Melbourne leads housing market up 0.6% in July, consolidating June gains with Sydney also strong: RP Data-Rismark

Continuing to defy the gloomy commentary, Melbourne was the strongest performing capital city housing market over July, with dwelling prices rising 1.4% to a median of $470,000 as the capital city housing market registered its second consecutive monthly gain, according to RP Data-Rismark Home Value indices.

Sydney was also a strong performer with a gain of 1.2% over July to a median of $541,000, with RP Data-Rismark concluding that lower mortgage rates may be starting to have an impact on the housing market.

These gains consolidated 1% increases recorded across both Melbourne and Sydney over June.

Nationally, dwelling prices increased by 0.6% over the eight capital cities to a median of $460,000, with house prices up 0.6% to a median of $480,000 and unit prices up 0.5% to a median of $425,000.

Over the three months to the end of July, capital city dwelling prices are up 0.2% according to RP Data-Rismark calculations.

RP Data notes that the over July, capital value increased relatively consistently over the first three weeks followed by a 0.2% fall over the final week of the month.

None of the other major capital cities recorded gains over July, with Adelaide the weakest, registering a 2.5% decline to a median price of $373,000.

Perth (-0.5%) and Brisbane (-0.2%) dwelling values were virtually flat over July at medians of $462,000 and $417,000 respectively.

Sydney's detached house prices recorded the strongest gains of the major capital cities – up 1.4% to a median of $595,000 – while Sydney unit prices were unchanged at $480,000.

Perth had the strongest unit market over July among the major capital cities with values up 2.7% to a median of $410,000.

RP Data’s research director Tim Lawless says the July results were heavily influenced by improving values across the most expensive capital city markets.

“The July rise was not as broad-based as the June results, with the month-on-month increase primarily being associated with the Sydney and Melbourne markets."

“The July result, when viewed together with the positive June result, suggests housing markets may be starting to respond to lower mortgage rates, which according to the RBA’s latest board meeting minutes are around 50 basis points below their 15-year average.”

Despite the positive month-on-month figures, Lawless says Australian home values are still down somewhat over 2012.

“The wash up is that values have fallen more than they have risen, with the market down by -1.2% over the first six months of 2012.

“Regardless, while discounted variable mortgage rates are as low as 5.6%, Australian households remain understandably cautious about the economy given the global uncertainty. This is likely to weigh down on consumer demand for high commitment purchases.”

Rismark CEO Ben Skilbeck noted that in the capital cities there remains significant differences in performance, though the “housing market’s fundamentals are increasingly solid”.

“While both Sydney and Melbourne experienced gains over the month, Adelaide declined 2.5%."

“On a year to date basis, Sydney values have risen 1.7% while at the other end of the spectrum, Melbourne and Adelaide have experienced declines of 2.7%”.

Among the smaller markets, Darwin recorded a 6.5% increase in its median dwelling price to $480,000, making it the third most expensive housing market in Australia behind Sydney and the Canberra ($496,000).

Over the quarter Darwin is also the best performing capital city with prices up 3.2%, with Adelaide the weakest with a 2.3% fall.

Darwin is also delivering the best rental returns for investors with Darwin houses delivering a gross rental yield of 5.7% and Darwin Units, a yield of 5.9%.

The lowest rental yields are Melbourne houses (3.6%) and Melbourne units (4.4%).

Hobart remains the most affordable city with a median dwelling price of $300,000.