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Sydney loses property price mantle to Melbourne

Sydney loses property price mantle to Melbourne

Melbourne has emerged as the capital city with the strongest annual property price growth on CoreLogic RP Data numbers, leaving Sydney in its wake.

Melbourne has overtaken Sydney as the capital city with the strongest annual property price growth, the latest figures from CoreLogic RP Data’s latest Home Value Index (HVI) reveal.

In the 12 months to 31 January, Melbourne dwelling values went up by 11%, surpassing Sydney’s growth of 10.5% over the same period.

The Victorian capital saw a monthly increase of 2.5% while its north-of-the-border counterpart was only up 0.5%. And although Melbourne was flat for the Nov-Jan quarter, Sydney property values fell by more than 2% in that time.

“While still a high rate of annual growth, Sydney’s annual rate of capital gain is now at a 29-month low and has been progressively softening since peaking at 18.4% in July last year,” said CoreLogic’s head of research, Tim Lawless.

“Melbourne’s housing market has been more resilient to slowing growth conditions which has propelled the annual growth rate to the highest of any capital city.”

Lawless added that “previously, during the height of the growth phase, there was a large separation between Sydney’s housing market, which was streaking ahead, and Melbourne’s, where the rate of capital gain was substantial but still well below the heights being recorded in Sydney.

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“The latest data reveals Sydney’s housing market is now playing second fiddle to Melbourne’s, at least in annual growth terms.”

Beyond Sydney and Melbourne

Dwelling values across the combined capitals were up 0.9% for the month and 7.4% for the year, but down 0.6% for the quarter.

Hobart and Canberra, up 4.7% and 2.8% respectively, joined Sydney and Melbourne as the only capitals to show positive monthly value growth. The Apple Isle and national capitals were also both up for the quarter.

Prices were flat in Adelaide and Darwin in January, down 0.7% in Brisbane and down 1% in Perth. However, the Queensland capital showed positive quarterly growth of 0.8% over the quarter, while the struggling WA capital was up a relatively healthy 1.7%.

Perth and Darwin were the only capitals not to show any positive growth over the year to January.

Capital performance

Canberra’s 6% increase puts it firmly in third place among the capitals for annual value growth, noticeably ahead of the next-best performer, Brisbane (up 2.8%). Its median dwelling price of $587,500 is nipping at Melbourne’s heels ($595,000), although still significantly short of Sydney’s $776,000 median.

The report notes the territory capital’s annual growth was its strongest gain in more than five years, with the city benefiting from “improved buyer confidence while rising demand has seen much of the housing oversupply absorbed, particularly across the detached housing market where gains have been the highest”. 

Looking ahead

“The bounce in dwelling values in January may provide an early sign that housing values across the combined capital cities are not likely to experience material decreases in 2016,” said Lawless.

“We believe that the rate of capital gain across the combined capitals in 2016 is likely to be less than the 7.8% experienced in 2015, driven by a slowdown in Sydney and Melbourne and continued softness in the Perth and Darwin markets.”

John Peters, CBA senior economist, agrees that "despite the clear positives of record low interest rates and likely continued solid jobs growth over 2016, moderating dwelling price growth is likely in the coming year".

He added: "Also kicking in will be the effects of micro-prudential policies in 2015 by ARPA/RBA aimed at taking some froth out of strong investor activity in the dwelling sector, which was helping boost dwelling price inflation."

Where to next?

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. The commentary provided from external companies that are not a member of the Commonwealth Bank of Australia Group of Companies (the CBA Group) does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. The CBA Group does not accept any liability for losses or damage arising from any reliance on external companies and their products, services and material.