House prices flat in February

The housing market continues to tread water, with the release of RP Data and Rismark figures showing prices didn’t grow at all during February, and rose by just 0.8% over the previous 12 months.

The best performing capital city during the February quarter was Sydney, but it only managed to record a seasonally adjusted 0.3% increase in prices, while Darwin suffered a much worse fate, with prices down 9%.

RP Data senior research analyst Cameron Kusher said in a statement the subdued capital growth is likely to continue for the foreseeable future, with values having “hardly moved” at all.

“Auction clearance rates have been a little weak, the number of homes advertised for sale is at the highest level it has been since we started collecting this data, and other lead indicators, such as the time it takes to sell a home… are climbing again.”

Kusher added that conditions are ripe for prospective investors, and said the large stock of homes could give potential buyers “increasing scope to negotiate on price”.

Over the February quarter, Sydney prices rose 0.3% to $500,000, and was the only city to record an increase in values.

Melbourne prices fell 1.8% to $474,000, Brisbane fell 3.3% to $434,000, while Adelaide prices dropped by 1% to $390,000.

Perth values fell 1.9% to $465,000, Darwin prices plummeted 9% to $434,500, Canberra dropped 2.5% to $507,500 while Hobart dropped 4.5% to $300,000.

RP Data said the interest rate hike in November, combined with the natural disasters, has made the last quarter particularly difficult. Across all capital cities home values are down by 1.3% in seasonally adjusted terms, while rest-of-state values are down by 0.9%.

The median dwelling price in capital cities is now at $459,000, down from a peak of $473,000.

Kusher points out the higher number of repossessions in Perth and south-east Queensland has also impacted the performance in those areas – Perth values are now 0.7% below their December 2007 numbers.

Rismark joint managing director Christopher Joye says the data, combined with figures showing disposable income growth has been set at 6.3% since 2003, shows the market is sustaining a reasonable house-price-to-income ratio.

“Australian home values have therefore underperformed disposable household income growth by a striking 1.1% per annum since 2003,” he said.

“In cumulative terms, Australian household incomes have risen by 11 percentage points more than Australian dwelling values over this period.”

He also said that if changes had been measured using the regression-based hedonic indices rather than averages, the house-price-to-income ratio would have actually declined.

Kusher agreed, saying that when you compare Australian inflation – which was at 2.7% in the year to December 2010 – property values have been declining.

The RP Data-Rismark figures found gross apartment detached house yields were down by 4.8% and 4.2% respectively. Melbourne recorded the weakest result in the apartment market at just 4.2%, with Hobart the strongest at 5.8%.