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RP Data September 2013 Results: Australian home prices surge to record high; Capital city house prices up 1.6% in September, RP Data-Riskmark shows
Topic Started: 1 Oct 2013, 01:05 PM (2,103 Views)
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Australia home prices jump to record high in Sept-RPData

Oct 1 (Reuters) - An index of home prices for Australia's major cities jumped to a record high in September fuelled by strong demand in Sydney and Melbourne, evidence that low mortgage rates were working to revive the housing market.

Figures out on Tuesday from property consultant RP Data-Rismark showed overall dwelling prices rose 1.6 percent in September, from August, and were 5.5 percent higher than in September last year.

The latest gains saw its index of prices just pip the previous all-time peak set in October 2010. The median property value across all 8 major cities hit A$500,000 ($466,200).

RP Data's director of research, Tim Lawless, said the gains in September were led by Australia's two largest housing markets, Sydney and Melbourne, where prices climbed more than 2 percent for the month.

For the year to September, values in Sydney were up by 8 percent while Melbourne boasted an increase of 5.4 percent.

The strength will likely stoke talk that record low interest rates are feeding a "bubble" in home prices, though Lawless emphasised the froth was very much centred in Sydney and Melbourne.

"Most other capital city housing markets are in fact showing only a modest growth trend," he noted. Prices in Perth, Brisbane, Darwin, Hobart and Canberra all fell in September.

The Reserve Bank of Australia (RBA) has cut interest rates to a record low of 2.5 percent in part to promote a recovery in home building.

The central bank has called talk of a bubble alarmist, though it has also cautioned that would-be home buyers should not expect a return to double-digit price gains.

The RBA holds its monthly meeting on Tuesday and is expected to stand pat on policy for now.

"One of the most positive outcomes of the strong housing market conditions is the flow on effects for new housing construction," said Lawless. "An uplift in the new housing sector is exactly what policy makers are hoping to see from the low interest rate setting." (Reporting by Wayne Cole; Editing by Shri Navaratnam)

Read more: http://www.reuters.com/article/2013/10/01/australia-economy-homeprices-idUSL4N0HR03K20131001
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Capital city house prices up 1.6pc in September, RP Data-Riskmark shows

James Glynn and Turi Condon

CAPITAL city house prices continued to rise strongly, stoking concern that record low interest rates were fuelling overheating in the country's property market.

RP Data-Rismark's gauge, which tracks median house prices across the nation's major cities, rose 1.6 per cent in September from August to a record high. The index climbed 5.5 per cent from a year earlier.

The September gains were driven by Australia's two largest housing markets, Sydney and Melbourne. Residential property values in Sydney rose 2.5 per cent from August and 8.0 per cent from a year earlier, while Melbourne saw gains of 2.4 per cent and 5.4 per cent, respectively.

"We haven't seen market conditions this strong since April 2009 for Sydney and May 2010 for Melbourne," said Tim Lawless, research director at RP Data, adding that Sydney's price growth was "extraordinary".

Maintaining such a rate of growth was unlikely, Mr Lawless cautioned, and even at the current rate was starting to erode yield for investors. Prices in Brisbane, however, were still 10 per cent lower than their 2009 peak, offering the second-highest yields in the country, he said.

The central bank lowered interest rates to a fresh record low 2.5 per cent in August, adding to seven cuts over the past two years aimed at cushioning the economy from an anticipated sharp slowdown in resources investment as a long mining boom cools.

The Reserve Bank of Australia is worried about the low rate setting causing overheating in the housing market, and recently urged the nation's banks to maintain stringent mortgage-lending practices.

"Any debate about unsustainable growth in housing markets should be very much focussed on Sydney and Melbourne," said RP Data's Mr Lawless. "Most other capital city housing markets are in fact showing only a modest growth trend."

Read more: http://www.theaustralian.com.au/business/property/capital-city-house-prices-up-16pc-in-september-rp-data-riskmark-shows/story-fn9656lz-1226730714064#
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RP Data-Rismark capital city house price index climbs by 1.6 per cent to hit record high in September

By business reporter Pat McGrath

A jump in house prices in Sydney and Melbourne over the past month has pushed the average value of homes in Australia's capital cities to a record high.

The latest monthly house price index from real estate industry firms RP Data and Rismark show capital city house prices increased by 1.6 per cent in September.

The result was driven by a 2.5 per cent rise in Sydney and a 2.4 per cent increase in Melbourne.

It comes amid growing concern about persistently low interest rates and speculative investment creating a property bubble in Australia.

RP Data analyst Tim Lawless says prices in Sydney have increased by 10 per cent in the first nine months of this year.

"What's driving that is the fact that Sydney's had a weak, long-term cycle," he said.

"Over the past 10 years, values have only risen by an annual rate of about 2.5 per cent. So in many ways Sydney's playing catch up at the moment."

Investors boost Sydney property prices

Mr Lawless believes much of the concern about high growth in Australian house prices is centred on Sydney.

"It's being driven very much by investment," he said.

"Whereas first-growth phase back in 2009 was very much driven by first home buyers, it's very different in this cycle and it's very much speculative. About 40 per cent of purchases in Sydney are investment properties."

But Mr Lawless says the annual increase of 5 per cent across all capital cities is fairly tame.

"We've seen much higher levels of growth in the previous growth cycles," he said.

"Back in 2009 for example, we saw annual growth peak at around 15 per cent to 17 per cent, in 2007 it peaked at about 20 per cent, and in 2001 it peaked at well above 20 per cent."

Prices in Darwin dropped by 2.5 per cent last month, while Hobart's average house price fell by 2 per cent.

There were also falls recorded in Perth, Canberra and Brisbane.

The average home value in Adelaide increased by 1.1 per cent.

Read more: http://www.abc.net.au/news/2013-10-01/house-price-index-hits-record-high/4990760
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Why this housing boom is different

Christopher Joye

Home values in Australia’s largest city, Sydney, are now up 10 per cent over the first nine months of the year according to RP Data-Rismark. That’s not the “annualised” rate of growth. If we annualise the index data from January to September 2013, Sydney house prices are expanding at a 13.7 per cent pace.

Across Australia’s eight largest capital cities home values are up circa 7 per cent over the nine months to end September (or a buoyant 9.2 per cent annualised).

Yet some say this is “nothing to worry about” because we’re in “familiar territory”. Australian house price growth was, after all, stronger in the early 2000s and in 2007 and 2009.

But there is a crucial flaw in this argument, which its purveyors have yet to disclose. In 2001 and 2002 annual per capita disposable household income growth was more than 6 per cent. Again in 2007 and 2009 disposable income growth was more than 8 per cent and 6 per cent, respectively.

The earnings experience of families in 2013 is markedly different. Disposable incomes are only growing at a 3 per cent annual clip.

This is the new normal, where incomes track wages much more closely after disposable earnings benefited from a range of one-off boosts over the past two decades, including tax cuts and the advent of multi-income families.This boom is therefore different: it is driven less by purchasing power and much more by cheap money.

House prices rising at around three-times incomes (and more than triple wages) is OK for a short period. It is not sustainable through the cycle. The longer the RBA persists with its growth-orientated policy of maintaining the lowest borrowing rates in history, the louder the chants of “bubble trouble” will likely become.

Read more: http://www.afr.com/p/blogs/christopher_joye/why_this_housing_boom_is_different_pZaiwA4LOwJxJeUbnSX1wJ
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That's one hell of a nation wide boom.

"Prices in Perth, Brisbane, Darwin, Hobart and Canberra all fell in September."
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newjez
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1 Oct 2013, 02:23 PM
That's one hell of a nation wide boom.

"Prices in Perth, Brisbane, Darwin, Hobart and Canberra all fell in September."
Now, now - I'm sure it's Perth prices just taking a run up, catching their breath after the boom. Isn't that right Mike?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Sydney and Melbourne property prices surge

October 1, 2013 - 1:32PM
Antony Lawes

Surging house price growth in Sydney and Melbourne has catapaulted national dwelling values to their highest point ever, according to the latest RP Data report.

Sydney is leading the charge with home values jumping 2.5 per cent last month alone, and 5.2 per cent over the September quarter, the RP Data-Rismark September Hedonic Home Value Index found.

Melbourne values grew almost as strongly, up 2.4 per cent and 5 per cent respectively.

The combined total of all capital city property values pushed 0.7 per cent higher than the previous record high which was last recorded back in October 2010, the index found.

Sydney's combined market is now 6.6 per cent above 2010 levels, although Melbourne is still 1.9 per cent below 2010 values.

RP Data research director and analyst Tim Lawless described the results as a ‘technical’ recovery in the housing market, after overall dwelling values fell 7.4 per cent from October 2010 to May 2012. Since June last year they’ve climbed 8.7 per cent.

Mr Lawless said most of these gains were due to the strong performance of Australia’s two biggest housing markets. Most other capital cities had subdued gains or even losses.

‘‘We haven’t seen market conditions this strong since April 2009 for Sydney and May 2010 for Melbourne,” Mr Lawless said

Read more: http://smh.domain.com.au/real-estate-news/sydney-and-melbourne-property-prices-surge-20131001-2upji.html
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I keep hoping a collapse will happen, I'm not confident though. The amount of immigration we have, coupled with not enough building of new dwellings and continued pressure from overseas investors... I don't think prices will ever go down substantially. It would be great to think they would stop getting so out of the reach of ordinary Australians, but it doesn't seem likely. And the large part of the population who already own and love the fact that values continue to go up means no politician will ever try and resolve the issue.

I get so frustrated with it - even my friend who bought a house five years ago and tells me "it wasn't a very good investment, the price hasn't gone up enough to give good returns". I pointed out to her that if she wants good returns, she was silly to invest in property. And the higher her returns generally, the less her child will be able to afford when he's old enough to want to buy his first place.

All those annoying investors out there, buzz off and let those of us who just want a place to live in without these forever escalating prices. I actually can afford a place, but there's plenty who can't (nurses, teachers, not for profit workers etc) and I also get frustrated that prices are so overvalued. It is unfair to those who are only at an age to enter the market now as opposed to having wage to house price ratios so much less even just 10-15 years ago. And yes, sometimes life sucks and will be unfair. The point being that (in my humble opinion), governments should try and regulate to reduce some of these disparities between generations.
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1 Oct 2013, 05:00 PM
I actually can afford a place, but there's plenty who can't (nurses, teachers, not for profit workers etc) and I also get frustrated that prices are so overvalued
I have several teachers, nurses, and also essential service workers (police/ambo's etc) in my circle of close friends and family. They *all* own houses....in Sydney......
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Re: Joye on Why This Housing Boom is Different

The average household still thinks their disposable income will grow at 6 – 8% and that the cash rate will stay at 2.5%. This is the delusion which is behind the surge in house prices.

The future will look more like this:

3% household income growth

5 to 6% cash rate – after global rates normalize (that’s roughly the post-inflation targeting average)

Put those figures into house price forecasts and there is no way price growth can realistically exceed income growth.

A new normal of 3% income growth/5-6% cash rate, also implies that the savings rate is going to need to increase dramatically (even from here) in order for the household debt/ income ratio to fall over time.
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