Property prices in capital cities in Australia increased by 1.4% in December and by 10.9% year on year, the highest annual growth since 2009, the latest index figures show.
But there is considerable variation with annual prices rising by 15.5% in Sydney but falling 4.3% in Perth while Melbourne and Hobart recorded gains higher than 10%, according to the data from CoreLogic.
The real estate firm’s head of research Tim Lawless pointed out that there has been a growing divergence between the broad housing product types. Over the past 12 capital city house values increased by 11.6% while unit values have increased by roughly half the pace at 5.9%.
The divergence in growth rates is the most distinct in Melbourne and Brisbane, where concerns around unit oversupply have eroded buyer confidence. Melbourne house values are up 15.1% over the year compared with a 1.7% rise in unit values, while Brisbane house values are 4% higher over the year with unit values falling by 0.2%.
In Sydney prices are up 0.9% month on month, 2.4% quarter on quarter and 15.5% year on year to a median average of $852,000. In Melbourne they increased by 3.1% month on month, 2.4% on a quarterly basis and 13.7% year on year to $641,200.
Month on month values increased by 0.6% in Brisbane, by 1.8% quarter on quarter and 3.6% year on year to $486,000, in Perth they were up 1.4% month on month and 2.8% quarter on quarter but down 4.3% year on year to $490,000 and in Hobart up 3.3%, 2.1% and 11.2% to $345,000.
In Adelaide prices were down 2% month on month and 1.6% quarter on quarter but are 4.2% above a year ago to a median of $425,000. In Darwin prices were also down month on month by 0.1% but up 5.9% quarter on quarter although year on year prices are up just 0.9% to $495,500.
Canberra has also seen price growth slow with values down 0.3% month on month but up 0.2% quarter on quarter and up 9.3% year on year to a median value of $595,000.
Australia’s regional housing markets generally did not experience the same growth conditions as the capital cities, with annual growth to November recorded at 2.8% across the combined regional markets.
Regional New South Wales showed the strongest growth conditions, with non-capital city house values rising 7.3% over the 12 month period to November 2016. The remaining regions showed relatively sedate growth with values rising by 0.5% in regional Victoria, 1% across regional Queensland and 1.1% across regional South Australia. Regional Western Australia recorded a 7% fall in house values over the year.
‘Those regional areas with intrinsic ties to the mining and resources sector have continued to record weaker housing market conditions since the end of the mining infrastructure boom, with Perth and Darwin recording the weakest housing market conditions across the capital cities,’ said Lawless.
‘Since values peaked in these markets during 2014, values have fallen by a cumulative 7.9% in Perth and 5.9% in Darwin. More recently both these markets have shown signs of moving through the low point of their respective downturns, with values rising by 2.8% and 5.9% respectively over the final quarter of 2016,’ he added.
Based on the annual housing market results, he explained that it is clear that housing markets across Australia have responded to regional differences in economic and demographic trends. For example, strong population growth and economic activity have driven value growth in Sydney and Melbourne, however, more recently strong growth trends have spread to Hobart and Canberra, as well as many of the coastal and lifestyle markets where values are now also rising swiftly.
The index data also shows that since the global financial crisis property prices in Sydney have almost doubled, rising by 97.5% since January 2009, whilst Melbourne dwelling values have increased by 83.5% over the same time.
Every other capital city has seen dwelling values rise at substantially lower rates over this period, highlighting just how strong the Sydney and Melbourne housing market conditions have been over the past eight years.
‘Sydney saw dwelling values increase by approximately $10,000 per month over the past year, creating a significant boost in wealth for home owners and at the same time we’ve seen mounting affordability challenges for aspiring home owners,’ said Lawless.
The recent CoreLogic housing affordability report shows Sydney home prices were 8.3 times higher than annual household incomes and households were dedicating an average of 44.5% of their income to service a mortgage based on an 80% loan to valuation ratio and the average discounted variable mortgage rate.