RP Data – Rismark Property Value Index Release

Thursday 31st March, 2008

For expanded Media Release click here to view the PDF document

Australian property market remains resilient ……

National house values are now approaching $500,000 for the average family home. A further increase 1.1 per cent in growth will potentially confirm this.

The release today of Australia’s most comprehensive and nationally reported property value indices report by RP Data and Rismark International, clearly shows that despite earlier reports from other data providers, the country’s residential property market has been largely resilient to falls in value, however, as expected the rate of growth is declining.

According to co‐author of the report, RP Data’s Tim Lawless, over the twelve months ending February 2008, Australian property values increased by 13.65 per cent to reach a median value of $466,209. Quarterly, values increased by 1.97 per cent over the three months ending February.

Simultaneously, the ASX200 and the All Ordinaries dropped 14.71 per cent and 13.94 per cent respectively.

Using the strength of the RP Data‐Rismark Property Value Index that looks at the market as a whole by using an hedonic methodology for its analysis, it shows property values in Australia clearly increased (on average) in February which is in direct contrast to the indications of other index providers as reported during early March.

Rismark International head of research Dr Matthew Hardman said, “The RP Data‐Rismark International February results were surprisingly resilient, however the report indicates that we can expect the first half of 2008 to see subdued rates of capital gains with the potential for increased volatility from month‐to‐month and especially around RBA interest rate announcements.

“This monthly volatility may result in some negative month‐on‐month returns in the very short term,” he said.

Based on quarterly figures, the national growth in property values slowed down since celebrating its peak in July last year at 5.1 per cent. Over the three month period ending February 2008, quarterly growth levels were at 2.0percent.

Dr Hardman noted that this decline in growth is a trend which is evident across all capital cities in varying degrees. He said the only fall in property values during the three months ending February 2008 has been recorded in the Sydney market where combined house and unit values fell by 0.4per cent.

“High immigration, low unemployment and a long‐term housing supply shortage support projections of strong residential price growth annually of 6 to 8 per cent on average across Australia over the next three to five years.

This is a view shared by the RBA, CBA and BIS Shrapnel in separate press releases over the last week,” Dr Hardman said.

Capital City performance

Adelaide and Brisbane continue to provide the strongest annual growth of any capital city, and are the only two capital cities showing solid growth across the board – from the inner city to the outer suburbs.

Adelaide has been Australia’s strongest property market during 2008, with property values growing consistently across all regions. Residential property values in suburbs through Eastern Adelaide particularly have grown strongly, with house price growth around 30 per cent, and unit price growth in excess of 30 per cent.

The Brisbane residential market continues to record annual price growth of over 20 per cent. Growth has been highest within the inner suburbs where house values have increased by 35 per cent over the last year.

Melbourne has also been booming over the last year with annual growth in house values of 22 45 per cent and 22 85 per 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% Percentage Change Feb 07 to Feb 08 22.45 22.85 cent for units. The strongest markets have been the inner, mid‐eastern, mid‐northern and southern suburbs, as well as the Moreland and Yarra Ranges areas. Value growth in these regions has been in excess of 25 per cent over the twelve months to February 2008.

The Outer Eastern and South Eastern suburbs have been essentially flat over the last three months with some suburbs increasing and some slightly falling. The lowest value growth areas have been Hume City and Outer South Eastern Melbourne with annual capital growth of between 0‐5 per cent.

Sydney house prices on average have shown no value growth over the last three months and unit values have declined by 1 per cent. However, these average figures disguise significant differences in growth rates between different areas.

House values in south-west Sydney continued to fall and have now been joined by houses in the Inner West and Eastern Suburbs; both down about 3-4 per cent for the quarter. This is the first time the Eastern Suburbs have recorded a price fall in almost two years. The decline in the Inner West and Eastern Suburbs demonstrate the new vulnerability of upper-end markets which up to now have largely avoided any fallout from interest rate rises.

Mr Lawless said it was interesting to note that unit values in the outer west and south west of Sydney have risen slightly due to the high level of affordability these dwellings offer.

“Many prospective home buyers are now viewing units and townhomes as an increasingly attractive option,” he said.

The Perth market, similar to Sydney, is split between the more affluent central and eastern metropolitan areas of Perth performing above the city average, while borrowing capacity constraints have led to price falls in the south and south eastern suburbs. Overall, Perth house values increased by 3% over the twelve months ending February 2008 while unit values fell by 2.2%.

RP Data & Rismark call for greater transparency among property information providers.

Dr Matthew Hardman of Rismark International explains why the importance of accurately analysing a market is vital:

In providing this monthly analysis of the entire Australian property market by using the country’s most comprehensive property database, the RP Data‐Rismark Hedonic Index results show that Australian residential property values clearly increased, on average over the 3 months to the end of February, in contrast to the indications of other index providers as reported during the second week of March.

It is important to note that the RP Data‐Rismark Indices results show that except for Sydney and Perth, property values rose across all capital cities during this period irrespective of whether a hedonic, median price or repeat sales index was used to calculate the price movements.

The RP Data‐Rismark February Index results are based on the largest available sample of property sales transactions including both data from the Valuers General and advice received from the real estate industry at large.

RP Data‐Rismark International deliberately delay calculation and publication of the index results until 4-5 weeks following
the subject month to ensure that we have a sufficiently large sample of sales to enable our results to be statistically reliable.

Publication of index results in such close proximity to the end of a month can potentially result in short run volatility which
may be reported to the detriment of home owners, investors, builders, developers and policymakers. Dr Hardman suggested that in future, it become standard and accepted practice that index providers disclose their methodology they are using in order to compute their results.

NOTE:

*RP Data and Rismark recommends that caution be used when interpreting property indices results as these results can
vary depending on the methodology used and sample size.

In all RP Data and Rismark published indices, methodology is clearly indicated. More information on the RP Data‐Rismark indices can be found here: http://www.rpdata.net.au/indices/

For media enquiries contact:

Mitch Koper, National Communications Manager, RP Data Limited – 0417 771 778 or mitch.koper@rpdata.com