Values adjust as market gains

Home values adjusted slightly in April but the market continues to gain in strength and confidence, according to figures released this week.

The latest RP Data/Rismark Home Value Index shows that dwelling values settled back 0.5 per cent in April, after posting a solid 2.8 per cent gain over the first three months of 2013.

The result brings the rolling quarterly movement in capital city dwelling values back to a more sustainable 1.1 per cent. Since the housing market reached a recent low point at the end of May last year, capital city dwelling values have recovered by 4.2 per cent.

According to RP Data’s director of research, Tim Lawless, the April results represent more of a stumble along the path to recovery than a sign of a renewed trend in value falls.

Softer capital city dwelling values were recorded across every capital city apart from Adelaide where dwelling values were up 2.8 per cent over the month and in Darwin where values rose by 0.2 per cent.

Across the major cities, Sydney values were down 0.4 per cent over the month, Melbourne values saw a 0.5 per cent drop, Brisbane values were down 0.7 per cent and Perth values recorded a 2.5 per cent fall.

At the combined capital city level, the performance of the detached housing and unit markets has been very similar. House values are up 2.7 per cent over the past 12 months while unit values have risen by a slightly lower 2.5 per cent.

Over the March quarter the house and unit markets performed virtually the same, with house values rising 1.0 per cent while unit values are up 1.1 per cent.

Rental prices continue to trend higher with most cities recording an increase in rents. Across the combined capital cities, house rents were up 1.4 per cent over the three months ending April and unit rents were up 1.3 per cent.

Despite the improvement, gross yields across the combined capital cities have held fairly firm, due to the fact that dwelling values are also rising.

On a total return basis (that is, capital values plus gross rents) the national market is now 8.3 per cent above its May 2012 lows and 6.9 per cent above the previous market high of October 2010, according to Rismark spokesman Ben Skilbeck.

“While capital returns for the last 12 months are a modest 2.7 per cent, total gross returns over this period of 7.1 per cent are compelling in an environment where 5-year fixed rate loans can be obtained for as low as 5.39 per cent p.a.", Skilbeck said.

"Overall the housing market is in much better shape than it was a year ago where values were still falling and market sentiment was very low.

“Despite the weak April results we are in a market where auction clearance rates are consistently higher than 60 per cent nationally and around the 70 per cent mark in Melbourne and Sydney.

“Vendors aren’t discounting their asking prices as much as they were a year ago, providing further evidence that buyers and sellers are starting to find some even ground,” RP Data’s Tim Lawless added.

"Importantly, our estimate for transaction volumes for the month of February was tracking about 8 per cent higher than a year ago, highlighting the fact that buyers are stepping off the sidelines”, he concluded.