Property prices in Australia up the most in Sydney and Melbourne
Property prices in Sydney and Melbourne continue to be the highest in Australia although the two cities are seeing growth ease slightly, the latest index shows.
Prices increased by 0.3% in Sydney and 0.6% in Melbourne in October compared with a national average of 0.2%, according to the CoreLogic RP Data index.
Overall prices increased by 1.4% quarter on quarter and are 10.1% higher year on year although the combined capitals index has been easing since July this year when the index was rising at 11.1% per annum.
According to CoreLogic RP Data’s head of research, Tim Lawless, a range of factors are contributing to the slowdown.
‘It’s not just the fact that mortgage rates have recently risen outside of any lift in the cash rate. We are also seeing approximately a 30% premium on investment related mortgage rates, tighter lending standards and borrowers generally requiring a larger deposit,’ he said.
‘Gross rental yields at record lows and affordability constraints are acting as a further disincentive, particularly in Sydney where the median unit price is equal to, or higher than the median house price in every other capital city,’ he explained.
‘Additionally, new housing supply is moving through record levels which should help to ease the upwards trajectory of home values,’ he added.
He pointed out that since the end of 2008, the Sydney housing market has recorded a cumulative capital gain of 77% while Melbourne values have moved a cumulative 66.6% higher over the same time frame.
Based on the median selling price at the end of 2008, Sydney home owners have accrued approximately $316,000 in gains from the housing market compared with around $246,000 in Melbourne.
‘While the rate of growth is significant, it is important to remember that this growth is across two cycles. Dwelling values were broadly tracking backwards during both the 2008 calendar year and between late 2010 through to the middle of 2012,’ said Lawless.
The only capital city where home owners have seen the value of their homes move lower since the end of 2008 is Hobart where the CoreLogic RP Data index is down 0.4% since the end of the global financial crisis.
The weakest housing market conditions continue to be found in Darwin and Perth where values are down 3.7% and 3.6% respectively over the past 12 months. According to Lawless, the slowdown in resources related infrastructure spending has caused ripples of economic weakness that are likely to persist for some time.
‘Capital expenditure relating to the mining and resources sector has fallen substantially which means tougher labour conditions and little in the way of migration which has previously fuelled housing demand in these areas,’ he said.