Home prices moderate, but Sydney and Melbourne continue to surge

Home values across Australia's capital cities moderated last month, but prices in Sydney and Melbourne continued to surge during the June quarter.

The CoreLogic June Home Value Index revealed a 0.5 per cent rise in combined capital city dwelling values in June and a 3.8 per cent increase during the quarter, resulting in an annual rise of 8.3 per cent.

The monthly result for the combined capitals was quite subdued, compared to April's 1.7 per cent increase and the 1.6 per cent rise recorded in May.

The two largest east coast capitals continued to dominate, with Sydney posting house price growth of 6.8 per cent during the quarter and 11.3 per cent for the year.

Melbourne home values rose by 3.5 per cent during the three months to the end of June and 11.5 per cent year-on-year.

The head of research at CoreLogic, Tim Lawless said price growth had been moderating in those two cities in the lead up to 2016, but capital gains have since bounced back.

"We're seeing Melbourne and Sydney well and truly leading the nation here, which has been a trend we've been seeing for a long time over the whole growth cycle, which started in 2012," he said.

"That may be fuelled by the lower interest rate settings that we've seen so far this year, which of course have been passed on to mortgage rates, but also the fact that we are still seeing investors as a fairly large proportion of the marketplace.

"Even though investor demand has wound back, after APRA became much more involved in lending, we're still seeing investors around about 45 per cent of all new mortgage originations, which quite a substantial amount," Mr Lawless said.

Home values in Darwin, Adelaide, Canberra fall

Hobart was another strong performer, with home values rising 1.8 per cent in June, 1.9 per cent over the quarter and 6.2 per cent on an annual basis.

Home Value Index price results:

Region Month (%) Quarter (%) YOY (%)
Sydney 6.8 6.8 11.3
Melbourne 0.8 3.5 11.5
Brisbane -0.1 2.2 10.0
Adelaide -1.3 0.8 6.5
Perth -0.8 -3.0 -0.9
Hobart 1.8 1.9 11.9
Darwin -1.6 -2.5 4.3
Canberra -1.1 3.8 8.3

Source: CoreLogic, June 2016 Results

But not all of the capitals advanced last month, with Darwin values falling by 1.6 per cent, Adelaide prices easing by 1.3 per cent, and Canberra home values sliding 1.1 per cent.

Perth values dropped 0.8 per cent and Brisbane prices fell by 0.1 per cent in the month.

Mr Lawless said he was surprised the lengthy federal election campaign had not led to a slowing in housing market activity.

"Normally, we'd see potential buyers just simply sitting on their hands until there was some more certainty in the market place, but that doesn't seem to have happened on this occasion," he said.

"In fact, we've been seeing auction clearance rates in Sydney and Melbourne up around the low to mid 70 per cent mark throughout the election campaign, and we're still seeing value growth in the market place."

But in the longer term, Mr Lawless expected capital gains would moderate across the major housing markets.

"There are a few obstacles in the market place — affordability is one of them; more people can't afford to enter the marketplace, so that means a slowdown in demand," he said.

"Also, rental yields are very low, which is going to have to become a disincentive for investment.

"But then you also have the natural cyclical component of the marketplace and I think a lot more people are going to be thinking that the market's very mature — we've been seeing capital gains now running consistently for four years, which is one of the longest growth cycles we've seen on our data."

Source: ABC News

Leave a Reply

Your email address will not be published. Required fields are marked *