Although spring is yet to finish, it looks as if the market has performed better this spring than it did throughout spring 2011.
The RP Data-Rismark Daily Home Value Index shows that across the five capital city aggregate index, which encompasses the five major capital cities and includes the Gold Coast, spring selling conditions have been stronger than for the same period last year. From August last year to November 30, 2011, home values fell by 1.9% according to our index. However, between August 31, 2012, and November 21, 2012, the index has shown that values increased by 0.9%.
Although a 0.9% increase isn’t overly substantial for the typically strong selling season for the market, it is a significant improvement on the 1.9% decline in values throughout the period last year. It also indicates that the lower interest rate environment is having an impact on the housing market. Throughout the last “spring selling season”, standard variable mortgage rates were recorded between 7.8% and 7.55%. Throughout spring 2012, standard variable mortgage rates have been recorded at between 6.8% and 6.65%, around 100 basis points lower than last year.
Clearly, with a lower mortgage rate environment, buyers have shown an increased propensity to enter into the market as the cost of servicing the debt has become cheaper. Unfortunately, timely sales activity data is not available as it is for home values, however, in the most recent month for which data is available (August) there has been a noticeable improvement in sales activity. Sales volumes over August 2012 were still 10% lower than the five-year average, but they were 15% higher than in August 2011.
Auction clearance rates, which are a key lead indicator of market performance, have also been stronger throughout this spring than they were in 2011. On a week-to-week basis, capital city auction clearance rates averaged 45.5% throughout spring last year. So far this spring, auction clearance rates have been recorded at an average of 53.1%. These clearance rates are still a long way from strong market conditions but do indicate better conditions recently.
Overall the “spring selling season” for 2012 has been better than 2011 but still nowhere near as strong as it has been over recent years. With values showing low levels of improvement, significantly lower mortgage rates, and ongoing improvement in consumer confidence it looks as if the performance over spring of this year is a good platform for further market improvement throughout early 2012. Of course, conditions are still likely to be weighed on heavily by domestic and economic conditions, and it is unlikely there will be a significant acceleration in value growth.
However, values should continue to slowly trend higher into 2013 especially if further cuts to mortgage rates are afforded, either by lenders or via cuts to the official cash rate by the Reserve Bank.
Cameron Kusher is senior research analyst at RP Data.