Capital gains push higher in August, led by strong rises in Sydney & Melbourne house values

The CoreLogic Home Value Index recorded a 1.1% rise in dwelling values in August, with six of the eight capital cities recording a lift in dwelling values over the month.

The CoreLogic Hedonic Home Value Index recorded a 1.1% rise across the combined capital cities over the month of August, while the performance of the combined regional areas (based on a one month lag) remained comparatively soft, with dwelling values virtually flat at -0.1% over the month. 

The strong combined capital cities headline result masks the underlying movements associated with dwelling values which are trending differently from region-to-region and across the broad property types. 

Index results as at August 31, 2016

2016-09-01-indices

In Sydney and Melbourne, dwelling values continued to increase at more than 1% month-on-month, with the cumulative growth over the cycle (June 2012 to date) now reaching 64% in Sydney and 44% in Melbourne.    This result highlights the differences in growth trends across the capital cities over the same time period.  Outside of Sydney and Melbourne, the third highest rate of capital gain over the cycle to date was in Brisbane at 18%, and was as low as 4% over this same period in Darwin.

CoreLogic head of research Tim Lawless said, “Despite a strong month-on-month reading, the pace of annual capital gains has trended lower compared with the 2015 peak in growth conditions, when capital city dwelling values were rising at 11.1% per annum.” 

“The most recent twelve month period has seen dwelling values rise by a lower 7% per annum.  However, the rate of annual growth in Sydney has virtually halved from a recent 18.4% peak to the current annual rate of 9.4%.  Similarly, in Melbourne the annual growth trend peaked at 14.2% per annum last year and has since tracked back to 9.2% per annum over the most recent twelve month period.”

Perth and Darwin remain as the only capital cities to record a fall in dwelling values over the most recent twelve month period, declining by 4.2% in both cities.  Mr Lawless said, “Softer economic conditions and a significant fall in overseas migration rates, together with an increasing net outflow of residents to other states and territories, has made a substantial dent in housing demand. This has resulted in corresponding declines in both dwelling values and rental rates.”

“For the remaining capital cities, each city continued to show a modest trend in value appreciation.  Signs are emerging that the pace of capital gains may be accelerating across Canberra and Hobart, with dwelling values up 7.6% and 6.5% respectively over the past twelve months. One year ago, Canberra’s annual growth rate was negative, at -0.9%, while in Hobart, values increased by only 1.5%.”

“While the annual growth trend is now lower than it was one year ago, the rate of capital gains remain well above other benchmark measures such as inflation, income growth and rents, which is pushing already stretched affordability ratios to new record highs,” he said. 

Demonstrating the decrease in housing affordability, utilising household income data for the June quarter provided by the Australian National University, the household income to dwelling price ratio was 8.4 in Sydney and 7.2 in Melbourne, compared to 5.7 in Brisbane.  Prior to the current growth phase, affordability ratios were much lower, with Sydney and Melbourne both showing a dwelling price to income ratio of 6.7.

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About CoreLogic

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.

With over 20,000 customers and 150,000 end users, CoreLogic is the leading provider of property data, analytics and related services to consumers, investors, real estate, mortgage, finance, banking, building services, insurance, developers, wealth management and government. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and geo spatial services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. CoreLogic employs over 650 people across Australia and in New Zealand. For more information call 1300 734 318 or visit www.corelogic.com.au.

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