Consumers remain cautious as we enter 2012, says RP Data’s’ Cameron Kusher
2011 was certainly a tough year for the residential property market with property values falling across most capital cities and regional markets and the number of transactions also decreasing in most regions.
According to the October results of the RP Data-Rismark Home Value Index, capital city home values fell by -4.0 per cent over 2011 with Brisbane experiencing the greatest magnitude of falls at -7.5 per cent and Canberra the only market to record an increase in home values over the first 10 months of 2011 (0.9 per cent).
Although property values have generally fallen, over the first 10 months of 2011 there has been some growth in rents prevalent in the market. Rental rates have risen by 5.2 per cent over the first 10 months of the year with house rents increasing by 5.4 per cent and unit rents increasing by 4.6 per cent.
Hobart is the only city in which rental rates have fallen over 2011 (-5.5 per cent) whereas rental growth has been most robust in Perth (11.8 per cent).
Regional markets in coastal locations, particularly those linked with the tourism sector are likely to continue to underperform. Again, we don’t believe that the conditions they are likely to experience will be as bad as those which they have incurred over recent years.
The national market is likely to be characterized by continuing soft conditions in 2012. Although interest rates have been reduced and many anticipate they will fall to lower levels we don’t believe that these conditions will necessarily be conducive to growth in property values.
Although lower interest rates improve housing affordability we believe most will remember how quickly the Reserve Bank lifted rates coming out of the GFC and will be wary about speculating within the housing market.
Consumers are well and truly acting cautiously, saving at around the highest levels since the mid 1980’s. Credit and debit card statistics also show that consumers are showing a preference for using their own money rather than the banks’.
The availability of housing credit seems unlikely to improve significantly over the coming year given the European Debt Crisis and ongoing economic woes in the United States.
Overall, we forecast that growth will be limited with values potentially falling further in certain areas. In those areas where values do increase they are likely to grow at a rate below inflation.