Australian housing prices continued their disappointing run in the March quarter, falling by 0.6%, but the result was better than expected and is proof the property market is holding up relatively well despite an ongoing correction, one economist argues.
According to the Australian Property Monitors, prices fell by 0.6% across the country during the three months to March to an average price of $550,946, representing only 0.2% growth over the year.
There were some disappointing regional results – prices in Hobart fell by 2.3% to $334,822, and prices in Perth fell for a third consecutive quarter by 1.1% to $540,978.
But APM economist Andrew Wilson says the figures aren’t worth worrying over – in fact, he thinks they’re better than expected.
“The key word here is stabilisation. The eastern seaboard markets are in a recovery situation, but they aren’t recovered yet. This is an adjustment process after the strong semi-boom conditions of last year.”
“I think our economy is still on track. There are some disappointments here, and the prices aren’t picking up to the levels we thought they would. But incomes are rising and we have good job creation.”
There are some standouts. Wilson points to the 0% growth rate in Melbourne for the quarter, saying this is better than expected given many economists expected a sharp correction after last year’s boom.
“Melbourne prices went up by around a third, which is a big leap. Now, under normal circumstances you would expect for there to be an adjustment process there, and I was expecting a flattening and a slight movement backwards.”
“Melbourne has held its ground,” he says.
Wilson also says many of the losses in the market were recorded during the back-end of the quarter, and that in the last few weeks the Melbourne market saw some recovery.
“That was reasonably heartening, and looking at the data it clearly shows there is some recovery in the market there. This market is on the upswing, and could show some growth by the end of the year.”
And while prices in Sydney have fallen by 0.4% over the quarter, Wilson says this result isn’t anything to scoff at either.
“This is a reasonable result, and again like Melbourne it was skewed towards the beginning of the quarter. We’ve seen some signs of improvement there.”
Brisbane prices fell by 2% to $446,669, but Wilson says this is surprising given the natural disasters there, adding there was an expectation of a bigger price fall.
“We were expecting sharp declines there. This is a reasonable result given that situation.”
The other results represent a fairly resilient market, despite a few falls. Adelaide prices fell by 0.6% and prices in Darwin have fallen by 1.6%.
Results for units were more disappointing – Adelaide recorded a 4.8% fall, followed by Darwin with a decline of 2.5% and Hobart with a 2.1% fall.
Sydney prices fell by 0.7%, Melbourne by 1.4%, Brisbane by 1.9%, Canberra by 1.4% and Perth by 0.7% – no capital cities recorded an increase in unit prices.
But still, Wilson says the result “could have been worse”.
“Obviously the downside is Perth, we’ve seen consecutive falls there now. But there is strong economic growth in Perth, although it looks to be a couple of quarters off.”
“I think we’ve got an issue in Western Australia with consumer sentiment, and I think this reflects the cloud of mining tax issues and so on out west.”
Wilson says that given there are very few first home buyers out on the market now, the property market is maintaining a strong position – even with the looming threat of interest rate rises on the horizon.
“The softening of house price growth reflects the ongoing hangover from the strong price growth generated between 2009 and 2010,” he says.
“After the strong boom conditions of last year, we’re just going through an adjustment process – our economy is well on track.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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