Australian home prices rise by +1.1% in November with 11.3% cumulative growth in first 11 months of 2009; results driven by robust gains in Sydney (+11.6% for year) and Melbourne (+17.0% for year).
Australia’s housing market continued to grind out strong gains in the month of November with cumulative double-digit growth recorded in the year-to-date.
According to the RP Data (rpdata.com)-Rismark National Home Value Index, which is published by the RBA in the Statement on Monetary Policy, Australian home values rose by an indicative 1.1 per cent in the month of November after 1.3 percent growth in October.
Over the first 11 months of 2009, Australian home values rose by 11.3 percent following on from their modest 3.8 percent peak-to-trough falls in 2008.
The most important story of 2009 has been the extraordinary recovery in the Melbourne and Sydney housing markets. In the three months to end November, home values in Melbourne and Sydney have outperformed most other capitals rising by 4.5 percent and 3.2 percent, respectively.
Over the year-to-date, Melbourne has been Australia’s best performing capital city outside of Darwin, generating exceptional capital gains of +17.0 percent. Sydney home values have increased by more than 1 percent per month with cumulative growth of 11.6 percent.
In the first 11 months of 2009, most of the other capital cities have performed strongly with Darwin (+17.9 percent) leading the way, followed by Canberra (+10.9 percent), Brisbane (+6.9 percent), Perth (+6.5 percent) and Adelaide (+5.7 percent).
Expert thoughts
According to Christopher Joye, managing director of Rismark International, “At the end of 2008 most forecasters were predicting substantial house price falls in the following 12 months. Almost all of them were proven wrong. Australia’s housing market has surprised on the upside with impressive double-digit capital gains in the year-to-date. The inability of most analysts to get close to divining Australia’s housing market trajectory during the GFC and in the recovery since, combined with the many misconceptions one typically hears about housing, illustrates just how poorly understood the sector is.”
Rpdata.com Research Director Tim Lawless suggests that the November results highlight that the Australian market may be less sensitive to interest rate rises and the removal of Government stimulus than many would have thought.
“The strong November results were achieved despite the 25 basis point lifts in the official cash rate in October and November as well as the wind back of the boost to the First Home Owners Grant which was halved on the first of October. First home buyers have been trending down since peaking in May ’09 and the gap is being filled by upgraders and investors who are much less sensitive to rate rises and the level of stimulus.”
Christopher Joye said, “First time buyers have been fading from the market and the withdrawal of the boost has yet to have any discernible impact on price growth. The key driver of Australian housing demand in the latter half of the year appears to have been upgraders and investors. We expect this trend to continue in 2010.”
He said that as mortgage rates normalise to around 7-8 per cent, house price growth will taper back to more modest single-digit levels in 2010. Since many borrowers did not reduce their mortgage repayments in 2008-09 when the RBA cut rates by circa 40 per cent, household balance-sheets should be well positioned to absorb higher costs.”
Rpdata.com’s Tim Lawless agreed stating that value growth in Australia’s residential sector is likely to be more subdued than what was recorded in 2009, “2009 has been both an exceptional and surprising year for Australia’s property market.”
“Looking forward we would expect market conditions to moderate into 2010 as interest rates continue move back to a neutral setting and the remainder of the Government stimulus is rolled back. The primary driver of growth will continue to be an under supply of housing coupled with extraordinary housing demand fuelled by population growth,” he said.
Market dynamics
The median Australian home price in all capital cities over the three months to end November was $439,800 (including houses and units). If we include all regions across Australia (i.e. not just the circa 40 percent of homes located in capital cities), the national median dwelling price is $395,000. (Note: that these are the ‘middle value’ or 50th percentile median prices based on the pooled sales over the last three months.)
The median Australian house price in capital cities is $470,000 while the median unit price is $390,000.
The most expensive houses, based on median price, are in Sydney ($550,000), followed by Canberra ($535,000), Darwin ($501,000), Melbourne ($486,400), Perth ($485,000), Brisbane ($449,850), Adelaide ($372,000) and Hobart ($330,000).
Sydney has the most expensive unit market with a median price of ($417,000). This is followed by Melbourne ($402,500), Canberra ($390,000), Perth ($385,000), Brisbane ($375,000), Darwin ($357,000), Adelaide ($310,000) and Hobart ($270,750).
In the month of November, detached houses (+1.0 percent) have underperformed units (+1.3 percent).
Over the three months to end November, unit values (+3.1 percent) have also shaded houses (+2.9 percent).
And in the year-to-date, units (+12.5 percent) have materially outperformed houses (+10.9 percent) presumably due to the influence of the first time buyers’ boost.
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