Property Point Dexter - Feb 4, 2010

Date released: 05/02/2010

Property Point Dexter reports on the latest Rpdata.com/Rismark International December Home Value Results now out.

Australia’s residential property market took a breather in December

After recording a stellar performance over most of 2009 the Australian residential property market ended 2009 on a softer note with national home values virtually flat during the month of December.

Australian home values recorded a -0.3 per cent fall in the month of December as the seasonal effect of the summer slowdown combined with rising interest rates and fading first time buyers put a dampener on what has otherwise been a very strong year for Australian residential real estate.

While capital growth across all homes in the December quarter was the weakest of the year, values were still up an impressive 2.1 per cent. (Note that this is less than half the growth recorded by ‘median price’ index providers, which have had their indices artificially inflated by the return of upgraders to the market buying more expensive homes combined with the withdrawal of first timers. RP Data-Rismark’s “hedonic” index is not affected by the changes in the composition of homes sold over time.)

All capital cities recorded strong capital gains during 2009 with the most spectacular results seen in the Darwin and Melbourne markets where home values were up 16.6 per cent and 15.6 per cent respectively.

The weakest market during the year was Adelaide with values rising 6.2 per cent. Residential property in Brisbane achieved a slightly better outcome with 7.3 per cent growth. Arguably one of the most interesting stories of 2009 has been the recovery of the Perth property market with values increasing by 7.1 per cent after cumulative losses of 7.9 per cent since September 2007.
According to Tim Lawless, rpdata.com’s head of research, the market drivers changed considerably over the year.

“The strongest gains were recorded early in the year with national home values up 3.1 per cent over the first quarter of ‘09.  The market was being led by first home buyers and consequently the most affordable end of the market saw a 3.9 per cent lift in values.”
“Over the second and third quarters it was upgraders in the middle and the top ends of the market that generated the strongest gains.  The top 20 per cent of Australia’s most expensive postcodes increased in value by 9.5 per cent over the last three quarters of the year compared to 4.1 per cent growth in cheapest 20 per cent of postcodes.”

Rental market
Rental markets around the country have failed to keep pace with the rapid growth in home values resulting in lower rental yields across every capital city.  Nationally, rental rates are down about 2.5 per cent which has resulted in rental yields being eroded.
Melbourne’s dramatic rate of capital growth together with a modest fall in weekly rents saw rental yields fall.  Melbourne’s gross rental yield for houses is now the lowest of any capital city at just 3.7 per cent.

Darwin, on the other hand, has seen rental yields remain the highest in the nation despite the consistently strong increases in property values.  Rental rates in Darwin are up more than 8 per cent over the year providing a gross rental yield of 5.7 per cent for houses and 5.9 per cent for units.

Units outperform houses
2009 saw Australian unit values increase by 13.5 per cent compared with house values up 10.4 per cent.  The trend was the consistent across every capital city, with units returning a strong gain over the year.

According to Mr Lawless, “The higher gains in the unit market are a deviation from normal performances.  Historically houses have tended to outperform units.  The recent reversal in fortunes has occurred due to more buyers leaning towards units because they have a more affordable price tag and are often located in more strategic locations in relation to transport and amenity than many detached housing options.  Other factors may also include changing housing preferences, particularly amongst baby boomers, and more highly targeted unit developments being delivered to the market.”

Key Statistics

• National Dwelling value down -0.3% in month of December
• National dwelling value up 11.5% over 2009 calendar year

Capital growth (hedonic index) and median dwelling prices
Australian capital cities, 2009 calendar year

• Sydney values ↑ 11.4% (median:$510,000)
• Melbourne values ↑ 15.6 (median:$460,000)
• Brisbane values ↑ 7.3% (median:$443,000)
• Adelaide values ↑ 6.2% (median:$365,000)
• Perth values ↑ 7.1% (median:$470,000)
• Darwin values ↑ 16.6% (median:$455,000)
• Canberra values ↑ 14.7% (median:$507,500)
• Hobart values ↑ 12.4% (median:$333,250)

Best performing capital city: Darwin, with home values up 16.6% over 2009 calendar year

Weakest performing capital city: Adelaide, with home values up 6.2% over the 2009 calendar year

Highest rental yields: Darwin with gross rental yield of 5.7% for houses and 5.9% for units

Lowest rental yields: Melbourne with gross rental yields of 3.7% for houses and Perth with a gross rental yield of 4.4% units

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