Australia | Feb 17 2009
By Andrew Nelson
The latest house price figures from Residex continue to show slippage in early 2009. On a national basis, prices were down an estimated 0.7% in January following a 0.8% decline in December. All up, the read is now down 2.7% on a year on year basis.
Westpac Senior Economist Matthew Hassan notes that month on month prices were lower in all major capital cities, with Sydney down 0.7%, Melbourne down 1.0%, Brisbane down 1.2%, Adelaide down 0.4% and Perth down 0.3%. He notes that prices are now tracking at a 4% annual rate of decline.
Brisbane remains one of the healthiest markets on a yearly rate basis, which likely reflects the significant increases in state government stamp duty concessions, Hassan notes. On the other hand, Perth is experiencing a more pronounced rate of decline, trending 6.3% lower for the year.
Apartment prices are showing a little more resilience than houses, booking a smaller 0.4% monthly decline in January, with prices falling at a 2.6% annual pace over the last six months.
All up, Hassan finds the price softness through the December-January period disappointing, given the 175bps in rate cuts through November and December. He notes the vast bulk of these cuts were passed on to mortgage rates. The substantial increase in the first home buyers grant has also not helped as much as could have been hoped, despite it being equivalent to about 1.5% of most median capital city house prices.
Not surprisingly, there is also a significant gap emerging between the price performance at the upper end of the Australian market and the rest. Hassan notes that premium property prices fell by nearly 10% over 2008 and are not surprisingly showing little response to lower interest rates and fiscal boosters.
On the plus side, Hassan points out that the December-January period is the off-season for housing markets, so the latest prices are based on relatively low flows. That means the read may also be capturing more sales by more motivated sellers, ones that need to sell quickly so are more prepared to accept lower price offers.
Given policy measures are still recent and prospective investors believe there may be more rate cuts to come, price reads for the February though March periods will probably offer a better picture as to how much support is actually coming from the RBA’s easing policy.
Hassan notes the early signs suggest market demand is improving, with auction clearance rates up strongly in the first weeks this month. And taken in a larger context of global financial turmoil and a weakening economy, Hassan thinks the performance of the Australian housing market is actually pretty good, especially compared to the US, UK and New Zealand. These countries have all recorded double digit house price declines.