Luxury homes struggle as affordable properties hold values

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Falling luxury home values are dragging down the Australian property market while affordable properties continue to hold their value, according new data released today.

The RP Data-Rismark home value index for April has revealed that seasonally-adjusted Australian capital city dwelling values were down by 1.2% in the three months to the end of April, and down 0.2% in raw terms. Sydney. Melbourne and Canberra all saw increases in raw terms - of 1.2%, 0.3% and 1.7% respectively - whereas Perth and Brisbane both saw a fall of 2.6% overall.

However, RP Data's Tim Lawless highlighted that falls in values of prestige properties is dragging the overall market down. Over the year to end April, RP Data figures show dwellings in the top 20% of suburbs by price recorded a 5.4% loss; in contrast, home values in the middle 60 per cent of suburbs were down by only 0.9%, and dwellings located in the cheapest 20% of suburbs only fell by 0.5%.

"The solid performance of cheap suburbs runs against the grain of popular claims that default rates are rocketing up amongst first time buyers, which the RBA recently rejected," said Lawless.
"The luxury end of the housing market is also showing its volatility. During the growth phase of the cycle the most expensive homes realised the highest capital gains. Yet as the market cools premium home values seem to be losing steam the fastest,"

Rismark managing director Christopher Joye added that luxury homes were likely to face more 'valuation headwinds' over the coming months.

Lawless also explained the the difference between the seasonally-adjusted and raw figures, the former of which shows a larger fall in values. He commented that the seasonally-adjusted data reflects the fact that the housing market typically experiences higher rates of capital growth at the start of each year. He added that the market outlook remains challenging.

"The number of homes for sale across the capital cities is now about 31% higher than at the same time last year. Transaction volumes for houses and units remain bout 13% below the five year average and 21% below the same time last year. The result is that a smaller number of prospective buyers have a larger pool of homes to choose from.”

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