New home price growth has collapsed across Australia in May, with annualised capital growth rates on existing housing in their second month of single digit growth.
In RP Data’s Rismark’s May index, capital cities recorded their second consecutive month of single digit annualised growth up a mere 0.6 percent in May while ‘Rest of State’ housing recorded a fall of -0.9 percent.
RP Data’s director of research Tim Lawless said RP Data-Rismark’s May index results reinforce mounting speculation that the Australian real estate market is transitioning towards a lower and more sustainable growth path, which will be encouraging for the RBA.
“This second consecutive month of single-digit annualised gains sends a signal that the double-digit growth rates recorded since January 2009 are behind us. The signposts have been in the market for several months now with lower auction clearance rates, fewer housing finance commitments, and weakening consumer confidence,” he said
Rismark International managing director Christopher Joye, expects to see more of the same over the remainder of the year.
“With disposable household incomes forecast to increase by only around 5 per cent in 2010, we have long predicted subdued dwelling price performance for this year. There is, however, some good news for borrowers on the horizon. Employment growth remains robust with unemployment forecast to fall back in line with its 4-5 per cent “full-employment” level. More importantly, the futures market is pricing in just one further rate hike through to 2012, which means borrowing costs should remain steady. The latest population growth estimates also show that net overseas migration is running at over 200k per annum, which is well above the government’s long-term forecast of 180k.”
All indications are that the new home building recovery will stall in 2011 says the Housing Industry Association (HIA), with growth slumping in May and long term projections unfavorable.
The HIA’s quarterly National Outlook Report highlights a healthy first stage new home building recovery that will run out of stream by mid next year.
“It is not too late to turn the situation around through policies targeted at new home building combined with more rapid progress in reducing structural supply side barriers,” said HIA Chief Economist, Harley Dale.