A combination of the rising Australian dollar, the volatile share market and the expectation that financial services worker’s salaries will remain subdued (ie: no enormous bonuses expected) have caused housing in affluent suburbs to drop by around 5.4 per cent over the year-end to April.
RP Data and Rismark divide their capital city index into three sub-indices: the bottom 20 per cent of suburbs ranked by price, the middle 60 per cent, and the top 20 per cent.
Over the year to end April, dwellings in the most expensive capital city suburbs recorded a -5.4 per cent loss In contrast, home values in the middle 60 per cent of suburbs were down by only -0.9 per cent. Dwellings located in the cheapest 20 per cent of suburbs were the best performers, hardly moving (-0.5 per cent).
RP Data’s research Director Tim Lawless said: “The solid performance of cheap suburbs runs against the grain of popular claims that default rates are rocketing up amongst first time buyers, which the RBA recently rejected.”
“The luxury end of the housing market is also showing its volatility. During the growth phase of the cycle the most expensive homes realised the highest capital gains. Yet as the market cools premium home values seem to be losing steam the fastest,” he said.
Rismark Joint Managing Director, Christopher Joye, added: “The uber-luxury segment is risky and highly illiquid and has had the rug whipped from under it via a combination of the soaring Aussie dollar and the volatile share market.
He said: “A final fly in the ointment is the much lower growth – and pay packets – expected in the financial services industry going forward. Luxury homes in areas like Sydney’s Eastern Suburbs will continue to face valuation headwinds as banks deal with the new normal of subdued credit growth.”
According to the report the national median dwelling price in capital cities is $468,000 based on sales over the three months to April. In the ‘Rest of State’ (i.e., non-capital city) markets, the national median dwelling price is a far lower $325,000. Across all Australian regions, the median dwelling price is currently $418,000.
He said we have had a substantial increase in interest rates preceding a modest softening in house prices, and now expects at least another one to two rate hikes this year, which will “solidify the cooling in residential valuations.”