House prices fall 0.4% in August, RP Data figures show

House prices fell by a seasonally adjusted 0.4% in August according to the latest figures from RP Data.

It was the smallest decline since April and home owners have seen a “total return” growth of 0.2%, the research house says. But over the past year capital city dwelling values fell by 3.2%.

The biggest declines were in Perth, which fell by 2% in August and by 3.8% over the quarter, with Canberra falling 1.8% in August and by 1.7% in the quarter.

Hobart values fell 0.8%, Adelaide fell by 0.4%, Brisbane and Melbourne by 0.2% and Sydney remained flat.

Hobart and Darwin were the only cities to record growth, of 0.8% and 0.2% respectively.

Over the quarter the biggest declines were in Perth – down 3.8%, Darwin – down 2.8%, Melbourne – down 2.3% and Adelaide and Canberra – both down 1.7%.

The best performing city was Sydney, with values down 0.1%.

Over the year Perth prices fell 7.1%, Adelaide 4.9%, Melbourne 4.3%, Hobart 5.3%, Canberra 2.1%, Darwin 3.4% and Brisbane 6.1%. Only Sydney managed growth, with prices up by 0.3%. Nationally prices were down 3.2%.

Despite the declines RP Data senior research analyst Cameron Kusher says prices remain resilient ahead of the spring selling season.

“Over the past 12 months Sydney dwelling values have increased by 0.3% including rents, Sydney’s total return has been 5% over the past year and is up 3.4% in the first eight months of 2011,” Kusher says.

“Melbourne home values actually rose in raw terms by 0.2% and reported a much lower seasonally-adjusted decline of just 0.2%. It will be interesting to see whether this trend continues as the spring selling season kicks off.”

RP Data and Rismark argue that home owners should watch total returns rather than just capital gains, saying that while home owners who let their house receive rents in dollar terms those who own their homes “save the market rent”.

“This is the same as a business owning and occupying a building,” they say.

Total returns have been positive – 3.4% in Sydney for the year to date and 1.8% in Darwin.

But results haven’t been so positive in other cities, with Melbourne down 2%, Brisbane 1.6%, Adelaide 1.8% and Perth 2%.

One positive was rental results, with RP Data noting that gross rental yields were at 5% in August for units while houses were at 4.3%. On a total return basis, with capital growth plus rents, capital city dwellings were up 0.2%.

Rismark economist Christopher Joye said the current economic environment has changed, with major banks forecasting rate cuts by the end of the year, adding that the market will be the beneficiary of any of those reductions.

Joye says any change in interest rates will create a better environment for consumer sentiment, which may have an impact on prices.

“According to NAB’s latest survey, only 20% of people now expect interest rates to be higher in 12 months’ time compared to a stunning 70% of people in June. This will likely provide support for housing sentiment,” Joye says.

“A number of leading indicators point to more positive portents. For example, Australia’s largest mortgage broker AFG reported the largest number of new housing finance applications in August for 18 months.”

But Joye notes that RP Data and Rismark remain more concerned about inflation and suggests that interest rates will not fall to 3.5% or less during the next 12 months.