Home prices
- Capital city home prices rose by 0.2 per cent in seasonally adjusted terms in December after falling by 0.1 per cent in November according to the RP Data-Rismark Hedonic Australian Home Value Index – the largest property database in Australia. Outside capital cities, prices fell by 0.3 per cent in December.
- Capital city home prices are up 4.7 per cent on a year ago – the slowest growth rate in 18 months. Prices in the ‘Rest of State’ markets were up just 0.8 per cent in 2010.
- Prices rose in just two of the seven capital cities in December with Sydney up 1.0 per cent, and Melbourne prices up 0.4 per cent. Prices fell most in Darwin (down 3.3 per cent), followed by Canberra (down 2.5 per cent), and Perth (down 0.9 per cent).
- Prices are higher than a year ago in all capital cities except Perth and Brisbane.
What does it all mean?
- Australian home prices have completed a soft landing. In March 2010, prices were seemingly going gangbusters with annual growth standing at 14.1 per cent. But home prices are now tracking at a 4.7 per cent annual rate – modestly below the long-term average pace of 8.0 per cent.
- Effectively you can strike another item off the Reserve Bank’s worry list. The rate hikes delivered over 2010 have taken the heat out of the housing market ensuring that the normal supply-demand fundamentals are ruling the roost across capital city housing markets.
- While the Reserve Bank has done its bit to restore order to housing markets, having lifted interest rates to ‘normal’ levels, now it is up to state governments to ensure that there is adequate housing stock being supplied to meet latent demand.
- There are now marked differences in home prices across the nation. Melbourne prices are up more than eight per cent over the year while Perth home prices are going backwards by more than two per cent. Certainly it is inappropriate to refer to one single national home market – conditions vary significantly from state to state and region to region.
What do the figures show?
- The RP Data-Rismark Hedonic Australian Home Value Index rose by 0.2 per cent in seasonally adjusted terms in December after falling by 0.1 per cent in the previous month.
- House prices rose by 0.3 per cent in the month while apartments fell by 0.2 per cent.
- Capital city home (dwelling) prices are up 4.7 per cent on a year ago, the slowest growth rate in 18 months. House prices are up 4.7 per cent and apartment prices are up by 4.8 per cent.
- Prices rose in just two of the seven capital cities in December with Sydney prices up 1.0 per cent, and Melbourne up 0.4 per cent. Prices fell most in Darwin (down 3.3 per cent), followed by Canberra (down 2.5 per cent), Perth (down 0.9 per cent) and Brisbane (down 0.1 per cent). Prices were unchanged in Adelaide. In Hobart, prices rose by 0.3 per cent in November (December data not yet available).
- Home prices are higher than a year ago across all capital cities except Perth (down 2.3 per cent) and Brisbane (down 1.0 per cent). Prices are up most in Melbourne (up 8.4 per cent), followed by Sydney (up 6.6 per cent), Darwin (up 4.8 per cent), Adelaide (up 3.6 per cent) and Canberra (up 2.5 per cent).
- December home prices aren’t available yet for Hobart. In the year to November, home prices in Hobart were up by 1.3 per cent.
- Across the capital cities, the rental yield on houses stood at 4.0 per cent in December with the rental yield on apartments at 4.7 per cent.
What is the importance of the economic data?
- The RP Data-Rismark Hedonic Australian Home Value Index is based on Australia’s biggest property database covering more than 340,000 sales during 2010. Unlike the ABS Index, which excludes terraces, semidetached homes and apartments, the RP Data-Rismark Hedonic Index includes all properties.
- The monthly RP Data-Rismark Hedonic Index compares month-to-month index results. Quarterly results are measured comparing end months rather than averaging each month in the quarter. For example, the first quarter of 2009 index results would compare the end of March index with the end of December index.
What are the implications for interest rates and investors?
- Home prices are off the Reserve Bank’s worry list – at least for now. But state governments can’t rest easy – they need to ensure that barriers aren’t being put in front of developers and investors and also need to ensure that markets are well supplied by affordable land.
- A softening in home prices combined with the prospect of interest rates remaining unchanged until mid year is clearly positive for budding home buyers. Less doom and gloom stories about interest rates and unsustainable home prices will be beneficial for consumer sentiment more generally, boosting the outlook for retailers.
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