Property prices continue upwards in key Australian cities

Property prices in Australian capital cities increased overall by 1.1% in August with six out of eight seeing growth in values, the latest index data shows.

However, the CoreLogic index report suggests that the strong combined capital cities headline result masks the underlying movements associated with dwelling values which are trending differently from region to region and across the broad property types.

In Sydney and Melbourne, dwelling values continued to increase at more than 1% month on month, with the cumulative growth over from June 2012 to date now reaching 64% in Sydney and 44% in Melbourne.

This result highlights the differences in growth trends across the capital cities over the same time period. Outside of Sydney and Melbourne, the third highest rate of capital gain over the cycle to date was in Brisbane at 18%, and was as low as 4% over this same period in Darwin.

‘Despite a strong month on month reading, the pace of annual capital gains has trended lower compared with the 2015 peak in growth conditions, when capital city dwelling values were rising at 11.1% per annum,’ said CoreLogic head of research Tim Lawless.

‘The most recent 12 month period has seen dwelling values rise by a lower 7% per annum. However, the rate of annual growth in Sydney has virtually halved from a recent 18.4% peak to the current annual rate of 9.4%. Similarly, in Melbourne the annual growth trend peaked at 14.2% per annum last year and has since tracked back to 9.2% per annum over the most recent twelve month period,’ he pointed out.

Perth and Darwin remain as the only capital cities to record a fall in dwelling values over the most recent twelve month period, declining by 4.2% in both cities. ‘Softer economic conditions and a significant fall in overseas migration rates, together with an increasing net outflow of residents to other states and territories, has made a substantial dent in housing demand. This has resulted in corresponding declines in both dwelling values and rental rates,’ said Lawless.

For the remaining capital cities, each city continued to show a modest trend in value appreciation. Signs are emerging that the pace of capital gains may be accelerating across Canberra and Hobart, with dwelling values up 7.6% and 6.5% respectively over the past twelve months. One year ago, Canberra’s annual growth rate was a negative 0.9%, while in Hobart, values increased by only 1.5%.

‘While the annual growth trend is now lower than it was one year ago, the rate of capital gains remain well above other benchmark measures such as inflation, income growth and rents, which is pushing already stretched affordability ratios to new record highs,’ Lawless added.

Demonstrating the decrease in housing affordability, utilising household income data for the June quarter provided by the Australian National University, the household income to dwelling price ratio was 8.4 in Sydney and 7.2 in Melbourne, compared to 5.7 in Brisbane. Prior to the current growth phase, affordability ratios were much lower, with Sydney and Melbourne both showing a dwelling price to income ratio of 6.7.