RP Data – Rismark Property Value Index Release

Released 27 February 2009

For expanded Media Release click here to view the PDF document (245kb)

Australian market proves to be resilient to tough economic times

Today’s release of the combined monthly RP Data-Rismark International Property Values Indices for the 2008 calendar year has once again proven the resilience of the Australia property market during turbulent world economic times.

While national property values decreased by 2.9 per cent over the calendar year, the results are not as catastrophic as those reported for the S&P/ASX 200 Index which in 2008 fell by 41.3 per cent. Simultaneously US housing prices dropped by more than 20 per cent.

RP Data National Research Director Tim Lawless said "The soft landing of Australian property markets can largely be attributed to a critical undersupply of housing across the nation’s capital cities which is estimated to be 140,000 homes and growing, combined with record population growth which is forecast to remain strong over the long term."

"The Australian residential property market has been protected by Australia’s very strong banking system, where the four major Australian banks all enjoy a 'AAA’ rating (only 13 banks around the world are currently rated AAA).  Australia’s residential market stands out as being one of the best performers internationally," Mr Lawless said.

Rismark International Head of Research, Dr Matthew Hardman said , "Low interest rates and the continued serious undersupply of housing will continue to hold a floor under capital city residential property values in the lower and middle market levels. For property prices to fall rapidly, a combination of oversupply and forced liquidity through high unemployment or a significant population exodus is required. Otherwise, people who may wish to sell simply stay put."

"While there is no doubt that rising unemployment will place downward pressure on prices, Rismark does not believe it will rise so far in 2009 as to outweigh the undersupply and low interest rates to trigger the falls of 20% predicted by some commentators," Dr Hardman said.

Based on recent housing finance data from the Bureau of Statistics, investors remain relatively inactive in the current market conditions, with investor housing finance commitments at their lowest level since 2002 during the December quarter of '08. 

Mr Lawless said it is likely the pace of residential property investment will pick up during 2009, as investors start taking advantage of the strong yield scenario and the proven lack of volatility that is evident in the residential property sector.  He believes investors are likely to be competing with first home buyers in the lower priced segments of the market where the risk profile is more appealing and yields tend to be higher. 

"As these two buyer segments eventually start to compete for housing stock there is likely to be a rise in prices around the nation’s mortgage belts and strategically located unit markets. The markets most prone to further declines in value will be coastal and holiday regions together with mining towns," Mr Lawless said.

Tourism numbers are projected to fall considerably during 2009 which will be detrimental to coastal markets which rely on holiday renters.  At the same time, many holiday home owners have been forced to place their weekenders on the market at a time when there is a great deal of stock available for sale in these locations.

Ends. Detailed tables available in the PDF.

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