Capital city property price drops reverse recent trends: RP Data

feature-collapse-200The RP Data-Rismark Home Value Index results show that property values fell throughout the month of April reversing the trend of recent months.

 

Capital city home values fell by 0.8% in April 2012 and are currently below their historic highs in each capital city market. Broadly capital city home values have fallen by -6.1% since peaking in October 2010 however, the results are quite different at an individual capital city level.

Values in Darwin (-13.5%), Brisbane (12.0%) and Hobart (10.2%) are showing double digit declines since their respective market peaks. Canberra (-3.7%), Sydney (-3.8%) and Adelaide (-4.7%) on the other hand, have recorded relatively minor falls in home values compared to their respective market peaks.

Although home values are lower across the board, the decline in values has not been a consistent or smooth phenomenon. 

Combined capital city home values peaked in October 2010 and have since fallen by -6.1%. From October 2010 to April 2012 is 18 months and given the -6.1% decline in values over this period it amounts to an average monthly decline in capital city home values of just -0.3%. As the graph shows, the decline in values has been far from consistent with values seeing periods of improvement, virtually no change month-to-month and periods of accelerating declines.

Across the major capital cities, the rate of decline has varied much more. Brisbane is the market which is farthest along its correction, being 29 months since the market peaked (April 2010). Over that time the housing market has recorded total value declines of -12.0% or an average monthly decline in values of -0.4%. Values in Sydney have been fallen by -3.8% in 17 months (-0.2%/month), Melbourne values are down -8.1% in 18 months (-0.5%/month), Adelaide values have declined by -4.7% in 19 months (-0.2%/month) and Perth values have fallen by -7.4% in 24 month (-0.3%/month).

As the graph details, the declines in values have been far from consistent with each capital city recording varying conditions throughout the period of decline in home values.

It hasn’t just been declines in values which have been experienced across the market. The number of transactions has also been in decline. Sales volumes reached their most recent peak in September 2009 with 51,021 sales nationally that month. Importantly, September 2009 was the last month in which the boost to the First Home Owners Grant was available in full and in October 2009, the RBA first lifted official interest rates from their generational lows.

Current sales volumes across the country are estimated to be -18% below the five year average.

The decline in home values over recent years has clearly improved housing affordability with all capital city markets recording values below their peak in real terms.

The 50 basis points worth of interest rate cuts this week will undoubtedly also further improve affordability, however, the big question remains whether or not it will encourage an uplift in market activity. Sales volumes have been constrained for some time now. Just because values are falling and servicing loans is cheaper doesn’t necessarily mean consumers will jump at the chance to re-enter the market. 

Consumers are largely shunning debt in the current economic environment, so it will be very important to analyse whether or not the recent value declines and the ongoing improvement in housing affordability will be enough to trigger a return to action in the housing market.

This article first appeared on RP Data.

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