01 Sep 2015

Capital gains slow across the housing market in August but trend growth remains high

CoreLogic RP Data Hedonic Home Value Index, August 2015 results
Released: Tuesday, September 1, 2015

Dwelling values moved 0.3% higher in August across CoreLogic RP Data’s combined capital cities index with Sydney values once again leading the pack with 1.1% growth over the month.

According to the CoreLogic RP Data August 2015 Home Value Index, capital city dwelling values continued to rise over the month, albeit with considerable variations in the performance of the housing market from city to city.

Index results as at August 31, 2015

CoreLogic RP Data Indices September 2015

The headline results show that dwelling values were 0.3 per cent higher over the month across the eight capital city index. The highest month-on-month movement was in Sydney, where dwelling values were 1.1 per cent higher, while dwelling values also moved higher across Adelaide (0.7 per cent) and Darwin (0.3 per cent), and were flat over the month in Melbourne and Brisbane. The remaining capital cities recorded a month-on month fall in dwelling values.

While the August results indicate a slowdown in the rate of appreciation in dwelling values, the quarterly figures highlight just how strong the housing market has been over the past three months; combined capital city dwelling values are 5.3 per cent higher over the three months to the end of August this year.

According to CoreLogic RP Data head of research, Tim Lawless, dwelling values across Melbourne were 8.0 per cent higher over the rolling quarter, and Sydney values were up 7.4 per cent. Both cities have seen dwelling values trend substantially higher than other capitals, where the third highest growth rate over the three month period was Brisbane, which showed an increase in values of 2.2 per cent.

While the three largest capital cities, together with Hobart, have all recorded growth in dwelling values over the past three months, half the nation’s capital cities have recorded a fall in values. Darwin recorded the most substantial decline in values with a fall of 3.2 per cent over the three month period, while Perth values were down by 1.5 per cent, Canberra values were 0.8 per cent lower and Adelaide values are slightly lower, at 0.1 per cent.”

With the lower month-on-month growth rate, the annual rate of appreciation has also slipped back a notch to 10.2 per cent per annum, from 11.1 per cent last month.

According to Mr Lawless, the annual rate of growth highlights how strong Sydney housing market conditions have been.

Sydney dwelling values are 17.6 per cent higher over the past year, and since the beginning of 2009, Australia’s largest capital city housing market has recorded a cumulative capital gain of 76 per cent. Using the median house price from January 2009 as a base, the typical Sydney home owner has seen the value of their home increase by approximately $309,000 since the beginning of 2009.

The only cities where dwelling values declined over the past twelve months have been Darwin (-4.6 per cent), Perth (-1.8 per cent) and Canberra (-0.9%). “Darwin and Perth have certainly felt the brunt of the downturn in resources investment while conditions in Canberra have been improving but remain volatile. We expect the softer housing market conditions in Perth and Darwin are likely to persist over the coming year,” Mr Lawless said.

Unit values have recently shown a higher rate of growth city house and unit values than detached houses, with values rising 0.8 per cent over the month compared with a 0.3 per cent rise in house values. The rolling quarterly rate of growth was also higher for units at 6.7 per cent compared with 5.1 per cent across the detached sector.

According to Mr Lawless it has generally been the case throughout this cycle, and previous cycles, that house values have risen at a faster rate than unit values. “However, over the past three months across every capital city except Melbourne and Brisbane, it has been the apartment sector that has shown the stronger growth result,” he said.

“This result comes at a time when apartment supply has ramped up substantially more than detached housing supply. To see such a broad-based over performance of units relative to houses, provides some comfort for developers and purchasers that higher density stock values are appreciating.

“Sub-markets where supply levels are heightened, or the pipeline of apartment supply is substantial, should still be viewed with some caution.” Mr Lawless warned.

Growth in weekly rental rates shifted to a new record low for annual growth over the month of August. Across the combined capital cities, the median weekly rental rate rose
by just 0.7 per cent over the past twelve months, with house rents up 0.5 per cent and unit rents up a higher 1.6 per cent.

Since May 2013, dwelling values have risen at a faster pace than weekly rents. “The result of the disparity between dwelling values and dwelling rents has been a consistent downwards trend in gross rental yields.

Gross yields are at record lows in both Sydney and Melbourne. A typical dwelling is attracting a gross yield of just 3.3 per cent and 3.1 per cent respectively across Australia’s two largest cities. Mr Lawless said that the low yield scenario has largely been overlooked by investors who appear to be more focused on chasing future anticipated capital gains rather than aiming for cash flow.

The slower rate of capital gain for August is likely to be a welcome relief for the RBA who has expressed some concern about the heat emanating from the Sydney and Melbourne housing markets.

”While the rate of capital gains slowed last month, today’s results are only one month worth of data. Therefore, we should be cautious about interpreting this as a slowdown in the overall trend of value growth. In fact, the quarterly and annual trend of capital gain remains high in Sydney and Melbourne.”

“The Spring season will provide a timely litmus test for the housing market given it’s a time when listing numbers normally increase materially. It will be important to monitor whether buyer demand keeps pace with the additional number of homes being advertised for sale,” Mr Lawless said.

Currently, new listing numbers are 5.5 per cent higher compared with the same time last year across the capital cities, led by a 16 per cent lift in newly advertised properties in Sydney and a 10 per cent lift in Melbourne. According to Mr Lawless, this is indicative that the spring listing trend is already accelerating as vendors look to take advantage of the strong selling conditions.


Media inquiries contact:
CoreLogic national communications manager – 07 3114 9879 or media@corelogic.com.au

Introduction to the CoreLogic RP Data Daily Hedonic Home Value Index methodology:
The CoreLogic RP Data Hedonic Home Value Index is calculated using a hedonic regression methodology that addresses the issue of compositional bias associated with median price and other measures. In simple terms, the index is calculated using recent sales data combined with information about the attributes of individual properties such as the number of bedrooms and bathrooms, land area and geographical context of the dwelling. By separating each property comprising the index into its various formational and locational attributes, differing observed sales values for each property can be separated into those associated with varying attributes and those resulting from changes in the underlying residential property market. Also, by understanding the value associated with each attribute of a given property, this methodology can be used to estimate the value of dwellings with known characteristics for which there is no recent sales price by observing the characteristics and sales prices of other dwellings which have recently transacted. It then follows that changes in the market value of the stock of residential property comprising an index can be accurately tracked through time. CoreLogic RP Data owns and maintains Australia's largest property related database in Australia which includes transaction data for every home sale within every state and territory. CoreLogic RP Data augments this data with recent sales advice from real estate industry professionals, listings information and attribute data collected from a variety of sources. For detailed methodological information please visit www.corelogic.com.au.

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CoreLogic Australia is a wholly owned subsidiary of CoreLogic (NYSE: CLGX), which is the largest property data and analytics company in the world. CoreLogic provides property information, analytics and services across Australia, New Zealand and Asia, and recently expanded its service offering through the purchase of project activity and building cost information provider Cordell. With Australia’s most comprehensive property databases, the company’s combined data offering is derived from public, contributory and proprietary sources and includes over 4.4 billion decision points spanning over three decades of collection, providing detailed coverage of property and other encumbrances such as tenancy, location, hazard risk and related performance information.

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