The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Monday, October 31, 2011

Australian housing market correction slows in September


Consistent with RP Data and Rismark’s forecasts, Australia’s housing correction appears to be slowing. In September, capital city home values had their best result in 7 months (down just -0.2 per cent seasonally-adjusted and raw) while regional house values rose +0.1 per cent (s.a.). Including rents, total returns are +0.7 per cent over the first nine months of 2011 and +0.9 per cent over the 12 months to end September.

According to the market-leading RP Data-Rismark Home Value Index, which captured nearly 251,000 sales in the first nine months of 2011 alone, Australia’s soft housing market may be starting to turn the corner. The RBA’s decision tomorrow will determine whether the commencement of any recovery occurs quickly, or is more elongated into 2012. Since 90 per cent of all home loans are variable rate, housing is one of the most interest rate sensitive sectors of the economy.

In the month of September, capital city dwelling values declined by just -0.2 percent (both seasonally-adjusted and in actual raw terms). This was the smallest decline since February 2011 and was crucial in reversing a trend of accelerating capital losses since end March 2011. Over the first 9 months of 2011, capital city home values have now declined by -3.6 per cent. In the 12 months to 30 September, capital city home values were off by -3.4 per cent.

RP Data-Rismark measures changes in the value of houses across all ‘regional’ markets, which cover the circa 40 per cent of homes not located in the capital cities. Regional house values also recorded a positive result in the month of September, rising by +0.1 per cent (s.a.).

On a seasonally-adjusted basis, the quarterly results across the capital cities and regional markets were identical (-1.3 per cent).

Continued strong growth in rents, which according to the ABS expanded by 1.2 per cent in the September quarter and by 4.6 per cent over the year, has meant that gross total returns for home owners have actually been positive.

In the first nine months of 2011, total returns (ie, capital change plus rents) were +0.7 per cent in the capital cities. Over the year to September 2011, gross total capital city returns were +0.9 per cent.

Using their patented hedonic index technology, RP Data and Rismark estimate rental yields adjusted for the different characteristics of homes. In the month of September, RP Data-Rismark reported that gross rental yields for apartments and houses were 5.0 per cent and 4.3 per cent, respectively.