House and unit prices declined in January 2012

by Chris Lang on February 13, 2012

Housing prices going down

“Am I paying too much?” is a big question on any prospective home buyer’s mind (and if it’s not – it should be). Of course the only way to answer that question is to watch the property market. In the past some used to argue that watching the market won’t achieve you anything because the only way for property prices is up, however… that isn’t the case any more.

The decline in property market continues – it’s a fact. In January houses in Melbourne were down -1.65% and units down -1.8%.

Have a look at the latest release from Residex, Australia’s leading provider of property information, that I’ve just received to my email. It’s not yet available on their website, so I am posting it here. The figures show quite clearly that any claims about property market having hit the bottom and beginning to climb back are simply not true.

MEDIA RELEASE 13 February 2012

Capital city property markets at tipping point as price corrections continue

House and unit prices declined in most capital cities during January, quashing hopes of a sustained recovery in early 2012.

Residex CEO John Edwards said housing markets around the country were at a cross road.

“Prices continued to weaken in almost every capital city over January. Our data suggests we are moving beyond the bottom of the cycle however the trend is not pronounced,” Mr Edwards said.

Mr Edwards said the less affordable end of the market, house and land, remained weak.

“On an Australia-wide basis we do not look as if we are through the worst of the correction phase.In most capital cities, while we may have reached the bottom of the cycle, there is no strong movement towards positive territory”, he said.

“The next few months will be crucial in determining where markets head. However, as the reality of the actual performance of housing markets becomes evident we can expect to see further weakness and potentially ongoing price corrections.”

Mr Edwards said the Reserve Bank’s decision not to cut rates this week was a missed opportunity to inject confidence among buyers and sellers.

“The property market is on a knife edge. A rate cut would have had an important impact on affordability and boosting confidence.”

Mr Edwards said the Reserve would remain under pressure to cut rates in early 2012.

“While Australia’s property market does not face the same risks as those that led to the collapse in US housing prices, we face continued headwinds including the high Australian dollar and the high cost of housing. We need to encourage home ownership otherwise we will arrive at a situation where the cost of rentals is unacceptably very high.” he said.

Little cheer in January data

Nationally, the median house value declined -1.21% in January while the median unit price was down -0.67%.

Melbourne was hardest hit with houses down -1.65% and units down -1.8%.

In Sydney, the median house value declined -1.18% against a -0.68% drop in the median unit value.

Brisbane’s median house value was stable, while the median unit value dipped -1.15%.

And now over to the readers – what do you think? Do you see the property market recovering in 2012?

{ 2 comments… read them below or add one }

Adam February 13, 2012 at 3:15 pm

“…continued headwinds including the high Australian dollar and the high cost of housing. We need to encourage home ownership otherwise we will arrive at a situation where the cost of rentals is unacceptably very high”

Home ownership is already encouraged. This is actually a veiled lobby against the drop in foreign investment (high AUD$), reduced stimulus for first-time buyers (eg. removal of stamp duty concessions in NSW) and no February fall in interest rates (apparently a 25 point drop saving $30/month makes all the difference). To offset falls in an asset that is supposed to be driven by capital growth, landlords may raise rents to a point where renting costs almost the same as buying – but we are a long way from that and Edwards is scaremongering.

“Little cheer in January data”

Actually, as a potential first-time buyer these figures are encouraging if you plan to buy in the next 2 years. This slow decline suggests that saving a deposit might not be out-run by rising house prices as they once were, without causing a property crash. It’s a correction and it had to happen. Businesses and the stockmarket have their up-and-down years and there should be no reason why property isn’t the same. Since 2006, first-home buyers like me have had huge difficulty saving quickly enough to keep pace with house prices. If buying, that meant taking out large LVRs on irresponsible levels of debt (something I have refused to do). In contrast, renting costs may indeed increase next but those increases are certainly more affordable and with the bonus of lifestyle flexibility.

I think the only certainty about a property market recovery in 2012 is its uncertainty. Australia’s property markets need first-time buyers to sustain volumes and prices. As evidenced by the recent hike in rates against the RBA, banks are trying to maintain profitability margins as lending falls (including staff cuts adding to unemployment). If banks then restrict lending (eg. through reducing their LVRs on new mortgages), we may see first-time buyers having a hard time obtaining credit. Those first-time buyers with access to credit would be taking a risk buying into a declining market unless their LVR is small. Certainly first-timers are the group at most risk of negative equity (owing more than their home is worth). Depending on what happens with our economy, we may see new money into property drying up over 2012; at least until prices decline to a point where first-timers don’t need huge LVRs and can at least avoid LMI. Obviously other factors, such as boomers entering retirement, property market stimulus measures (or lack of), and supply/demand are also at play.


Paul Buys Fixer Uppers, Fast!! February 14, 2012 at 3:30 am

Dear Homeiown,
Neat Post, House prices are consistently falling and many buyers hold off from making a purchase and wait to see exactly how far prices will fall. It makes you wonder how are you going to sell your own house. It’s definitely not as easy to price your home correctly during the current economic slump.
Great Job!
~ PaulH from


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