The release of the February home value results earlier this week by RP Data & Rismark showed an overall slowdown in performance for Australia’s major capital city markets. This week, research analyst Cameron Kusher shares his views on how these markets performed over this period, and what we’re likely to see across the remaining days of March.
Kusher noted that sellers are currently the major benefactors of the current housing conditions; proof of this is the lower number of properties for sale now than for the same period last year. Across the combined capital cities, vendor discounting at 5.6 per cent, has improved and properties are selling in relatively shorter periods of time compared to 6.2 per cent 12 months ago.
When we see lower levels of discounting at play, we are also seeing properties selling quicker; 54 days compared to 72 days a year ago. The number of newly-advertised capital city properties listed for sale is currently rising from a seasonally low point however; the amount of newly listed stock on the market is 7.8 per cent higher than at the same time last year. The total number of listings is also trending higher however, they are -8.8 per cent lower than at the same time last year. Total property listings are lower than a year ago in all capital cities except for Hobart and Darwin.
Another interesting take out from the February results is rental growth. Across the capital cities, rental growth is being significantly outpaced by the growth in home values; as a result, rental yields are easing. Over the 12 months to February 2014, capital city rental rates have increased by 2.4 per cent for houses and 3.4 per cent for units, well below the five year average annual rates of increase of 4.0 per cent for houses and 4.1 per cent for units. As sales volumes have increased, it is clear that rental pressures in the market are abating.
Looking forward, and based on positive economic data coming through, the likelihood of the Reserve Bank cutting rates further seems unlikely. We’re seeing the majority of economists now pushing back the timing of their predicted future rate cuts with some now forecasting that the next movement will be an increase. However, the RBA in its most recent decision has indicated that they see official interest rates being on hold for the foreseeable future.
Of course, if interest rates were to increase this may extinguish some of the current housing market exuberance. Furthermore the high level of investment activity is a further potential pitfall for the market. If value growth slows or potentially falls there is a risk that many of these investors could look to exit the market at the same time, potentially creating downwards pressure on home values.