Million dollar home sales continue to fall away

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.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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5 Responses to Million dollar home sales continue to fall away

  1. Tony Harris August 26, 2011 at 1:29 pm #

    Tim, you only have to look at the disastrous finale of The Block to see that people don’t want to overpay $1 million plus for overpriced homes, as I explained in my blog this week.

    http://www.differenthere.com/2011/08/real-estate-in-crisis-block-auction.html

    Naturally Channel Nine would have profited through advertising and sponsorship during The Block series, but the dismal auction results and sale price reveal a property market in crisis. Unknowingly Channel Nine may have pulled the trigger on the bursting of the bubbliest city in the bubbliest housing market in the world.

    Melbourne’s property market was in a poor state prior to the disastrous Block finale, with low auction clearance rates, falling prices, and a large overhang of stock (plus much more in the construction pipeline), but there’s little doubt the negative publicity provided by The Block will have cemented a truly alarming picture in the minds of most Melbourne homeowners and property investors.

    Tony Harris.

    • Tim Lawless August 26, 2011 at 2:00 pm #

      Thanks Tony, I agree that the poor result at the Block auctions has reinforced the weak state of play in the Melbourne housing market., and for that matter, auctions in general. Our clearance rates for Melbourne and Sydney have been steady around the low to mid 50% mark since April. As any real estate professional will probably agree, the finale also highlighted how not to run an auction. A case of successful TV, unsuccessful salesmanship.

  2. Damon August 31, 2011 at 9:33 pm #

    Tim, no offence, but I would not take anything that a real estate agent says for a grain of salt. They are liars, swindlers and notoriously lazy. The fact that you can become a “fully qualified” real estate agent after a 5 day course implies that most agents know very little (about anything).
    Our market could not sustain itself, and now as the fear grows and the new generations have realised just how overpriced our real estate market is, the price drops will continue for quite a few years.
    It happened everywhere else, Australia is NO DIFFERENT.
    Check the facts, check the figures. If there was not a problem with over valuation, those houses would have sold themselves on The Blobk. The golden days are over, and the people that jumped on the bandwagon thinking they that Aussies could continue to make money off each other off a floating market are over. Welcome to reality.
    Who in their right mind would buy a property now, or in the near future? Only an egg Tim. Hopefully you get some coming your way.

  3. stefan September 1, 2011 at 12:00 pm #

    Wasn’t the Sydney average $515,000 last month and It’s at $500,000 this month..How is that a gain of 0.5%…?

    • Tim Lawless September 1, 2011 at 12:20 pm #

      The change in value is calculated based on the change in hedonic index value, not on change in the median price.

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