Weak top end hurts property market
Australia’s blue ribbon property market has endured large price falls of late, but is this trend set to continue long term?
The housing market’s poor performance can in part be attributed to ongoing weakness in the premium property market.
According to new research by RP Data, a lacklustre premium housing sector has resulted in value falls across all markets except Sydney.
The latest Hedonic Home Value Index found the top 20 per cent of Australia’s suburbs fell 3.3 per cent in value over the year to March 2011.
In contrast, values across the broad middle 60 per cent of suburbs were virtually flat, while the most affordable 20 per cent of suburbs were up 0.3 per cent over the year.
RP Data’s research analyst Cameron Kusher said there’s no doubt that all three sectors have recorded a marked slowdown in capital gains during recent months.
“In the major capitals, the market performance over the year has actually been quite different apart from in Adelaide; in all other capital cities, the top 20 per cent of suburbs have been the weakest performers,” he said.
Annually, the March results showed that values across the most expensive of Brisbane’s suburbs had fallen by 8.2 per cent with a 4.5 per cent fall recorded over the last quarter alone.
Perth’s top end fell by 11.8 per cent over the year, with an 8.4 per cent fall last quarter.
Mr Kusher said these results highlight the ongoing and growing weakness within the premium sectors of these two cities. During the last quarter, the most affordable 20 per cent of suburbs have been the best performers in each city outside of Sydney.
"Given that value growth has stalled and is running well below inflation, it may be an indication that values at the lower end of the market are at least becoming more attractive to purchasers. In saying this, don’t expect a rush of growth because rents are still generally more affordable than servicing a mortgage,” Mr Kusher says.
“Over the coming months we anticipate that the weakness in the premium sector is likely to persist, however falls are not expected to be as substantial as those in recent times.”
McGrath Estate Agents’ chief executive officer John McGrath agreed with Mr Kusher.
According to Mr McGrath, property prices in the blue ribbon areas will continue to fall, especially as the threat of rising rates loom larger.
“Rising rates don’t tend to affect blue ribbon buyers, but they do negatively affect first home buyers and it stops them from getting into the market. The fewer first home buyers there are, the greater property price falls across all markets,” he says