House price growth stronger than apartments in Sydney and Melbourne

House price growth stronger than apartments in Sydney and Melbourne
Jonathan ChancellorDecember 7, 2020

The August quarter update from RP Data showed the strongest winter performance in Australian capital cities since 2007.

Sydney and Melbourne's housing out-performed expectations.

Sydney, which has the highest prices in the country, recorded a $650,000 median dwelling price for August after 16% annual growth.

Burrowing down with the price growth showed Sydney was much stronger when it came to house growth with the median at $740,000, up 17.2% annually.

With greater supply of apartments, the price growth for units in Sydney was up 12.1% to $565,000.

The growth gap was more noticeable in Melbourne where there was 6.2% annual growth to a $460,000 median Melbourne unit price while house values rose 12.4% over the year to a $570,000 median.

RP Data national research director Tim Lawless said ongoing investor demand was one of the key drivers of market conditions, particularly in Sydney where ABS data showed investors account for more than half of all new mortgage commitments across Australia.

Lawless said investors are concentrated across Sydney and Melbourne, where the markets have proven strong capital gains but now lower yields. Yields are currently so low in Sydney that they’re on track to race below Melbourne.

“Potentially there are better investment returns to be had in the smaller capital cities where the growth trend is less mature and yields are also healthier,” he said.

There were several capitals where apartment price growth was stronger that house price growth including Perth, Darwin, Brisbane and Canberra.

Perth houses were up 3.2% to $530,000 over the year to August 31, while its apartment growth was up 7.2% to $440,000.

Darwin houses were up 4.3% to $550,000, while its apartment growth was up 10.3% to $450,000.

The latest RP Data Core Logic Home Value Index suggested that while yields are tracking down in the majority of areas, there are still opportunities for investors willing to look further afield than Sydney and Melbourne.

HOUSE YIELDS
  1.  DARWIN ------------ 5.9%
  2.  HOBART ------------- 5.2%
  3.  BRISBANE ----------- 4.5%
  4.  ADELAIDE ---------- 4.2%
  5.  PERTH -------------- 4.1%
  6.  CANBERRA --------- 4.1%
  7.  SYDNEY ------------ 3.6%
  8.  Melbourne ------- 3.2%

UNIT YIELDS
  1.  DARWIN --------- 5.8%
  2.  BRISBANE ------ 5.4%
  3.  HOBART --------- 5.2%
  4.  CANBERRA ----- 5.0%
  5.  ADELAIDE ------ 4.8%
  6.  PERTH ---------- 4.6%
  7.  SYDNEY -------- 4.5%
  8.  Melbourne -- 4.2%

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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