Property Outlook Australia: Rate of decline in the Aussie housing market measured against the US, UK and NZ

Based on CoreLogic’s House Price Index (HPI), it’s been 69 months since the US housing market peaked.  Since the national index for ‘single family combined homes’ reached its high point back in April 2006, US home prices have fallen by 32.8%.

The first three years of US home prices coming down could be characterized as a reasonably steep downwards trajectory.  Using a compounding growth rate, between April 2006 and April 2009 the annual rate of decline averaged 11.4% or 30.5% overall.  Most of the home value destruction was over and done with in the first three years directly after the market peaked.  Home values have come down a further 1.9% year on year (on average) since that time.  Note, if you would like a complete run down on the US housing market, you can’t go past the ‘Market Pulse’ report from CoreLogic (January’s report was released last week).
Similarly, in the UK (based on the Halifax Index) the initial period of decline showed the steepest trajectory with home values falling by 10.5% per annum over the first 24 months post peak.
Using Property IQ’s House Price Index for New Zealand we can see a similar trend with the steepest trajectory of decline being recorded across the first 16 months after price peaked (down 9.6% over that period or 7.7% on an average annualized basis).
Looking at Australia, while there isn’t a long time series of data since the market peaked back in October 2010, values are down 3.8% in total (3.5% on an average annualized basis). The downwards trajectory in Australian dwelling values fits reasonably closely with the US trajectory over the same 13 month time frame (US prices were down 4.4% over the first thirteen months post peak compared with the 3.8% fall in the Australian market).  Six months later the US market was recording falls of 1-2% month-on-month as the US banking sector imploded, unemployment and mortgage defaults rose swiftly and the GFC spread around the world.
If the November results from the RP Data – Rismark Hedonic Index remain consistent (November month on month result was +0.1% s.a.) and we see another flat result for December, it may provide the best indication yet that the Australian housing market is flattening out.  The risk of a US style housing meltdown are looking increasingly remote.  The key factors to watch will continue to be interest rates and the labour market data.  With inflation tracking lower than expected, speculation about further rate cuts is likely to improve market sentiment.  In balance, unemployment is ticking upwards and the banks are looking unlikely to pass on any cash rate cuts in full.  Overall I think we can expect market conditions to remain reasonably flat over the first six months of 2012 at least.

Kind Regards,
Rashesh Bhavsar
Financial Planner

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Source: http://blog.rpdata.com/2012/01/how-has-the-rate-of-decline-in-the-aussie-housing-market-compared-with-the-us-uk-and-nz/

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Former Miss Venezuela Eva Ekvall died in Houston after fighting breast cancer since last year, her representatives said. She was 28.
"Sadly, cancer had the last word," writer Leonardo Padron told Globovision.
Ekvall, an actress and news anchor, died on Saturday after "demonstrating extraordinary calm and courage in her fight against cancer", Padron said, without confirming whether the body would be sent home to Venezuela.
The former beauty queen wrote a book after being diagnosed with breast cancer last year and tried to raise awareness of the disease.
"Now I know what it feels like to not have a hair on your head," she said in a Twitter posting on March 10.
In Venezuela, "we invest a lot of money in looking beautiful and not in health care", the former model said.
Well-known photographer Roberto Mata worked with Ekvall to chronicle her fight against cancer in the book Fuera de Foco.
Source: http://au.news.yahoo.com/world/a/-/world/12399029/former-Miss-Venezuela-dies-at-28   
Facts about Breast cancer in Australia:

Every day in Australia, more than 30 women discover they have breast cancer.

Breast cancer is the most common cancer diagnosed in women aged over 35 years — 29% of all cancers diagnosed.

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Rashesh Bhavsar
Financial Planner

Fortune Wealth Creation Group
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Australian economy update: Statement by Glenn Stevens, Governor Dec 2011

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 4.25 per cent, effective 7 December 2011.

Growth in the global economy has moderated this year after a strong performance in 2010. Some of the slowing reflected temporary factors, and as these passed, the pace of expansion in the United States and much of Asia began to pick up around mid year. China's growth has been slowing, as policymakers there had intended. Trade in Asia is now, however, seeing some effects of a significant slowing in economic activity in Europe.

The sovereign credit and banking problems in Europe, to which European governments are still seeking to craft a full response, are likely to weigh on economic activity there over the period ahead. Financial markets have experienced considerable turbulence, and financing conditions have become much more difficult, especially in Europe. This, together with precautionary behaviour by firms and households, means that the likelihood of a further material slowing in global growth has increased. Commodity prices have reflected this, declining further over recent months and taking pressure off CPI inflation rates. This has increased the scope for some easing in monetary policy in a number of countries.

Information about the Australian economy suggests output growth has been close to trend, with demand growth stronger than that. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, changed behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little since mid year, though it remains close to 5 per cent.
CPI inflation on a year-ended basis remained above the target at the latest reading, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened. Accordingly, the Bank's current judgement is that inflation is likely to be consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme.

The reduction in the cash rate as a result of the Board's previous decision flowed through to lending rates, which are now around their average level of the past 15 years. Short-term market interest rates have tended to decline a little further in recent weeks, though term funding conditions for financial institutions have become more difficult. Credit growth remains subdued and asset prices have declined further over recent months. The exchange rate has been quite variable over the past few months, but remains at an historically high level.

Overall, the Board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate. The Board will continue to set policy as needed to foster sustainable growth and low inflation over time.

Cheers,
Rashesh Bhavsar
Financial Planner

Fortune Wealth Creation Group
Ground Floor, 566 St. Kilda Road,
Melbourne VIC 3004

Free Consultation (valued over $660):Call today on 03 9018 5534 or send an email to info@fortunewealth.com.au to book a free financial consultation to find out your personal wealth creation and wealth protection plan for you and your family.

Source: http://www.rba.gov.au/media-releases/2011/mr-11-28.html