Dwelling values up by 9.8 per cent over financial year
According to the latest CoreLogic RP Data Home Value Index Release, dwelling values for June across Australia’s combined capital cities is almost 10% higher over the financial year.
The June results show that dwelling values for the combined capitals have risen by 2.1% for the month, 2.0% for the quarter and 9.8% YoY, ending the 2014-2015 financial year strongly. In comparison, the 2013-2014 financial year recorded a slightly higher rate of growth of 10.1%.
Sydney remains at the top of the table finishing with a growth of 16.2% over the past financial year, followed by Melbourne with a 10.2% growth. However, every other capital city has seen a growth of less than 5%, whilst Perth has seen a decrease in dwelling values of -0.9%, and Darwin takes the bottom with -2.9%.
Over the course of 2015, the housing market has picked up the pace as the rate of capital gain was also higher for the second half of the year (5.1%) compared with the first half (4.1%). The cut in interest rates in May and February might have caused this increase in capital gains, according to Tim Lawless, CoreLogic RP Data’s head of research.
Mr Lawless commented that, "Growth conditions had been moderating from April last year through to the end of January 2015. With the RBA cutting the cash rate in February, there was an instant buyer reaction across the Sydney and Melbourne housing markets where auction clearance rates surged back to levels not seen since 2009, capital gains once again accelerated and we are now seeing Sydney and Melbourne homes selling in record time; Sydney homes are selling in just 26 days and Melbourne homes are selling in 32 days."
The median dwelling price for Sydney now sits at a whopping $772,200, whilst Melbourne is $560,000. On the other hand, Brisbane which has seen a growth of 3.4% over the year is still an affordable place to buy with the median dwelling price of $455,000, which sits below the median dwelling price for the combined capitals, of $565,000.
Houses are clearly outperforming units with a total return year on year of 14.8% for houses and just 10.6% for units across the Australia top 5 capitals. The median unit price in Sydney now sits at $650,000, followed by Melbourne with $480,000, whilst Brisbane is only $382,000 and is being highlighted as the next best place to buy now. In Melbourne, it is very clear that houses are outperforming units as houses have gone up by 11.2% over the year, whilst units have only increased by 2.4%.
So why are units underperforming houses? The main reason is due to supply. Units have a much higher supply compared to housing in today’s market, and parts of Melbourne for example have an oversupply of apartments such as in the Docklands. It therefore pays to shop around and find an apartment in an area with low supply to get the best possible gains.
As we enter into a new financial year, what does 2015-2016 have in store for property? All heads turn to Sydney and whether dwelling values will start to slow down. Since May 2012, dwelling values have been increasing in value and dwellings have seen a huge increase of 43.1%. Mr Lawless believes that it is very unlikely that Sydney will keep up this rapid pace of growth due to the affordability issue, “Not only is affordability becoming a challenge for many sectors of the market, but yields are substantially compressed, rents are hardly moving and investors are facing tighter financing conditions from lenders.”
Dwelling values in Sydney will probably rise over the course of the next 12 months, but after this things are sure to slow down. Sydney is the most expensive place to buy property right now and it is becoming increasingly harder to get a foothold on the property ladder.
Published on 2nd of July 2015 by Marty Stanowich