RPData just released their end-of-year housing data for 2012 and it confirms what many MB readers already knew. 125bps over the last 12 months still hasn’t been enough to get traction under the market and as we roll into the “fiscally responsible” new year 2013 isn’t looking all that great either. The latest uptick in commodity prices should provide some support for national incomes, so that is a positive as long as it can last, but given what we’ve seen in the trend in credit since the GFC that may just result in further down payment of debt rather than increasing asset prices.
With governments across the country all hoping that housing construction will provide some economic support it’s going to be an interesting year for the housing market, but with immigration again on the rise and the RBA predicted to cut deeper they may still be some upside in 2013. For the bulls Sydney and Darwin are still looking good, for the bears there is everywhere else.
This overview from RPData
“Capital city home values remain -5.7 per cent lower than their historic highs of November 2010, however, dwelling values are up 1.8 per cent from their low of late May 2012.
“It is important to note that despite the fact that standard variable mortgage rates have fallen by an average of 85 basis points over the past year and by 135 basis points since October of last year, the housing market has still been unable to record growth in values over the year.
“Home values remain below their historic highs across each capital city and have increased at an averageannual rate of just 1.9 per cent over the past five years; it is clear that the previous strong value growthconditions to which many home owners became accustomed of recent years are well and truly behind us.
“Home values in Brisbane, Perth and Hobart remain below where they were five years ago, whereas the other mainland cities have all recorded significantly lower rates of growth in home values over the past five years thanthey did over the preceding five year period.” Mr Kusher said
Macroeconomic factors, both domestically and internationally, are likely to weigh heavily on the performance of the housing market throughout 2013. It has become clear that adjustments to official interest rates by the Reserve Bank are not having the same impact on consumers as they have in the past.
This is no real surprise given that households are saving around 10 per cent of their disposable income and are showing a preference for saving and paying down debt rather than spending. Consumer sentiment remains quite weak, although therehave been some recent improvements, and demand for credit is growing at extremely low levels with housing credit demand growing at an historic low level. Until these factors change, we can more than likely expectrelatively subdued housing market conditions, with growth rates likely to be somewhere between inflation andwages growth.Finally, rental growth has continued to outpace value growth over the past year.
Capital city dwelling rents have increased by 3.0 per cent over the past year and yields have improved from 4.2 per cent last year to 4.3 per cent currently. Investors are likely to focus more on yield maximisation over the coming year, and positioning for long term capital gains.
Full report below