Residex has released its house and unit price results for the month of October, which revealed strong growth in national house values over the month, but divergence across the various markets (see below table).
Residex’s price results are broadly in line with RP Data’s, which recorded 1.3% growth in dwelling values nationally in October. However, Residex’s quarterly growth rate of 1.67% (houses) and 1.39% (units) is well below RP Data’s, which recorded 3.4% growth in both house and unit values over the quarter, albeit at the national capital city level.
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According to Residex founder, John Edwards, a number of significant milestones were achieved in October:
The most notable being that the median value of houses in Sydney is now nudging the $750,000 mark. Other milestones include the Melbourne house median value passing the $600,000 mark and the Perth market regaining all of its lost value since the peak of its cycle in March 2008 ($520,930). The Perth median house value is now $521,000.
The relatively high rate of growth in Sydney over the last 12 months was not anticipated by market analysts. Residex models predicted growth, but not to this magnitude.
That said, price growth has been patchy:
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At the end of October 2013, Melbourne and Sydney continued to lead the nation in capital growth while Canberra, Adelaide and Hobart recorded no real growth (growth above inflation).
And the unit market has been far less impressive, although Melbourne’s developer cartel has managed to hold-up values:
Growth rates for the last 12 months have been much more moderate [in the unit market]. The least impressive result was achieved in Melbourne, which is as expected considering it has a stock surplus that is likely to be in the thousands. However, the Melbourne market has not gone into a “tail spin”. This outcome is a testament to good management by the large developers who dominate this market and are releasing stock to the market in an apparent planned way.
The rental market is also quite weak:
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The rental year change difference in the house and land market and the unit market is significant. Rentals in the unit market have fallen while this is not the case in the house and land market…
The rental outcome suggests that there is a potential oversupply of unit stock in most markets, which is likely to be correct as this is where the majority of development activity is taking place. However, it also indicates that there is first home owner activity in the unit market. Tenants are taking advantage of lower interest rates and lower price growth rates and moving into home ownership via unit purchases.
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.
