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Capital city home values increased 9.8% during the 2014-15
financial year. Reflecting the greatest rate of annual increase
since August 2014 but still lower than the peak
of 11.5% growth over the 12 months to April 2014.
Home values in Sydney have increased by 16.2% over the 2014-15
financial year with Melbourne recording the second greatest growth
at 10.2%. Price growth has been more subdued outside of our two
largest cities. Adelaide had the third highest increase in values over
the year at 4.5% followed by: Brisbane (3.4%), Canberra (2.4%) and
Hobart (0.9%). Home values have fallen over the past year in Perth
and Darwin, down -0.9% and -2.9% respectively.
While home values are increasing at a fairly rapid rate, the same can’t
be said for rental rates. Over the 12 months to June 2015, combined
capital city rental rates increased by 1.1%. Hobart (2.8%), Sydney
(2.6%) and Melbourne (2.3%) are the only cities in which rents
have increased by more than 2.0% over the past year. Rental rates
have fallen over the past year in Perth (-5.1%), Darwin (-8.1%) and
Canberra (-0.5%). With new housing supply continuing to rise and
investor purchasing activity at record highs it is reasonable to expect
that rental growth will continue to slow over the coming months.
The surging demand from investors is one of the most prevalent
trends in the housing market currently. The surge is mainly a NSW
and to a lesser degree Victorian phenomena. In April 2015, 47.9%
of all investment lending nationally was in NSW with a further 25.1%
in Victoria. Across the remaining states the proportions of national
investment lending were: 12.8% in Queensland, 3.6% in South
Australia, 8.1% in Western Australia, 0.5% in Tasmania, 0.7% in the
Northern Territory and 1.4% in the Australian Capital Territory.
Investment lending is anticipated to slow over the second-half of this
year as the banks and APRA continue to tweak lending standards.
In particular the cap of 10% for annual growth in housing credit may
start to take some of the exuberance out of the market together with
changes to service limits and banks no longer factoring in negative
gearing benefits when determining investment mortgages. From an
investor’s perspective the best opportunity to enter many markets
has likely passed, especially considering the current growth phase
has now been running for three years and in the larger cities rental
yields are at or close to record lows.
The ideal outcome for the Reserve Bank of Australia (RBA), under
the current and potentially lower interest rate setting over the coming
year, would be that housing market conditions moderate back to
more sustainable levels. However, housing demand needs to remain
strong enough to keep dwelling construction at the current high levels
and new home sales relatively high.
The challenge outside Sydney and Melbourne will be creating enough
employment opportunities to make these cities sufficiently attractive
to lure residents out of the two major capitals.
National overview
Note: ‘this year’ = July 2015, ‘last year’ = July 2014
Median price = As at July 2015
Growth = 12 month to July 2015
Adelaide
Darwin
Houses
Units
Median Price
$430,000
$337,200
Growth
4.7%
2.0%
Days on Market
50
this year
58
this year
47
last year
55
last year
Discounting
-5.8%
this year
-5.5%
this year
-6.5%
last year
-6.5%
last year
Houses
Units
Median Price
$585,000
$463,500
Growth
-4.8% -4.9%
Days on Market
96
this year
96
this year
58
last year
64
last year
Discounting
-6.5%
this year
-8.7%
this year
-5.0%
last year
-6.2%
last year
Perth
Houses
Units
Median Price
$525,000
$425,000
Growth
-0.6% -3.9%
Days on Market
58
this year
76
this year
43
last year
39
last year
Discounting
-6.8%
this year
-7.1%
this year
-5.2%
last year
-5.4%
last year
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