Premium housing markets around Australia are leading the downturn with home values across the most expensive segments of the capital city housing markets down by 5.6% over the 12 months to June compared with a 1.2% fall at the most affordable end of the market and a 1.5% fall across the ‘middle’ priced suburbs. The drops, which are based on the RP Data-Rismark Stratified Hedonic Home Value index (yes… a bit of a mouthful), come after premium housing markets recorded higher than average gains during 2009 and 2010.
Over the year to June 2010 values in the top end housing market were up 12.2% compared with a rise of 7.8% at the most affordable end, and during the peak of the market (year to Feb ’10) annual growth was recorded at 19.5% across premium homes compared with 10.2% across the most affordable homes.
It is clear based on the volume graphs and tables below that demand for premium housing has fallen away at a more rapid rate than standard housing; however some cities are being harder hit than others. The largest declines at the top end have been recorded in Perth where values are down 12.8% over the year. Brisbane has also seen a marked decline in premium home values, down by 10.9% over the year.
The number of million dollar home sales tells the story. Based on the June data, there has been a larger than average fall away across the million dollar segment of the market. The most significant falls in the number of transactions are in Brisbane and the surrounding coastal markets of the Gold Coast and Sunshine Coast where volumes are down by around 60% compared with the five year average. Perth, which has the largest prestige market outside of Sydney and Melbourne, is showing a drop of close to 30% in volumes compared with the average. Melbourne million plus transactions are down by 20% while Sydney’s million plus transactions are down by the lowest margin of 11.4%.
As can be seen in the summary table, the largest drop in transaction volumes can be seen in the million plus unit market. This can be partly attributed to settlement periods for new developments (off the plan purchases which have not settled are not included), but is probably more symptomatic of a slowdown in the luxury apartment market.
Historically, the premium housing market has been quite sensitive to changes in other asset classes and business drivers. The volatility in the equities markets together with the slowdown in business confidence and global economic uncertainty are all likely to be drivers of the slowdown in premium housing demand.