David Scutt | Business Insider| 3 January 2017
Australian capital city house prices grew at the fastest pace in seven years in 2016, according to new research released by CoreLogic on Tuesday.
The group’s home value index jumped by a further 1.4% in December, leaving the gain in 2016 at an eye-watering 10.9%.
It marked the fastest pace of growth during a calendar year since 2009, and came despite wage growth slowing to the lowest level on record in the 12 months to September.
Two interest rate cuts from the RBA in May and August, stronger economic conditions and lower than normal housing turnover, along with signs of increased investor activity in the second half of the year, no doubt contributed to the hefty gains seen in Australia’s southeastern capitals.
By market, prices in Sydney surged by 15.5% over the year, outpacing gains of 13.7% and 11.2% in Melbourne and Hobart.
Elsewhere, prices increased by 9.3% in Canberra, 4.2% in Adelaide, 3.6% in Brisbane and 0.9% in Darwin.
In contrast, prices in Perth — the capital most exposed to the fortunes of Australia’s mining sector — fell by 4.3% over the same period.
As the index is a weighted average of capital city house price movements, the performance of Australia’s largest housing markets — Sydney and Melbourne — are influential on the national reading.
Tim Lawless, head of research at Corelogic, said that there was a stark divergence between the performance of house and unit prices during the year.
“Over the past twelve months we have seen capital city house values rise by 11.6%, while unit values have increased by roughly half the pace at 5.9%,” he said following the release of the December report.
“The divergence in growth rates is the most distinct in Melbourne and Brisbane, where concerns around unit oversupply have eroded buyer confidence. Melbourne house values are up 15.1% over the year compared with a 1.7% rise in unit values, while Brisbane house values are 4.0% higher over the year, with unit values falling by 0.2%.”
This table from CoreLogic shows how each capital city performed in 2016, breaking the results down by price changes reported for houses and apartments.
It’s a treasure trove of information, but one familiar trend remains the same: Sydney and Melbourne dwelling prices continue to skyrocket.
According to CoreLogic, prices in Sydney have jumped by 97.5% since January 2009, with those in Melbourne following close behind at 83.5%.
Simply enormous increases which have had both positive and negative side effects, according to Lawless.
“Sydney-siders saw dwelling values increase by approximately $10,000 per month over the past year, creating a significant boost in wealth for home owners,” he says.
“At the same time we’ve seen mounting affordability challenges for aspiring home owners.
“The recent CoreLogic Housing Affordability Report shows Sydney dwelling prices were 8.3 times higher than annual household incomes and households were dedicating an average of 44.5% of their income to service a mortgage based on an 80% loan to valuation ratio and the average discounted variable mortgage rate.”
With capital city house prices gaining 2.1% in the December quarter — including 2.4% apiece in Sydney and Melbourne — it’s little wonder why an increasing number of analysts believe that the RBA’s easing cycle is now over.