“Mixed bag” housing market gains momentum with 1.6% rise over July: RP Data-Rismark

Capital city dwelling values have risen 3.5% over the past two months with RP Data-Rismark recording a further 1.6% rise in July on top of a 1.9% rise in June.

It follows a mid-year slip with a 1.7% decline recorded over April and May.

This takes the cumulative recovery in residential home values to 6.5% since the market bottomed out in May last year with a national median dwelling value now at $488,000.

Melbourne was the strongest performer among the big city markets with a 2.3% rise in dwelling values to $492,000 followed by Sydney (up 2% to $570,000) and Perth (up 1.6% to $494,600).

Adelaide’s property market continued to slowly decline with dwelling values falling 1.5% over July to $382,000 making it the weakest performing market over the quarter with a 3.1% fall.

Another weak market is Brisbane with almost no change in dwelling values over July (up 0.1%) and little change over the past year (up 0.8%) with a median of $429,000.

“Despite the strong headline, the market remains somewhat of a mixed bag,” says RP Data research director Tim Lawless.

“The housing market is being buoyed by very positive conditions in Sydney, Perth and to a lesser extent Melbourne.

“At the other end of the scale you have cities like Adelaide, Brisbane and more recently Darwin where conditions are more sedate with dwelling values slipping lower over the past quarter,” he says.

Perth is the best performing capital city for the July quarter (up 4.4%) and over the past year (up 8.3%).

Sydney dwelling values are up 4.4% for the quarter and 6.5% year-on-year with Melbourne up 4.3% year-on-year.

Perth is also delivering the strongest returns to investors with a total gross return - capital gains and gross rental yields – of 13.3% - followed by Sydney (11.2%) Canberra (9.1%) and Melbourne (8.2%).

“By including rental yields in our assessment of the housing market, some clarity is provided as to why investors are becoming so active,” says Lawless.

“The RP Data-Rismark Accumulation Index, which factors in both capital gains and gross rental yields, is up 9.4% over the past year.

“As noted by RBA Governor Glenn Stevens earlier this week, with an easing in monetary policy one of the expected and intended effects will be that people start to shift their portfolios away from the less risky assets such as cash and in the direction of holding equities and physical assets such as property,” he says.

Among the smaller capital city markets, Canberra recorded a 2.5% rise with its median dwelling value recorded at exactly $500,000 while Darwin recorded a 2% rise to $490,000.

Lawless notes that each of the vendor metrics published by RP Data-Rismark has continued to strengthen over the month.

“A typical capital city dwelling is selling in just 45 days compared with 59 days at the same time a year ago.

“Vendors are discounting their prices less and clearance rates remain close to 80% in Sydney and slightly lower in Melbourne.

“With the housing market once again showing solid capital gains and rents also rising, the issue of housing affordability is likely to begin attracting more attention.

“The recent housing market correction which bottomed in May 2012, where values were down 7.4% from peak to trough across the combined capital cities, together with mortgage rates moving to historically low levels, delivered substantial affordability improvements for Australian housing.

“However, with Sydney, Perth and Canberra values now back at record high levels and some other capital cities not far off their previous peaks, there are likely to be a growing number of households who find it challenging to enter the housing market,” he says.

The index is calculated using recent sales data combined with information about the attributes of individual properties such as the number of bedrooms and bathrooms, land area and geographical context of the dwelling.