House prices down 0.2% in March but rental yields starting to rise

National house prices are continuing to stagnate, with the latest data from the RP Data-Rismark Home Values Index showing national prices fell 0.2% in March, and were down 2.1% in the March quarter.

However, the data does contain some good news for property investors, with rising rents boosting rental yields.

According to RP Data, the national median house price for city dwellings fell 0.2% in March and 2.1% in the March quarter to $455,000.

House prices were flat in Sydney during the month (for a median price of $500,000) and rose 0.6% in Melbourne (median of $465,000). Darwin reported the biggest rise in house values for the month, with prices up 1.1% to a median of $430,000.

Prices in all other Australian cities fell. Canberra house prices were down 0.4% to $511,500, and prices in Adelaide were down 0.7% to $385,000.

The biggest falls were in resource-rich states of Perth – where prices continued their recent falls to drop .9% to $465,000 in March – and flood-hit Brisbane, where prices dropped 1.4% to $430,000.

RP Data research director Tim Lawless says Brisbane has recorded the weakest results over the quarter and the year.

“Unsurprisingly, the flooding that has occurred within South East Queensland has likely compounded Brisbane’s weak market conditions.”

Brisbane homes were the worst performers during the March quarter, with values dropping sharply by 4.6% seasonally adjusted. Prices dropped 6.8% over the year to March 2011.

Despite stagnant house prices, there was some good news for property investors, with a relatively tight rental market and flat or falling house prices pushing up yields.

RP Data says rents have increased 4.6% nationally over the six months to March 31, with yields improving to 4.2% nationally for houses and 4.9% for units.

Lawless says market conditions clearly favour buyers, who are enjoying rising household incomes (growing at about 6% per annum) and flat prices.

He expects this environment will entice first home buyers back into the market over the medium-term, but expects little upwards movement in house prices for the rest of the year.

“Clearance rates are bouncing around the low 50% mark each week, the number of homes being advertised for sale is almost 30% higher than at the same time last year, and sellers are being forced to adjust down their price expectations.”

“Before there is any real upwards pressure on home values there will need to be some absorption of effective supply and a return of sustained buyer confidence to the market.”