June 01, 2012
Canberra house prices recorded a larger than average fall in May, but are down less than any other capital city over the past year, new figures show.
The latest RP Data-Rismark home value index, published this morning, said the housing market had not responded to the latest round of interest rate cuts, prompting one analyst to predict even more cuts will be on the way. The Reserve Bank meets to consider rates on Tuesday, a month after cutting 50 basis points from the official cash rate.
The new report showed that capital city home values were down 1.4 per cent, while Canberra values dipped 1.5 per cent.
ACT values are now down 1.7 per cent over the past three months, and by 0.9 per cent compared with a year earlier. Nationally, values are 5.3 per cent lower than a year ago.
Canberra house values took a bigger hit than unit values, dropping 1.6 per cent and 0.8 per cent in May respectively.
The median price for sales over the past three months in Canberra is $495,000 – the second highest behind Sydney's $555,000. Houses had a median sale price of $519,00 and units had a median of $420,000.
RP Data research director Tim Lawless said that much of the weakness had been confined to the detached housing market rather than apartments, where values had been much more resilient. Nationally, unit prices were up an average 1 per cent in May.
“It is clear that the market is becoming increasingly price point driven. Unit values across the combined capitals increased in May and they are up by 1.3 per cent over the first five months of the year. Based on median prices, unit prices are generally around 15 to 20 per cent lower than house prices. Investment yields also tend to be higher and units are often located more strategically compared with their detached counterparts,” Mr Lawless said.
This was backed up in further national data, showing values were falling by proportionally much more in the more expensive suburbs.
CommSec chief economist Craig James said that there were opportunities in even the weakest economic environments.
“Houses are out of vogue; apartments are in demand. As a result apartment prices are rising. Investors have to come to grip with the new reality: Gen Y wants to live close to their workplaces, cafes and entertainment venues,” he said.
Rismark managing director Ben Skilbeck said housing affordability was showing a marked improvement.
“The combination of interest rate reductions, declining home values and disposable income growth has significantly improved affordability. Since dwelling values peaked in November 2010, they are down by -7.6 per cent, the RBA cash rate has fallen from 4.75 per cent to 3.75 per cent and disposable income per household has increased by over 5 per cent,” Mr Skilbeck said.
Mr James said the results confirmed that the housing market was “becalmed”.
“Something more than rate cuts will be required to help housing. There is a crisis of confidence, with underlying housing demand reasonably solid but home-owners, investors and developers haven't got the confidence to build. Federal and state governments need to come up with a comprehensive Australia-wide solution to kick start the housing sector,” he said.
He predicted another rate cut “of at least 25 basis points”.
“We have also pencilled in another rate cut in August,” he said.
Each 25 basis point cut – if passed on in full – would save a homebuyer almost $50 a month in repayments on a 25-year $300,000 mortgage.
HSBC chief economist Paul Bloxham said last night that he thought it unlikely the Reserve would drop rates again next week, so soon after cutting 50 basis points last month.
"We are yet to see the impact of this on the economy. Indeed, almost all of the available economic data pre-date the May cut. Given the time lag in processing, many households are actually yet to see last month's rate cut in their required mortgage repayments," he said.
However, he expected further rate cuts later this year.
"Given downside global risks, we are shifting our rates profile and now expect a further 50 basis points of cuts in [the second half of the year]. Of note, this is still significantly less than the 150 basis points of cuts currently priced in [by the financial markets] by year-end. As we pointed out at the beginning of the year, global risks were the 'elephant in the room'. The elephant has clearly grown larger since then."