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Hobart gains, Sydney and Melbourne home values end FY16 at record highs

Hobart gains, Sydney and Melbourne home values and rents end FY16 at record highs

Dwelling values in Sydney and Melbourne surged to end the 2016 financial year at record highs, while rental yields across the capitals dropped.

Sydney and Melbourne dwelling values surged in June to end the financial year up 15%, more than 11% higher than last year, according to CoreLogic’s latest RP Data Home Value Index report.

Hobart continued to hold its own against the NSW and Victorian capitals with dwelling values up almost 12%, an increase of 6.2% on last year's previous corresponding period.

CoreLogic research director Tim Lawless said, “Potentially the Hobart market is being fuelled by the sheer affordability of housing and a renewed trend towards Melbourne and Sydney buyers unlocking their equity to make lifestyle housing purchases.”

Capital city dwelling values combined show a growth of 8.3% over the 2015-16 financial year. But that’s a drop in comparison to 2014-15 when they were 9.8% higher and 2013-14 when capital city dwellings combined were 10.1% higher.

Perth and Darwin have played their part in this, down 4.7% and 1.1% respectively. They continue to underperform, which Lawless said was because of reduced demand in housing, a downturn in migration and less employment opportunities.

Rental yields fall

The average gross rental yield across the combined capital cities plummeted to its lowest level since CoreLogic first began reporting in 1996. As of June, the gross yield on a house was averaging 3.2%, while apartments were averaging 4.1%.

Rental yields throughout Melbourne and Sydney have dropped to record lows according to CoreLogic. Rental yields for houses in Melbourne are down to 2.9%, while apartments are at 4.0%. Similarly for Sydney, rental yields for apartments were 3.9% and houses were at 3.0%.

“Despite low mortgage rate settings, the low yield profile implies that the majority of recent investors will be experiencing a cash flow loss on their property after expenses are taken into account,” Lawless said.

Hobart on the other hand is experiencing the highest rental yields across all capital cities - above 5% for both houses and apartments.

Sydney and Melbourne auction clearance rates have started to improve since December last year – hovering around the 70% mark to date. Lawless said it appeared to be a buyer's market, particularly in Sydney.

“Vendors are starting to offer larger discounts on their asking prices in order to make a sale,” he said.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Past performance is not an indication of future performance.