Australian home prices rose by a further 1.1% in November, with 11.3% cumulative growth in the first 11 months of 2009. The encouraging performance in the wake of a downturn in the second half of 2008 was led by the two largest markets – Melbourne (+17%) and Sydney (+11.6%).

Based on the RP Data – Rismark National Home Index, Australia’s housing market continued to grind out strong gains in the month of November on the back of similar growth of 1.3% in October. Over the first 11 months of 2009, Australian home values rose by 11.3 per cent following on from their modest 3.8 per cent peak-to-trough falls in 2008.

The most important story of 2009 has been the extraordinary recovery in the Melbourne and Sydney housing markets. In the three months to end November, home values in Melbourne and Sydney have outperformed most other capitals rising by 4.5 per cent and 3.2 per cent, respectively.

Melbourne has been Australia’s best performing capital city outside of Darwin (+17.9 per cent). Canberra also had a strong year (+10.9 per cent), while Brisbane (+6.9 per cent), Perth (+6.5 per cent) and Adelaide (+5.7 per cent) all saw a moderate resurgence.

“At the end of 2008 most forecasters were predicting substantial house price falls in the following 12 months,” Christopher Joye, managing director of Rismark International, noted. “Almost all of them were proven wrong. Australia’s housing market has surprised on the upside with impressive double-digit capital gains in the year-to-date. The inability of most analysts to get close to divining Australia’s housing market trajectory during the GFC and in the recovery since, combined with the many misconceptions one typically hears about housing, illustrates just how poorly understood the sector is.”

Rpdata.com Research Director Tim Lawless suggested that the November results showed the Australian market may be less sensitive to interest rate rises and the removal of Government stimulus than many would have thought.

“The strong November results were achieved despite the 25 basis point lifts in the official cash rate in October and November as well as the wind back of the boost to the First Home Owners Grant which was halved on the first of October. First home buyers have been trending down since peaking in May ‘09 and the gap is being filled by upgraders and investors who are much less sensitive to rate rises and the level of stimulus.”

The RBA has since raised interest rates by a further 25 basis points in December and more rate rises are likely throughout the year.

Mr Joye said that as mortgage rates normalise to around 7-8 per cent, house price growth will taper back to more modest single-digit levels in 2010.

“Since many borrowers did not reduce their mortgage repayments in 2008-09 when the RBA cut rates by circa 40 per cent, household balance-sheets should be well positioned to absorb higher costs,” he advised.

A closer look at the data

The median Australian home price in all capital cities over the three months to end November was $439,800 (including houses and units). Across all regions in Australia, the national median dwelling price is $395,000.

The median Australian house price in capital cities is $470,000 while the median unit price is $390,000.

The most expensive houses, based on median price, are in Sydney ($550,000), followed by Canberra ($535,000), Darwin ($501,000), Melbourne ($486,400), Perth ($485,000), Brisbane ($449,850), Adelaide ($372,000) and Hobart ($330,000).

Sydney has the most expensive unit market with a median price of ($417,000). This is followed by Melbourne ($402,500), Canberra ($390,000), Perth ($385,000), Brisbane ($375,000), Darwin ($357,000), Adelaide ($310,000) and Hobart ($270,750).

National rental yields tapered slightly in November with the gross annualised rental yield for units being 4.9 per cent while house yields are lower at 4.1 per cent.