House prices in Australia’s southeastern are rising briskly again, especially in Melbourne.
According to CoreLogic, house prices in the city jumped by 3.1% in July, leaving the increase on a year earlier at 15.9%.
A giddying increase, ensuring that the city retained the title as the hottest housing market in Australia for yet another month.
Prices in Australia’s other southeastern capitals also rose strongly, lifting by 2.4%, 1.4% and 1.1% in Canberra, Sydney and Adelaide from one month earlier.
Since January 2009 — the height of the global financial crisis — the median dwelling price in Sydney has surged by 113.7%, outpacing Melbourne where prices increased by 101.4% over the same period.
Canberra, at 42.4% growth, comes in a distant third place. All other capitals have seen prices go backwards in real inflation-adjusted terms.
Over the year prices in Canberra have now risen by 12.9%, displacing Sydney for second spot where prices grew by 12.4% over the same period.
The strength in those capitals offset continued weakness in Darwin and Perth property prices, along with a 0.6% decline in Brisbane.
This table from CoreLogic shows how individual capital city prices have performed over the past month, quarter and year.
Courtesy of the strong gains in Melbourne and Sydney — Australia’s largest and most expensive housing markets — prices across Australia’s capital cities rose by 1.5% in July in weighted terms, leaving the increase over the past year at 10.5%.
The group said that house prices rose by 1.4% across the nation’s capitals in July, outpaced by a 2.1% surge in unit prices over the same period.
This next table from CoreLogic breaks down the price performance by type of dwelling by individual capital city.
Units in Melbourne rose by 3.5% over the month, scuppering earlier views that an enormous increase in supply would lead to a decline in prices. Strong population growth in the city, the fastest of any capital over the past year, is one factor helping to underpin prices in the city.
Melbourne also recorded the largest increase in house prices of any capital city in July at 3.1%.
“Melbourne appears to be benefitting from consistently high population growth which is creating strong demand for housing, as well as consistently high jobs growth and more affordable housing options relative to Sydney, said Tim Lawless, head of research at CoreLogic.
Lawless said the strong national performance in July was likely due to a combination of previous seasonal weakness in the CoreLogic data series and new incentives from several state government’s to help improving housing affordability for first-time buyers.
“The recent bounce in capital gains may be partially due to a recovery from the seasonal slump in values recorded in April and May. However, other factors, such as stamp duty concessions for first home buyers in New South Wales and Victoria, may also be having a positive impact on market demand,” he said.
“It’s still too early to measure the effect of first home buyer incentives, which went live on July 1st. However historically, the first time buyer segment has been very responsive to stimulus measures.”
While you wouldn’t know it from looking at the tables above, Lawless says that price growth is slowing from the levels seen earlier this year.
“Despite the higher month-on-month capital gains in June and July, the quarterly trend rate of growth has clearly reduced,” he said,.
“The rolling quarterly pace of capital gains across the combined capitals has fallen from 3.6% in February earlier this year to reach 2.2% at the end of July.
“The slowdown in growth conditions is most evident across the hottest markets, with the quarterly growth trend reducing from 5.0% in Sydney earlier this year to 2.2% at the end of last month. Melbourne growth conditions have also slowed, though to a lesser extent, with growth easing from a 2017 quarterly peak of 5.5% to 4.2%.”
Lawless says several factors have contributed to the modest slowdown seen in recent months, noting higher mortgage rates for investors, along with housing affordability constraints in some markets, have all played a part in the deceleration in price growth.
Lawless expects the pace of capital gains to continue to ease through 2017, particularly in Sydney, and to a lesser degree Melbourne, where value growth has been most extreme over the past five years.