Apartment prices fall 0.8%, houses up by 0.7% in December quarter: Australian Property Monitors

Yet another report showing housing prices remained flat during the final months of 2010 has been released, with new figures from Australian Property Monitors revealing apartments dropped by 0.8% in the December quarter, while house prices were up by 0.7%.

APM economist Andrew Wilson says the lacklustre performance in units, with growth of only 2.1% over the year, is due to a range of factors including low yields and an influx of stock.

“With apartments, I think we saw the final wave of first home buyers move out of the market. Apartments tend to be an entry-level type dwelling, and over the last couple of years the more expensive penthouse types have moved out of the marketplace.”

Hobart suffered the worst falls in apartment prices, falling 9.6% during the quarter to a median price of $238,786. Perth also recorded declines of 3.9%, with Brisbane prices also falling by 0.3%. Melbourne prices fell by 0.3%, with Sydney prices flat.

Adelaide was the only city to record growth during the quarter at 2.7%.

“Finance figures also show investor loans were down from right about May,” Wilson says

“We’ve also seen a record relationship between deposit rates and lending rates… there was a lot of money into term bank deposits. These were tempting options to investors.”

“Of course, yields have started to flatten as well.”

Wilson also points to an influx of apartments set to come on the market in Melbourne during the first six months of the year, which should curb apartment price growth in that market during the next year or so.

“The supply of new stuff there is better than in other capitals,” he says. “You would assume there would be a requirement to absorb new stock there, and that will take a quarter or two to happen in Melbourne.”

The disappointing house price growth was also expected. Over the year, house prices grew by just 6% nationally, the figures show.

The best performance was in Melbourne at 14% for the year, with Canberra following at 7.1%, Sydney at 5.7%, Adelaide at 4.4% and Hobart at 4.1%. Darwin also recorded a slight gain at 1.2%.

Perth prices fell by 1.4%, while Brisbane prices also fell by 1.3%.

But Wilson says the quarterly figures are much more representative of what the market will be like for the next six months, especially as the Reserve Bank keeps interest rate movements on hold.

“We’re not in a boom here. There is buyer momentum. But we saw there was a last gasp in the December quarter, and that faded with the interest rate rise. What we’re projecting is that the market will pause to catch its breath, especially in Melbourne.”

Housing prices grew at their most in Hobart at 2.6% to $312,216, with Melbourne prices up by 2.1% to $574,850 and Canberra prices up by 1.7% to $577,870. Prices fell in Perth by 1.5% to $508,592, and in Brisbane by 1.4% to $442,798.

Wilson says the quietest markets will be Melbourne and Brisbane. Melbourne’s auction clearance rates have dropped right back following a hot year, and he says the sheer amount of stock will keep prices low.

“There is no doubt that there is more stock and that has kept downward pressure on prices. And you also see the median price in Melbourne is only about $60,000 below Sydney, which has higher incomes, so the gap has closed there. That’ll take time to adjust.”

Wilson also says the possibilities for growth in Brisbane remain “problematic” due to the impact of the floods and the large amount of stock.

However, Perth is expected to see some solid growth this year.

“There is going to be a lot of work in Perth this year, with resource projects and so on. And when that labour starts, we’ll see net migration rise. The level of this is significant enough that we should see some growth there.”