Home values have remained below the historic high levels

Home values have remained below the historic high levels across Australian capital cities and they have increased at an average annual rate of just 1.9 per cent over the past five years; it is obvious that the previous strong value growth conditions that most home owners became used to in recent years are over.

“Home values in Brisbane, Perth and Hobart remain below where they were five years ago, whereas the other mainland cities have all recorded significantly lower rates of growth in home values over the past five years than they did over the preceding five year period.” Mr Kusher from RP Data said.

Macroeconomic factors, both domestically and internationally, are likely to weigh heavily on the performance of the housing market throughout 2013. It has become clear that adjustments to official interest rates by the Reserve Bank are not having the same impact on consumers as they have in the past.

This is no real surprise given that households are saving around 10 per cent of their disposable income and are showing a preference for saving and paying down debt rather than spending. Consumer sentiment remains quite weak, although there have been some recent improvements, and demand for credit is growing at extremely low levels with housing credit demand growing at an historic low level.  Until these factors change, we can more than likely expect relatively subdued housing market conditions, with growth rates likely to be somewhere between inflation and wages growth.

Finally, rental growth has continued to outpace value growth over the past year. Capital city dwelling rents have increased by 3.0 per cent over the past year and yields have improved from 4.2 per cent last year to 4.3 per cent currently. Investors are likely to focus more on yield maximisation over the coming year, and positioning for long term capital gains.