Property markets hold firm despite gloom

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Australia's national property market has remained strong thanks to robust demand outstripping supply, according to a recent report by RP Data and Rismark International.

The report showed record population growth in metropolitan areas around the country has not been matched by the necessary new dwellings.
“This imbalance should put to rest any claims that Australia’s property market is heading for a crash,” said RP Data’s national research director Tim Lawless.

He said national dwelling values remained positive over the 12 months ending August 2008, and over the past three months there was only a modest decline, with property values down just 0.96% over this period.

“Values are holding relatively firm, particularly when compared to the benchmark equities S&P/ASX 200 Index, which dropped by 19% between January and August,” Lawless said.

Among capital cities, only Perth showed a sharp decline in property values, dropping 5.69% in one year from August. Lawless said investors should put this in the context that Perth median values increased 13.9% annually over five years. “The August indicative figures showing 5–6% falls should be read with caution as they’re based on a small sample of sales,” said Lawless. “Perth has been remarkably resilient, considering the combined influences of the stock market decline and the rapid property price rises of 2003–07 and their effect on affordability. On average, the market is only down about 2% over autumn and winter.”

Also worth noting in the report was the noticeable convergence of the capital city market dynamics over the past six months, which showed that all capital cities recorded slightly negative growth, with no particular city significantly out of step with the others.

“Clearly, the observable phenomenon of the two–tiered markets in Sydney and then Melbourne, and to a lesser extent in Brisbane and Perth, has disappeared,” said Matthew Hardman of Rismark International. “Market movements are now similar across all metro areas rather than value falls being isolated within the mortgage belts. This balancing can be attributed to the squeeze that the more affluent markets are experiencing due to the turbulence in the financial and equities sector.”

Even with affordability concerns on hand, Hardman said demand will eventually push prices back up.

“Although unemployment is rising, unless it grows rapidly to significantly greater levels of 6% or 7% over the next couple of years, excess demand will eventually outweigh affordability constraints and begin to push property markets upwards again, probably by the second half of 2009,” said Hardman.

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