Affordability lifts as prices drop
Residential property values continue to drop, according to the latest RP Data-Rismark Home Value Index.
Released this week, the Index shows a fall of 1.4 per cent in dwelling values over the month of May 2012. The latest drop brings the cumulative decline to -2.2 per cent over the first five months of 2012 and -5.3 per cent over the past twelve months.
The May falls in value were spread across every capital city except for Adelaide, where dwelling values bucked the trend, improving by 1.2 per cent. Melbourne recorded the weakest market conditions over the month with dwelling values down 2.7 per cent in May.
Much of the weakness is confined to the detached housing market rather than apartments.
According to RP Data’s research director Tim Lawless, unit values have been much more resilient to value falls compared to houses.
"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", Mr Lawless said.
"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," he added.
The stronger performance across more affordable markets is also evident in the results from the RP Data-Rismark Stratified Hedonic Home Value Index. This index provides a summary of how dwelling values have changed across the most expensive 20 per cent of capital city suburbs, the middle 60 per cent of suburbs and the most affordable 20 per cent of suburbs.
According to Mr Lawless, premium dwelling values have fallen by -6.1 per cent over the twelve months ending April 2012 while dwelling values at the affordable end of the spectrum are down by just -1.5 per cent.
Rismark managing director Ben Skilbeck, however, pointed out that housing affordability is showing a marked improvement.
"The combination of interest rate reductions, declining home values and disposable income growth has significantly improved affordability", Mr Skilbeck said.
"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."
Rental yields are also showing some improvement, not just on the back of lower home values but also higher rents, while other housing market indicators are showing some positive signs that conditions might move towards stability.
Mr Lawless noted that each of the key vendor metrics analysed in producing the Index have improved over the month.
"Vendor discounting has reduced from a peak of -7.9 per cent to -7.1 per cent which suggests that vendors are becoming more realistic about price expectations on their home.
"The average number of days it takes to sell a property has also fallen from the seasonal highs recorded earlier this year – the typical capital city house is now taking 63 days to sell compared with 70 days last month."
He concluded by pointing out that auction clearance rates have also levelled around the 50 per cent market compared with an average of about 45 per cent throughout the second half of 2011.