Australia has seen a cool-down in the property markets of its major cities, according to the latest RP Data Rismark home value index. The market hasn’t slumped, but across the capitals it has stood still, with the combined capitals index showing no change in February and only Sydney, Hobart and Darwin registering growth.
The latest news follows eight successive months of growth, over which dwelling prices rose by 10%, and since June of 2012 prices have risen by 13.2%. And it’s a level of growth that has tipped prices over their previous high in October 2010: on average, they’re 4.8% higher now.
Tim Lawless, TP Data’s research director, said, ‘The February market results are in stark contrast to earlier readings where capital city dwelling values moved 2.6% higher over the past three months. The likelihood is that the weak reading for February is an adjustment from the strong readings in December and January rather than the beginning of a flat to negative growth phase across the macro level housing market.’
There’s other data to support that theory. RP Data found that buyer demand remained very strong in February, and the company’s valuation platforms recording a record high in average daily levels of mortgage-related activity. Additionally, auction clearance rates continued strong and the market saw little change in vendor discount levels or in average selling times, both key indicators of the health of pricing levels.
Mr. Lawless said it would be a mistake to assume that this is the crest of the wave, pointing out that so far, February is an anomaly. ‘Our view is that housing market conditions will start to wind down later this year as affordability constraints and low rental yields dampen market conditions. Additionally, with a belief that mortgage rates are likely to start tightening later this year, it may help to quell some of the exuberance we have been seeing,’ Mr. Lawless said.
Rismark International CEO Ben Skilbeck pointed out that Sydney continued to be the standout performer. ‘When looking at individual capital cities, the Sydney market has had a surprising run of nine successive month end increases totalling 14.1%. In keeping with what other capital cities have experienced, we would have expected some dips along the growth trajectory over a nine month period,’ Mr. Skilbeck said.
‘Despite the recent strong Sydney capital gains, over the past decade Sydney values have compounded at just 2.9% per annum. Arguably this market is playing catch up before settling into a more sustainable rate of growth.’
February’s results also show that the premium end of the market actually speeded up slightly, while more affordable residential sales slowed, indicating a change in the market that’s more detailed than aggregate figures show. Values in the top quarter of capital city housing markets are actually up by 3.8%, while homes at the more affordable end of the market were flat for the three months to February 2014, mirroring a worldwide trend for premium property to accelerate away ahead of more affordable housing. Mr. Lawless recalls, ‘we saw the same trend in 2009… as well as during the 2007 growth cycle. The trend is likely being compounded by the low number of first home buyers active in the marketplace,’ he went on. First home buyers are a major driver of demand for more affordable accommodation.