Annual growth rate higher than 10 percent in half of Australian capital cities: Corelogic
March combined capital city dwelling values increased 1.4 percent over the month, according to CoreLogic, with the combined capital city annual growth rate at 12.9 percent - the highest annual rate of growth since the twelve months ending May 2010.
Tim Lawless, CoreLogic head of research said while Sydney and Melbourne recorded the strongest growth conditions, the annual rate of capital gains has also moved into double-digit growth in both Hobart (+10.2 percent) and Canberra (+12.8 percent).
"On an annual basis, dwelling values in Perth fell by -4.7 percent and by -4.4 percent in Darwin where economic conditions and migration trends remain weak across both cities," he said.
"Adelaide and Brisbane also saw dwelling values continue to trend higher at a sustainable pace with increases of 3.4 percent and 3.7 percent respectively in these cities over the past twelve months.
"The March results highlight the continued resurgence in the pace of capital gains.
“This became evident through the second half of 2016, fueled largely by lower mortgage rates and a rebound in investment activity. Since June last year, the CoreLogic capital city hedonic index has increased by 9.3 percent.”
He said the diversity of performance between houses and units is also a current key feature of the housing market.
"Across the combined capitals index, house values were 13.4 percent higher over the past twelve months compared with a 9.8 percent rise in unit values," he said.
“The disparity in growth rates is more significant in those cities where high new unit supply is more apparent. In Melbourne, house values were 17.2 percent higher over the past twelve months compared with a 5.2 percent increase across the unit sector. Similarly, in Brisbane, house values were 4.0% higher over the past twelve months compared with a 0.2% rise in unit values over the same period.”
“The weaker growth conditions within the unit markets’ sector reflect heightened levels of new supply across specific inner city precincts and also suggests that consumer confidence has been negatively affected by the warnings of a potential unit oversupply.”
“Given the recent policy announcements from the Australian Prudential Regulation Authority (APRA) are aimed at dampening investment related credit demand, we can expect lending conditions for investment purposes will tighten, particularly for investors with small deposits or those applying for an interest only loan. Additionally, higher mortgage rates handed down by Australia’s major banks may contribute towards cooling some of the exuberance being seen in the largest capital city housing markets.”
“Furthermore, organic constraints in the market are becoming more pronounced. As examples, record-low rental yields, which imply dwelling values are out of balance with rents, and heighted affordability constraints are preventing some prospective buyers from participating in the market.
“Record-high levels of apartment supply are also likely to act as a brake on capital gains in those precincts where supply levels are high.
“Stronger buyer demand can be attributed to the rising number of investors participating in the market compared with a year ago as well as the lower cash rate stimulus and population growth. However, overall transaction numbers remain approximately 15.5 percent lower than their recent 2013/14 peaks.”
“A shortage of advertised stock can contribute to upwards pressure on prices, as prospective buyers experience FOMO (fear of missing out) which reduces a buyers ability or willingness to negotiate on prices and causes some urgency in the decision making process.”