With only a week to run in June, the RP Data daily home values index has staged a sharp recovery following May’s sharp 1.9% fall, which was the biggest monthly decline since the daily index began in January 2012.
As at 22 June, home values at the 5-city level have risen by 0.51%, driven by strong rises in Sydney, Brisbane and Perth, which more than offset weakness in Melbourne and Adelaide (see next chart).
However, at the individual capital city level, the picture is changing. While Sydney has maintained its out performance, price growth in Melbourne has plummeted to become the second worst performing major capital in 2014 (see next chart).
The shift in momentum is best captured by the next chart, which plots the daily index on a 14-day moving average basis, thus removing much of the index’s inherent volatility. As you can see, while the worm has turned up across most capitals, Melbourne’s prices have fallen by around 5% over the past two months (see next chart).
The 0.51% rebound recorded so far in June is not all that surprising, given the RP Data daily index is not seasonally adjusted, and values typically rise at this time of year. Indeed, in both 2012 and 2013, values rebounded by 0.97% and 1.98% respectively in the month of June following heavy falls in May (see next chart).
Following this month’s rebound, prices at the 5-city level are now 6.1% above their 2010 peak in nominal terms, although only Sydney and Perth are in positive territory (see next chart).
Obviously, the heavy seasonal swings in the RP Data index illustrates why it should be interpreted with caution and should not be used to draw definitive conclusions about the strength of the housing market.
Rather, the single best predictor of house price growth is total housing finance commitments (excluding refinancings), which is produced monthly by the ABS. This series continues to register positive annual growth, which points to continued national house price gains, although at a slowing rate. Once this indicator turns south, the chances are that house prices will too.
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