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Capital city property values moved 1.6% higher over the first
quarter of the year, recovering from the 1.4% fall recorded over
the December quarter of last year. The latest growth in home
values, plus the addition of new housing stock to the market
takes the total value of Australia’s residential property asset
class to $6.5 trillion.
While home values are still rising, some heat has come out of the
market, which is evident in the easing annual pace of capital gains.
Capital city dwelling values increased by 6.4% over the 12 months
to March 2016, down from a recent peak of 11.1% annual growth
recorded over the 12 months to July 2015.
For the first time since September 2013, there hasn’t been a single
capital city that has recorded annual property value growth of more
than 10%. Sydney and Melbourne are still recording stronger annual
growth than all other capital cities, in fact, they are the only capital cities
to have recorded growth in excess of 5.0% over the year. Sydney
home values have increased by 7.4% over the past year, which is
the city’s slowest rate of value growth since August 2013. Melbourne
home values have increased by 9.8% over the past year, which is the
slowest value growth for the city since May 2015. Across the remaining
capital cities, the annual changes in home values have been recorded
at +4.5% in Brisbane, +3.2% in Adelaide, –2.0% in Perth, +4.8% in
Hobart, –1.8% in Darwin and +1.7% in Canberra.
In rental markets, rents have fallen by –0.2% over the 12 months to
March 2016. This is the weakest rental market on record (based on
data from 1996) and is occurring in concert with gross rental yields
sitting at historic lows of 3.5%. The recent deterioration of rental market
conditions becomes more apparent when you consider that a year
ago, rental rates had increased by 1.7% over the year and yields were
3.7% at that time.
The slower housing market conditions come at a time when stock
levels are starting to rise, providing more choice for buyers. Melbourne,
Hobart and Canberra are the only capital cities in which total listings
are lower than a year ago. Sydney has actually recorded the largest
year–on–year increase in properties listed for sale up 11.1%. This result
suggests buyers have more choice and are taking longer to decide on
whether to purchase a home, which lends further weight to the overall
slowing in Sydney growth.
The slowdown in housing market conditions comes after a strong
cycle of growth which commenced in June 2012. Since that time
capital city property values have increased by a cumulative 32%,
with Sydney and Melbourne standing out as the strongest markets.
Recent housing market forecasts released by CoreLogic and Moody’s
Analytics indicate there is likely to be a continued moderation of home
value appreciation; however, a sharp decline in home values is unlikely.
Interest rates are set to remain around historically low levels, which
will continue to provide support for housing demand. Additionally,
investment activity is likely to remain strong considering the low returns
in other asset classes such as cash and bonds and the volatility in
equity markets that discourages many from investing heavily in shares.
Easing pace to capital gains
but market continues to grow
Note: ‘this year’ = March 2016, ‘last year’ = March 2015
Based on CoreLogic monthly indices capital city data to March 31, 2016
Adelaide
Darwin
Houses
Units
Median Price
$443,500
$340,000
Growth
3.3%
2.0%
Days on Market
65
this year
65
this year
69
last year
70
last year
Discounting
–6.0%
this year
–5.9%
this year
–5.6%
last year
–6.3%
last year
Houses
Units
Median Price
$540,000
$465,000
Growth
–1.5% –2.9%
Days on Market
117
this year
104
this year
71
last year
85
last year
Discounting
–8.9%
this year
–12.2%
this year
–5.1%
last year
–7.1%
last year
Perth
Houses
Units
Median Price
$510,000
$420,000
Growth
–2.0% –1.9%
Days on Market
80
this year
94
this year
66
last year
63
last year
Discounting
–7.2%
this year
–8.7%
this year
–5.5%
last year
–6.0%
last year
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