Pricey property a matter of perception

A debate about Australian residential property prices has simmered along among researchers and economic boffins for a while now, but broke back into full view yesterday.

On one side is the real estate lobby, builders associations and economists such as Shane Oliver from AMP, who back the commonly held belief that residential property is becoming extremely unaffordable.

Research service Australian Property Monitors released data yesterday that apparently supports this view.

"2009 ended with the strongest annual house price growth since 2003,"  Australian Property Monitors said in their Quarterly Housing report.

APM reported that for the December quarter the Australian property market posted a 4.8 per cent rise in median house prices nationally, with a 12.1 per cent rise overall for the year.

Melbourne recorded the highest annual growth rate of 18.5 per cent, said APM, "forcing house prices past the $500,000 barrier for the first time."

On the other side of the debate is the other major residential price monitoring service RP Data, which in conjunction with its partner Rismark, will release its own data tomorrow showing a much more moderate increase in median house prices.

Tim Lawless, RP Data's National Research Director, said in a statement yesterday afternoon that APM's figures were "unexpectedly high and are likely to reflect a change in the types of properties that are transacting rather than true capital growth.

"A resurgence of interest in higher-priced properties combined with the fall back of first home buyers is likely to have played a role in inflating the latest growth figures."

Christopher Joye, CEO of Rismark, said in the statement that RP Data-Rismark's house price results will provide a substantially more conservative picture of Australia's housing market conditions.

"In the first quarter of 2009, the median price index providers got it very wrong, claiming that house prices were falling when in fact they were rising rapidly," said Joye. "The medians were being dragged down by a surge in first-time buyers purchasing cheap homes.

"RP Data-Rismark, in contrast, reported strong growth in the first quarter in 2009. Since the first quarter, RP Data-Rismark's index has shown gradually cooling market conditions with a tapering in growth rates between January and September 2009. We expect this to continue in the fourth quarter of 2009.

"The true rates of capital gains across Australia are substantially less than those reported by median price providers," said Joye.