Top end property set for a better 2013
Current property purchasing behaviours are, in part, mirroring those that began the housing market recovery back in late 2008, where conditions first improved across the most affordable sectors and then moved to significant improvements in premium markets.
As we look forward to 2013, we can ask whether we will see history repeating itself.
Current housing market data confirmed that capital city home values have started to record modest improvements over recent months, however, values generally remain lower compared with the same time last year.
But new data suggests that the results across the three broad price segments – the affordable end of the market, the middle 60% and the premium end – are beginning to converge with the most notable being the recent improvement across the most expensive suburbs nationally.
Over the 12 months to September 2012, the most affordable capital city suburbs recorded a value fall of -1.7%; the broad middle 60% of suburbs have recorded a decline of -0.3%, and the most expensive suburbs recorded a fall of -1.7%.
As the housing market emerged from the Global Financial Crisis (GFC) in 2009, property in each market sector recorded an increase in values. The low mortgage rate environment and incentives for first time buyers saw the more affordable sectors of the market begin to grow first, followed by the premium housing market which shortly thereafter took over as the strongest performing sector.
This may provide some insight as to how any future recovery in the housing sector may take place.
In the most severe circumstances across individual capital city markets, the most affordable Brisbane suburbs are -13.2% below their peak and the most expensive suburbs in the city are -10.8% below their peak, while the most expensive Melbourne suburbs are -10.4% below their peak.
In comparison, the broad middle market in Sydney is the only sector across any city in which values are currently sitting at all-time highs.
Following on from the on-set of the GFC, capital city home values fell by a total of -6.1%. The largest value falls were recorded in Melbourne (-8.3%) and Perth (-6.8%) while the smallest declines took place in Canberra (-3.2%) and Adelaide and Darwin (both 3.3%).
Since the post-GFC housing market peak, the most recent decline in values from the market peak-to-trough has been greater at -7.4%.
Across individual cities, peak-to-trough falls have been greatest in Darwin (-19.7%) and Hobart (-14.6%) and most modest in Sydney (-5.0%) and Canberra (-5.3%).
Since the combined capital city housing market bottomed in May 2012, capital city housing markets have recorded value increases of 2.1% to October 2012.
Once again, most of the recent improvement in values has occurred within the more affordable sectors of the housing market.
Although we don't expect the recovery in the housing market to be rapid, it is certainly looking as if 2013 will continue to see improving market conditions. It will be interesting to see what transpires over the next 12 months and whether or not the recovery mimics that of 2009 where the premium housing market takes over as the best performer.
This article first appeared on RP Data.