The Sydney property market juggernaut appears to be gaining even more momentum, with the NSW capital showing its strongest year-on-year (YoY) value growth in more than 14 years according to the latest CoreLogic figures.
Sydney median house prices went up by 19.1% over the 12 months to 28 February to reach $895,000, while apartment prices also saw healthy YoY growth of 15.4% for combined growth of 18.4% across all Sydney dwellings.
Melbourne and Canberra have also shown double-digit percentage YoY value growth of 13.1% and 10.4% respectively for their combined dwelling markets.
The strong performance of the three cities has helped lift the annual growth trend across the combined capitals to a new cyclical high of 11.7% over the past 12 months.
“The annual growth rate across the combined capitals hasn’t been this strong since the 12 months ending June 2010," said CoreLogic head of research, Tim Lawless.
“In Sydney, [the annual 18.4% growth rate] is the highest rate since the 12 months ending December 2002 when the housing boom of the early 2000s started to slow.”
Sydney’s affordability challenge
CoreLogic notes the current growth cycle is approaching five years in duration. Capital city property prices began rising from a slump in June 2012 and have since increased by a cumulative 47.3%. This ranges from a capital gain of almost 75% in Sydney, down to a net gain of just 6% in Perth.
Lawless warned that while “the strong growth conditions across Sydney have provided a substantial wealth boost for home owners… the flipside is that housing costs are becoming increasingly out of reach. This is especially true for price-sensitive segments of the market such as first-time buyers and low-income families.
“Affordability challenges are most pronounced across the Sydney housing market where, based on September 2016 data, dwelling prices are almost 8.5 times higher than gross household incomes. The second most expensive capital city, Melbourne, has a dwelling price to income ratio of 7.1,” he said.
CommBank senior economist, Michael Workman, argued “affordability issues are gaining more attention from policy makers”, and called for “demand and supply issues, like population growth, infrastructure and tax policies, [to be] discussed as part of an integrated approach towards reforming the imbalances in the housing sectors in the major capitals cities”.
Weakness beyond Sydney and Melbourne
Strong growth in the two largest property markets is masking weaker performance in other capitals as well as regional Australia.
The days of Perth being the third-most expensive capital city property market are long gone. With the WA capital posting monthly, quarterly and yearly value losses in February, its median dwelling price of $477,000 is now also below Darwin’s ($499,500) and Brisbane’s ($485,000) and well below Canberra’s ($575,500).
Darwin also posted large monthly and quarterly falls, although CommSec senior economist Savanth Sebastian suggested “the sustained lift in commodity prices may help to alleviate some of the [Perth and Darwin] weakness in coming months”.
Brisbane and Adelaide both posted positive but marginal YoY growth in February, while Hobart continues to show promise, posting the best quarterly percentage growth figures (5.8%) of all the capital cities.
Outside the capitals, regional dwelling prices have risen by just 1.1% over the past 12 months.