Shaky housing finds February footing

by Adam Smith02 Mar 2012

Housing declines in January have been offset by a solid February, but the result has left the market flat.

The inaugural RP Data – Rismark Hedonic Daily Home Value Index has indicated a slight rise for the market for February, reversing declines at the start of the year. Capital city values notched up an 0.8% rise for the month, all but erasing the 1% decline they saw in January.

RP Data research director Tim Lawless said Reserve Bank cuts have helped to stabilise – not to supercharge – housing values.

“While the rate of decline in Australian home values has eased in 2012, conditions remain soft across most capital cities. The November and December RBA cash rate cuts have improved affordability but have not yet fed into higher home values, which is no surprise. A return to housing market stability is likely the outcome the RBA was hoping for,” he said.

Rismark’s Ben Skillbeck agreed, and said the market was showing signs of life even before the Reserve Bank moved on rates.

“The strong February results, accented by capital gains in Melbourne and Sydney of 1.8% and 0.8%, respectively, likely reflect the impact of the November and December rate cuts. Even before the RBA reduced rates, housing finance flows were staging a rebound with the ABS reported seasonally-adjusted number of new home loans approved for people buying established dwellings rising for nine consecutive months,” he said.

Capital city values have still seen a 4.4% year-on-year decline, with markets ranging from 0.4% increase in Canberra to a whopping 8.3% decline in Hobart. But Lawless said higher rental yields have helped to offset capital losses, and pointed to signs that shakiness in the housing market may be lessening.

“Auction clearance rates aren’t moving any lower. In fact, last week’s clearance rate was above 50% for the first time since July last year. Average selling time and vendor discounting rates have generally been improving and listing volumes, although elevated, haven't bounced back to the highs recorded late last year. Transaction numbers were showing some improvement prior to the December/January slowdown in line with better housing finance commitments, which also suggests some confidence is returning to the market,” he said.

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