Please find below RP Data’s May house price release, which reveals that dwelling values fell by -1.2% at the national 8-city level, the same as the -1.2% decline announced on Friday at the 5-city level.
According to the Media Release:
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Based on the index results, capital city dwelling values are now 1.1 per cent higher over the first five months of 2013 and 2.9 per cent higher compared to May last year which is also when the housing market broadly reached a recent low point after values corrected by -7.4 per cent from peak to trough.
According to RP Data national research director Tim Lawless, the weak May result comes on the back of a substantial fall in consumer confidence over both April and May…
“The RP Data-Rismark daily index tracked higher from late April through to the 10th of May, and then went into a consistent decline over the remainder of the month. How much of this downwards pressure can be attributed to the lower confidence reading is anyone’s guess, but the correlation of housing market conditions with consumer confidence is a strong one. “If we see confidence levels remain in the doldrums, there is likely to be a similar dampening effect on the housing market,” Mr Lawless said…
Mr Lawless noted that the two months of lower dwelling values comes at a time when a number of metrics such as auction clearance rates, vendor discounting, time on market and transaction volumes are performing well. “Auction clearance rates have been nudging the 70 per cent mark on a weighted average basis over the past couple of months, with average selling time improving and vendors now offering up lower discounts from original asking prices in order to make a sale. We have also seen the number of house and unit sales rise compared with the same time last year,” Mr Lawless said
Rismark’s CEO, Ben Skilbeck said, “There is one of two means by which metrics such as auction clearance rates, transaction volumes and vendor discounting improve; either buyers increase their offer price in order to meet vendor expectations or, alternatively, vendors reduce their expectations in order to meet buyer offers. The first is usually associated with a rising market, while the second relates to a flat or declining market.
“In the absence of looking at house price indices to work out which market mechanism may be at play, two good metrics to examine are consumer confidence and housing finance credit growth. If credit growth is anaemic and consumer confidence is weak, both of which is currently the case, it’s a good indication that strength in auction clearance rates, and other associated metrics, may largely be driven by vendors reducing their initial expectations in order to meet buyer offers.”
My advice is not to read too much into that past two month’s results. The RP Data index is inherently volatile and not seasonally adjusted. Hence, the recent pull-back reflects some mean reversion from the extraordinarily strong gains posted in the March quarter, much of which reflected seasonality (the March quarter is typically the strongest quarter of the year).
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
