Sydney and Melbourne record highest home value growth

There’s good news for home values according to the latest CoreLogic Quarterly Review which reveals the combined capital city home values have recorded value growth of 6.1% over the 12 months to July 2016.

Interestingly, there are only three capital cities that have recorded value growth of more than 5% over the past year. These are Sydney, Melbourne and Hobart. Sydney remains the market leader with home values increasing by 9.1% over the past year, whilst home values in Melbourne are 7.5% higher. Hobart has also seen an increase of 6.2% in home values over the past year.

At the other end of the scale however is Perth and Darwin who both experienced a fall in home values over the past year, down -5.6% and -7.6% respectively.

The middle runners include Adelaide, Brisbane and Canberra that have all seen mediocre value growth at 4.8%, 3.9% and 2.9% respectively.

However, it is important to note that the total return from residential housing over the past year has been far greater compared to returns across the majority of other asset classes

Sydney Property Market Overview

Sydney, alongside Melbourne continues to record the strongest annual rates of value growth. However, home values in Sydney have increased at the fastest annual pace out of all the capital city markets. Home values might be growing at a strong pace, but compared to the peak of July 2015, this is only growing at half the rate.

This is perfectly normal behaviour when you see where Sydney sits in the property cycle. At the end of 2015, Sydney was in a booming market, property prices were at a record high and properties were selling very quickly. Now, the Sydney property market is slowing down and this is indicated by the fact that properties are starting to take longer to sell and selling conditions are not as strong as they were 12 months ago.

Rental markets are also soft, and rental rates, although they are increasing, they are growing at their slowest rate on record.

In spite of this, last year saw exceptionally high levels of growth; Sydney and Melbourne are just dropping to steadier levels of growth, but are still experiencing good levels of growth. Sydney’s home values have increased by 5.6% over the quarter and 9.1% over the past 12 months.

The median property price in Sydney now sits at $880,000 for houses and $670,000 for units, with units experiencing a 9.4% growth over the last 12 months.

Melbourne Property Market Overview

Melbourne’s home values have increased at the second fastest rate out of all the capital cities over the past year and sits behind Sydney. However, Melbourne’s values, just like Sydney’s, are only increasing at half the rate of their peak in September 2015.

Selling times remain stable compared to 12 months ago, but over the last few months this has risen helped by vendors settling much more realistic property prices and discounting rates substantially lower.

In spite of this, Melbourne has the lowest growth rental yield out of all capital cities, with July 2016 seeing new record lows.
Properties however remain much more affordable when compared to Sydney with the median property price sitting at $645,000 for houses and $482,500 for units. Property values in Melbourne have grown by 3.5% over the quarter and 7.5% over the past 12 months.

Brisbane Property Market Overview

Compared to Sydney and Melbourne, Brisbane has continued to experience moderate home value growth over the past 12 months. For those looking for a property, whether as an owner occupier or as an investor, then the cost of housing in Brisbane is significantly lower when compared to Sydney and Melbourne markets.

Average time on the market for properties, along with discounting levels have also increased slightly during this time, whilst the rental market has seen falls over the past year due to rental supply increasing.

The median price in Brisbane is now $505,000 for houses and $395,000 for units.

Economic Overview

One of the biggest factors seen this year is the cut in interest rates. With official interest rates being cut to an all-time low of 1.5% in August 2016, mortgage rates are also at their lowest level since the 1960s, making owning a home today even more affordable.

However, not all of the Big 4 banks have passed on the full cut to their customers, with these banks only passing on less than 15 basis points of the 25 basis point cut.

Property is becoming much more attractive though with smaller mortgage repayments and better value compared to safe investments such as government bonds and term deposits which are showing very low returns.

Unemployment rates have also reduced slightly from 5.8% June 2015 to 5.7% this July 2016, and the number of employed persons has increased by 1.9% over the past year.

The last 12 months have also seen Australian lenders making significant changes to their lending policies, particularly for investors who have faced a premium applied to mortgage interest rates as well as offshore borrowers recently facing stricter lending policies.

What does 2016-2017 hold for property?

With interest rates at their lowest level, this is likely to spur on property ownership and investment, especially as another rate cut is expected next year. Both Sydney and Melbourne continue to see the strongest level of growth, even if it is at half the rate of last year’s peak, whilst Brisbane remains an affordable city to buy in.

Melbourne has also recently been named the world’s most liveable city for the sixth year running by the Economist Intelligence Unit’s survey, and this world status is likely to have a positive impact on the city. Both Sydney and Melbourne have experienced consistently strong growth for over four years now, making both economies more attractive to buy in, especially for those looking for a solid and stable investment.

However, with interest rates at their lowest, affordability is stretched, particularly in Sydney, with tighter lending restrictions though to take some heat out of the market. It is likely that investors will start to look at other cities for better investment opportunities.

Brisbane however should not be underestimated. The city may be seeing more construction happening, but the city is actually catching up on years of lower growth where very little construction occurred. This so-called oversupply will not last long, with the city gaining in population and working towards its goal of becoming Australia’s next New World City by 2022. Both Victoria and Queensland are the only two states that have recorded positive interstate migration and this housing supply will meet the demand from increasing population numbers.

Brisbane also has many large-scale developments proposed or underway over the next few years to increase the city’s appeal for residents as well as tourists including Queen’s Wharf, Brisbane Airport Redevelopment, Northshore Hamilton and Brisbane Live. All of this construction will attract more jobs, which in turn will attract more people to live in the city for work and the need for more housing.

With demand from the investment sector starting to pick up again, investors are now a greater proportion of lending than that to owner occupiers who aren’t first home buyers. First home buyer activity may be trending at near record-lows (8.3% of the value of total housing finance commitments), but many first home buyers may start to look at investing in property first, to get a foothold on the property market.

To find out more about where you should be investing in property, or to learn how you should enter the property market, give the team at iBuyNew a call. We are here to help you with any property enquiries you might have, whilst steer you in the right direction to meet your property goals.

Call us today on 1300 123 463 to get started.

Published on 5th of September 2016 by Marty Stanowich
Marty Stanowich
Marty Stanowich


Sign up to the iBuyNew newsletter to receive more article and property news straight to your inbox

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Off the plan

Want access to exclusive opportunities in off-the-plan property?

Sign up to our Free VIP membership for a personalised service.

Learn more