November’s market improvements should be taken with caution, says RP Data’s Cameron Kusher
Latest RP Data-Rismark Home Value Index results for November 2011 show the housing market improved in the combined capital cities over the month. On a seasonally adjusted basis, values increased by 0.1 per cent over November. The increase was the first monthly one since December 2010 and followed the first of two cash rate cuts in November and December.
Although the increase is encouraging, the market’s performance across individual capital city markets was quite varied. Home values recorded a monthly increase in Melbourne (up 0.2 per cent), Perth (0.5 per cent) and Canberra (0.4 per cent), while values were flat in Sydney and fell across all other capitals – by as much as 0.9 per cent in Darwin. It is also imperative to note that while home values increased in November, they remain 3.8 per cent below their peak, fell by 0.8 per cent over the quarter and were down by 3.5 per cent over the past 12 months.
The values increase is a positive development, but it’s only one month of data and what most home owners would like to see is a sustained recovery – or at least a lack of falls – over several consecutive months.
It is difficult to determine whether or not this is likely to occur under current economic conditions.
Other indicators suggest market conditions are yet to improve noticeably. In the combined capital cities, houses took an average of 53 days to sell, compared with 46 days at the same time in 2010. The level of vendor discounting in November was -6.9 per cent, compared to -5.9 per cent in 2010.
During the final week of November 2011, the total number of properties advertised for sale across the combined capital cities was 24 per cent higher than at the same time in the previous year. Any recovery in the housing market is likely to be hamstrung if the amount of stock available for sale remains at inflated levels.
Undoubtedly in the past and in the most recent instance (2008) when mortgage rates have been reduced, the volume of home buyers and home values has grown. While lower mortgage rates improve housing affordability, especially in comparison with rental costs, purchasers must be aware that lower rates are usually indicative of weaker economic conditions such as slowing economic growth and increasing levels of unemployment.