Residex reports rising home prices in May

By Leith van Onselen

House price analysis has just gotten more confusing after Residex released its home price results for May, which recorded a monthly rise of 1.01% nationally for houses and 0.02% for units (see below tables). The result contradict those of RP Data, which reported a fall of -1.8% for houses and a rise of 1.0% for units (-1.4% for all dwellings) in May.

Residex CEO, John Edwards, was clearly impressed, noting the following about the results:

On an Australia wide basis, statistics for May are pleasing. Houses achieved 1% growth while units were marginally in positive territory. The trend for Australia as a whole is provided in the graph ‘Australian Trend’. The trend is showing that markets have clearly moved to the positive and adjustments are now occurring at a lower rate. The unit market does not appear as robust and supply issues are impacting on its recovery. Looking a little deeper, the result we are seeing is largely a consequence of the largest markets (Sydney and Melbourne) producing reasonable outcomes. Sydney houses produced close to 2% growth in May while the correction for units was -0.25%. Melbourne houses have not done as well by comparison however its unit market has provided an unexpected growth, at 1.48% in May and 2.58% for the quarter which has largely helped offset the poorer Sydney result.

Edward’s comment that the unit market is less robust than houses contradicts directly results from RP Data, which have recorded far stronger unit price growth on a monthly, quarterly and annual basis.

Edwards sees Darwin and Brisbane as stand-out performers going forward, and believes that Australia’s links to Asia should see us avoid most of the carnage afflicting the global economy:

The world economy remains in a state of flux with considerable risks resulting from the euro zone… As Australians, we remain lucky as Asia continues to be a growth area and we remain a significant resource provider to its economies. Our banks are well capitalised and our population has, for some time now, been increasing saving rates and repaying debt. Our position is getting safer by the day but we will not be totally immune to the coming events in Europe.

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  1. This doesn’t surprise me at all! Here’s the second chance that vendors have been waiting for to ‘get out’. It happened in NZ, and it will happen in Oz. The trick is to actually, get out. The temptation is to revert to the old property-always-goes-up mentality. A bounce in prices from here gives any governing body the ability to say, “We did our best, but you didn’t take the opportunity we gave you, It’s not our fault….”

    • My thoughts exactly.
      But with the house prices always go up belief so ingrained it is likely that this will be seen as the beginning of a recovery rather than an opportunity to get out.

      • It certainly is! But here’s the problem: Even the most entrenched of bears, even on this site, are about to buy ’cause they think ‘the time is right’. It’s likely to be distressing in the winter of next year that those who have been SO right, have been dragged back into the game against their instinctive sense. But both NZ and Oz are now into the hard bit: staying out when all about you say “I told you, property a…..!”

        • Well for me I get what you say, and I think we’re only beginning to see the public wake up, I have friends who want to buy on 95% LVR because they secretly still believe they can’t wait it out. For me its not about timing the market, its more what is the upside scenario and what is the downside, the upside just isn’t worth risking the downside atm (e.g. at best low returns at best, 10 years of digging myself out of the hole neg. equity wise). The kind of behavior is a microcosm of the “crystal balling” for future capital gains that is the default attitude, vs. buying for value (return). And we’re not even close to the point where rents are more than mortgages.
          On another note we will see whether their faith will be shaken by events in Melbourne, after all 90% of this “crystal balling” is faith based.

          • sorry i mean at best low returns vs. 10 years of digging myself out of a hole neg. equity wise.

    • dumb_non_economist

      If they think “We did our best, but you didn’t take the opportunity we gave you, It’s not our fault….” gets them off the hook, that’s laughable! If everyone took that advice our RE market really would mimic the O/S experience.

      • russellsmith55

        When do you think the Melbourne unit oversupply will be hurting their prices the most Peter? (as in, when do you think we’d hit peak oversupply)

        • russlesmith55 – I don’t visit Melbourne often so I don’t claim to be an expert on supply there, but usually any oversupply will be evident after the last large development has completed and you notice that no more are following. Even if there isn’t a genuine oversupply, it will seem like it as speculators bail out of units they can’t find tenants for quickly and can’t afford to hold.

    • MsSolarFelineAU

      But, generally speaking, I thought the Melbourne units that are contributing to the glut are shoddily constructed.

  2. Or alternatively, here we have an index which shows house prices have been rising since June last year – contradicting every other stat in the country.

    The June spike was clearly the end of the grants – ad nauseum.

    And Peter, there is a massive glut already, they are canning projects due to the glut. Ireland here we come.

    • “Irish property prices, which have suffered peak-to-trough falls of 50%, increased 0.2% in May, their first month-on-month rise since September 2007” That’s what ‘they’ are trying to avoid, here.

    • Aristo – refer to what I said above. Yes there does seem to be an oversupply in Melbourne. I don’t live there, but if you do, then your own eyes will tell you what statistics sometimes don’t.

      I know that Leith is very negative on Melbourne prices (please correct me if I’m wrong) and I’m not in serious disagreement with that, but I don’t believe that is universal nationwide. Local conditions and employment prospects differ from Capital to Capital.

  3. On my just over 2km drive to work each day I pass no fewer than 10 dual occupancy projects either underway or that have the advertising board up.

    This does not include the other properties that have either FOR RENT or FOR SALE signs currently on them.

    There are numerous apartment and housing developments within a short drive that are also either currently under construction or being sold off the plan prior to construction. This can only end in carnage!!!

    I live in MELBOURNE, Eastern suburbs.

  4. On a more personal note, a mate of mine has put the deposit down on a 2 bedroom apartment that is not due for completion for another 18 months min.

    Around $430k (give or take) pi**ed into the wind as far as im concerned.

  5. Residex says it’s up, RP Data says it’s down and now BIS Shrapnel says the good times are about to roll again, big time! They even have the gall to trot out the now disproven garbage about there being a ‘chronic housing shortage’ in NSW. Maybe they think nonbody reads the census figures, who knows? But I agree with the bulk of the comments here – the consumer knows the jig is up and most won’t be suckered in to buying into a chronic bear amrket.

    • Herds (ie: your ‘most’) operate on the basis of perceived risk, not ‘what the census said’. On that basis we are about to see a run for the ‘paddock that was green last year, so it will be this year’ . It’s not until the herd realises that the paddock they have run to is actually the green-painted concrete of the abbatoir that they will realise where they are; and all too late….Property prices respite from here, probably followed by a winter of discontent.

    • The herds do not read the census figures. They are “boring”. The herds just read the headlines and away they go.

      Remember that it is a human trait to want to believe – and we humans find a shred of evidence on something and that satisfies our mind and then we believe.

      People want to believe property is bottoming out and going to go up. A simple headline will help them think that.

  6. This residex report is like seeing Coles or Woolies cheering a rise in price of (already extremely expensive) food….