August was a solid month for property prices in most capitals cities, with dwelling values up in all but two, according to CoreLogic’s latest Home Value Index report.
The value of homes across the capitals increased by 1.1%, driven by increases in Sydney and Melbourne as well as the smaller property markets of Canberra and Darwin. Brisbane and Perth also saw marginal rises over the month, while dwelling prices fell by 1% in Adelaide and 0.9% in Hobart.
Over the three winter months, Sydney dwelling values increased by 3.9%, with Melbourne not far behind at 3.4%. The only other capitals to report an increase in this period are Hobart (2%) and Canberra (2.4%).
Not surprisingly, Sydney is the powerhouse performer of 2016, where property prices have gone up almost 12% since 1 January. On the flipside, property prices have fallen by 4.6% in Perth, the worst-performing capital market by a wide margin.
Houses outpacing units
Houses have been the main benefactor of price increases over the past 12 months, with values up by 7.2% as opposed to 5.5% for units. The average house in an Australian capital city cost $600,000 last quarter, and the average unit price went to $495,000.
“The trend for house value growth outperforming unit values is apparent across most of the capital cities, particularly in Melbourne and Brisbane, where concerns around inner city unit oversupply are mounting,” says Tim Lawless, CoreLogic’s head of research.
“House values [have increased] by more than double the rate of units over the past year in each of Melbourne, Brisbane, Adelaide and Canberra.”
According to the latest ABS figures, the value of all residential construction work done was up 0.8% in seasonally adjusted terms over the June quarter, while in July dwelling approvals rose in trend terms in Sydney and Melbourne but fell in all other capitals.
Despite this activity in the two big cities, however, the number of property sales is 17% lower than the same period last year across the capitals.
“The trend of fewer sales coinciding with values pushing higher is likely explained, at least partially, by low stock levels, particularly in Sydney and Melbourne,” says Lawless.
The Reserve Bank of Australia’s decision to drop the interest rate to a record low of 1.5% at the beginning of August is also likely encouraging more buyers to enter the market, driving up competition and therefore prices.
With winter over, spring season kicks off this week and should see the number of properties for sale increase across the country. CommSec chief economist Craig James argues the development of new homes will also affect growth in prices.
“The housing market remains generally healthy. The key concern is what happens to prices over the next year as more new homes are completed,” says James. “Supply will lift to meet demand, putting downwards pressure on prices.”
Both Lawless and James emphasise that the property markets across the country and across dwelling types are becoming more autonomous.
“The disparity in the performance of housing markets across the capital cities and from region to region highlights the diverse economic and demographic factors around the country,” says Lawless.
“Such diversity, not only regionally, but also across housing types, makes reading the housing market more challenging than ever.”