Property values could dip in October: Lawless

Based on daily movements in the aggregated RP Data-Rismark Home Value Index (updated daily at www.rpdata.com, www.asx.com.au, Bloomberg and Reuters) covering Australia’s five key capital cities,  Australia’s housing market reached a recent trough on May 30 of this year after values peaked 1.5 years earlier and 7.7% higher.  Since the recent low point in the index, dwelling values across the five-city aggregate index have gained 2.5%.

As can be seen from the table below, each capital city reached its respective market peak and eventual trough at a different time. Perth’s housing market peaked the earliest (May 9, 2010), followed by Brisbane (May 13, 2010) with the other major capitals finding a high point in October or November 2010.

Additionally, the recovery time frame and duration of the correction varies from city to city.  The cities where housing markets were comparatively weaker recorded an earlier peak, while in the stronger markets (Sydney and Melbourne) values peaked later in the cycle.  In the combined Brisbane/Gold Coast market values consolidated over a two-year period, with values falling by 12.9%.  Adelaide’s housing market correction ran for 1.8 years, with values down 8.4%.  In Melbourne, values fell by 11.1% over 1.6 years, Perth recorded a 12.5% correction over 1.5 years and Sydney’s housing market had the smallest correction, with values down 6.8% over a 1.5-year period.

An interesting development in the most recent set of daily indices data is that the upwards trend in values that was evident from the end of May has taken a turn.  The five-city aggregate index reached a recent peak on the last day of September; over the first 16 days of October dwelling values have retraced 0.6%, hinting that the October results may finish in negative territory. If the monthly index does move back into the red in October, it will be the first fall since the five-city index fell by 1.4% over the month of May 2012.

The market dynamic for each of the capital cities included within the daily index is provided below. Two graphs are presented for each city; the recovery phase (ie market trough to October 16) and the longer cycle of values since June 30, 2009 which provides a depiction of when each market peaked, the duration and magnitude of the correction and the start of what seems to be a recovery.

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