RP Data – Rismark Property Value Index Release

Released 29 August 2008

For expanded Media Release click here to view the PDF document

National Property Indices Reveals Good Time to Start Buying

The latest release of the RP Data/Rismark International National Property Values Indices shows that Australia's residential property market continued to lose some ground during July with national dwelling values down by 1.81 per cent over the seven months to July 2008.

Tim Lawless, RP Data's national research director said, "The falls have been modest particularly when compared with the share markets where the S&P/ASX 200 fell by 21.5 per cent during the same period."

"These declines in property values comes as buyers take the cautious approach and wait on the sidelines," Mr Lawless said.

The number of house and unit sales is now 30 per cent below the ten year average and 40 per cent below the recent peak in sales volumes which occurred in March 2007.

Based on the findings in the Indices, there are too few buyers to create any degree of competition that is required to place upwards pressure on dwelling prices.

"We are not likely to see a wholesale return of home buyers and investors to the market until consumer confidence improves markedly," Mr Lawless said.

As seen in the Westpac-Melbourne Institute Consumer Sentiment Index for August, a jump in confidence may provide an encouraging sign that consumers are starting to view domestic economic conditions in a slightly more positive light.

The August consumer sentiment figures revealed a 9.1 per cent jump for the month as oil prices fell and interest rate cuts became more certain. This confidence is likely to improve if the RBA makes successive rate cuts, thus encouraging buyers back to the market.

The only market to maintain a positive rate of growth over the first seven months of 2008 was Adelaide where dwelling values increased by 2.83 per cent to July 2008. Despite strong growth, Adelaide still provides the most affordable detached housing of any mainland capital city with a median value of $410,753.

Perth and Sydney are the only capital markets to record an annualised fall in property values with Perth dwellings down by 3.82 per cent and Sydney dwellings down 1.14 per cent in value over the 12 months ending July 2008.

Dr Matthew Hardman of Rismark International refutes recent commentary suggesting the possibility of falls ranging from 10 to 20 per cent for the property market nationally.

"The Australian residential property market has diversified significantly over the past decade Therefore large national falls are much less likely. "Recent stress testing conducted by Rismark International suggests the probability of a 10% fall nationally in a 12 month period is less than 1% ie. a 1 in 100 year event and the probability of a 20% fall nationally in a 12 month period is less than ¼% ie. a 1 in 400 year event."

"We do however expect fluctuations of 1-2 per cent in returns due to seasonal factors and natural volatility. Consumers should not read too much into a 2 per cent fall over winter, as it could easily be reversed with the traditional spring bounce back, particularly now that the interest rate environment appears to have stabilized," Dr Hardman said.

OBESERVATIONS – Rents & Yields
Around the country rental yields are up as rental rates continue to outpace dwelling values in the growth states. Nationally, the average gross rental return for houses and units is now 4.31 per cent and 5.12 per cent respectively.
Darwin recorded the strongest performance for yields where gross annualised rental yields are averaging 6.4 per cent for houses and 6.5 per cent for units. The is largely because the Darwin rental market is benefitting from relatively inexpensive housing combined with a very tight rental market and growing rental demands. The median house and unit values are well below national average at $421,390 and $308,300 respectively.

Around the State

Sydney Property Market

• On average over Sydney as a whole, house and unit values are down about 2.7% n the first 7 months of this year. Overall, values have been slightly negative through winter.
• Our view is that the Sydney market will begin to turn around strongly in the more affluent areas by Spring 2009, largely due to supply shortages and continued high wages and low unemployment.
• We do not believe prices in the Western and South Western Sydney regions will fall much further, due to increasing rental yields, high construction costs and demand for new housing.

Melbourne Property Market

• Melbourne values have fallen on average less than 1% in the past 3 months.
• On an annual basis, Melbourne house and unit values have increased by 5.6% and 8.6% respectively
• The gross rental yield on houses and units is lower than the national average due to the strong value growth in dwellings during 2007, however yields are now showing month on month improvements.

Brisbane Property Market

• Brisbane house values have fallen on average 1.9% and 0.3% for units over the last seven months, versus an average rise of 5.8% 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.
• Rental yields are slightly below the national average with houses providing a gross rental return of 4.3% and units returning 5.0%

Adelaide Property Market

• Adelaide property values are still growing, 1.6% for houses and 8% for units since Christmas.
• The winter months have seen the Adelaide market slow further, recording an average fall in dwelling values of 2.2% over the three months ending July 08.
• Adelaide houses still provide the most affordable entry point to the mainland capital city market with a median house value of $410,753
• Gross rental yields are well below the national average due to house and unit value growth outpacing rental rates. Houses are averaging a gross rental yield of 3.9% and units are averaging a gross rental return of 4.65%

Perth Property Market

• Perth overall has not slumped as heavily as some commentators have suggested it might: it’s off an average of 4% so far this year.
• Perth buyers should be conservative about the price they are willing to pay due to the dependence of capital values on the continuation of world demand for metals.
• Perth rental yields remain the lowest of any capital city with houses providing an average gross rental return of 3.9% and units returning 4.5%.

Canberra

• Overall, Canberra house and unit values have fallen by about 2.9% over the first seven months of the year.

Darwin

• Overall, the Darwin market can be described as flat with dwelling values virtually at the same level as at the start of the year.
• Darwin remains the most affordable city to purchase a unit with the median value currently $308,300.
• Darwin provides the highest rental yields of any capital city with houses providing an average gross rental return of 6.4% and units returning 5.4%.

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