Home prices surge to record highs
September 30, 2009
Australian property values jumped by almost 2 per cent in August in the largest monthly movement since the RP Data-Rismark Home Value Indices began in January 2005.
Australia’s largest housing database showed the recovery has been swift, with strong capital gains registered across the country despite evidence of fading first home buyer numbers. Home values in Australia rose by 1.9 per cent during the month of August, bringing cumulative capital growth in the first eight months of 2009 to 7.9 per cent.
Tim Lawless, rpdata.com research director, said the August results surprised on the upside and were a sign of buyer confidence and a lack of supply.
“These buoyant conditions sit in striking contrast to the same time last year when values were falling, less than half of the auctions held cleared and sales volumes were at rock bottom. We are now seeing home values rising at a solid rate, almost 80 per cent of auctions are clearing, and sales volumes have bounced back significantly,” he advised.
Low mortgage rates, stimulus packages, economic recovery, limited supply and strong population growth have created the perfect environment for rising house prices.
Australian home values have now risen 3.8 per cent past their February 2008 peak, after a fall of 3.8 per cent last year when there were dire predicitions of an imminent economic armageddon.
Rismark International Managing Director, Christopher Joye, added that the assertions of artificial inflation from first home buyers now seemed far from the truth as investors pick up the slack.
“In contrast to claims that this is a first time buyer bubble, the cheapest 20 per cent of suburbs in Australia have actually underperformed both the mid-priced market and Australia’s 20 per cent most expensive suburbs since the housing market bottomed in December 2008,” he noted. “As recently noted by the RBA, all major lenders now require a minimum 10 per cent deposit and are applying the strictest credit standards we’ve seen in over a decade.”
“Australian housing credit growth has also been running at levels that are extremely low by historical standards and noticeably less than the growth experienced in the 1991 recession.”
Over the last three months the premium residential market increased in value by 4.5 per cent compared with a 3.4 per cent gain in the middle market and a 2.8 per cent improvement at the cheapest end. However, the premium end is still 1.1 per cent off highs thanks to a miserable end to 2008.
The market researchers are now expecting more moderate growth in the medium term.
Other key findings from the August RP Data-Rismark Index results:
- Unit values (+2.1 per cent) outperformed houses (+1.8 per cent) in the month of August. Over the course of 2009, units (+8.5 per cent) have also generated slightly higher capital growth than houses (+7.7 per cent).
- Most capital cities recorded robust gains in the month of August with every single city experiencing rises in home values during the first eight months of 2009.
- After several years of subdued growth following the end of Australia’s last housing boom in 2003, home values in the two major capital cities, Melbourne and Sydney, have led the recovery in 2009 with total capital gains of 11.6 per cent and 8.6 per cent, respectively.
- Following Melbourne, Darwin has been the next best performing capital city with growth of 9.7 per cent in 2009. Home values in Canberra (+6.7 per cent), Brisbane (+5.2 per cent), Perth (+4.1 per cent) and Adelaide (+3.1 per cent) have also realised sustained gains in 2009.
- National rental yields have softened slightly given the strong capital growth with the gross annualised rental yield for units being 5.1 per cent while house rental yields are slightly lower at 4.3 per cent.