysis by the Reserve Bank of Australia has comprehensively demonstrated that housing affordability is not at an all-time low. According to one of the Reserve Bank's benchmarks, the representative household in June 2007 had more real disposable income left over after purchasing a home and servicing a 90per cent mortgage than at any other time since June 1982.

The bank also found that the representative household could afford to buy 33 per cent of all homes in June 2007, which, although less than the historical average of 45 per cent, was markedly better than the 13 per cent of homes available to it in June 1990.

Importantly, the Reserve Bank's present 4.25 per cent cash rate is considerably lower than the 6.25 per cent rate that existed in June 2007. Since mortgage rates peaked at 9.6 per cent in August, the Reserve Bank has pushed them down to about 6.7 per cent, with markets predicting that they will be less than 5 per cent by mid-2009. At the same time, house prices have not appreciated...."

"The Reserve Bank believes Australia's housing market is leading the US by three years, having entered into its downturn in 2004. There is also a consensus between the Reserve Bank and most economists that the doomsayers' predictions will be proven wrong. A striking counterfactual is the 1990-92 recession, when unemployment hit 10.9 per cent yet house prices rose by 2 per cent a year according to the Australian Bureau of Statistics.

The media would do well to interrogate sensationalism."

Source: The Australian

October 2008 Property Index

"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. ...

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.” ...

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.”

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.

See Press Release and Details

August Property Value Index

RP Data Rismark Index for August

"The national end of month property indices report released by RP Data & Rismark International confirms that the supply and demand imbalance currently being experienced in the Australian property market has placed a floor under housing prices, resulting in minimal value falls.

Based on the analysis in the report, this is most evident in the metropolitan areas around the country where record population growth has not been accompanied by new dwellings to satisfy the housing demand.

According to RP Data National Research Director Tim Lawless the property market has proven to be remarkably resilient with national dwelling values remaining positive over the 12 months ending August 2008. Over the three months to August 2008 there was a modest decline with property values down by just 0.96 per cent over this period.

Mr Lawless said the recent figures should put to rest claims that Australia’s property market is headed for a crash. “In fact, values are holding relatively firm particularly when compared to the benchmark equities S&P/ASX 200 Index which dropped by 19 per cent between January and August,” he said.

One of the most interesting findings in the indices release today was the convergence of the capital city market dynamics over the past six months which revealed that all capital cities recorded slightly negative growth; no particular city was significantly out of step with the others.

According to Rismark International’s Dr Mathew Hardman “Clearly, the observable phenomenon of the two-tiered markets in Sydney and then in Melbourne and to a lesser extent in Brisbane and Perth has disappeared ”

“Market movements are now similar across all metro areas rather than value falls being isolated within the mortgage belts. This balancing can be attributed to the squeeze the more affluent markets are experiencing due to the turbulence in the financial and equities sector.

“Looking towards the next six months, strong excess demand in most capital cities is creating a floor under property values, making large falls unlikely,” Dr Hardman said. According to RP Data, with population growth projected to remain high and interest rates falling, the demand/supply imbalance is expected to protect the market from any major falls in property values. Rismark International’s Dr Hardman believes that unemployment is not a major factor driving property prices; affordability, excess demand and market momentum are far more significant he said.

“Although unemployment is rising, unless it grows rapidly to significantly greater levels, eg 6 or 7 per cent over the next couple of years, excess demand will eventually outweigh affordability constraints and begin to push property markets upwards again, probably by the second half of 2009.”

Brisbane

• Brisbane has actually fallen more than Sydney & Melbourne over autumn & winter: on average by 3 – 5 per cent. The median house value is now $455,146 and the median unit value is now $326,606.
  South East Queensland continues to be the strongest population growth region in Australia. Such strong demand for dwellings will continue to place upwards pressure on values over the medium to long term.

See http://www.rpdata.com/news/rp/20081001_media.html

RP Data Rismark Update

Property Value End of Month Index Release, 31 July 2008

"Most markets fall slightly in value through winter but U.S. experience won’t happen here. The RP Data/Rismark International end of month property indices report released today confirms what most people know to be true already; we are seeing modest declines in most property markets. However, RP Data National Research Director Tim Lawless said that the good news for buyers is that property is not a homogenous market and if you look at the flipside of this downturn, it may well prove to be the ideal buying window as speculation that interest rates may stay on hold and rents continue to surge.

Brisbane Property Market
• Brisbane house values have fallen on average 2% and 0.2% for units over the last six months, versus an average rise of 7.5% over the past 12 months.
• Prices of home units in the inner and south eastern suburbs have held and in many areas risen as prospective buyers choose a unit over a house due to affordability."