These are the finding of the latest RP Data – Rismark Home Value Index, which shows a preliminary capital city dwelling value drop of -0.2% for the month of December, but a rise in weekly rents of 1% over the quarter.
November’s price movements provide some positive reading, however, with November’s preliminary figure having been revised up from 0.1% up to 0.4% thanks to additional sales information. According to the Index, this represents the largest month-on-month improvement in Australian home values since May 2010.
Despite November’s improved result, Australia’s capital city home values declined by -0.5% over the December quarter. RP Data’s director of research Tim Lawless was quick to point out, however, that this represented the year’s smallest quarterly decline.
“According to our index, capital city home values fell by -1.5% in the March quarter, and by a further -0.8% in each of the June and September quarters. This rate of decline had decelerated to -0.5% by the final quarter of 2011,” he said.
Sydney managed to buck the national trend and record a home value increase of 0.4% during December and 0.7% over the quarter.
Over the course of the year, Australian capital city home values dropped by around 3.5%, with regional house values seeing around a 3% fall, according to the Index, which compared well to the 14-15% decline in Australian shares. When the improvement in rents is taken into consideration, the gross total return to Australian property investors was found by RP Data – Rismark to be just under 1%.
“Weekly rents across the capital cities were up 1% over the December quarter and are now 6.3% higher than at the same time last year,” said Lawless, adding that higher rental rates and the slide in property values has improved yields for property investors.
“The average capital city dwelling is now offering a gross rental return of 4.6% after a consistent trend upwards since mid-2010 when the typical capital city dwelling was yielding just 4.1%. Darwin and Canberra are the highest yielding locations for property investors, while Hobart, Brisbane, and Sydney provide gross yields that are better than average,” he said.
More activity ahead
While December is traditionally characterised by a lull in buying activity, Rismark’s managing director Ben Skilbeck predicts a busier period ahead for Australia’s property market.
“We expect that the RBA’s interest rate cuts in the final two months of 2011 will lend further momentum to housing activity as transaction volumes pick up over February and March after the seasonally slow months of December and January. If financial market pricing for substantial additional RBA rate cuts proves accurate, we could see a stronger-than-expected bounce-back in housing conditions.”
He added that a striking improvement in housing affordability will also play its part, with disposable incomes rising by 5% over the year to 2011 while Australian dwelling values have declined by 3.4% cent since September 2010
“As a result of the RBA’s rate cuts borrowers can now get fixed and variable rate home loans as low as 5.9% and 6.14%. Rismark’s research shows that disposable incomes per household have risen about 15% further than Australian dwelling values since the end of 2003. This helps account for the decline in Rismark’s national dwelling price-to-income ratio, which is as low as it’s been since 2003,” he said.
Lawless added that, while global uncertainty and a stagnant local labour market could play their part in dampening sentiment, improvements in monthly housing finance commitments look promising.
“RP Data’s leading indicators on average selling times and vendor discounts are also starting to look healthier,” he said. “There is no doubt that additional interest rate relief in 2012 would afford a very welcome cushion to the housing market.”