Australia Capital Cities down 2.1% on March Quarter Seasonally Adjusted

Houses down. Rents up.
30 April 2011 RP Data – Rismark Home Value Index Release

The latest RP Data-Rismark Home Value Index results show capital city dwelling values were flat in the month of March (-0.2 per cent s.a. and 0.0 per cent raw). However, over the March quarter capital city home values softened noticeably (-2.1 per cent s.a. and -0.4 per cent raw).

In the non-capital city regions the story has been similar. In the year to end March 2011, ‘Rest of State’ house values were relatively unchanged (-0.5 per cent s.a.). However, the March quarter was a weaker one, with house values declining by -1.8 per cent s.a. (-0.7 per cent raw).

At the end of the March quarter, in the capital cities the national median dwelling price was $455,000. For all regions across Australia, the national median dwelling price substantially lower at $410,000.

This is followed by lots of pixels being spilled praying for a soft landing.

“Clearance rates are bouncing around the low fifty percent mark each week, the number of homes being advertised for sale is almost 30 per cent higher than at the same time last year, and sellers are being forced to adjust down their price expectations. Before there is any real upwards pressure on home values there will need to be some absorption of effective supply and a return of sustained buyer confidence to the market,” he said.

Wait, where's the housing shortage?

“In contrast to the fall in home values, gross rental yields have been improving with apartments and houses now delivering a gross return of 4.9 per cent and 4.2 per cent, respectively, in March 2011 according to RP Data-Rismark’s estimates,” Mr Lawless said.

A normal recommended rental yield is 7%, absent capital growth potential. This doesn't include the tax benefits of negative gearing. Tolerance for low rental yields seems the norm in Australia. There's been noise about changing the negative gearing rules, but I doubt anyone would take such action at a time like this, given the shock it would cause to the market (rents are actually sensitive to supply and demand, so rents won't be the side of this equation to give if negative gearing is no longer favorable).