This follows as 0.5% fall in April and a 2.8% rise in the first three months of 2013. But values are still 2.9% higher than May last year which is also when the housing market broadly reached a recent low point after values corrected downward by 7.4% from peak to trough.
According to RP Data national research director Tim Lawless, the weak May result comes on the back of a substantial fall in consumer confidence over both April and May which can partly be attributed to a growing level of uncertainty about domestic economic conditions and possibly a sour reaction by consumers to the Federal Budget announcements in the middle of May.
‘The RP Data-Rismark daily index tracked higher from late April through to the 10 May, and then went into a consistent decline over the remainder of the month. How much of this downwards pressure can be attributed to the lower confidence reading is anyone’s guess, but the correlation of housing market conditions with consumer confidence is a strong one,’ he explained.
‘If we see confidence levels remain in the doldrums, there is likely to be a similar dampening effect on the housing market,’ he added.
Based on today’s indices results, the fall in dwelling values over the month of May and for the quarter was broad based with all capital cities apart from Perth and Hobart recording a fall in values over the month, and with half of the capital cities recording a fall in values over the quarter. While most cities experienced softer conditions, Lawless noted that Melbourne stands out as being one of the weakest performers.
‘The combined capital city index is stock weighted, meaning that larger cities like Sydney, Melbourne and Brisbane have a larger impact on the aggregated results. With Melbourne dwelling values down by 2.1% over the month and down 1.9% over the last three months, the pull down effect on the aggregated index has been substantial,’ said Lawless.
He pointed out that the two months of lower dwelling values comes at a time when a number of metrics such as auction clearance rates, vendor discounting, time on market and transaction volumes are performing well.
‘Auction clearance rates have been nudging the 70% mark on a weighted average basis over the past couple of months, with average selling time improving and vendors now offering up lower discounts from original asking prices in order to make a sale. We have also seen the number of house and unit sales rise compared with the same time last year,’ he explained.
Rismark’s chief executive officer Ben Skilbeck said there is one of two means by which metrics such as auction clearance rates, transaction volumes and vendor discounting improve; either buyers increase their offer price in order to meet vendor expectations or, alternatively, vendors reduce their expectations in order to meet buyer offers.
‘The first is usually associated with a rising market, while the second relates to a flat or declining market. In the absence of looking at house price indices to work out which market mechanism may be at play, two good metrics to examine are consumer confidence and housing finance credit growth,’ he pointed out.
‘If credit growth is anaemic and consumer confidence is weak, both of which is currently the case, it’s a good indication that strength in auction clearance rates, and other associated metrics, may largely be driven by vendors reducing their initial expectations in order to meet buyer offers,’ he added.
‘Given the weak housing markets of 2011 and 2012 were followed by a very robust 2013 first quarter, we may well be seeing some natural market volatility associated with vendors acquiescing and taking the opportunity to sell. It will be interesting to see which way the market trend develops in the coming month or two, especially given the historically low interest rate settings,’ Skilbeck concluded.
The RP Data-Rismark analysis of rental markets showed weekly rents across the combined capital cities were up 3.1% over the past 12 months. With values shifting slightly higher over the year as well as gross rental yields holding reasonably steady at 4.2% for houses and 5% for units.
Darwin and Perth are continuing to record the highest rate of rental growth with Darwin rents rising 9.5% and 9.6% for houses and units respectively, and Perth rents up 8.9% and 8.3% over the year.
