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Home values in Australian cities up and hot spring market expected

The increase was 1.6% in July and 1.9% in June but if the three months are taken together then values were up 4%, the highest rate of capital gain since the three months ending in April 2010.

According to RP Data research director, Tim Lawless, the slower month on month result is actually a welcome sign after the strong growth conditions of previous months fuelled renewed debate around the sustainability of property prices.

‘The half a per cent gain over the month of August is a much more sustainable rate of growth and will be a welcome turn of events for policy makers. While the recent surge in dwelling values has caused some renewed debate about an Australian housing bubble, it is important to remember that the average annual capital gain over the past decade has been just 4.3% across the combined capital cities,’ he explained.

He also pointed out that in Sydney the annual rate of growth has seen a much lower decline of 2.4% which is well below current inflation.

The softer housing market conditions over August can be attributed mostly to a lower rate of growth across the Sydney and Melbourne housing markets where dwelling values rose by 0.6% and 0.2% respectively. Several cities recorded a fall in values over the month, with Hobart seeing the largest decline with a 1.2% fall and Perth values slipping by 0.2%.

According to Lawless, the most significant turnaround in market conditions can be found in Brisbane where the monthly rate of growth jumped to 1.5%. ‘Brisbane’s housing market has been underperforming since the onset of the global financial crisis with home values still almost 10%lower than their previous peak which was back in November 2009. The strong result for August was evident across both the detached housing and the unit markets and may potentially mark a positive turning point for Brisbane’s housing market,’ he said.

Looking at the performance across the broad pricing segments of the market, the RP Data-Rismark Stratified Hedonic Index is continuing to show the broad middle of the market to be the best performing, although the rate of capital gain is gathering some momentum at the more prestigious end of the market.

The broad mid priced market has recorded a capital gain of 5.2% since the start of the year, while the most expensive quartile has seen values increase by a less substantial 4.9%and the most affordable quartile has recorded the lowest rate of growth at 4.4%.

Lawless expects the upcoming spring season this year to show strong housing market conditions. ‘Housing market conditions are looking set to provide what could be described as a near to perfect spring season with the number of homes currently available for sale around 15% lower than a year ago,’ he added.

In Sydney listing numbers are about 28% lower than a year ago mainly as a result of fewer new listings being added to the market and a higher rate of absorption, with a 30% increase in sales activity compared with a year ago.

‘We are already seeing a substantial increase in real estate agent activity across the RP Data platforms which indicate a surge in pre listings activity,’ Lawless said.

According to Rismark chief executive officer Ben Skilbeck the owner occupier segment of the market is more than twice the size of the investor segment, but there continues to be a number of indicators suggesting that this spring investors will be punching above their weight.
 
‘With year on year gross total returns being 10% cross the combined capital cities and 11.7% in Sydney, and borrowing costs close to half of this, it’s likely investors will continue to be attracted into the market. The rate of growth in lending commitments for the purchase of existing dwellings, continues to be material higher for the investor segment than the owner occupier segment,’ he said.

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