Home values across Australia's capital cities continued to soften over the month of May, defying the Reserve Bank's efforts to restimulate the nation's residential housing market with interest rate cuts, and further strengthening calls for additional interest rate reductions in the coming months.
According to the latest RP Data-Rismark home value index, residential property values slid 1.4 per cent across Australia's capital cities in May, bringing the year-to-date cumulative national decline to 2.2 per cent, and taking the annual decline to 5.3 per cent.
The index showed that seven out of the nation's eight capital cities experienced declines in housing values over the month, with the exception of Adelaide, which saw an increase of 1.2 per cent.
Melbourne was the worst performer, posting a dip of 2.7 per cent, while Perth, Sydney and Queensland sustained falls of 1.7 per cent, 1.2 per cent and 0.3 per cent, respectively.
According to RP Data's Research Director, Tim Lawless, much of the weakness in real estate values was contained in detached housing rather than apartments, with unit prices having actually increased over the year thus far.
"It is clear that the market is becoming increasingly price point driven. Unit values across the combined capitals increased in May and they are up by 1.3 per cent over the first five months of the year. Based on median prices, unit prices are generally around 15 to 20 per cent lower than house prices. Investment yields also tend to be higher and units are often located more strategically compared with their detached counterparts," Mr Lawless explained.
And while sliding housing values are obviously not particularly positive for vendors, soft market conditions are increasing the affordability of residential properties for prospective purchasers, noted Rismark Managing Director, Ben Skilbeck.
"The combination of interest rate reductions, declining home values and disposable income growth has significantly improved affordability. Since dwelling values peaked in November 2010, they are down by -7.6 per cent, the RBA cash rate has fallen from 4.75% to 3.75% and disposable income per household has increased by over 5 per cent," Mr Skilbeck said
Mr Lawless also pointed out various factors that indicate housing market conditions may have improved over the past few months.
"Each of the key vendor metrics we analyse have improved over the month," he said.
"Vendor discounting has reduced from a peak of -7.9 per cent to -7.1 per cent which suggests that vendors are becoming more realistic about price expectations on their home. The average number of days it takes to sell a property has also fallen from the seasonal highs recorded earlier this year.
The typical capital city house is now taking 63 days to sell compared with 70 days last month. Auction clearance rates have also levelled around the 50 per cent market compared with an average of about 45 per cent throughout the second half of 2011," concluded Mr Lawless.
For those Australians looking to buy a residential property in the near future, this decrease to the Index should signal the chance for affordable investment options. With lower interest rates and reduced competition in the marketplace, now might just be the perfect time to buy.
For information about available property purchase opportunities in your area, please contact your local Century 21 agent.