Are house prices rising or falling?

Research analyst RP Data said on Monday that property prices are dropping.

But its competitor, the Fairfax-owned Australian Property Monitors, said with auction clearance rates at three-year highs prices are on the rise.

So who to believe? It’s plausible, perhaps, that they’re both right – with the RP Data figures also taking into account private treaty sales? Or it could be, as RP Data analysts say, that vendors have dropped their prices to meet the market. And that prices are rising in some regions in capital cities but not in others.

Sydney dwelling values dropped 1 per cent and Melbourne’s fell 2.1 per cent last month, the RP Data-Rismark May Hedonic Home Value Index says.

RP Data national research director Tim Lawless blamed the results on big falls in consumer confidence in April and May.

“If we see confidence levels remain in the doldrums, there is likely to be a similar dampening effect on the housing market,” Mr Lawless said.

His colleague, Cameron Kusher, said: “It was really a very sluggish market performance throughout May … much of the gains that we saw over the first quarter of the year … has now been subtracted.”

But to the average punter, this latest data is at odds with apparent rising buyer confidence at auctions.

And agents say last month’s interest rate cut encouraged some bidders to get over-excited.

“In the last two weeks, things have gone berserk,” said Betty Ockerlander of Better Homes Realty.

One of her properties on the weekend – 29 Willoughby Street, Epping – had 25 registered bidders and it sold for $1.66 million. More than 150 people attended and Ms Ockerlander says it “went well and truly over reserve”.

It was a similar story for another Epping property, and also one in Eastwood. “It’s a very strong market,” she said.

The senior economist at the Fairfax-owned Australian Property Monitors, Dr Andrew Wilson, said that Sydney weekend auction clearance rates have been averaging 75 per cent over the past two months. In Melbourne they’ve averaged 70 per cent since Easter. This contrasts with clearance rates in both cities last year in the 50s.

Writing about the weekend’s solid auction clearance rates of 78 per cent in Sydney and 71.8 per cent in Melbourne, Dr Wilson said that both cities have completed their strongest start in three years “with price rises an inevitable consequence”.

APM releases its price data in three-month sets rather than for just a month, with their most recent figures – for the March quarter – showing Sydney’s median hitting a new peak of $671,681 and entering an “expansionary” phase.

APM’s figures for Melbourne for the March quarter were the strongest for any capital city, with house prices jumping 3.6 per cent to $538,922. It had been the highest growth rate since March 2010, but the city’s median was still 4.2 per cent below its peak.

When questioned about the RP Data figures, Dr Wilson said: “I’m not here to be critical of anyone’s methodology, but auction clearance data is a reliable indicator of price growth and we have auction clearance rates at three-year highs.

“There is obviously more competition for property and and that’s why we have higher clearance rates.”

Dr Wilson said that monthly data was “incredibly volatile”, which was why APM relied on “quarterly house models”.

“[RP Data has] said for two months in a row that prices are down, for June figures to rise we’re going to have to see a very strong June,” Dr Wilson said.

In response, RP Data’s Mr Kusher conceded that it was “unusual” that clearance rates were so strong. “You would expect that home values were rising,” he said.

“Certainly during the first three months of the year they did.

“But we’re seeing a lot less stock now on the market, particularly compared to late last year.

“Our analysis would tend to suggest that maybe people that have had their properties on the market for a long period of time are now discounting those properties and getting them moving off the market.

“Auction clearance rates have been very strong, but that won’t necessarily translate into property value growth because it’s all about the prices at which they’re selling those properties.

“And I think that people are getting a bit more realistic about the price they’re asking.”

Mr Kusher said that only one in five properties went to auction so it was only a very small proportion of the market. “We also ring up agents to tell us about the private treaty sales, so we are providing about 60 per cent of the overall sales before the government provides those records to us.”

He said it was feasible that in some regions – such as Sydney’s inner west which had an 89 per cent auction clearance rate on the weekend – prices had risen. “There’s always regional variances to what’s happening with the index … somewhere like the inner west you’re buying between $800,000 and $1.5 million to $2 million – it’s quite possible there’s been some level of growth there.”


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