Property prices up 1.4% month on month in Australian citiesPrices in Australia’s capital cities increases by 1.4% in June with all cities apart from Adelaide and Darwin recording a rise in values, according to the latest RP Data monthly report.
Research director Tim Lawless pointed out that the strong result has partially reversed last month’s 1.9% fall and takes the quarterly fall to just 0.2%.
The report also shows that over the 2013/2014 financial year the top performing cities for capital gains have been Sydney and Melbourne where home values are up 15.4% and 9.4% t respectively across each city.
The Brisbane housing market, where conditions have generally remained relatively sedate, is now gathering some pace with values up 7% over the past 12 months, the third strongest result of any capital city.
The index results show that the softest performances over the past year have been recorded in Hobart at 2.5%, Canberra at 2.9% and Adelaide also at 2.9%.
Over the current growth cycle, capital city property values are up 15.5% with Sydney recording the most significant capital gain at 23.1% growth since the end of May 2012. Adelaide’s housing market recorded the least significant capital gain over the cycle to date, with home values rising by 5.6%.
Lawless explained that recent volatility in the month to month index reading is likely to be a seasonal factor. ‘The last time we saw a negative quarterly movement in our combined capital city index was May last year. The recent reduction in capital gains is likely a correction from the strong market conditions reported over the first quarter of the year,’ he said.
‘Looking through the monthly movements, the trend in performance is much more important. It shows that the quarterly rate of growth peaked across the Australian housing market in August last year at 4%. Since that time the rate of capital gain has generally trended towards a more sustainable level,’ he pointed out.
‘The slowdown in dwelling value appreciation will be a welcome relief to policy makers and those seeking to buy into the housing market,’ he added.
The data also shows that from a total returns perspective, Sydney once again stood out as having provided the most outstanding performance. Combining the capital gain with the gross rental yield over the year has provided Sydney home owners with a total return of 20.2% over the financial year. Melbourne, Darwin and Brisbane have also recorded a total gross return in excess of 12% over the year.
Across the different price segments of the housing market, the broad middle priced sector of the market is now showing the highest rate of annual change. Values at the most affordable end of the capital city housing markets have moved 8.8% higher over the past year compared with a 10.3% capital gain across the most expensive suburbs and a 10.6% increase across the broad middle 50% of the capital city market.
Looking at rental markets, gross rental returns are currently recorded at 3.9% for capital city houses and 4.6% for capital city units. The yield environment is lowest across Melbourne where gross yields are averaging just 3.4% or a typical house and 4.3% for units. Darwin continues to show the highest gross rental yields at 6.1% for houses and 5.9% for units.
‘With interest rates remaining low for the foreseeable future, it is doubtful that housing values will start to slide, at least not at a macro level. What is more likely is that natural affordability constraints will start to dent buyer demand, as will the low rental yield scenario’s that are very much evident across the largest capital cities of Melbourne and Sydney,’ said Lawless.
Other indicators such as clearance rates are holding relatively firm which, according to Lawless, further reinforces the notion that the housing market isn’t set to show a market correction.
Over the month of June, clearance rates strengthened and are generally around the high 60% mark across the capital cities week on week. Average selling and vendor discounting rates also levelled out at relatively strong readings, and listing numbers remain relatively tight.
‘Activity across RP Data valuation platforms has also held firm at relatively high levels suggesting mortgage demand isn’t dropping off just yet,’ added Lawless.