House prices bounce back in June thanks to lower interest rates
Monday, July 2, 2012/
Lower interest rates helped Australia’s eight capital cities record a 1% gain in dwelling prices over June to a median of $460,000, according to the latest RP Data?Rismark June Hedonic Daily Home Value Index.
The three biggest markets – Sydney, Melbourne and Brisbane – all recorded dwelling price gains of 1% over June.
Perth was the standout market, with a 2% gain to a median of $460,000, with Perth dwelling prices now down just 1.4% over the previous 12 months.
Perth also had the strongest house price gain over June, with house prices up 2.4% to a median of $475,000.
The combined Brisbane-Gold Coast market was the strongest unit market over June, with a gain of 2% to a median of $355,000.
For the 12 months to the end of June Sydney dwelling prices are down 2% to a median of $541,000.
Melbourne remains the weakest housing market, with dwelling values down 6.6% for the year to June to a median of $480,000. The Brisbane market is down 4.7% to a median of $415,000.
RP Data research director Tim Lawless says the catalyst for the improvement in market conditions “is likely to have been the 55-basis-point reduction in the average discounted home loan rate over May and June as well as the subtle improvement in consumer sentiment readings that have been reported”.
“The increase in capital city dwelling values is an encouraging sign that the market appears to be responding to improved housing affordability and lower interest rates,” Lawless says.
Lawless notes that capital city dwelling values have simultaneously risen over three months and fallen over three months – but the end result is that the market is still down 1.2% over the first six months of 2012.
“Regardless, while discounted variable mortgage rates are as low as 5.6%, Australian households remain understandably cautious about the economy given the global uncertainty.
“This is likely to weigh down on consumer demand for high commitment purchases,” he says.
Rismark CEO Ben Skilbeck described the Melbourne rebound as “perhaps the most significant insight from the daily index”.
“Between January 2009 and December 2010 Melbourne dwelling values rose by a remarkable 35%.
“Since that time they have corrected by just over 8%. After reaching a trough on 11 June, Melbourne dwelling values have now recovered by an impressive 1.7%. But they are still off about 4.1% in 2012,” Skilbeck says.
Skilbeck also notes the impact of lower interest rates on house prices.
“The rebound in capital city home values during June indicates that the RBA’s relaxed monetary policy stance may have reached the point of inflating asset prices despite households remaining cautious about the economy,” says Skilbeck.
He says housing market fundamentals are increasingly solid, with asset prices likely to respond to further monetary policy stimulus.
The only major capital city to record a fall was Adelaide, with dwelling prices down 1.1% to a median of $370,000.
Among the smaller capital city markets, Canberra dwellings rose 2% to a median of $485,000 and Hobart up 2.7% to a median of $342,000.
Darwin dwelling prices fell 0.7% in June to a median value of $468,000 – but it remains the only capital city market alongside Canberra to be up over the past 12 months.
The highest rental yields are Darwin houses and units. Both have a gross rental yield of 6.1%.
The lowest rental yields are Melbourne houses at 3.7% and Melbourne units at 4.5%.