Property prices in state capitals continue to fall

The cost of property in Australia’s state capitals has taken its biggest quarterly fall in at least 12 years, as more stock in the housing market allows prospective buyers to be more patient and wait for bargains.



Capital city property values fell by a seasonally adjusted 2.1% in the first quarter of the year, according to the latest RP Data-Rismark Home Value Index and the quarterly change was the steepest since the index series began in June 1999. The index also shows that prices were flat in the month of March and down 0.6% over the past 12 months, with the property value median price at $455,000.



Prices are decreasing due to a recent rapid build up of housing stock into the market, with estimates that the amount of properties being advertised for sale is about 30% higher than what it was last year, which has resulted in prospective buyers negotiating for lower prices more regularly than in previous years, as there are simply more properties available for sale at the moment.

The average value of capital city properties has also decreased due to the two weakest performers, Brisbane and Perth, who are down 4.6% and 3.4% respectively in the first three months of the year. Property owners are now selling properties approximately 6.5% lower than the original asking price on average, compared with about 5.2% the same time last year. Recent extreme weather events, such as the flooding in Queensland, are also having an effect, as they are likely to compound Brisbane’s weak market conditions.



In addition, interest rate speculation always seems to be increasing, with speculation based on the assumption that interest rates will be rising in the near future, particularly with the CPI figures released in recent times.



However, while residential properties have not seen any capital growth over the past 12 months, many have experienced strong increases in rental yields. In contrast to the fall in home values, gross rental yields have been improving with apartments and houses now delivering a gross return of 4.9% and 4.2% respectively in March 2011.



The fall in house values, which follows sharp increases in interest rates in 2010, is likely to reinvigorate first home buyer demand which is currently struggling with low affordability. Income growth across the economy is running at 6 per cent per year and while interest rates are close to their cyclical peak, the market is moving in favour of buyers, which means future home owners may have more purchasing power for home renovations, such as extending your house or glass tinting.



Isla Campbell writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.