The two faces of housing data

RPData’s latest newsletter highlights that the housing market is falling unevenly, with the top of the market taking a bigger hit than the rest of the market at this stage.

With the premium market underperforming, many of the higher priced capital city regions have recorded a significant decline in median house prices since they peaked whereas more affordable markets are recording better housing market conditions.

During the March 2011 quarter, the median house price across the combined capital cities was recorded at $478,000. Recent results from the RP Data – Rismark Home Value Indices have also shown that the premium housing market is currently the weakest performer. Over the 12 months to April 2011, the 20% of most expensive suburbs within the combined capital cities recorded a value fall of -5.4% compared with a -0.5% fall at the most affordable end and -0.9% decline across the broad middle 60% of the market.

Over the year to April 2011, capital city home values have fallen by -1.5%, given this, there are many regions across the capitals that have recorded a decline in housing prices. As always, there are also a number of regions that have continued to record growth in median selling prices.

Although I think it is a little statistically dubious to talk about medians in low volume markets, there certainly does seem to be a problem at the top-end of the market. However, this isn’t exactly a new phenomena. RPData’s own charts from a previous media release shows that the top 20% of the market rides the “highs higher and the lows lower” (red line-second chart ). The other sectors of the market follow the same trend but at a lower variance.

RPData’s newsletter continues with a discussion of the suburbs that are still growing in price.

At the other end of the spectrum, a number of capital city regions have their median house price holding firm at record highs. Across all capital cities, just 14 areas have current median house prices which are recorded at the historic high.

And concludes with:

This analysis certainly supports the broad trends which indicate that the weak performance of the premium sector of the market is having a significant impact on the overall market and subsequently sentiment also.

The premium sector is being impacted by a perfect storm of forces, namely: consumer conservatism, higher interest rates, poorly performing equities markets (both in Australia and nationally), shaky economic conditions globally and low levels of business and consumer confidence. With subdued residential property markets likely to persist over the next year, we anticipate that the premium and most affordable segments will underperform. The most affordable sector will likely see demand dampened by interest rate rises which impact lower income households and the premium sector will be hampered by those forces previously detailed.

I agree with this analysis although I once again note RPData does not mention Australia’s demographics and its effects on the market over the coming years. Maybe they do not see it as an issue?  I do, however, get the feeling that RPData is trying to move the goal-post on their previous “soft landing” rhetoric. They are now suggesting that it is not an issue of concern that the market is falling overall, because it is only the top end of the market that is having any real problems. The rest of the market is “in for a soft landing”.

Maybe I am being a bit hard on them, but this sudden focus on splitting the market into sectors when it is in decline is … “interesting”. As you can see from their longer chart, the market ultimately moves together, and by their own admission there are a large number of factors against the housing market at present. This all means that housing investment is now an activity for people who were able to explain 16 months ago why Adelaide Hills would be worth more in the future, but Adelaide would not.

If you are not one of those people then, in my opinion, you should leave your money in the bank.

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Comments

  1. As a resident of Mosman Park (WA) I was impressed to see we were top of the pile. When we bought in, in 2001 the median was $520k which is about what we paid. At the time it did seem a fortune for what was an old house on a small block (parents were ‘shocked’) and we certainly would not be in a position to have borrowed much more in the time since.

    MP has a unique property market with Homeswest Apartments and several streets that pizza delivery will not drop at to the West (with ocean views) and to the East (river side) Australia’s most expensive house that recently traded at $50+ mill.

    For a while there 2006-2008 people were queing up to to pay 2, 3 or 4 mill for property closer to the river. A lot of for sales signs up now. I did always wonder how people could afford it.

    Crazy times indeed but MP remains one of the best places in Perth to live (only suburb with river and sea boundaries) so long as you don’t have a huge mortgage. Very happy to not have doubled down on the McMansion.

    • Not so sure why people are so keen about waterviews.I am shit scared about tsunamis , rising sea levels , oil spills , all that risks that come with living near the sea

      • Haha I completely agree. Even those who opted for water views of the pooey Brisbane river have paid the price for it!

    • Sandgroper Sceptic

      Mos-man is right in that WA suburb Mosman Park contains a very mixed supply of housing, it has public housing, units, cheap old houses, new houses and unbelievable mansions right on the river. I would take its big fall with a grain of salt, the change reflecting proportionately more older or cheaper houses selling . Subiaco or Cambridge are much more homogenous areas and probably reflect a truer picture of Perth’s premium end. There is definitely pressure on the top end.

      The really bizarre thing is the number of homes for sale with no price (why bother with agents if they cannot even come up with a selling price?). I am not sure if this is happening in the east, but the agents typically have a date when it ends and say something like all offers presented. Seems very silly as buyers want discounts so no price means they are very reluctant to bid. The ones in my area (Cambridge) are not selling, they pop up with a new agent 2+ months later. Note we have far fewer auctions than eastern states most sales are fixed price negotiations.

      • I’d say that an old house in Mosman Park is only old, not cheap.

        I travel regularly to the States and knew we were in trouble when standing in someone’s nice newish two storey with basement and garage house on a big block in a nice suburb was told houses like this cost $485,000. Imagine their surprise when I said that an old weatherboard on a small block with street parking was $1 mill where I live and $485k was about bottom end.

      • I’m regularly trawling through the listings in Perth looking for newly listed houses, and you’re right….a very large number have no price listed at all. The other ones that puzzle me are when a price range is quoted? So we want somewhere between $720-850k….what will you offer? How about $650k is my response. I also always check to see what the house last sold for and when (Landgate).
        I also believe that RE agents are now telling vendors that buyers are negotiating down by 10-15%….so the latest listings where a price is stated are now 10-15% higher than they were a year back as vendors steadfastly refuse to accept their house may be worth less than the homes that sold around them 12 months ago, and simply ask for more to give a ‘discount’ which brings them back to the price they have always believed the place was worth. I think the whole market in Perth is is a stand off phase where vendors are trying to bluff buyers into believing there will be no further decline in prices….if buyers can hold their nerve a little longer, the dam will break. Interestingly, the real carnage in the housing market has been in full swing down in places like Margaret River, where there are astonishing numbers of houses on the market, and substantial discounts. Three years ago, there were maybe 20 or so places listed in this region….today there are hundreds.

        • “if buyers can hold their nerve a little longer, the dam will break”

          Definitely support this comment! The longer you save, the more you realise what property is actually worth. The larger your savings grow the less inclined you will be to get involved in this artificially supported market.

          The rest of the world looks at the property show in Australia with amusment. Wow, how long can this standoff continue? Didn’t they learn anything from the mistakes the rest of us made a few years ago? How long before the majority of people in Australia get over their giddy excitement of expecting to get rich from property or the fear of missing out? It’s very entertaining!

          You can earn alot less overseas (including Europe) and have a much better quality of life 🙂

          The sooner this dam wall breaks the better for the quality of life in Australia. Such a pity to see a beautiful country going this way.

  2. I personally don’t it surprising at all why cheaper yet high-demand, higher-density areas are performing better than even similarly populated but more expensive areas: they are cheaper, and people are all moving their “demand” to the places where many can still afford, and, hence, where their is still capital gains to be made.

    In DE’s own words: the churn still higher there simply because more people can still afford to churn there.

    My 2c

  3. Wait to see the above list in about a year- I guarantee today’s prices will look as laughable as those in other developed countries esp. Japan and the U.S. BUT THEN Australia is different; we can’t build enough houses because of Kangaroos… he he he!

  4. DE wehere is QLD in all this?

    There is only a conclusion: either I missed something (most likely) or Brisbane doesn’t have Suburbs or the prices in and around Brisbane increased in value and therefore they are not mentioned….

  5. I notice the lack of Queensland as well. I am really not sure why it didn’t make the list.

    Check out Ascot

    http://www.rs.realestate.com.au/cgi-bin/rsearch?a=sp&s=qld&u=ascot

    It easily beats Mosman Park.. Maybe they left it out because of the “flood effect” ?

    As I said in the article the use of medians in low volume areas is fairly misleading. Check out Mosman Park’s historic median

    http://www.rs.realestate.com.au/cgi-bin/rsearch?a=sp&s=wa&u=mosman%20park

    It tells a slightly different story. So although this data is interesting, it isn’t exactly that useful except in the context of market sentiment.

    The broader hedonic market index is the one to watch, and it is certainly telling the story of slow but sure downward trajectory at a national level, with a faster pace in some areas.

  6. Interestingly with the other end of the spectrum were prices are holding, seems to reflect Sydney’s higher immigration pockets ie Hurstville, Rockdale and Botany Bay, large Chinese immigration, Blacktown Liverpool, NZ and Oceania.

    Can’t find the actual data but I move a fair bit around Sydney and these are my own observations.

    Which makes me wonder with the UK having the highest immigration number, where are they settling? QLD?

    I also noticed the comparison of schedules and graphs, the median house prices refers to “house prices” were the graphs refers to “dwellings”. Does this then include apartments?

    Makes a difference especially to the 1.2% growth in Sydney.

    While house prices maybe declining or holding in high immigration and more affordable areas, apartments are selling quick and fast in those areas and surrounding suburbs mentioned.

    For example 2 weeks ago the 129 apartment bldg “Discovery Point” in Wolli Creek (next door to Rockdale) 12mins from the CDB, 102 sold in one day 95% Chinese off the plan.

    • The UK & Ireland might have the highest immigration no (next to NZ of course), but I believe most settlers from there these days are in late 20’s/30’s, and come over on sponsored visas. Those that come to settle will not buy immediately in any-case, and will recognise an overpriced house when they see one since the UK market has fallen significantly. In addition, the strength of the AUD vs GBP means people are reluctant to move money at the moment, even if it is the ‘new normal’.

      How do I know all this? I migrated from the UK 10 years ago, and have seen this about to happen for a long time.

    • Rockdale and surrounding suburbs were also relative slow in price growth in earlier years, so it has done a bit of catching up to the rest of the overinflated market in the past 12-18 months.

      You can see that units have started falling in price and houses are flattening and starting to fall also. its just a bit of a delayed reaction.

      I still wonder how many of those Chinese buying off the plan will actually follow through with the purchase.

  7. Good old Canberra is holding up in the statistics. Though I have seen some anecdotal evidence that it is falling (when vendors do really need to sell) or properties are just being pulled off the market. Time will tell if it reflected in the data here soon.

    • Canberra has slowed significantly in the past 6-8 months from what my agent friends are telling me.

      There is too much construction down there and has been for years now. I dont know who is buying all that property.