Much more stoic than most realise.
The best measure of data on residential prices, the RPData-Rismark Hedonic Index, shows that Australian house prices fell just 0.2%last month. This equates to an actual drop of $1,200 against a median dwelling value of about $525,000. Even on a quarterly basis, the drop is just 0.9% or $4,700.
This effectively means no change. Amazing, really, given the low level of confidence, the high level of advertised stock for resale and the persistent warnings of a real estate Black Friday. The year-on-year result is a fall of just 2% or $10,600. Even Brisbane, with the impact of the recent flood weighing down its property market, has fallen just 2.6% or by $11,600 since January. The Australian sharemarket can fall more than this in a single day.
In addition, RPData's index, suggests that maybe the worst is behind us, with the monthly and quarterly results starting to trend upwards. This recovery is likely to be slowerthan those in the past, as many markets are now priced over $500,000, which presents an affordability barrier to many buyers and especially investors and first home buyers. It will take some time before wages grow enough to start pushing dwelling prices.
Over the last seven years, Darwin's dwelling values grew the most, up 100%; whilst Sydney's grew the least, up by about 25%. Most markets since mid-2005 enjoyed a lift in end prices of between 35% and 60%.
Interestingly, detached houses experienced the same rate of capital growth as attached product, although of late, apartmentsare gaining the upper hand. Gross rental yields are starting to improve for apartments (compared to a slight deterioration for detached homes), so this divergence might start to accelerate.
Recent research by Rismark shows that just one in 14 resales across Australia over the last decade made a loss. Importantly, close to half of the sellers since early 2000 made an annual gain of over 10% per annum. Keep in mind that capital growth can be deceptive, as most measures exclude inflation, costs, taxes and charges. But still, the results are encouraging.
The time is right to buy. But you must be able to comfortably service a mortgage at least 1% higher than today's rates. Also, you need a long timeframe; the buying power to afford a property close to infrastructure, and one which can be shared by tenants in order to maximise yourrental return.
The Matusik Snapshot is opinion and not advice. Readers should seek their own professional advice on the subject being discussed. Comments are welcome, contact me on michael@matusik.com.au
