RPData August analysis

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As noted earlier by Data Sword, the latest RPData index was out today and as usual he has done an excellent job in the analysis. The press release is also out (available below) and as usual I like to provide a bit of analysis outside the data.

The results certainly shouldn’t come as a surprise to any of our readers and anyone from Melbourne was well warned by the Unconventional Economist about the risks in that market.

Canberra (+1.9 per cent s.a.), Darwin (+0.6 per cent s.a.) and Sydney (+0.1 per cent s.a.) bucked the soft trend set by the other cities, which, led by Melbourne homes (down -1.4 per cent s.a.), all registered declines during July.

Over the first seven months of 2011, Australian capital city home values were down -3.4 per cent. According to RP Data research director Tim Lawless, this national result conceals wide divergences across the individual cities.

Mr Lawless pointed to the example of Melbourne homes, which after rising by a stunning 29 per cent over 2009 and 2010 had now corrected by -5.3 per cent in 2011. In contrast, dwelling values in Canberra had actually risen in value by 1.8 per cent over the course of 2011.

Over the 12 months to July 2011, Australian capital city home values are off -2.9 per cent. Mr Lawless said that it looks like a multi-speed housing market: Brisbane (-6.6 per cent), Perth (-6.3 per cent), and Melbourne (-4.3 per cent) have all experienced significant declines over the last year, whereas the 35 per cent of Australia’s capital city population that lives in Canberra (+1.9 per cent) and Sydney (+0.5 per cent) had realised capital gains.

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It should be noted that some cities such as Perth and Brisbane have now been falling in value for over 12 months so the YoY values are not the total “from peak” falls. I think it would be valuable if RPData produced this information as it would be useful in assessing the true state of the property market at this point.

I also wonder about the difference between the graph in today’s press release and the one in RPData’s latest quarterly report (shown below) that was released just one week ago. Given that as far as I can tell the raw data has larger QoQ falls than the seasonally adjusted in the press release containing the June data, I am finding it quite difficult to work out exactly what this chart represents.

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I am also finding it increasingly difficult to read Mr Joye’s commentary on the property market. Back in July’s press release he stated

Rismark’s economist, Christopher Joye, added, “We think the RBA is likely to raise rates at least once or twice more to address Australia’s burgeoning inflation problem, which means dwelling values will probably soften a bit further. This should open up attractive investment opportunities.”

And in today’s:

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“If rates do remain on hold, or begin to fall, we would expect to see Australia’s housing market find a base and begin to generate capital gains again. If the RBA has really come to the end of its tightening cycle – which we would find surprising given the high core inflation revealed over the last six months – 2011-12 will likely be judged one of the best buying windows seen in quite some time. The turning point will arrive when otherwise hawkish Australian consumers accept the notion that rates are not going to inexorably increase,” Mr Joye said.

Up is up, down is up . Interesting analysis.