Residential properties continue to outperform shares

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National property values continued to drop, down 1.81% over the seven months to July this year, but real estate continues to outperform the Australian share market, which has suffered losses of more than 20%.

According to the RP Data/Rismark International property value indices, only Adelaide managed to show an increase of its property values over that seven month period, growing by 2.83%. Perth fared the worst, dropping 4%, followed by Canberra which was down 2.88%, and Sydney, down 2.7%.

But Tim Lawless, RP Data's national research director, said the real estate market was performing nowhere near as badly as the stock market.

"The falls have been modest particularly when compared with the share market where the S&P/ASX 200 fell by 21.5% during the same period," he said.

Lawless said buyers are now waiting "on the sidelines" for the right moment to get back in the real estate market.

"We are not likely to see a wholesale return of homebuyers and investors to the market until consumer confidence improves markedly," he said.

But confidence may be on the upswing. RP Data's release cited a Westpac-Melbourne Institute Consumer Sentiment Index for August showing a 9.1% jump in sentiment for the month as oil prices fell and interest rate cuts became more certain.

Since interest rates have just been lowered by the RBA by a quarter of a percent that confidence is likely to grow further.

Looking back to a full year, RP Data/Rismark International said that only Perth and Sydney fell in value for the capital city markets. Perth dropped 3.82%, while Sydney slipped 1.14%. Adelaide meanwhile was at the top again, rising 12.82% from a year ago. The national average was an increase of 2.47%.

While the market clearly has been down lately, Matthew Hardman of Rismark International refuted recent predictions by experts in some media stories that national prices would fall 10% to 20%.

"The Australian residential property market has diversified over the past decade," he said. "Therefore large national falls are much less likely."

Specifically, he said Rismark testing suggested the probability of a 10% fall nationally in a 12-month period was less than 1% and a 20% probability at less than 0.25%.

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