The rate of growth in property prices has started to slow in Australia.
Sydney has been the standout growth city with prices rising more than 30% since 2012.
But 2015 looks like being different, with the growth opportunities switching to other cities.
Brisbane, Adelaide and Hobart might be worth looking at.
Tim Lawless, head of research of property analysts CoreLogic RP Data, says the housing market is moving into the 2015 calendar year with some substantial momentum.
Home values are 8.5% higher compared with a year ago across the combined capitals.
“The growth comes on a backdrop of slowing conditions though, with the annual rate of capital gain peaking early in the year at 11.5% over the twelve months ending April,” he says.
“While values are still rising at a healthy rate, at least at a high level and in trend terms, we anticipate that 2015 will see the housing market dynamic shift geographically.”
Here’s CoreLogic RP Data’s take on the market in 2015.
The rate of capital gain is slowing down, after the annual rate of growth peaked in April last year at 16.7%.
The annual rate of growth will have slowed to about 12.5% by the close of 2014. Lawless says: “We expect the trend towards a more sustainable rate of capital gain to continue over the 2015 due to natural affordability constraints that are becoming increasingly evident in the market, as well as a reduction in investor demand which will likely be attributable to the low yield environment as well as tougher investment lending requirements from the banking sector.”
The rate of annual growth across the Melbourne housing market has been slowing since January values had moved 11.9% higher over the 12 months. By the end of 2014 the annual rate of capital gain will have have drifted back to about 8%. “This slowing trend is likely to continue through 2014 as investor demand is dampened by the low rental yield scenario as well as tighter finance controls around investment lending from the banking sector,” Lawless says.
Lawless says Brisbane (along with Adelaide and Hobart) is one of only three capital cities where the annual rate of capital gain is likely to be higher this year than it was last year. CoreLogic RP Data expects the annual rate of capital gain to finish the year around the 7%, compared with a 5.1% capital gain over the 2013 calendar year. “We are expecting growth in Brisbane dwelling values to outperform the capital city average over the coming year,” Lawless says.
The Adelaide housing market is likely to finish the 2014 calendar year with a higher rate of capital gain compared with the 2013 calendar year. CoreLogic RP Data expects Adelaide values will have increased by 3.5% in 2014 compared with a growth rate of 2.8% over 2013. “Transaction numbers have been rising over the second half of the year indicating a rise in buyer demand, affordability pressures are relatively tame and rental yields are higher than what can typically be found in Sydney and Melbourne,” Lawless says. “While we aren’t expecting values to surge across Adelaide in 2015, a steady market with values continuing to show a modest rise is the likely outcome.”
The Perth housing market moved through the peak of its growth cycle in December 2013 when then annual rate of growth was at 9.9%. Since then the annual rate of growth has drifted substantially lower and CoreLogic RP Data expects by the end of 2014 the annual rate of growth will be closer 1%. Population growth into Western Australia has slowed sharply which is reducing demand for housing at a time when there is a large amount of new detached housing approved for construction. The previously strong Western Australian economy is progressively weakening as the pipeline of large infrastructure projects winds down. “Dwelling values are likely to continue their weak trend and may potentially end the next calendar year lower,” Lawless says.
The Hobart housing market has been the weakest of any capital city post GFC. Home values remain 3.9% lower than they were at the beginning of 2009. However, housing market conditions have recently started to improve across. Transaction numbers have recorded a sharp rise from a low base and dwellings show a remarkable level of affordability compared to other capital cities and gross rental yields are the second highest of any capital city after Darwin. Lawless says values are likely to end the 2014 calendar year about 6% higher. “Äs demand from lifestyle buyers continues to rise, we expect Hobart home values to continue their moderate trend higher during 2015,” he says.
The Darwin housing market has been a solid long term performer, recording the highest rate of capital gain over the past decade across the capital cities. The 2014 calendar year is likely to see Darwin dwelling values increase by about 1.5%. Lawless says prospects for further growth in 2015 are diminishing due to a wind down in the major infrastructure projects.
The National Capitals’ housing market saw a material slowdown over the second half of 2014 with values likely to finish the second half the calendar year 1% lower. Lawless says: “Uncertainty surrounding the local labour market, federal government job cuts and potentially an oversupply of housing are all factors that are likely to contribute flat to falling housing values during 2015.”
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