June 2012 saw a strong growth in home values for most capital cities (with the exception of Darwin and Canberra) indicating a possible turnaround in the property sector for some regions. This improvement is likely to be linked to the recent interest rate cuts by the RBA.
The RP Data-Rismark Home Value Index results for June 2012 showed capital city home values increased by 1.0% over the month, not quite reversing the -1.4% fall in May. The month-on-month increase in values was the largest since March 2010 when we saw a 2.0% jump in the index.
Adelaide and Darwin were the only capital city markets where values fell, down -1.1% and -0.7% respectively. Darwin's price correction however did not seem to affect rental prices with the average rental yield for houses at 5.9% – the highest of all capital cities in Australia.
Estimates show that the number of sales transactions in April 2012 was 9% lower than the five year average (nationally) and 28% lower across the combined capital cities. While stock levels are still high, the property market as a whole may possibly be improving due to stock levels decreasing from their record highs of the previous year. Purchasers are therefore spoilt for choice, allowing a stronger negotiating position through heavier discounting.
Renters are likely to face continuing cost pressures particularly in Perth and Darwin as well as across select dwelling types in other capital cities. Perth rents are up 15.2% over the twelve months to May 2012 and Darwin rents are up 8.3%.
With subdued house prices and historically low interest rates, it may be an excellent opportunity for current renters in certain areas to look into home ownership.
While the cash rate has been steady for the past 2 consecutive months in July and August, it's still expected that there is likely to be further interest rate cuts by the RBA which may help to improve market conditions further. Buyers still hold the upper hand when it comes to purchasing a home; there is plenty of stock to choose from and a lack of competition amongst buyers which means discounting and selling times are likely to remain at higher than average levels.
Looking at the property market data, it may indicate that the Australian housing markets are likely to remain relatively flat with regards to capital gains over the coming year. As always, there is likely to be a continued divergence of performances from city to city and region to region.
Your local Mortgage Choice broker can provide you with more detailed property market information such as rental yields, median sale price as well as % stock and time on market for specific suburbs of your choice. For current renters, it may be worthwhile asking your broker to provide calculations as a basis of comparison against mortgage vs. current rental repayments.
Thorough research on the area as well as your finance options are imperative when it comes to a major purchase decision such as property, so it pays to have an obligation-free chat with us.
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