The hottest housing markets in the nation, Sydney and Melbourne, have continued to see an easing in the rate of capital gain over the month of October, however values continued to show a modest rise of 0.3 per cent, and 0.6 per cent respectively across Australia’s two largest capital cities over the month.
More broadly, dwelling values across the combined capital city index moved 0.2 per cent higher over the month of October, were up by 1.4 per cent over the quarter, and 10.1 per cent higher over the year. The annual rate of growth across the combined capitals index has been easing since July this year when the index was rising at 11.1 per cent per annum.
Index results as at October 31, 2015
According to CoreLogic RP Data head of research, Tim Lawless, a range of factors are contributing to the slowdown.
“It’s not just the fact that mortgage rates have recently risen outside of any lift in the cash rate. We are also seeing approximately a 30 per cent premium on investment related mortgage rates, tighter lending standards and borrowers generally requiring a larger deposit.
“Gross rental yields at record lows and affordability constraints are acting as a further disincentive, particularly in Sydney where the median unit price is equal to, or higher than the median house price in every other capital city. Additionally, new housing supply is moving through record levels which should help to ease the upwards trajectory of home values.”
“Since the end of 2008, the Sydney housing market has recorded a cumulative capital gain of 77.0 per cent, while Melbourne values have moved a cumulative 66.6 per cent higher over the same time frame. Based on the median selling price at the end of 2008, Sydney home owners have accrued approximately $316,000 in gains from the housing market compared with around $246,000 in Melbourne.”
“While the rate of growth is significant, it is important to remember that this growth is across two cycles; dwelling values were broadly tracking backwards during both the 2008 calendar year and between late 2010 through to mid-2012.”
“The only capital city where home owners have seen the value of their homes move lower since the end of 2008 is Hobart where the CoreLogic RP Data index is down 0.4 per cent (approximately $1,155) since the end of the GFC,” Mr Lawless said.
The weakest housing market conditions continue to be found in Darwin and Perth where dwelling values are down 3.7 per cent and 3.6 per cent respectively over the past twelve months.
According to Mr Lawless, the slowdown in resources-related infrastructure spending has caused ripples of economic weakness that are likely to persist for some time.
“Capital expenditure relating to the mining and resources sector has fallen substantially which means tougher labour conditions and little in the way of migration which has previously fueled housing demand in these areas,” he said.