Property values resilient: RP Data International

Australian property values have fallen by just 2.6 per cent during 2008, showing a resilience to the financial crisis, according to the combined RP Data-Rismark International national property indices report.

However, the report showed that including rents, the total returns to residential property were actually positive in 2008.

By comparison, US house prices are down by more than 25 per cent, the benchmark ASX All Ordinaries Index fell by 45 per cent and Australian listed property trusts (LPTs) declined by 55 per cent, with the Australian share market falling by more than 5 per cent in a single day on more than four occasions over the past year, RP Data-Rismark International said.

The report confirmed that the key driver of the modest tapering in Australian house prices was the rise in mortgage rates from just 8 per cent in July 2007 to a peak of 9.6 per cent in mid-2008.

The robust performance of Australian residential markets can largely be attributed to a critical undersupply of dwellings across the nation’s capital cities, which Westpac estimates to be 140,000 homes and growing, combined with record population growth that is forecast by the ABS to continue through to 2056, according to RP Data national research director Tim Lawless.

Meanwhile, rising rental returns are currently at 5.4 per cent and 4.5 per cent for units and houses, respectively. This means that as mortgage rates fall, investors will soon confront ‘positive gearing’ opportunities, given rents in some areas will be higher than rates, said RP Data International.