The newest Rismark Home Value Index indicates continued improvement in the Australia’s capital cities. Property prices are on the rise in Sydney, Melbourne and Brisbane, and value growth in these cities drove a 1.3% increase in overall average value for the month of October. Experts say that while values are rising across the board, much of the growth in other capital cities is being driven by strong activity in Sydney. Analysts note that the rise in value is happening very quickly and prices haven’t been this fast to rise for the past three years. For more on this continue reading the following article from Property Wire.
Property prices in state capital cities in Australia increased by 1.3% in October, driven largely by the Sydney housing market as well as significant value growth in Melbourne and Brisbane.
The latest Rismark Home Value Index also shows that over 12 months values increased by 7.9% and are up 8.2% year to date. It is the fastest pace of growth in three years.
RP Data’s senior research analyst Cameron Kusher explained that the latest data also emphasises the strong housing market conditions in Australia’s two largest cities, Sydney and Melbourne, which is having a strong influence on capital growth across the combined capital cities.
Sydney home values increased by 2.4% in October and increased by 5.5% over the past three months while in Melbourne, home values increased by 1.2% in October and recorded an increase of 3.8% over the past three months. ‘For the first 10 months of this year, Sydney and Melbourne house values have performed very strongly achieving growth of 13.4% and 8.7% respectively,’ Kusher said.
Ben Skilbeck, Rismark chief executive officer, added that while Sydney has eclipsed its previous cyclical high and Melbourne is near its peak, Brisbane remains 8.4% below its highs.
‘There is, however, evidence that growth conditions may be spreading to Brisbane with home values in that city rising by 1.4% over the month and 2.6% over the past three months. While Brisbane auction clearance rates are typically low in comparison to Sydney and Melbourne due to differences in the preferred sale mechanism, Brisbane auction clearance rates are approaching the 50% mark which was last consistently observed in 2009 when values increased 7.1% over the year,’ he explained.
Values increased by 0.3% in Adelaide and by 1.6% in Darwin, but they fell by 0.2% in Perth, were down 2.3% in Hobart and down by 1.5% in Canberra.
Kusher said that of note were the recent weaker capital growth conditions for the Perth housing market. According to Kusher, two months ago Perth was experiencing the fastest 12 month rate of value growth of all capital cities at 9.4% but this has now slowed to 6.9% following a 0.6% fall in home values over the past quarter.
‘Although values are broadly rising, the strength in the market is being fuelled by Sydney where home values have only increased at an average annual rate of 2.7% over the past decade. Therefore, it is little wonder that the Sydney market is responding strongly to record low mortgage rates given its long period of underperformance coupled with a pent up undersupply of new housing over recent years,’ he pointed out.
Outside of the home values growth, most other indicators are pointing to an ongoing improvement in overall housing conditions. Over the three months to August 2013, RP Data estimated that capital city home sales were 20.1% higher than the same time in 2012. The number of capital city properties listed for sale is 12% lower than it was a year ago.
There has also been marked improvements in the time it takes to sell a home and the level of discounting by vendors. Capital city homes are currently selling after 44 days compared to 56 days a year ago and discounting levels have reduced from 6.8% a year ago to 5.7% currently.
Skilbeck commented that while overall housing credit growth remained modest at nearly 5% per annum, the latest lending commitment data shows the month of August 2013 had commitments for existing dwellings which exceed the August 2012 month by 10.2% for owner occupiers and 22.6% for investors.
Kusher said that with home values growing at a much more rapid pace than rents there are already seeing signs of an erosion of rental returns, particularly within the Sydney and Melbourne markets.
‘It could be expected that value growth will continue to outpace rental growth within these cities over the short term and if this occurs it will lead to an ongoing decline in rental returns,’ he added.
This article was republished with permission from Property Wire.