RP Data-Rismark Hedonic index shows a strong rebound in Australian residential property market
Highlights:
- Housing market experiences strong rebound with 6.6% growth during first half of 2007, affordability continues to deteriorate
- Adelaide, Brisbane, Melbourne, Darwin and Sydney all register increases in both house and unit prices.
In spite of the gloomy forecasts of some commentators, the RP Data-Rismark Hedonic Index results show that the Australian residential property market has continued to experience a strong rebound during the first 6 months of 2007 with property prices growing by an impressive 6.6% during this period.
The growth in property prices during the first half of 2007 comprised a 6.0% increase in the price of houses and an 8.5% increase in the price of units. These rates of growth are significantly higher than the historical averages registered for the Australian market over the last 25 years.
According to RP Data, RP Data-Rismark estimates that the median value of an Australian property has increased to $432,365, pushing the great Australian dream beyond the grasp of a growing number of families. The median house price in Australia is now $459,402 while the median unit price is $365,322.
The fact is that home ownership remains important to many Australian households and the evidence indicates that despite the recent interest rate rises families are still willing to commit a growing share of their income to purchasing new properties and servicing debt.
In the first half of 2007, house prices increased in Adelaide (11.6%), Brisbane (10.6%), Melbourne (7.9%), and Darwin (9.0%). Sydney houses have also experienced their strong growth in years, with a 3.4% increase during the six months to 30 June 2007.
Consistent with RP Data-Rismark’s previous forecasts, the Perth housing market has seen a turnaround with sluggish growth of just 1.5%.
Sydney and Perth remain the two expensive markets to live in with median house prices of $559,770 and $505,115, respectively. They are followed by the comparatively less expensive cities of Brisbane ($411,491), Melbourne ($402,817) and Adelaide ($359.504).
Perhaps reflecting the affordability of units compared with houses, the value of units has experienced even strong growth than houses with a 8.5% rise during the first half of 2007. The growth in unit prices has been propelled by substantial increases in the major capital cities during the year-to-date, including Adelaide (21.9%), Brisbane (15.7%), Melbourne (10.2%), Darwin (14.2%), Perth (8.6%) and Sydney (4.7%).
Perth is far and away the costly unit market, with a median unit value of $460,549, followed by Sydney ($407,181), Melbourne ($322,470), Brisbane ($301,264) Adelaide ($280,908) and Darwin ($278,538).
According to Rismark International, while some commentators have been forecasting a housing market contraction over the next 5 years, Rismark has been insistent in projecting, outside of WA, a robust rebound in 2007/2008. The striking recovery in the national housing market over the last six months vindicates Rismark forecasts and can be attributed to a fundamental discount between the demand for new housing and the availability of supply.
Looking forward, the inevitable outcome of the rising cost of housing in this country is a gradual shift towards increasing densities and a change in our understanding of the ‘great Australian dream’, the notion of a free-standing home in the burbs is destined to become a historical footnote for many families with semi-detached and apartment style living emerging as the predominant form of tenure for first time buyers. This should not be viewed as a bad thing.
The RP Data-Rismark Hedonic Indices benefit from exclusive access to the comprehensive property database in Australian and NZ, which is owned by RP Data.
RP Data spends over $5m annually collecting new property information and has amassed a database comprising over 88 million property data records covering around 98% of all homes. Over 70% of Australian real estate agents subscribe to RP Data’s property information services.
In a recent independent review of the efficacy of the RP Data-Rismark Indices, the credit rating agency Moody’s concluded that the suite of indexes calculated by RP Data- Rismark represents a significant improvement in the quality of housing price statistics available in Australia.
Detailed capital city analysis:
Sydney, on the back of a 4% increase in sales volume for the June quarter, posted price growth of 2.1% and 2.7% for houses and units respectively in the June quarter, with the average property taking 33-35 days to sell. Over the last 3 months prices in the Inner West, Inner City and Northern Beaches increased by more than 4%.
Investors are also doing with rental yields between 4-5% for the June 2007 quarter. The Hunter region and Wollongong reported modest increases over the last six months with prices rising by 2-3% for houses and units.
Melbourne posted consistent price increases since the start of the year. To June 2007, Melbourne house prices increased 7.9% while unit prices increased 10.2%. Over the last 12 months house and unit prices in Inner City Melbourne, Moreland City, Boroondara City, East Middle Melbourne and Southern Melbourne increased by over 10%.
Auction clearance rates are also up in Melbourne with over 46.6% of house auctions and 51.1% of unit auctions resulting in a sale.
Brisbane also continues to perform strongly. Over the last 12 months Brisbane houses increased 14.7% while units increased 20%. RP Data-Rismark expects that Brisbane will deliver superior returns over next 5 years unless the housing supply deficiencies in Brisbane are remedied.
Adelaide reported the large June quarter price increase of the capital cities, with house prices increasing 8.4% and unit prices increasing 14.5%. Sales volumes also increased 11% in the June 2007 quarter.
Adelaide remains Australia’s cheapest city, with Port Pirie West, Gladstone, Port Augusta, and Moonta proving the best budget buys. Adelaide is also returning strong yields for property investors, 4.7% for houses and 5.7% for units this June quarter. This is possibly in response to the influx of students identifying Adelaide as an attractive and cheaper alternative to Australia’s other more expensive capital cities.
In line with the recent turnaround, properties in Perth remain ‘on the market’ for approximately 51-66 days, well above the market norm during Perth’s boom times in 2006 which saw property being listed for only 30 days.
4-Sep-2007