House prices climb 1.8% during January quarter as demand soars

National housing prices have started the year with confidence, growing by 1.8% during January equating to an annual rise of 11.8%, the latest RP Data Rismark Hedonic Home Value Index reveals.

While the report claims only a small sample of sales were used due to the seasonal summer slowdown, RP Data national director Tim Lawless said in a statement the “residential market has started the year with some confidence”.

The report also shows values rose by 2.4% for the three months ending January, but rental yields have declined.

“Week-on-week, we are seeing an increase in the number of new property advertisements coming to the market. While new stock has been increasing rapidly, the total number of properties available for sale has been falling which is an indicator that buyers are for the time being outweighing sellers and new supply is being quickly consumed.”

“In addition, auction volumes are higher than at the same time last year and the national weighted clearance rate last week was a very healthy 73%.”

The report shows the best performing capital city was Darwin, with values rising 4.6% over the quarter to $475,000, with the worst performing city Perth with values declining 0.6% to a median of $472,500.

Melbourne prices rose 4.3% to $455,000, with Canberra also rising 4.3% to $489.250. Adelaide rose 3.2% to $379,600, Brisbane gained 1.8% to $440,000, Sydney rose 1.7% to $494,500, while Hobart lost 0.1% to $320,000.

The highest rental yields were in Darwin, with a gross yield of 5.7% for houses and 5.9% for units, while the lowest were in Melbourne and Perth with 3.8% for houses, with the latter only recording 4.2% for units.

The report shows that over the year, Australian properties have gained 11.8% in value.

Melbourne is at the top with a 17.6% rise, followed by Darwin and Canberra at 15.6% and 14.7% respectively. Sydney values rose by 10.7%, Hobart by 9%, Brisbane by 8.5%, Adelaide by 8.3% and Perth by 7.1%.

Rismark International chief executive Christopher Joye said in a statement while the January results are “thin”, there is still no sign of a sustained cooling off period for the market.

“The RBA Governor recently noted that while Australian house prices have risen ‘smartly’ during the last year, credit growth is not excessively strong while lending standards are tightening rather than deteriorating. That is, Australia is not experiencing a credit-fuelled asset price boom.”

“Rismark’s affordability index shows that Australian house prices are around 4.1x disposable incomes, which is where they have been for the last six years. In my debate with Steve Keen this week I argued that anyone wanting to stimulate media hysteria by spruiking a house price bubble needs to at least back up their claims with objective analysis, which I have yet to see.”

Lawless added the gross rental yield for houses has fallen from 4.7% in January last year to 4.2% in January 2010, with gross rental yields for units down from 5.3% to 4.9%. He said the market is beginning to stabilise.

“We are beginning to see the first signs that the softening of yields is slowing and, in some cities, yields are now beginning to improve.”

“With rental demand likely to be higher during 2010 due to continuing strong migration and fewer first home buyers, we anticipate that rents and consequently yields, will improve over the year.”