Combined capital city dwelling values increased by 7.9 per cent over the last 12 months and are up 8.2 per cent year to date.
RP Data’s Senior Research Analyst Cameron Kusher noted that the latest data also emphasises the strong housing market conditions in Australia’s two largest cities, Sydney and Melbourne, which is having a strong influence on capital growth across the combined capital cities.
“Sydney home values increased by 2.4 per cent in October and increased by 5.5 per cent over the past three months while in Melbourne, home values increased by 1.2 per cent in October and recorded an increase of 3.8 per cent over the past three months. For the first 10 months of this year, Sydney and Melbourne house values have performed very strongly achieving growth of 13.4 per cent and 8.7 per cent, respectively,” Mr Kusher said.
Rismark CEO, Ben Skilbeck, added that while Sydney has eclipsed its previous cyclical high and Melbourne is near its peak, Brisbane remains 8.4% below its highs.
“There is, however, evidence that growth conditions may be spreading to Brisbane with home values in that city rising by 1.4 per cent over the month and 2.6 per cent over the past three months.
“While Brisbane auction clearance rates are typically low in comparison to Sydney and Melbourne due to differences in the preferred sale mechanism, Brisbane auction clearance rates are approaching the 50% mark which was last consistently observed in 2009 when values increased 7.1 per cent over the year,” Mr Skilbeck said.
Elsewhere, the results confirmed that dwelling values rose over the month in Adelaide (0.3%) and Darwin (1.6%) while they fell in Perth (-0.2%), Hobart (-2.3%) and Canberra (-1.5%).
Mr Kusher said that of note were the recent weaker capital growth conditions for the Perth housing market. According to Mr Kusher, two months ago Perth was experiencing the fastest 12 month rate of value growth of all capital cities at 9.4 per cent, whereas this has now slowed to 6.9 per cent following a -0.6 per cent fall in home values over the past quarter.
“Although values are broadly rising, the strength in the market is being fuelled by Sydney where home values have only increased at an average annual rate of 2.7 per cent over the past decade. Therefore, it is little wonder that the Sydney market is responding strongly to record low mortgage rates given its long period of underperformance coupled with a pent up undersupply of new housing over recent years,” Mr Kusher said.
Outside of the home values growth, most other indicators are pointing to an ongoing improvement in overall housing conditions. Over the three months to August 2013, RP Data estimated that capital city home sales were 20.1 per cent higher than the same time in 2012. The number of capital city properties listed for sale is 12.0 per cent lower than it was a year ago.
There has also been marked improvements in the time it takes to sell a home and the level of discounting by vendors. Capital city homes are currently selling after 44 days compared to 56 days a year ago and discounting levels have reduced from 6.8 per cent a year ago to 5.7 per cent currently.
Rismark’s Ben Skilbeck commented that while overall housing credit growth remained modest at nearly 5 per cent per annum, the latest lending commitment data shows the month of August 2013 had commitments for existing dwellings which exceed the August 2012 month by 10.2% for owner-occupiers and 22.6% for investors.
RP Data’s Cameron Kusher said that with home values growing at a much more rapid pace than rents we are already seeing signs of an erosion of rental returns, particularly within the Sydney and Melbourne markets.
“It could be expected that value growth will continue to outpace rental growth within these cities over the short term and if this occurs it will lead to an ongoing decline in rental returns,” Mr Kusher said.
Key statistics, tables and graphs available in the PDF [600KB].
This article first appeared in the RP Data – Rismark Home Value Index Release – 1 November 2013