RP Data December Update

From RPData-Rismark comes the December and end of year results for the Australian property market.

According to today’s release of the RP Data-Rismark Home Value Index results for December 2013, capital city home values moved 1.4 per cent higher over the last month of the year.

Over the fourth quarter of the year, capital city home values rose by 2.8 per cent following on from a 2.8 per cent increase over the first quarter, by 0.2 per cent increase over the second quarter and by 3.7 per cent increase over the third quarter.

Across the combined capital cities, home values increased by 9.8 per cent over the 2013 calendar year. According to RP Data’s Cameron Kusher, this was the fastest annual rate of value growth since August 2010, and the largest calendar year increase in values since 2009 when home values were up by 13.7 per cent.

And just look at Sydney!

RPData1

No bubble though.

However, Cameron Kusher suggests that 2014 will be a little different.

Mr Kusher said that it is clear that as the market enters 2014 and as values rise across each capital city, the rate of growth will vary greatly. He said that the main challenges in 2014 are likely to be the impact of a forecasted higher unemployment rate, affordability constraints for the more price sensitive sectors of the market (particularly in Sydney, Melbourne and Perth) and whether any regulatory changes will be implemented by APRA and the RBA to cool the near-record high levels of investment activity.

 

Full report below.

RP Data Rismark Home Value Index 2 January 2014MediaRelease

Comments

    • GunnamattaMEMBER

      He sure was.

      Worth looking at his 2014 call

      ‘6. House prices

      Having risen a solid 10% or so in 2013, house price growth is likely to taper somewhat in 2014. A rise of less than 5% for the year is more likely as tighter monetary policy, a rebound in supply and some satisfaction of pent up demand works to take some house price heat out of the market. Indeed, if the RBA hikes a little more than I expect, house prices may be dead flat in the second half of 2014.’

    • Well yes, but this is no surprise, this is what the RBA were aiming at and they could just keep manipulating monetary policy to get there.

      The surprise for me is always that these guys think this is a good thing.

      • General Disarray

        Exactly.

        Imagine if house prices had fallen by 10% in a year. The RBA would have slashed and burned no what factors were at play. But a rise of 10%, that’s just what was required – no need to raise rates.

        The RBA are just a bunch of puppets looking out for the profits of their bankster mates (and future employers).

  1. Property price rises can be a good thing IF the means to justify that rise is the result of productive endeavour. But just look at what Australia has created for itself during 2013 – a fall in productive national income (the mining bust; a good look at the national accounts etc) and a necessity for more debt to be assumed to buy substantially the same property stock that was in existence in 2012.
    Getting a pay rise and buying a bigger house is fine; but taking a pay cut and buying a bigger house in anticipation of future pay rises is….well, optimistic stupidity, at best.

    • GunnamattaMEMBER

      ‘Getting a pay rise and buying a bigger house is fine; but taking a pay cut and buying a bigger house, in anticipation of future pay rises is….well, optimistic stupidity, at best.’

      I agree 100% – but that is, it seems, the major plank of economic policy of both Government and opposition.

      All the more reason to make sure that even if you are living here every last skerrick of liquid asset is somewhere else, for at some point they will want another major plank of economic policy…….and the question is how long they can keep that as a viable main plank of economic policy (with its essentially defensive thrust) instead of something which positions the Australian economic for economic progress.

      • I’m not sure I follow you there Gunna. Are we talking about significant potential devaluation of the AUD here?

        • GunnamattaMEMBER

          My take is that defending what is (mainly house prices, to backstop retail) gets exposed for its limitations at some point and the attendant risk it arguably wont work (or is working for few and fewer as unemployment ticks higher).

          As that becomes more obvious the AUD would be at risk of maybe another rate cut (or possibly two – the DLS thesis) and/or the risk of AUD movements becoming disorderly (as Steve Keen noted in the last podcast). Blackrock was talking about an USD 0.80 AUD the other day. I still buy the line that in order to resume non mining investment the dollar would have to come much lower than that – I reckon as an economy we are competitive circa 0.70, and buy the DLS line that to convince foreign investors that we are serious (after they have been fried by 1.10 for 3 years) it would have to go lower than that. With house prices I dare say the investors would go further into orbit with a rate cut sans macroprudential, and presumably bid prices higher, but the underlying economy kicks in at some point, and the Kouks call about a dead 2H 2014 would fit broadly into that sort of narrative.

      • “All the more reason to make sure that even if you are living here every last skerrick of liquid asset is somewhere else..”

        Which avenues you reckon are available to achieve this Gunna?

        Cheers and a happy 2014!

    • ‘Optimistic stupidity’ – I don’t think I’ve ever heard a more accurate and succinct description of the Australian psyche!

  2. As Christopher Joye writes in the AFR “ the bona-fide ‘boom’ anticipated in (his) pages….Australian real estate will be more expensive than it ever has been before relative to incomes. It already is in pure price terms”. So the like of he and The Kouk have been shown to be right. But at what cost? Both writers have been part of the propaganda machine that drives property prices, and both now appear to be tempering their views (I could be wrong, of course!) for fear of what others have had the audacity to warns against before them. Their ‘correctness’ has come at the cost of what is about to become the Australian Economic Tragedy. They both would have served their country better to have been concerned, and publicly so, several years ago. Property prices aren’t’ going to be the salvation of the economy, they will be its undoing, as they have for so many other countries before ours.

    • Well said Janet. 16% rise in housing in a year in our major capital is an economic disaster. How the younger generations are in the steets rioting I’ll never know, but I guess they are just going to leave instead.

      • And they are. 25 to 35 year olds are the majority of our people emigrating. Emigration is still trending up and is already at an historical high level.

      • The kids are alright.

        Not meaning to point fingers, but it seems greatest greed binge is from the current stock of ~45 to ~65 year olds. They’re the ones pouring petrol on (what is not) utterly ridiculous housing prices.

        This is a generalisation, of course, but the number of 60 year olds we see who have leveraged up to the eyeballs against their otherwise debt-free home (which, thanks to the bank’s valuers, has a sticker value of $1m) so they can buy one or two shonky apartments is….well….a train wreck waiting to happen. Try to explain the risks and the standard reply is a smug “I bought my house for $50k x-years ago, now it’s worth a million….I know what I’m doing”.

        So by comparison the kids are ok. Whether by choice, mathematical ability or understanding that their parents will eventually die ($inheritance) many are not buying.

  3. And they won’t be missed (in terms of house buying) because the slack will just be taken up by foreign investors and more immigrants in this eternal Ponzi scheme.

  4. Well hopefully there is some severe moderation in Perth by November. I have a feeling there will be, everyone’s discussion of the mining place is much less rosy than last year and I swear I am seeing more for sale signs around.

    Current lease will be up then and we’ll be yearning for a place to settle for the long term future.

    • I would have to agree. With what is going on in places like Karratha and Port Hedland flowing through to Perth (especially the city) and first home buyers in the west piling in, the vacancy rate will continue to grow this year as FHB move into new digs and people continue to leave the state.
      When Gorgon, Wheatstone and Roy Hill are complete in a few years Perth, will have a large overhang.

  5. Seems largely a Sydney problem. All other capitals except Perth are still below previous peaks, so must be cheaper in real terms than 3 years ago. Plus incomes have risen in that time….. what am I missing?

    About 80% of Australian’s don’t live in Sydney….. what am I missing?

    Based on the numbers I’m seeing (Sydney excluded), it seems more likely we’re at the start of a slow melt than a bubble. You know, with prices falling and all…..

    • Yes, prices are cheaper in most capital cities (in real terms) than they were.

      But I would make two points:
      1. Just because they are marginally cheaper in real terms doesn’t mean they aren’t still horrendously overvalued.
      2. Extrapolating a ‘slow melt’ from this and discarding the possibility of a sharp correction at some point is premature.

      Having said that, property is an asset class I have been very wrong on for many years now. I put it down to underestimating the stupidity of the Australian populace, but perhaps that’s just to make me feel better…

      • I’m not discounting the possibility of a sharp correction, but it does seem rather unlikely when you consider interest rates being low and remaining low (maybe not this low, but lower than historical norms), excellent employment prospects (95% of people who want a job have one), rising wages (even if they’re rising a little more slowly than normal, the facts is they are rising. Put your hand up if you’re earning less than 2 years ago!) foreign money piling in, Australian’s obession with owning their own home, blah blah blah. Oh yeah, I forgot the choked supply.

        But yeah, there could certainly be a correction. No doubt it’s overvalued in some parts . I’m not saying we’re in a slow melt, I just meant that if you look unemotionally at the numbers (something most are incapable of) they point more to a slow melt than a bubble. Of course if you look at one year in isolation you will get a different picture.

        Hey, does the final graph titled ‘Change in capital city home values from their previous peak to December 2013’ allow for inflation? Because if not, then prices are down further than I thought.

        In fact I probably owe David Collyer an apology. When he declared a year or two ago that prices were unwinding, he may have been closer to the mark than I had given him credit for.