R.P.Data gets bullish (Updated)

As H&H mentioned yesterday, RPData stats are out for September and a glance at the data tells you that the slow melt continues. RPData have taken a bit of a bullish stance on the data, which is in line with their latest newsletter. Here are the numbers:

The big markets of Sydney and Melbourne deteriorated slightly but the big improvements in Brisbane, Perth and Adelaide have lifted the averages.

RPData’s bullishness is premature given this is a single month’s data and we all know it is the trend that matters. But we have seen a little bit of sunshine for housing over the last two months after many months of bad news and the ABS owner occupier data volumes leading into September did show an uptick in volume, so I won’t be too harsh on the report:

There is, however, nothing I can see in either the latest stock on market data from SQM research, or the latest credit aggregates from the RBA to suggest we are seeing a sustained rebound in lending and therefore a market bottom. I have questioned the usefulness of AFG data, but it did forecast this September jump and showed a drop again October (I will revisit that data). RPData disagrees:

In September, capital city home values had their best result in 7 months (down just -0.2 per cent seasonally-adjusted and raw) while regional house values rose +0.1 per cent (s.a.). Including rents, total returns are +0.7 per cent over the first nine months of 2011 and +0.9 per cent over the 12 months to end September.

According to the market-leading RP Data-Rismark Home Value Index, which captured nearly 251,000 sales in the first nine months of 2011 alone, Australia’s soft housing market may be starting to turn the corner. The RBA’s decision tomorrow will determine whether the commencement of any recovery occurs quickly, or is more elongated into 2012. Since 90 per cent of all home loans are variable rate, housing is one of the most interest rate sensitive sectors of the economy.

In the month of September, capital city dwelling values declined by just -0.2 per cent (both seasonally-adjusted and in actual raw terms). This was the smallest decline since February 2011 and was crucial in reversing a trend of accelerating capital losses since end March 2011. Over the first 9 months of 2011, capital city home values have now declined by -3.6 per cent. In the 12 months to 30 September, capital city home values were off by -3.4 per cent.

RP Data-Rismark measures changes in the value of houses across all ‘regional’ markets, which cover the circa 40 per cent of homes not located in the capital cities. Regional house values also recorded a positive result in the month of September, rising by +0.1 per cent (s.a.).

As a number of commenters stated yesterday, we are now seeing a battle of wills between buyers and sellers as to where the market will go next. If there isn’t a need to sell in the short term, because employment holds, then you can expect the market to do what it is now, slowly melt under the influence of low rates of credit growth. Obviously a lowering of rates today will give the market a little more strength, but where the market is right now is a preferable outcome for the RBA and the Australian economy allowing households to deleverage as their asset values hold within a range that doesn’t cause a panic sell.  We heard that message from Ric Battelino recently.

I am, however, concerned about how this trend can last with the long term backdrop of Australia’s demographics, but am also aware that recent changes in state government legislation have demonstrated there is still pent up demand for housing and lower values may spur a new round of purchases. Once again it seems to be a balancing act and we need to watch closely which dynamic wins out in the short term.  I am obviously of the opinion that the downside risks have more weight than the upside at this point, which is why I agree with H&H’s argument yesterday that a rate cut is needed.

There are big macro issues that could derail everything, specifically in the commodities markets and Europe, if either of these scenarios play out then all bets are off as far as I am concerned.

As an aside, I was talking to a Brisbane real estate agent last night and stated that the market was looking up because there seemed to be far less “for sale” signs than a few months ago. His reply was “Oh yeah that.. No, No the market is still dead but we have stopped putting up signs because there were too many”.  That explains that then.

Update:  Picking up on a point made by raveswei in the comments I thought I would show the revisions for the August data between the September (indicative) and the October (actual) press releases. You can see from the chart below these revisions are bearish and significant. You can check out the reports yourself if you are interested in the Unit/house break-down.

The full October report is below.


  1. Adelaide? I wasn’t expecting Adelaide to lift. I’m not surprised by the slight gain in Brisbane. It’s due to the Xmas season (every buyer wants to spend Xmas in their new house) and I then expect slight falls early in 2012 until we see an uptick in the market later in 2012.

    Actually FHB’s are coming back to the market. Not in droves by any means, but numbers are increasing.

    Its fair to say that FHB numbers were brought forward in 2008, but that was 3 years ago, that effect is wearing off. New households are formed everyday, people don’t stop mating – even in wartime that happens although birth rates fall away, but a mild recession is not wartime.

    • @ peter: “New households are formed everyday, people don’t stop mating – even in wartime that happens although birth rates fall away, but a mild recession is not wartime.”

      How is this relevant? It is interesting to notice that over the last few years, some of fastest growing areas of western world saw largest house price declines

      • Hi Rav – it’s new households that become FTB’s. Single occupant households do count, but it’s couples in particular who want to leave their parents home to start life as a couple that matter most. I couldn’t quickly find any stats on Australian houeshold formation, especially during financial hardtimes, but here is an MSN article from the USA that might explain it for you. Couples rent or buy, but either way they increase demand for housing.


        You constantly point to the USA and expect the same to happen here, but we both know that after 4 years it still hasn’t happened, so yes it is different here, that’s quite obvious. Anyone who has studied chemistry knows that a repeat experiment at STP will give you exactly the same result every time, but if the result differs, then the ingredients or the ratio of the ingredients must differ as well – there is only one explanation. You need to examine the differences instead of looking for the similarities. Four years of constantly monitoring a different result should tell you that.

        We all know that when real estate in the USA starts to lift, the recession will start to fade. Builders will find work, building material sales start to quicken and increase in volume, brickworks will increase production, timber mills will employ more staff, white goods will sell at a greater speed, carpetlayers, painters, architects, engineers etc etc will all find more work than what is on offer at present.

        Peter Schiff will tell you that houses don’t produce anything, but they do affect GDP and we need shelter to live in. Its the balance of housing within the economy that matters.

        Does that explain it sufficiently?

      • I think in the case of population growth, Ireland is more relevant than the US. Irish population growth had been (until their crash) higher than Australia’s since about 1999, while the growth in the US was lower.


        Also worth noting that I love Google’s public data explorer as linked above.

      • are you saying in 2008 we were different than USA so we must be still different?

        You must failed your chemistry class

  2. Same deal on the signs here (inner W Melb) DE. Heaps of properties without boards, mostly the severely overpriced where the owners are fishing. Must say the Jimbo index accords well with SQM and Burbwatch.

    My 5 suburb watch historically averaged 450 listings, which blew out to around 600 this year. It’s been hovering around 640 till a fortnight ago when it exploded to 690. We talk of a slow melt, however there are properties on watch that started at $660K, now reduced to $530 and still no takers. There were plenty of like type sales previously at the $700 mark.

    I’m seeing a similar dynamic to 2008 where adjoining suburbs with large price delineations are breaking down. I.e the market loses definition such that asking prices in the inferior suburb begin to appreach those of far better offerings in the superior neighboring. Neither are selling though.

    • Excellent comment! There were some pretty major revisions, and the current numbers don’t make much sense.

      So perhaps the focus should be on the previous month’s results, after revisions. Sydney, the property bulls’ darling, went from 0.0% to -0.5%. And Brisbane from -0.2% to -1.2%. Ouch!

      • Yup. Sydney, for the two previous months was touted in the media as “bucking the trend” by having positive growth numbers, but then was quietly revised down to negative growth without even a whimper. Melbourne also have been generally revised down from their headline numbers.

        Meanwhile, Brisbane and Perth generally have large falls reported MoM (in the vein of -1.5% to -2.0%), which are then revised up to something less negative (say, around -0.5% to -0.6%). This month is the first in a while to buck that trend, but it will not surprise to see both Perth and Brisbane revised to negative growth in a month or two.

        Meanwhile, MSM still reports the unrevised headline numbers from the previous reports in comparison to the current numbers, when the revised numbers are in the press release, staring them in the face. What price for good journalism?

  3. reusachtigeMEMBER

    I don’t see falling house prices as “bad news” and I don’t see anything that will avert the decline in house prices as a “little bit of sunshine”. To me, that’s spruiker talk!

    • The BurbWatcherMEMBER

      …depends on whether your surrounding economy is structurally predicated/dependant on the house prices being where they are (and the mode by which they got there) – which ours’ is….

      This means that if the house price / structure starts to unwind, then the economy will experience significant unwinding as well (ie. re-alignment to the new, emerging paradigm, whatever that is).

      My 2c

      • “This means that if the house price / structure starts to unwind, then the economy will experience significant unwinding as well (ie. re-alignment to the new, emerging paradigm, whatever that is).”

        Indeed. And I don’t think you have to particularly desire the result of this unwinding to still want it to occur sooner rather than later.

  4. “In September, capital city home values had their best result in 7 months (down just -0.2 per cent seasonally-adjusted and raw) ”

    How does the worst home value become the best result?

  5. I think the biggest thing to come out of this report is that RP Data has felt the need to add a “Total Gross Returns” column to their table after all these years. Reminds of 2008 when Lawless’ monthly report mysteriously changed its house price change % chart from monthly to quarterly figures, which just happened to paint a rosier picture.

    Each cap city on these numbers is down on the quarterly and YoY numbers. If Sydney prices start to slide before the other cap cities prices halt their slide then even the gross yield numbers won;t be enough to hide the downturn.

    • Yeah, I’m sure I’m not the only one who thinks we’ll start to see a lot more of these “total return” figures. Maybe they should add a “total expenses” column as well?

  6. Diogenes the CynicMEMBER

    No recovery in Perth. I suspect a slight change in the mix, with a few higher priced households selling. A house nearby was on the market for $2.9m, then after 3 months, $2.5m, then after 6 months, $2.2m with still no takers. House now off the market, owners refuse to sell for less than they bought it for. Given they are medical specialists they can definitely pay their mortgage.

  7. but am also aware that recent changes in state government legislation have demonstrated there is still pent up demand for housing and lower values may spur a new round of purchases.
    I did not quite get what you mean. Are you referring to any specific legislation to artificially bring demand forward?
    Well, that will do just that – bring demand forward.. and we will have a bigger slump later.

    • I don’t disagree with the outcome Mav.

      But that doesn’t change the fact that Queensland’s stamp duty change showed that even a small amount of money has the potential to re-stimulate the market.

  8. What I find extraordinary is the lag in unit prices falling (or did they fall more than 12 months ago?). Nationally houses have falling by 4.1% in 12 months compared to only 1.1% for units and some cities the difference is even greater, like Brisbane -7.1% and -0.9%.

    I’m seeing a lot of suburbs where house prices are falling to near unit prices ($380K for a modest unit or $430K for a house). Surely units will start to fall as those who are buying switch to houses as better value? My guess is that this will probably trigger the next wave of declines which will be devastating for the ’09 vintage FHBs who bought in a brick-six-pack hoping their value would increase so they could buy a family home before having kids (I know a lot of people who have done this).

    • I have always been surprised by the relative value of houses and units. I think it is probably something to do with older people downsizing. Often those who are older see a larger garden as a burden rather than a desirable, as they worry about maintaining it. With the baby boomers now doing the downsizing thing, the effect may get worse. In addition, perhaps (although it is only a guess) units are overall newer and in better condition than houses.