The decline in Australian residential property values appears to be waning, according to a private sector study.
Capital city homes posted their best relative performance in seven months, the RP Data-Rismark Hedonic Home Value Index said on Monday.
Capital city dwelling values declined by minus 0.2 per cent in September, the smallest fall since February.
RP Data said the monthly decline “was crucial in reversing a trend of accelerating capital losses since end March 2011”.
In the first nine months of 2011, capital city home values declined by minus 3.6 per cent, and were down by 3.4 per cent for the 12 months to 30 September.
RP Data research director Tim Lawless said there were wide divergences in the performance of the individual cities in the month of September.
In contrast to recent index results, seasonally adjusted dwelling values rose in Brisbane (0.4 per cent) and Adelaide (0.5 per cent). They were flat in Darwin and down just slightly in Perth (minus 0.1 per cent).
Mr Lawless said the two worst performers for the month of September were Canberra (minus 0.5 per cent) and Sydney (minus 0.6 per cent).
“This represents a reversal of sorts, given Sydney and Canberra have had the shallowest peak-to-trough falls (minus 1.7 per cent and minus 2.8 per cent, respectively) of all the cities.
“After a significant run in capital gains, the Melbourne housing market has undergone a controlled correction,” he said. “Between January 2007 and January 2011 Melbourne house values were up 49 per cent.
“In 2011 they were down by about minus 5 per cent. This is possibly because they overshot fundamentals in the prior period.
Mr Lawless said housing market conditions were starting to show some green shoots.
He said an 8.1 per cent lift in consumer confidence, as well as rising speculation that interest rates were heading down, were likely to be the drivers of the improvement.
Rismark executive director Christopher Joye said the housing market could improve further, if the Reserve Bank of Australia (RBA) cut interest rates at its regularly monthly board meeting on Tuesday.
“Rismark forecasts imply that a reduction in interest rates on Tuesday, which could see discounted variable home loan rates fall to as low as 6.6 per cent, would kick-off a recovery in housing activity,” Mr Joye said in a statement on Monday.
“Based on our assumption that there were more hikes to come in this cycle, we had been projecting the recovery would commence in around mid 2012.
“This timing would be brought forward a quarter or two by any decision by the RBA to normalise (cut) its cash rate tomorrow.”
The survey also found that property investors profited from a continued strong trend in rent values, which rose by 1.2 per cent in the September quarter (and 4.6 per cent over the year), according to Australian Bureau of Statistics data.
