March '07 Quarter Housing Data & Commentary

MARCH KEY FIGURES

	Dec Qtr 07 to Mar Qtr 08	Mar Qtr 07 to Mar Qtr 08
Established house prices	% change	% change
Weighted average of eight capital cities	1.1	13.8
Sydney	-1.5	7.1
Melbourne	4.1	25.9
Brisbane	2.8	20.8
Adelaide	2.1	21.6
Perth	-0.6	0.6
Hobart	-0.7	8.2
Darwin	-1.3	4.9
Canberra	1.0	14.4

ESTABLISHED HOUSE PRICES, Weighted average of eight capital cities - Quarterly % change

ESTABLISHED HOUSE PRICES, Quarterly % change - March quarter 2008

• Preliminary estimates show the price index for established houses for the weighted average of the eight capital cities increased 1.1% in the March quarter 2008.
• The capital city indexes rose in Melbourne (+4.1%), Brisbane (+2.8%), Adelaide (+2.1%), Canberra (+1.0%), and fell in Sydney (-1.5%), Darwin (-1.3%), Hobart (-0.7%) and Perth (-0.6%).
• The movement in the preliminary established house price index between September and December quarters 2007 has been revised from an estimated increase of 3.2% to an increase of 4.1%.

• Over the year to March quarter 2008, preliminary estimates show that the price index for established houses for the weighted average of the eight capital cities rose 13.8%.
• Annually, the capital city indexes all rose - Melbourne (+25.9%), Adelaide (+21.6%), Brisbane (+20.8%), Canberra (+14.4%), Hobart (+8.2%), Sydney (+7.1%), Darwin (+4.9%) and Perth (+0.6%).
• The movement in the preliminary established house price index between December quarters 2006 and 2007 has been revised from an estimated increase of 12.3% to an increase of 13.8%.

Commentary

PROPERTY MARKETS HIT THE BRAKES

APM released our March Quarter housing series this week. It showed that half (4 of 8) of the capital cities experienced a decline in values for the quarter, with the rest recording little or no growth. The aspect of these latest figures that surprised me most was just how abrupt the slow down in the heated markets of Melbourne, Brisbane and Canberra has been over the first three months of the year.

The March quarter results strongly suggest the property market is slowing significantly and is likely to be sluggish throughout 2008. After all, we are experiencing a climate of rapidly rising mortgage rates which is deterring investors and causing pain for mortgage holders. Let's face it, those that took out a mortgage worth $400K three years ago will have suffered an extra $1000 per month in extra mortgage repayments since. Who's got a lazy extra $1000 per month just hanging around do nothing? As for investors with a short term focus, they can achieve yields of over eight per cent by leaving funds in cash.

No doubt, rapidly rising interest rates are biting the property market hard creating a very different sentiment to that felt last year. In 2007, Adelaide, Canberra, Melbourne and Brisbane were deep in sellers markets. Clearly, the property market is hitting the brakes in these capitals. In my opinion they also demonstrate the acute sensitivity of the Australian property market to rapidly increasing mortgage re-payments. This leaves property markets in a precarious position vulnerable to more hikes in the cash rate.

Property markets have historically taken time to taper off after heated price growth. We saw this in 2003-2006. That is what makes the abrupt slow down in the property market through the March quarter so notable.

Sadly, these softer conditions are expected to persist throughout 2008. With fewer buyers and more sellers beginning to create a glut of unsold property in the market, it is hard to argue otherwise. In 2008, buyers are likely to be spoilt for choice where vendors are likely to experience more headaches.

Michael McNamara

Australian Property Monitors

Melbourne Edition 02 May 2008

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