RP Data sees housing market recovery

By Leith van Onselen

RP Data has released its December housing market update, which is always worth a watch for the significant amount of property-related data on offer.

This month’s report includes the following collection of charts that track the health of the market at the national level.

First, sales volumes have recovered somewhat, up 10% nationally and 7% at the capital city level from the same time last year. However, volumes remain low by recent historical standards, tracking -4% below the five-year average (5YA) at the national level and -7% below the 5YA at the capital city level (see next chart).

Second, the average number of days taken to sell a home nationally has fallen from 58 days in October 2011 to 49 days in October 2012:

Third, the average vendor discount has fallen from 7.3% in October 2011 to 6.6% in October 2012:

While the above metrics point to an improving market, the overall number of homes for sale across Australia has hit new highs, tracking 6.8% above the same time last year:

Overall, RP Data believes that the Australian property market is on the road to recovery, despite national capital city home prices falling by -1.0% in October, recording zero movement in November, and recording a -0.33% fall in values so far in December. Interest rates are falling and finance approvals are rising, which points to improving conditions in 2013, according to RP Data, although growth is likely to remain fairly subdued overall.

Twitter: Leith van Onselen. Leith is the Chief Economist of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.

 

Comments

  1. Isn’t it tiring the way the housing bottom gets called weekly here in Oz?

    You never hear these Einsteins saying something like: “Whoa, looks like a long, slow slide from here on in!”, do you?

  2. Let’s hope this is a modest recovery. Any sudden increase in house prices could end the hope for further interest rate cuts and lowering the high dollar at a time when our main source of income takes a hit. Messy.

    • Yep it’s just a modest recovery. I would expect the national average to be close to flat over 2013.

      • Flat to me is modest growth or modest falls. I think that a few states will record gains, whilst others will record small losses, with the net result neutral as gains offset losses.

        We have high prices putting a ceiling on housing, and low interest rates placing a floor under it, so prices are sandwiched between the two.

        Even within cities you may see the inner city suburbs gain with far away suburbs penalised for lack of transport options, accentuated if petrol costs rise.

        In the absence of big drivers either way it will be local issues that dictate price movements. I know that you have different ideas on supply, but it is our undersupply in key areas that will prevent a crash. I do acknowledge that we are oversupplied in holiday homes, but they are not the houses that we need right now.

      • Thanks Peter.
        On supply 22% of our homes are lone occcupants and that is only going to rise, so it will put pressure on the system. Some demographic trends will work as tailwinds I suspect.

      • I agree Peter i cant see 2013 being much more of a slow melt. The patience of an impatient boomer investor will be wearing thin by 2014 – 2015.I also believe that we will have TOT crisis within 3 years and then all bets are off as the RBA is forced to hike rates

      • Where is Mav when you need him?

        “We have high prices putting a ceiling on housing, and low interest rates placing a floor under it, so prices are sandwiched between the two.”

        MB has shown on numerous occasions that there is no such thing as a ‘price floor’ which can be supported by alleged or actual shortages of homes or low interest rates. You choose to ignore these numerous case studies from the US and specific states such as California. Your ‘belief’ flies in the face of numerous housing examples from recent economic history. So, I’ll take evidence over the ‘belief’ of a mortgage broker any day of the week.

        “Even within cities you may see the inner city suburbs gain with far away suburbs penalised for lack of transport options, accentuated if petrol costs rise.”

        Studies show that when the inevitable housing bubbles blow up, the damage is felt less in those areas in the inner rings around the CBD. So what? A loss is still a loss. And if you bought into suburban hell in one of the far flung, poorly serviced areas in the boonies, you are totally screwed in terms of price drops. Stapledon has shown this in his recent work if you don’t believe me.

        “In the absence of big drivers either way it will be local issues that dictate price movements. I know that you have different ideas on supply, but it is our undersupply in key areas that will prevent a crash. I do acknowledge that we are oversupplied in holiday homes, but they are not the houses that we need right now.”

        Evidence from economic history has proven that shortages of homes does not provide a ‘floor’ – so by extension a crash in prices cannot be prevented in this manner.

        Your beliefs are wrong and are seemingly incapable of being influenced by strong evidence at hand because your economic well-being demands it.

      • Further, where’s the ‘actual/demand-driven/pent up’ demand when SQM figures for total homes available for sale, and the RP data sales figures per month put the available housing at over 10 months housing supply?

        6 months is considered a balanced market in real-estate land right Peter?

    • Yes, until their tradeable index gets approval from ASX and they can profit from it falling the only way is up.

    • Tell (the) people what they want to hear, and you’ll be paid handsomely for it. If you want to be boo’ed and hissed of stage, well, you know the rest.

  3. A very limp response to 175 basis points of interest rate cuts in 13 months. Banks remain eager to lend to anyone who can service a loan, though the number willing is mighty subdued.

    I am watching the ‘Gearer numbers closely for signs of capitulation. They haven’t made a brass razoo in five years, in real terms. The only reason they stay in is they lack the number skills to calculate the scale of their cash losses, plus the hit to opportunity cost.

    The spruikers see more bottoms than in a nudist camp.

    Don’t Buy Now!

    • They stay in because they look back 5 years and compare to shares and bank interest on their net equity after costs if they had sold and think thank god I didn’t own shares which are still over 30% down from the top in October 2007.

      Even Melbourne and the Gold/Sunshine/Brisbane areas are still better in property from 5 years ago than they would have been in shares

      That might not be the outcome in another 5 years if lower rates lead to re-rating of the stock market and house prices fall as so many have been predicting for so long.

      • Exactly, most home owners with a mortgage are ahead with their loan payments and are unconcerned by a temporary halt in house price rises.

        I have an investment policy of holding property, shares, and cash. The shares lost me quite a bit in 2008, property not so much, and the cash will probably have to be converted to more property during 2013 to maintain a good return.

      • Well prices never follow a straight up trend, they do have downward turns as well. I don’t understand why you call an acknowledgement of reality a spruik.

        After years of solid growth I don’t concern myself with a small pullback occasionally, would you?

        It’s all good, but thanks for your concern.

      • Like those downward trends that saw real house prices not reach their 1890s depression highs until around the 1950s in Australia as evidenced by Stapledon?

      • So Bobby you cherry pick a 60 year period that saw two depressions, two world wars and a decade of government house price fixing, but you make sure that it doesn’t include the 100% gain in the next 12 months – well done. You capacity to twist is beyond comparison.

      • Paul I have seen several articles claiming that around 50% of Australian mortgagors are 1.5 years in advance of repayments. Here is a SMH online poll showing a similar result from September.
        http://www.smh.com.au/business/banking-and-finance/borrowers-in-a-hurry-to-pay-off-mortgages-20120925-26ilm.html

        The claims of mass defaults by some who post online are simply unfounded, especially as borrowing rates here are variable and they have all reduced since that poll.

        I’m seeing zero stress amongst my clients.

      • And numerous surveys out there showing around 1/5 struggling with mortgage stress again fly in the face of your anecdotal claim…

        “The number of Australian homeowners facing mortgage stress has jumped from 21 percent in June, Genworth said in its September Homebuyer Confidence Index, based on surveys conducted from July 30 to Aug. 5, and released today.”

        http://www.businessweek.com/news/2011-09-20/australia-s-mortgage-stress-jumps-as-costs-rise-genworth-says.html

      • Bobby – that Genworth link is over 14 months old – since then we have had more than 1% reduction in loan interest rates. So if we had 20% suffering some housing stress then, how much stress is there now that they have received a 15% (approx) reduction on their loan payments?

        You would have to agree that it will be significantly less, right?

      • The scary thing with my shares is that I have done OK but mainly with the banks and TLS which are divedend related so if the gearers capitulate, the banks have higher bad debt, profits and share should fall. There is no way the CBA should be worth as much as the combined banking systems of Germany and italy. The cBA is by the way at $62 a new all time high.

      • dumb_non_economist

        Peter, are you expecting property to return more than you’d get from a term deposit from say 2013 to 15?

      • DNE – I can only guess. I’m in Brisbane and I can get 5.5% gross now, so net 4.5% is about the same as bank Term Deposit Rates now. If we get some more reductions in rates that gives a leveraged IP both a reduction in costs, and a better comparison to bank rates which will again fall.

        If you are in Melbourne the returns on resi property probably won’t exceed the return on a term Deposit unless the price reduces. Every city is different, and even each deal is different. Sales that go against the norm do happen.

        But remember that is my guess, I have no foolproof formulae or model. Caveat Emptor.

      • That’s a convoluted bit of logic, Explorer. A person experiences poor returns on cash, shares and property. Property appears to be doing relatively better at the moment, so that’s the better call.

        Rear view mirror investment.

        I would say interest rates are low and falling and likely to stay low for some time; land is high and falling; shares are low and …

        It’s shares. So my tatty and sad portfolio (still 16% below entry) gets
        my attention and funds.

        DBN

      • it s not really a one off, once you factor in survival bias (huge, pretty much divide your real return by 2), slippage, transaction cost, and everything in between you must come to the conclusion that Shares are for suckers.

        Nothing safer than property/land for long term investment, does not disappear and mainly increase in value simply because of the population growth.Gold is in waiting for a return to mean.

  4. Advantage of shares versus property, more transparent market signals and pricing, liquidity, plus income and potential compounding with minimal other costs. Property, unclear pricing and sales signals/processes, high related costs, not liquid and falling in real terms, with minimal income if renting out.