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Property prices up in all Australian capital cities month on month

Property prices in capital cities in Australia increased by 1.4% in March and are up 12.9% compared to a year ago, the latest index figures show.

Lower mortgage rates are fuelling the growth with annual price rises not at their highest rates since the 12 months ending in May 2010, according to the data report from real estate firm CoreLogic.

Four of Australia’s eight capital cities are now showing an annual growth rate in dwelling values higher than 10%, while Perth and Darwin values continue to trend lower on an annual basis but month on month prices rose in all cities.

Month on month the highest rise was in Darwin and Hobart with growth of 3.1%, followed by Melbourne up 1.9% and Sydney and Canberra both up 1.4% while Perth saw prices rise by 1%, Brisbane by 0.2% and Adelaide 0.4%.

Year on year the price growth is led by Sydney with a rise of 18.9%, followed by Melbourne up 15.9%, Canberra up 12.8%, Hobart up 10.2%, Brisbane up 3.7% and Adelaide up 3.4% but prices fell by 4.4% in Darwin and by 4.7% in Perth.

According to CoreLogic head of research Tim Lawless, the March results highlight the continued resurgence in the pace of capital gains. ‘This became evident through the second half of 2016, fuelled 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%,’ he 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 and Canberra, he added.

According to Lawless 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% higher over the past 12 months compared with a 9.8% rise in unit values.

‘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% higher over the past 12 months compared with a 5.2% increase across the unit sector. Similarly, in Brisbane, house values were 4% higher over the past 12 months compared with a 0.2% rise in unit values over the same period,’ Lawless explained.

‘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,’ he pointed out.

Whether such strong growth conditions can be sustained much longer is yet to be seen and Lawless said that 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,’ he added.

‘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,’ he concluded.